PBF Energy Inc. — Q1 2022 Form 10-Q Summary
Reporting period: Three months ended March 31, 2022; compared with Q1 2021. PBF Energy operates six U.S. refineries with approximately 1.0 million barrels per day of combined capacity and a logistics business through PBFX. PBF Energy consolidates PBF LLC and PBFX.
Key financial metrics
| Metric | Q1 2022 | Q1 2021 |
|---|---|---|
| Revenue | $9,141.7 million | $4,924.8 million |
| Income from operations | $91.0 million | $57.7 million |
| Consolidated net income (loss) | $(3.3) million | $(22.2) million |
| Net income (loss) attributable to PBF Energy stockholders | $(21.1) million; $(0.18) per diluted share | $(41.3) million; $(0.34) per diluted share |
| Consolidated gross margin | $196.8 million; $2.63 per barrel of throughput | $138.4 million; $2.07 per barrel |
| Gross refining margin (non-GAAP) | $850.7 million; $11.36 per barrel | $650.2 million; $9.70 per barrel |
| Cash from operating activities | $312.3 million | $(13.7) million |
| Cash used in investing activities | $(225.5) million | $(60.5) million |
| Cash and cash equivalents, period end | $1,434.6 million | $1,541.2 million |
| Total debt outstanding, before unamortized financing items | $4,309.3 million | $4,329.4 million at Dec. 31, 2021 |
PBF LLC, the operating entity, reported net income of $15.8 million, but after $17.8 million attributable to noncontrolling interests, its net loss attributable to PBF LLC was $2.0 million. PBF Energy’s reported loss attributable to stockholders also reflects noncontrolling interests and its tax structure.
Operating cash flow less investing cash flow was approximately $86.8 million in Q1 2022, compared with approximately $(74.2) million in Q1 2021; these amounts are calculated from the reported cash flow totals. Working capital was $1,293.9 million, down from $1,439.5 million at year-end 2021. Operating expenses were $620.4 million, or $7.95 per barrel of throughput, versus $481.3 million, or $6.86 per barrel.
Changes versus Q1 2021
- Revenue increased 85.7%, reflecting higher hydrocarbon prices and increased throughput. Average throughput rose to 832,600 barrels per day from 745,500.
- Refining margins and operating income improved with stronger crack spreads, crude differentials, throughput and product sales. Management cited recovering demand and global supply disruption, including disruption related to sanctions on Russia following its invasion of Ukraine.
- Gross refining margin excluding special items was $850.7 million, or $11.36 per barrel, versus $244.6 million, or $3.65 per barrel, in Q1 2021. The prior-year period included a $405.6 million non-cash inventory valuation benefit; Q1 2022 had no such adjustment.
- Operating cash flow improved substantially, although working-capital movements remained significant. Accounts receivable and inventory increased, alongside increases in accounts payable and accrued expenses.
- Cash used in investing activities rose, including higher property spending and turnaround costs.
Outlook, risks and unusual items
- Outlook and spending: Management expects 2022 refining capital expenditures of $500 million to $550 million, with most planned spending for turnarounds and other required work. Spending pace and turnaround scope may adjust with market conditions. PBFX expects approximately $18 million to $23 million of net capital expenditures for the remainder of 2022.
- Renewable diesel: The company is progressing a planned 20,000-barrel-per-day facility at Chalmette, targeting production in the first half of 2023. It invested approximately $40 million in incremental project capital in Q1 and continued discussions with potential partners.
- Special items: Q1 2022 included a $50.3 million fair-value loss on contingent consideration, primarily related to Martinez, a $19.3 million increase in the Tax Receivable Agreement liability, and a $12.8 million net tax expense related primarily to deferred-tax-asset remeasurement. Management’s non-GAAP adjusted fully converted net income excluding special items was $43.3 million, or $0.35 per share; this is not a GAAP measure.
- Liquidity and capital allocation: Management reported operational liquidity above $2.6 billion, including approximately $1.4 billion of cash excluding PBFX and more than $1.2 billion of borrowing availability under the Revolving Credit Facility. PBFX reported approximately $474.8 million of liquidity. The company was in compliance with debt covenants at quarter-end. PBF Energy’s $0.30 quarterly dividend remained suspended, and management did not anticipate a dividend in the foreseeable future. PBFX declared its $0.30-per-unit distribution for Q1.
- Debt and inventory financing: The $900 million Revolving Credit Facility balance was unchanged; PBFX repaid $25 million on its revolver, reducing borrowings to $75 million. The J. Aron inventory intermediation agreement runs through December 2024, with an optional extension by mutual consent; at expiration, the company may need to repurchase covered inventory and fund it itself. The agreement covered $521.6 million of inventory at carrying value at quarter-end.
- Compliance and environmental exposure: Renewable energy credit and emissions obligations totaled $1.141 billion, including RIN-related obligations; the company had $756.2 million of forward purchase commitments for such credits. Estimated aggregate environmental liabilities were $158.7 million at quarter-end. The company cited ongoing regulatory, climate, commodity-price, natural-gas-cost, counterparty and litigation risks.
- Subsequent event: In April 2022, the company repurchased $29.9 million of senior notes for approximately $25.8 million; it expects to recognize an approximately $3.8 million extinguishment gain in Q2.
Important facts for investors to verify
- Whether strong refining margins and elevated demand persist, and how crude prices, supply disruptions and regional differentials affect realized margins.
- How much Q1 operating cash flow depended on working-capital timing, and whether liquidity remains adequate as inventory, credit and compliance requirements change.
- The scale and timing of 2022 turnaround and capital spending, and progress toward the Chalmette renewable diesel project’s stated schedule.
- Potential cash costs from RIN and emissions-credit obligations, environmental remediation, the Tax Receivable Agreement and Martinez contingent consideration.
- Debt repayment plans, revolver availability and covenants, the suspended PBF Energy dividend, and the company’s ability to finance inventory if the J. Aron agreement ends or is not extended.