PBF Logistics LP
Q4 2020 Earnings Call Transcript

Published: 11 Feb 2021

[Operator:]

Welcome to the PBF Logistics Fourth Quarter 2020 Earnings Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode. And the floor will be open for your questions, following managements prepared remarks. As a reminder, this conference is being recorded. It is now my pleasure to turn the floor over to Colin Murray, Investor Relations. Please go ahead, sir.

[Colin Murray:]

Thank you, Melissa. Good morning, and welcome to today's call. With me today are Matt Lucey, our Executive Vice President; Erik Young, our CFO; and several other members of the partnership's senior management team. If you'd like a copy of our earnings release, it is available on our website.

[Matt Lucey:]

Thanks, Colin. Good morning, everyone. Even with 2020 now behind us, the pandemic continues to present near-term challenges even as we see signs of improvement in terms of progress of vaccine rollouts and the prospect of eventually being able to return to a more normal daily routine. Despite the challenges PBF Logistics continues to operate well as can be seen in the consistency of our earnings in 2020. Our assets operated well and we were able to reduce operating and capital expenses. We have seen an overall modest decline in throughput levels, but much less than what we -- much less than what can be seen in the drop in demand nationally for the products we move, store and deliver. One of the highlights of the year was the processing agreement at our East Coast Storage Assets with Maersk. We were able to support Maersk for the duration of the one-year agreement. However, as a result of the pandemic, Maersk did not extend the agreement beyond its initial term, which ended in the fourth quarter. That being said, Maersk remains a valued customer and we continue to provide processing services on a spot basis. Last October, our sponsor and partner, PBF Energy announced a strategic restructuring of its East Coast Refining System, whereby, the Paulsboro refinery idled several major processing units and expected output for the refinery will decrease. For 2021, the impact of this configuration change is expected to equate to less than 1% of partnership EBITDA. Going forward with changes I just mentioned, we expect partnership revenues for 2021 to be in the $330 million to $350 million range. With 2021 EBITDA in the $210 million to $220 million range. This will allow the partnership to maintain healthy distribution coverage and continue generating ample cash flow to delever the business.

[Erik Young:]

Thank you, Matt. Good morning, everyone, and thank you for joining us on today's call. We reported fourth quarter net income attributable to the limited partners of $31 million. Adjusted partnership EBITDA was $58.5 million, which includes roughly $3 million of transaction-related expenses, non-cash unit-based comp and environmental remediation costs associated with the East Coast terminals. During the quarter, we spent roughly $1.1 million in maintenance CapEx and incurred $2.7 million in total CapEx. Our 2020 total CapEx was $12.3 million. For 2021, we currently expect the CapEx to be approximately $15 million. We ended the quarter with approximately $331 million in liquidity, including a cash balance of $36 million and approximately $295 million of availability under our revolving credit facility. During the quarter, we repaid roughly $13 million on our revolver. Net debt to annualized adjusted EBITDA was 2.9 times. We expect to continue using excess cash to improve leverage ratios and strengthen our balance sheet. Operator, we've concluded our opening remarks. And now we'll open the call for questions.

[Operator:]

Thank you. At this time we’ll be conducting a question-and-answer session. Our first question comes from the line of Spiro Dounis with Credit Suisse.

[Spiro Dounis:]

Hey. Good morning, guys. Thanks for taking the question. I wanted to start off with just options around burning through the remaining challenging environment here as we could sort of get back to normal. And Matt, I know in the past you talked about or saying all options are more or less on the table as you think about different options between PBF and PBFX. And so, curious as time has gone on and the vaccine is out and things have maybe improved narrowly. Can you narrow the bands on what some of the options are and perhaps, exclude some of the things you were thinking about in the past?

[Matt Lucey:]

No. Not necessarily. I would describe it -- clearly, in the eye of the storm, we did not make any strategic decisions that alter the course of the company. I absolutely believe we're now in a position where every day the world will get a bit healthier than it was the day before. And as a result, there will be sort of daily improvements to our industry.

[Spiro Dounis:]

Got it. Got it. Okay. I appreciate that. Second one, I wasn't able to listen to the PBF call, but I understand that the Chalmette Refinery was maybe mentioned as a potential candidate for renewable diesel conversion. I believe you got a pretty sizable crude storage contract there still a few years left on it. Can you walk through any potential impact to PBFX? And if that were to convert to renewable diesel?

[Matt Lucey:]

Well just to be clear, so everyone listening to this call, it wasn't converting the refinery to a renewable diesel project. There's a stand-alone renewable diesel prospective project at Chalmette that would not impact. Certainly, it would impact the crude contract between PBF or PBFX, it wouldn't impact any of the refining operations. So if you then extend the question is okay, well will not affect PBF and PBFX contracts or based refining operations, is there a pathway for PBFX to participate in the project in some way? And the answer to that is, it's possible, but we're still in the early stages of development. But it's certainly possible and PBFX once you get into that arena you have to be careful about what's qualified income and what's not qualified income. But PBF has a clean slate in regards to non-qualified income, with our non-qualified income at zero. So we have some flexibility, if we want to use PBFX, but it's way too early in that process to be talking about that at this point.

[Spiro Dounis:]

Got it. Thanks for the clarification, Matt. Do your best.

[Matt Lucey:]

Thanks. Okay.

[Operator:]

Thank you. Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to Mr. Lucey for any final comments.

[Matt Lucey:]

Well I appreciate it. And as I just mentioned, we look forward to the world getting healthier every single day and by extension that will certainly extend to our industry. And we look forward to speaking to you next quarter. Thank you very much.

[Operator:]

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.