PBF Energy Inc. — 2019 Form 10-K
Reporting period: Fiscal year ended December 31, 2019. This is an annual filing, not a standalone fourth-quarter report. PBF Energy consolidates PBF Energy Company LLC (PBF LLC) and PBFX. At year-end, the company operated five refineries with approximately 900,000 barrels per day of capacity and reported Refining and Logistics segments.
Key financial results
| Metric | 2019 | 2018 |
|---|---|---|
| Revenue | $24.508 billion | $27.186 billion |
| Income from operations | $649.0 million | $358.1 million |
| Net income attributable to PBF Energy stockholders | $319.4 million | $128.3 million |
| Diluted EPS | $2.64 | $1.10 |
| Cash from operating activities | $933.5 million | $838.0 million |
| Capital expenditures, as reported | $748.9 million | $733.9 million |
| Cash and cash equivalents at year-end | $814.9 million | $597.3 million |
| Gross debt at year-end | $2.097 billion | $1.975 billion |
2019 consolidated gross margin was $913.1 million, or $3.04 per barrel of throughput; gross refining margin was $2.801 billion, or $9.34 per barrel. Excluding the specified special items, gross refining margin was $2.551 billion, or $8.51 per barrel, versus $2.823 billion, or $9.09 per barrel, in 2018. These gross-refining-margin measures are non-GAAP.
Year-end working capital was $1.315 billion. Reported total liquidity was approximately $2.276 billion, including cash and availability under PBF Holding’s revolving credit facility; PBFX separately had $212.2 million of available borrowing capacity. Debt to capitalization was 37%.
Fourth-quarter 2019 revenue was $6.302 billion, operating income was $123.0 million, net income attributable to PBF Energy stockholders was $53.0 million, and diluted EPS was $0.44. In fourth-quarter 2018, the company reported an operating loss of $446.2 million, a net loss attributable to PBF Energy stockholders of $353.8 million, and diluted loss per share of $2.97.
Changes versus prior period
- Full-year revenue fell 9.9%, primarily reflecting lower hydrocarbon prices; revenue per barrel sold declined 9.3%.
- Reported attributable net income and EPS increased from 2018, but the comparison is materially affected by inventory accounting. A noncash lower-of-cost-or-market inventory adjustment benefited 2019 income from operations by $250.2 million, compared with a $351.3 million charge in 2018.
- Excluding special items, adjusted fully converted net income was $109.3 million in 2019 versus $387.0 million in 2018, or $0.90 versus $3.26 per diluted share, respectively. This is a company-defined non-GAAP measure.
- Management attributed weaker underlying refining results to unfavorable crude differentials, lower throughput at most refineries and significant turnaround and maintenance activity. Stronger West Coast crack spreads and higher Mid-Continent throughput partly offset those pressures.
- Operating cash flow rose to $933.5 million from $838.0 million. Investing cash outflow was $712.6 million, chiefly for property, plant and equipment and refinery turnarounds.
- PBFX canceled its incentive distribution rights in February 2019 in exchange for 10 million common units. The company also restarted Chalmette’s idled 12,000-barrel-per-day coker in fourth-quarter 2019.
Outlook, financing, and risks
- Management expected 2020 spending of approximately $550–600 million for facility improvements, maintenance, turnarounds and regulatory requirements, excluding PBFX and Martinez-related capital spending. PBFX expected net capital expenditures of $22–34 million.
- On February 1, 2020, PBF completed the Martinez refinery acquisition for $960 million plus approximately $230 million of estimated hydrocarbon inventory, subject to final valuation. The acquisition added a 157,000-barrel-per-day refinery and increased total capacity to more than 1 million barrels per day. Potential seller earn-out payments may apply for up to four years.
- In January 2020, PBF Holding issued $1.0 billion of 6.00% senior notes due 2028; the proceeds were used in part to redeem the $500 million 2023 Senior Notes. The notes were redeemed in February 2020 at 103.5% of principal plus accrued interest. These post-year-end transactions are not reflected in year-end debt.
- Management said available cash and borrowing resources were expected to meet near-term capital, working-capital, dividend and debt-service needs, while noting cash generation remains dependent on oil markets and other factors outside its control. The company was in compliance with debt covenants at December 31, 2019.
- Major exposures include volatile refining margins and crude differentials, refinery outages and logistics disruptions, substantial environmental and safety obligations, RIN and emissions-credit costs, leverage and working-capital requirements. RIN costs were $122.7 million in 2019, down from $143.9 million in 2018.
- Environmental and legal matters include remediation obligations, regulatory settlements and pending proceedings. The filing states that identified matters were not expected, individually or in aggregate, to materially affect financial position, results or cash flows, but some outcomes and costs could not be estimated clearly.
- PBF Energy intended to continue quarterly dividends of approximately $0.30 per share, subject to board discretion, cash availability and debt restrictions. Management also cited potential benefits from IMO 2020 low-sulfur marine-fuel rules, while actual effects depend on market conditions.
Most important facts for investors to verify
- How much of 2019 earnings and gross margin reflects the $250.2 million noncash inventory-reserve benefit, and how recurring operating performance compares using consistent measures.
- Actual Martinez refinery contribution, integration and synergy progress, final inventory valuation, funding and any earn-out payments.
- Post-acquisition debt, interest expense, liquidity, covenant headroom and the treatment of PBFX borrowings and distributions.
- Refinery throughput, turnaround costs and reliability, particularly after 2019 downtime and as the restarted Chalmette coker operates.
- Changes in environmental remediation estimates, litigation outcomes, RIN/emissions-credit costs and the company’s ability to recover California compliance costs from customers.