PBF Logistics LP
Q2 2020 Earnings Call Transcript

Published: 1 Aug 2020

[Operator:]

Welcome to the PBF Logistics Second Quarter 2020 Earnings Conference Call and Webcast. [Operator Instructions] Please be advised today's program maybe recorded. It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

[Colin Murray:]

Thank you, Erin. Good morning, and welcome to today's call. With me today are Matt Lucey, Executive Vice President; Erik Young, our CFO; and several other members of the partnership's senior management team. If you like a copy of our earnings release, it is available on our website. Before we begin, I'd like to turn your attention to the forward-looking statements disclaimer contained in today's press release. In summary, it outlines that statement in the press release and on this conference call that state the partnership's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the Safe Harbor provisions under Federal Securities Laws. There are many factors that could cause actual results to differ from our expectations, including those we've described in our filings with the SEC. As noted in our press release, we will be using certain non-GAAP measures while describing the partnership's operating performance and financial results. For reconciliations of non-GAAP measures to the appropriate GAAP figure, please refer to the supplemental tables provided in today's press release. I'll now turn the call over to Matt.

[Matthew Lucey:]

Thank you, Colin. Good morning, everyone and thank you for joining us on today's call. Despite the challenges presented by the pandemic PBF Logistics operated well during the second quarter. We were impacted by the market turmoil as we saw total revenues come down, primarily due to lower throughputs at our terminals and pipelines as demand declined. This was partially offset by increases in our storage segment. Overall, revenues were down less than 5% due in large part to our strong sponsored relationship and contract structure that provides support for 90% of our base business. Our EBITDA and distributable cash flow were up versus last quarter as a result of lower costs. We reduced our corporate overhead and operating expenses came down due to lower throughputs and savings. We have also reduced capital expenditures and we are targeting $8 million to $10 million in savings for total 2020 forecasted CapEx of approximately $20 million. Going forward, results should continue to be stable as we expect to see comparable consistency in our revenue stream. Durable cost decreases and potentially an incremental benefit as demand recovers. Today, we declared a distribution of $0.30 per unit. We will continue to review our distribution policy going forward with respect to company performance, market conditions and alternate use of funds. I'll now turn it over to Eric.

[Erik Young:]

Thank you, Matt. Good morning, everyone and thank you for joining us on today's call. We reported second quarter net income attributable to the limited partners of $37.5 million, adjusted partnership EBITDA was $60 million which includes approximately $1.1 million of non-cash, unit-based compensation, transaction related expenses and residual environmental remediation costs. Our earnings were up quarter-over-quarter and year-over-year, which is a reflection of the stability of our revenues and overall growth of our business through acquisitions and continuing development of our organic growth projects During the quarter, we spend approximately $1.8 million in CapEx including $1.1 million in maintenance capital. We ended the quarter with approximately $268.7 million in liquidity, including $21.6 million of cash and approximately $247 million of availability under our revolving credit facility. During the quarter, we repaid approximately $135 million on our revolving credit facility. Net debt to annualized adjusted EBITDA was 3.1x. Operator, we've concluded our opening remarks. And now we'll open the call for questions.

[Operator:]

[Operator Instructions] Your first question comes from Spiro Dounis with Credit Suisse. Your line is open.

[ChadBryant:]

Hey, guys. This is Chad on for Spiro. Starting off I just wanted to get a little more color on the priority of debt pay down. Is there a specific leverage target in mind before you start to get more aggressive on M&A?

[MatthewLucey:]

I don't necessarily think there's a specific leverage target. I just think in conjunction with the reset essentially of the distribution that occurred during the first quarter combined with the fact that now we're going to be averaging well north of 2x coverage as opposed to just having the cash sitting on the balance sheet earning, de minis -- the minimus amount of interest. I think our plan at this point is to continue to use that to be lever. That being said we're continuously opportunistically looking at different types of acquisitions, as well as organic projects. It just feels like the pandemic has pushed a lot of the timeline on multiple potential opportunities doubt for the right. So there is not a dedicated leveraged target that we're trying to get to. Just overall trying to delever the business as we go, we felt like this was the most strategic and probably prudent move for us, given the uncertain times that we're in today.

[ChadBeynon:]

Okay. Understood. And switching gears a bit with sort of all the factors going into this quarter from the utilization storage standpoint just want to get your thoughts on what's the earning power if refineries are running normal again?

[MatthewLucey:]

Well, I think the way the company is structured; you're protected with strong contracts on the downside. What goes with that is there's not tremendous upside because many of the contracts as you increase above your MBCS, your rate on this particular asset declines so to speak. So we've had at run rates that are very high in the past and you've seen where we've operated. But there's the whole structure of the company was built around sort of a collared returns and stable.

[Operator:]

Our next question from the line of Ryan Levine with Citi. Your line is open.

[RyanLevine:]

Good morning. I wanted to follow up on your comments around reviewing the distribution policy going forward. Should we look for every quarter further be considerations about any material change there? And to the extent that the share price were to react in either direction. Would that be the key driver of any change in capital allocation policy?

[MatthewLucey:]

I think everything's connected. And we'll react to the market we're in. We're in unprecedented times and to the degree that the world normalizes, demand comes back and that extends to the MLP securities and directly to PBFX, we are constantly and will continuously reevaluate where the company stands. At the moment, we're focusing on delevering and to the extent we need to reevaluate that we certainly will. So there is no magic other than will continuously reacting to the market that's in front of us.

[RyanLevine:]

Okay. And then to the comment around pushing some of the CapEx to the right. Can you be a little more specific as to what are the drivers of some of the CapEx deferments? Are they specifically related to COVID related delays or is there any other color you're able to share?

[MatthewLucey:]

Yes. I would say just in reaction to the market we are in and managing our expenses and capital as most efficiently as we can in a turbulent time like that. We've experienced the most proven thing to do is to reduce your expenses and your capital to the greatest extent possible. Because if nothing else you're going to hope for the best but prepare for the worst. And that's certainly what we're trying to do.

[RyanLevine:]

Okay and then last question, so in light of that how do you weigh potential share or unit buybacks in relation to other capital allocation decisions? Is that something that's on the table or is the focus on fortifying the balance sheet in the near term?

[MatthewLucey:]

I would say it's on the table. We evaluate everything and we look at continuously.

[Operator:]

And there are no additional questions at this time. I'd like to turn the call back over to Matt Lucey for any closing remarks.

[Matthew Lucey:]

I appreciate everyone's listening today. And I hope you have a nice safe the rest of the day and weekend. And look forward to speaking you next quarter.

[Operator:]

Thank you for your participation. This does conclude today's program. You may disconnect at any time.