PBF ENERGY : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the audited financial statements
of PBF Energy and PBF LLC included in the Annual Report on Form 10-K for the
year ended December 31, 2019 and the unaudited financial statements and related
notes included in this report. The following discussion contains
"forward-looking statements" that reflect our future plans, estimates, beliefs
and expected performance. Our actual results may differ materially from those
currently anticipated and expressed in such forward-looking statements as a
result of a number of factors. We caution that assumptions, expectations,
projections, intentions or beliefs about future events may, and often do, vary
from actual results and the differences can be material. Please see "Cautionary
Note Regarding Forward-Looking Statements."
PBF Energy is the sole managing member of, and owner of an equity interest
representing approximately 99.2% of the outstanding economic interests in PBF
LLC as of September 30, 2020. PBF LLC is a holding company for the companies
that directly and indirectly own and operate our business. PBF Holding is a
wholly-owned subsidiary of PBF LLC and PBF Finance is a wholly-owned subsidiary
of PBF Holding. As of September 30, 2020, PBF LLC also holds a 48.0% limited
partner interest and a non-economic general partner interest in PBFX, a
publicly-traded MLP.
Unless the context indicates otherwise, the terms "we," "us," and "our" refer to
PBF Energy and its consolidated subsidiaries, including PBF LLC, PBF Holding and
its subsidiaries and PBFX and its subsidiaries. Discussions on areas that either
apply only to PBF Energy or PBF LLC are clearly noted in such sections.

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Overview

We are one of the largest independent petroleum refiners and suppliers of
unbranded transportation fuels, heating oil, petrochemical feedstocks,
lubricants and other petroleum products in the United States. We sell our
products throughout the Northeast, Midwest, Gulf Coast and West Coast of the
United States, as well as in other regions of the United States, Canada and
Mexico and are able to ship products to other international destinations. As of
September 30, 2020, we own and operate six domestic oil refineries and related
assets with a combined processing capacity, known as throughput, of
approximately 1,050,000 barrels per day ("bpd"), and a weighted-average Nelson
Complexity Index of 12.8. We operate in two reportable business segments:
Refining and Logistics. Our six oil refineries are all engaged in the refining
of crude oil and other feedstocks into petroleum products, and are aggregated
into the Refining segment. PBFX operates certain logistics assets such as crude
oil and refined petroleum products terminals, pipelines, and storage facilities,
which are aggregated into the Logistics segment.
Our six refineries are located in Delaware City, Delaware, Paulsboro, New
Jersey, Toledo, Ohio, Chalmette, Louisiana, Torrance, California and Martinez,
California. Each refinery is briefly described in the table below:
                                                                    Throughput Capacity (in
Refinery           Region                Nelson Complexity Index    bpd)                    PADD      Crude Processed (1)       Source (1)
                                                                                                      light sweet through heavy
Delaware City      East Coast            11.3                       190,000                 1         sour                      water, rail
                                                                                                      light sweet through heavy
Paulsboro          East Coast            13.2                       180,000                 1         sour                      water
Toledo             Mid-Continent         9.2                        170,000                 2         light sweet               pipeline, truck, rail
                                                                                                      light sweet through heavy
Chalmette          Gulf Coast            12.7                       189,000                 3         sour                      water, pipeline
Torrance           West Coast            14.9                       155,000                 5         medium and heavy          pipeline, water, truck
Martinez           West Coast            16.1                       157,000                 5         medium and heavy          pipeline and water


________
(1) Reflects the typical crude and feedstocks and related sources utilized under
normal operating conditions and prevailing market environments.
As of September 30, 2020, PBF Energy owned 120,172,826 PBF LLC Series C Units
and our current and former executive officers and directors and certain
employees and others held 970,647 PBF LLC Series A Units (we refer to all of the
holders of the PBF LLC Series A Units as "the members of PBF LLC other than PBF
Energy"). As a result, the holders of our issued and outstanding shares of our
PBF Energy Class A common stock have approximately 99.2% of the voting power in
us, and the members of PBF LLC other than PBF Energy through their holdings of
Class B common stock have approximately 0.8% of the voting power in us (99.0%
and 1.0% as of December 31, 2019, respectively).
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Business Developments
Recent significant business developments affecting us are discussed below.
COVID-19
The outbreak of the COVID-19 pandemic and certain developments in the global oil
markets continue to negatively impact worldwide economic and commercial activity
and financial markets, as well as global demand for petroleum and petrochemical
products. The COVID-19 pandemic and related governmental responses have also
resulted in significant business and operational disruptions, including business
and school closures, supply chain disruptions, travel restrictions, stay-at-home
orders and limitations on the availability of workforces and has resulted in
significantly lower demand for refined petroleum products. We believe, but
cannot guarantee, that demand for refined petroleum products will ultimately
rebound as governmental restrictions are lifted. However, the ultimate
significance of the COVID-19 pandemic on our business will be dictated by its
currently unknowable duration and the rate at which people are willing and able
to resume activities even after governmental restrictions are lifted. In
addition, recent global geopolitical and macroeconomic events have further
contributed to the overall volatility in crude oil and refined product prices
and may continue to do so in the future.
The price of refined products we sell and the crude oil we purchase impacts our
revenues, income from operations, net income and cash flows. In addition, a
decline in the market prices for products and feedstocks held in our inventories
below the carrying value of our inventory may result in the adjustment of the
value of our inventories to the lower market price and a corresponding loss on
the value of our inventories, and any such adjustment is likely to be material.
We are actively responding to the impacts from these matters on our business. In
late March and through early April 2020, we started reducing the amount of crude
oil processed at our refineries in response to the decreased demand for our
products and we temporarily idled various units at certain of our refineries to
optimize our production in light of prevailing market conditions. Currently, our
refineries are still operating at reduced throughput levels across our refining
system as demand for refined products continues to be lower than historical
norms due to the COVID-19 pandemic.
As previously announced, we have adjusted our operational plans to the evolving
market conditions and taken steps to lower our 2020 operating expenses budget
through significant reductions in discretionary activities and third party
services. We continue to target and execute these expense reduction measures.
Through the end of the third quarter, we exceeded our full-year goal of $140.0
million in total operating expense reductions by achieving over $225.0 million
in reductions, including energy. While some of these savings are a result of
reduced operational tempo, the majority are deliberate operating and other
expense reductions. In addition, we continue to operate our refineries at
reduced rates and expect near-term throughput to range from 700,000 to 800,000
barrels across our refining system. As the market conditions develop and the
demand outlook becomes clearer, we will continue to adjust our operations in
response.
On October 29, 2020, we announced an operational reconfiguration of our East
Coast refining system comprised of our Delaware City and Paulsboro refineries.
As part of the reconfiguration, the Paulsboro refinery will be idling certain of
their major processing units. The reconfiguration is expected to be complete by
year-end 2020 with future East Coast throughput capacity expected to be
approximately 260,000 barrels per day, depending on market conditions. Annual
operating and capital expenditures savings are expected to be approximately
$100.0 million and $50.0 million, respectively, relative to average historic
levels. As a result of the reconfiguration, we expects to incur charges in the
fourth quarter of 2020 of approximately $15.0 million related to severance and
employee related expenses.
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In addition to the steps above with respect to our operations, we also have
continued our focus on preserving liquidity and keeping our employees safe. We
previously disclosed several transactions and initiatives related to these areas
which included raising net proceeds of approximately $982.9 million in
conjunction with our May issuance of 9.25% senior secured notes due 2025 (the
"2025 Senior Secured Notes"), the sale of five hydrogen plants in April for
gross proceeds of $530.0 million, significant reductions of approximately $357.0
million in 2020 planned capital expenditures, minimizing corporate overhead
expenses primarily through temporary salary reductions, the suspension of PBF
Energy's quarterly dividend and the establishment of a company wide COVID-19
response team.
We continue to evaluate various other liquidity and cash flow optimization
options in addition to safely and responsibly bringing back our workforce to the
refineries and corporate office locations. As part of these cost saving
initiatives, we reduced our workforce across our refineries in the second
quarter in response to current challenging business conditions, which resulted
in a $12.9 million charge. We have also continued to utilize our COVID-19
response team to implement additional social distancing measures across the
workplace in addition to the continued enhancement of personal protective
equipment and the cleanliness of our facilities. Through the guidance of our
COVID-19 response team, we have started to bring back a portion of our workforce
to their primary locations on a phased in approach, and we will continue to rely
on our team and the evolution of the COVID-19 pandemic as we evaluate the
appropriate time and way in which we will phase in the return of the rest of our
workforce.
Many uncertainties remain with respect to the COVID-19 pandemic, including the
extent to which the COVID-19 pandemic will continue to impact our business and
operations, the effectiveness of the actions undertaken by national, regional,
state and local governments and health officials to contain the virus or treat
its effects, and how quickly and to what extent economic conditions improve and
normal business and operating conditions resume. We are unable to predict the
ultimate economic impacts from the COVID-19 pandemic, however, we have been and
will likely continue to be adversely impacted. There can be no guarantee that
measures taken to date to mitigate known impacts of the COVID-19 pandemic will
be effective.
Refer to "Liquidity" and "Part II - Other Information - Item 1A. Risk Factors"
for further information.

Factors Affecting Comparability Between Periods
Our results have been affected by the following events, the understanding of
which will aid in assessing the comparability of our period to period financial
performance and financial condition.
COVID-19
The impact of the unprecedented global health and economic crisis sparked by the
COVID-19 pandemic was amplified late in the quarter ended March 31, 2020 due to
movements made by the world's largest oil producers to increase market share.
This created simultaneous shocks in oil supply and demand resulting in an
economic challenge to our industry which has not occurred since our formation.
This combination has resulted in significant demand reduction for our refined
products and atypical volatility in oil commodity prices, which may continue for
the foreseeable future. Our results for the three and nine months ended
September 30, 2020 were impacted by the sustained decreased demand for refined
products and the significant decline in the price of crude oil, both of which
negatively impacted our revenues, cost of products sold and operating income and
lowered our liquidity. Throughput rates across our refining system also
decreased and we are currently operating our refineries at reduced rates. Refer
to "Item 1A. Risk Factors" included in "Part II - Other Information" of this
Form 10-Q for further information.
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Tax Receivable Agreement
As of September 30, 2020, PBF Energy has recognized a liability for the Tax
Receivable Agreement of $132.9 million ($373.5 million as of December 31, 2019)
reflecting the estimate of the undiscounted amounts that the Company expects to
pay under the agreement, net of the impact of a deferred tax asset valuation
allowance recognized in accordance with ASC 740, Income Taxes. As future taxable
income is recognized, increases in our Tax Receivable Agreement liability may be
necessary in conjunction with the revaluation of deferred tax assets. Refer to
"Note 9 - Commitments and Contingencies" and "Note 15 - Income Taxes" for more
details.
Severance Costs
Following the onset of the COVID-19 pandemic, we have implemented a number of
cost reduction initiatives to strengthen our financial flexibility and
rationalize overhead expenses, including reductions in our workforce. During the
second quarter of 2020, we reduced headcount across our refineries, which
resulted in approximately $12.9 million of severance related costs included in
General and administrative expenses.
Sale of Hydrogen Plants
On April 17, 2020, we closed on the sale of five hydrogen plants to Air Products
and Chemicals, Inc. ("Air Products") in a sale-leaseback transaction for gross
cash proceeds of $530.0 million and recognized a gain of $471.1 million. In
connection with the sale, we entered into a transition services agreement
through which Air Products will exclusively supply hydrogen, steam, carbon
dioxide and other products (the "Products") to the Martinez, Torrance and
Delaware City refineries for a specified period (not expected to exceed 18
months). The transition services agreement also requires certain maintenance and
operating activities to be provided by PBF Holding, for which we will be
reimbursed, during the term of the agreement. In August 2020, the parties
executed long-term supply agreements through which Air Products will supply the
Products for a term of fifteen years at these same refineries.
Debt and Credit Facilities
Catalyst Financing Obligations
On September 25, 2020, we closed on agreements to sell a portion of our precious
metals catalyst to certain major commercial banks for approximately $51.9
million and subsequently leased the catalyst back. The precious metals financing
arrangements cover a portion of the catalyst used at our Delaware City, Martinez
and Toledo refineries. The volumes of the precious metal catalyst and the
interest rates are fixed over the term of each financing arrangement. At
maturity in 2021, we are obligated to repurchase the precious metals catalyst at
fair market value.
Senior Notes
On May 13, 2020, we issued $1.0 billion in aggregate principal amount of the
2025 Senior Secured Notes. The net proceeds from this offering were
approximately $982.9 million after deducting the initial purchasers' discount
and offering expenses. We used the net proceeds for general corporate purposes.
On January 24, 2020, we issued $1.0 billion in aggregate principal amount of
6.00% senior unsecured notes due 2028 (the "2028 Senior Notes"). The net
proceeds from this offering were approximately $987.0 million after deducting
the initial purchasers' discount and offering expenses. We used the proceeds
primarily to fully redeem our 7.00% senior notes due 2023 (the "2023 Senior
Notes") and to fund a portion of the cash consideration for the Martinez
Acquisition (as defined below).
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On February 14, 2020, we exercised our rights under the indenture governing the
2023 Senior Notes to redeem all of the outstanding 2023 Senior Notes at a price
of 103.5% of the aggregate principal amount thereof plus accrued and unpaid
interest. The aggregate redemption price for all 2023 Senior Notes approximated
$517.5 million plus accrued and unpaid interest. The difference between the
carrying value of the 2023 Senior Notes on the date they were redeemed and the
amount for which they were redeemed was $22.2 million and has been classified as
Debt extinguishment costs in the Condensed Consolidated Statement of Operations
as of September 30, 2020.
Refer to "Note 7 - Debt" of our Notes to Condensed Consolidated Financial
Statements, for further information.
Revolving Credit Facility
During the nine months ended September 30, 2020, we used advances under our PBF
Holding's asset-based revolving credit agreement (the "Revolving Credit
Facility") to fund a portion of the Martinez Acquisition (as defined below) and
for other general corporate purposes. The outstanding borrowings under the
Revolving Credit Facility as of September 30, 2020 were $900.0 million. There
were no outstanding borrowings under the Revolving Credit Facility as of
December 31, 2019.
PBFX Revolving Credit Facility
During the nine months ended September 30, 2020, we made net repayments of
$70.0 million on the PBFX Revolving Credit Facility, resulting in outstanding
borrowings as of September 30, 2020 of $213.0 million. There was $283.0 million
of outstanding borrowings under the PBFX five-year, $500.0 million amended and
restated revolving credit facility (the "PBFX Revolving Credit Facility") as of
December 31, 2019.
Martinez Acquisition
On February 1, 2020, we acquired from Equilon Enterprises LLC d/b/a Shell Oil
Products US (the "Seller"), the Martinez refinery and related logistics assets
(collectively, the "Martinez Acquisition"), pursuant to a sale and purchase
agreement dated June 11, 2019 (the "Sale and Purchase Agreement"). The Martinez
refinery is located on an 860-acre site in the City of Martinez, 30 miles
northeast of San Francisco, California. The refinery is a high-conversion
157,000 bpd, dual-coking facility with a Nelson Complexity Index of 16.1, making
it one of the most complex refineries in the United States. The facility is
strategically positioned in Northern California and provides for operating and
commercial synergies with the Torrance refinery located in Southern California.
The Martinez Acquisition further increased our total throughput capacity to over
1,000,000 bpd.
In addition to refining assets, the Martinez Acquisition includes a number of
high-quality onsite logistics assets including a deep-water marine facility,
product distribution terminals and refinery crude and product storage facilities
with approximately 8.8 million barrels of shell capacity.
The aggregate purchase price for the Martinez Acquisition was $1,253.4 million,
including final working capital of $216.1 million and the obligation to make
post-closing earn-out payments to the Seller based on certain earnings
thresholds of the Martinez refinery (as set forth in the Sale and Purchase
Agreement), for a period of up to four years following the closing date (the
"Martinez Contingent Consideration"). The transaction was financed through a
combination of cash on hand, including proceeds from the 2028 Senior Notes, and
borrowings under the Revolving Credit Facility.
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Torrance Land Sale
On August 1, 2019, we closed on a third-party sale of parcels of real property
acquired as part of the Torrance refinery, but not part of the refinery itself.
The sale resulted in a gain of approximately $33.1 million in the third quarter
of 2019, included within Gain on sale of assets in the Condensed Consolidated
Statements of Operations.
PBFX Equity Offering
On April 24, 2019, PBFX entered into subscription agreements to sell an
aggregate of 6,585,500 common units to certain institutional investors in a
registered direct public offering (the "2019 Registered Direct Offering") for
gross proceeds of approximately $135.0 million. The 2019 Registered Direct
Offering closed on April 29, 2019.
PBFX Assets and Transactions
PBFX's assets consist of various logistics assets. Apart from business
associated with certain third-party acquisitions, PBFX's revenues are derived
from long-term, fee-based commercial agreements with subsidiaries of PBF
Holding, which include minimum volume commitments, for receiving, handling,
transferring and storing crude oil, refined products and natural gas. These
transactions are eliminated by PBF Energy and PBF LLC in consolidation.
Since the inception of PBFX in 2014, PBF LLC and PBFX have entered into a series
of drop-down transactions. Such transactions and third-party acquisitions made
by PBFX in the current or prior periods are discussed below.
TVPC Acquisition
On April 24, 2019, PBFX entered into a contribution agreement with PBF LLC,
pursuant to which PBF LLC contributed to PBFX all of the issued and outstanding
limited liability company interests of TVP Holding Company LLC ("TVP Holding")
for total consideration of $200.0 million (the "TVPC Acquisition"). Prior to the
TVPC Acquisition, TVP Holding owned a 50% membership interest in Torrance Valley
Pipeline Company LLC ("TVPC"). Subsequent to the closing of the TVPC Acquisition
on May 31, 2019, PBFX owns 100% of the membership interests in TVPC. The
transaction was financed through a combination of proceeds from the 2019
Registered Direct Offering and borrowings under the PBFX Revolving Credit
Facility.
PBFX IDR Restructuring
On February 28, 2019, PBFX closed on the transaction contemplated by the Equity
Restructuring Agreement with PBF LLC and PBF Logistics GP LLC ("PBF GP"),
pursuant to which PBFX's incentive distribution rights (the "IDRs") held by PBF
LLC were canceled and converted into 10,000,000 newly issued PBFX common units
(the "IDR Restructuring"). Subsequent to the closing of the IDR Restructuring,
no distributions were made to PBF LLC with respect to the IDRs and the newly
issued PBFX common units are entitled to normal distributions by PBFX.
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Results of Operations
The tables below reflect our consolidated financial and operating highlights for
the three and nine months ended September 30, 2020 and 2019 (amounts in
millions, except per share data). Differences between the results of operations
of PBF Energy and PBF LLC primarily pertain to income taxes, interest expense
and noncontrolling interest as shown below. Earnings per share information
applies only to the financial results of PBF Energy. We operate in two
reportable business segments: Refining and Logistics. Our oil refineries,
excluding the assets owned by PBFX, are all engaged in the refining of crude oil
and other feedstocks into petroleum products, and are aggregated into the
Refining segment. PBFX is a publicly-traded MLP that operates certain logistics
assets such as crude oil and refined petroleum products terminals, pipelines and
storage facilities. PBFX's operations are aggregated into the Logistics segment.
We do not separately discuss our results by individual segments as, apart from
PBFX's third-party acquisitions, our Logistics segment did not have any
significant third-party revenues and a significant portion of its operating
results eliminate in consolidation.

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PBF Energy                                     Three Months Ended September 30,           Nine Months Ended September 30,
                                                   2020                2019                  2020                   2019
Revenues                                       $  3,667.5          $ 6,430.5          $       11,460.8          $ 18,206.7

Cost and expenses:
Cost of products and other                        3,378.6            5,700.2                  11,095.0            15,865.2
Operating expenses (excluding depreciation and
amortization expense as reflected below)            471.9              436.5                   1,445.7             1,348.7
Depreciation and amortization expense               130.3              107.7                     369.3               314.9
Cost of sales                                     3,980.8            6,244.4                  12,910.0            17,528.8
General and administrative expenses (excluding
depreciation and amortization expense as
reflected below)                                     46.6               64.7                     187.0               175.9
Depreciation and amortization expense                 2.7                2.1                       8.4                 7.8
Change in fair value of contingent
consideration                                       (28.6)                 -                     (93.5)                  -
Impairment expense                                    7.0                  -                       7.0                   -
Loss (gain) on sale of assets                         1.7              (32.6)                   (469.4)              (31.8)
Total cost and expenses                           4,010.2            6,278.6                  12,549.5            17,680.7

Income (loss) from operations                      (342.7)             151.9                  (1,088.7)              526.0
Other income (expense):
Interest expense, net                               (70.4)             (39.7)                   (185.1)             (121.3)
Change in Tax Receivable Agreement liability        252.2                  -                     240.6                   -
Change in fair value of catalyst obligations         (2.4)              (3.8)                      4.2                (6.4)
Debt extinguishment costs                               -                  -                     (22.2)                  -
Other non-service components of net periodic
benefit (cost)                                        1.1               (0.1)                      3.2                (0.2)
Income (loss) before income taxes                  (162.2)             108.3                  (1,048.0)              398.1
Income tax expense (benefit)                        235.6               22.0                      (0.7)               92.0
Net income (loss)                                  (397.8)              86.3                  (1,047.3)              306.1
Less: net income attributable to
noncontrolling interests                             19.4               16.8                      46.7                39.7
Net income (loss) attributable to PBF Energy
Inc. stockholders                              $   (417.2)         $    

69.5 $ (1,094.0) $ 266.4

Consolidated gross margin                      $   (313.3)         $   

186.1 $ (1,449.2) $ 677.9

Gross refining margin (1)                      $    203.1          $   

647.6 $ 108.0 $ 2,106.6

Net income (loss) available to Class A common
stock per share:
Basic                                          $    (3.49)         $    0.58          $          (9.15)         $     2.22
Diluted                                        $    (3.49)         $    0.57          $          (9.15)         $     2.20

(1) See Non-GAAP Financial Measures.

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PBF LLC                                        Three Months Ended September 30,           Nine Months Ended September 30,
                                                   2020                2019                  2020                   2019
Revenues                                       $  3,667.5          $ 6,430.5          $       11,460.8          $ 18,206.7

Cost and expenses:
Cost of products and other                        3,378.6            5,700.2                  11,095.0            15,865.2
Operating expenses (excluding depreciation and
amortization expense as reflected below)            471.9              436.5                   1,445.7             1,348.7
Depreciation and amortization expense               130.3              107.7                     369.3               314.9
Cost of sales                                     3,980.8            6,244.4                  12,910.0            17,528.8
General and administrative expenses (excluding
depreciation and amortization expense as
reflected below)                                     46.4               64.3                     186.5               174.8
Depreciation and amortization expense                 2.7                2.1                       8.4                 7.8
Change in fair value of contingent
consideration                                       (28.6)                 -                     (93.5)                  -
Impairment expense                                    7.0                  -                       7.0                   -
Loss (gain) on sale of assets                         1.7              (32.6)                   (469.4)              (31.8)
Total cost and expenses                           4,010.0            6,278.2                  12,549.0            17,679.6

Income (loss) from operations                      (342.5)             152.3                  (1,088.2)              527.1

Other income (expense):
Interest expense, net                               (73.0)             (42.3)                   (192.8)             (128.3)
Change in fair value of catalyst obligations         (2.4)              (3.8)                      4.2                (6.4)
Debt extinguishment costs                               -                  -                     (22.2)                  -
Other non-service components of net periodic
benefit (cost)                                        1.1               (0.1)                      3.2                (0.2)
Income (loss) before income taxes                  (416.8)             106.1                  (1,295.8)              392.2
Income tax (benefit) expense                         (1.2)              (2.0)                      8.6                (7.4)
Net income (loss)                                  (415.6)             108.1                  (1,304.4)              399.6
Less: net income attributable to
noncontrolling interests                             22.8               16.0                      60.3                36.1
Net income (loss) attributable to PBF Energy
Company LLC                                    $   (438.4)         $    92.1          $       (1,364.7)         $    363.5




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Operating Highlights                         Three Months Ended September 

30, Nine Months Ended September 30,

                                                  2020                2019                2020                2019
Key Operating Information
Production (bpd in thousands)                     716.7               863.0               750.2               817.9
Crude oil and feedstocks throughput (bpd in
thousands)                                        706.1               850.9               744.6               816.4
Total crude oil and feedstocks throughput
(millions of barrels)                              65.0                78.3               204.0               222.9
Consolidated gross margin per barrel of
throughput                                   $    (4.82)           $   2.38          $    (7.10)           $   3.04
Gross refining margin, excluding special
items, per barrel of throughput (1)          $     2.98            $   8.87          $     3.92            $   8.21
Refinery operating expense, per barrel of
throughput                                   $     6.96            $   5.26          $     6.78            $   5.72

Crude and feedstocks (% of total throughput)
(2)
Heavy                                                43    %             32  %               43    %             31  %
Medium                                               25    %             30  %               26    %             30  %
Light                                                18    %             25  %               17    %             25  %
Other feedstocks and blends                          14    %             13  %               14    %             14  %
Total throughput                                    100    %            100  %              100    %            100  %

Yield (% of total throughput)
Gasoline and gasoline blendstocks                    54    %             50  %               50    %             48  %
Distillates and distillate blendstocks               28    %             33  %               31    %             32  %
Lubes                                                 1    %              1  %                1    %              1  %
Chemicals                                             1    %              2  %                1    %              2  %
Other                                                18    %             15  %               18    %             17  %
Total yield                                         102    %            101  %              101    %            100  %






(1)  See Non-GAAP Financial Measures.
(2)  We define heavy crude oil as crude oil with American Petroleum Institute
("API") gravity less than 24 degrees. We define medium crude oil as crude oil
with API gravity between 24 and 35 degrees. We define light crude oil as crude
oil with API gravity higher than 35 degrees.
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The table below summarizes certain market indicators relating to our operating results as reported by Platts.

                                                 Three Months Ended 

September

                                                              30,                     Nine Months Ended September 30,
                                                    2020               2019               2020               2019
                                                                (dollars per barrel, except as noted)
Dated Brent crude oil                           $    43.05          $  61.86          $    40.74          $  64.71
West Texas Intermediate (WTI) crude oil         $    40.91          $  56.40          $    38.12          $  57.08
Light Louisiana Sweet (LLS) crude oil           $    42.46          $  60.60          $    40.13          $  63.35
Alaska North Slope (ANS) crude oil              $    42.75          $  62.98          $    41.32          $  65.23
Crack Spreads
Dated Brent (NYH) 2-1-1                         $     8.30          $  14.72          $     9.30          $  12.73
WTI (Chicago) 4-3-1                             $     7.08          $  16.51          $     6.56          $  16.69
LLS (Gulf Coast) 2-1-1                          $     6.53          $  14.32          $     7.79          $  12.32
ANS (West Coast-LA) 4-3-1                       $    11.70          $  18.81          $    11.41          $  18.49
ANS (West Coast-SF) 3-2-1                       $    10.88          $  18.38          $     9.77          $  17.20
Crude Oil Differentials
Dated Brent (foreign) less WTI                  $     2.14          $   5.46          $     2.62          $   7.63
Dated Brent less Maya (heavy, sour)             $     3.88          $   6.36          $     5.95          $   5.58
Dated Brent less WTS (sour)                     $     2.09          $   6.01          $     2.72          $   8.76
Dated Brent less ASCI (sour)                    $     1.38          $   2.98          $     1.99          $   3.11
WTI less WCS (heavy, sour)                      $     9.29          $  12.79          $    10.58          $  11.78
WTI less Bakken (light, sweet)                  $     1.23          $   0.74          $     2.57          $   0.53
WTI less Syncrude (light, sweet)                $     1.94          $  (0.89)         $     1.58          $  (0.30)
WTI less LLS (light, sweet)                     $    (1.55)         $  (4.20)         $    (2.01)         $  (6.27)
WTI less ANS (light, sweet)                     $    (1.84)         $  (6.58)         $    (3.20)         $  (8.15)
Natural gas (dollars per MMBTU)                 $     2.12          $   

2.33 $ 1.92 $ 2.56

Three Months Ended September 30, 2020 Compared to the Three Months Ended
September 30, 2019
Overview- PBF Energy net loss was $397.8 million for the three months ended
September 30, 2020 compared to net income of $86.3 million for the three months
ended September 30, 2019. PBF LLC net loss was $415.6 million for the three
months ended September 30, 2020 compared to net income of $108.1 million for the
three months ended September 30, 2019. Net loss attributable to PBF Energy was
$417.2 million, or $(3.49) per diluted share, for the three months ended
September 30, 2020 ($(3.49) per share on a fully-exchanged, fully-diluted basis
based on adjusted fully-converted net loss, or $(2.87) per share on a
fully-exchanged, fully-diluted basis based on adjusted fully-converted net loss
excluding special items, as described below in Non-GAAP Financial Measures)
compared to net income attributable to PBF Energy of $69.5 million, or $0.57 per
diluted share, for the three months ended September 30, 2019 ($0.57 per share on
a fully-exchanged, fully-diluted basis based on adjusted fully-converted net
income, or $0.66 per share on a fully-exchanged, fully-diluted basis based on
adjusted fully-converted net income excluding special items, as described below
in Non-GAAP Financial Measures). The net loss attributable to PBF Energy
represents PBF Energy's equity interest in PBF LLC's pre-tax income, less
applicable income tax expense. PBF Energy's weighted-average equity interest in
PBF LLC was 99.2% and 99.0% for the three months ended September 30, 2020 and
2019, respectively.
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Our results for the three months ended September 30, 2020 were positively
impacted by special items consisting of a non-cash, pre-tax lower of cost or
market ("LCM") inventory adjustment of approximately $9.9 million, or $7.3
million net of tax, a change in fair value of the contingent consideration
associated with earn-out obligations related to both the Martinez Acquisition
and PBFX CPI acquisition, of $28.6 million, or $21.1 million net of tax and a
pre-tax benefit of $252.2 million, or $185.9 million net of tax, related to the
change in our Tax Receivable Agreement liability (as defined in "Note 9 -
Commitments and Contingencies" of our Notes to Condensed Consolidated Financial
Statements). Our results for the three months ended September 30, 2020 were
negatively impacted by impairment expense of $7.0 million, or $5.2 million net
of tax, related to the write-down of certain PBFX long-lived assets and a net
tax expense of $282.3 million associated with the remeasurement of certain
deferred tax assets. Our results for the three months ended September 30, 2019
were negatively impacted by a special item consisting of a pre-tax LCM inventory
adjustment of approximately $47.0 million, or $34.6 million net of tax,
partially offset by a pre-tax gain on the sale of land at our Torrance refinery
of $33.1 million, or $24.3 million net of tax. The LCM inventory adjustments
were recorded due to movements in the price of crude oil and refined products in
the periods presented.
Excluding the impact of these special items, our results were negatively
impacted by the ongoing COVID-19 pandemic which has caused a significant decline
in the demand for our refined products and a decrease in the prices for crude
oil and refined products, both of which have negatively impacted our revenues,
cost of products sold and operating income. In addition, during the current
quarter we experienced unfavorable movements in certain crude differentials, and
overall lower throughput volumes and barrels sold across our refineries, as well
as lower refining margins. All of our operating regions experienced lower
refining margins for the three months ended September 30, 2020 compared to the
three months ended September 30, 2019. Additionally, our results for the three
months ended September 30, 2020 were negatively impacted by increased
depreciation and amortization expense associated with the Martinez Acquisition
and our continued investment in our refining assets.
Revenues- Revenues totaled $3.7 billion for the three months ended September 30,
2020 compared to $6.4 billion for the three months ended September 30, 2019, a
decrease of approximately $2.7 billion, or 42.2%. Revenues per barrel were
$49.57 and $69.85 for the three months ended September 30, 2020 and 2019,
respectively, a decrease of 29.0% directly related to lower hydrocarbon
commodity prices. For the three months ended September 30, 2020, the total
throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast
refineries averaged approximately 251,400 bpd, 108,400 bpd, 125,600 bpd and
220,700 bpd, respectively. For the three months ended September 30, 2019, the
total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West
Coast refineries averaged approximately 357,200 bpd, 151,100 bpd, 178,000 bpd
and 164,600 bpd, respectively. For the three months ended September 30, 2020,
the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West
Coast refineries averaged approximately 287,500 bpd, 118,000 bpd, 137,400 bpd
and 261,200 bpd, respectively. For the three months ended September 30, 2019,
the total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West
Coast refineries averaged approximately 413,900 bpd, 163,300 bpd, 223,700 bpd
and 199,600 bpd, respectively.
The throughput rates at our refineries were lower in the three months ended
September 30, 2020 compared to the same period in 2019. Our Martinez refinery
was not acquired until the first quarter of 2020 and is therefore not included
in the prior period West Coast throughput. We operated our refineries at reduced
rates during the third quarter and, based on current market conditions, we plan
on continuing to operate our refineries at lower utilization until such time
that sustained product demand justifies higher production. Total refined product
barrels sold were higher than throughput rates, reflecting sales from inventory
as well as sales and purchases of refined products outside our refineries.
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Consolidated Gross Margin- Consolidated gross margin totaled $(313.3) million
for the three months ended September 30, 2020 compared to $186.1 million for the
three months ended September 30, 2019, a decrease of approximately $499.4
million. Gross refining margin (as described below in Non-GAAP Financial
Measures) totaled $203.1 million, or $3.13 per barrel of throughput for the
three months ended September 30, 2020 compared to $647.6 million, or $8.27 per
barrel of throughput for the three months ended September 30, 2019, a decrease
of approximately $444.5 million. Gross refining margin excluding special items
totaled $193.2 million or $2.98 per barrel of throughput for the three months
ended September 30, 2020 compared to $694.6 million or $8.87 per barrel of
throughput for the three months ended September 30, 2019, a decrease of $501.4
million.
Consolidated gross margin and gross refining margin were positively impacted by
a non-cash LCM adjustment of approximately $9.9 million on a net basis,
resulting from the increase in crude oil and refined product prices from the
second quarter in 2020 to the end of the third quarter of 2020. Gross refining
margin excluding the impact of special items decreased due to unfavorable
movements in crude differentials and refining margins and decreased throughput
rates across the majority of our refineries. For the three months ended
September 30, 2019, special items impacting our margin calculations included a
non-cash LCM inventory adjustment of approximately $47.0 million on a net basis,
resulting from a decrease in crude oil and refined product prices.
Additionally, our results continue to be impacted by significant costs to comply
with the Renewable Fuel Standard ("RFS"). Total RFS costs were $86.6 million for
the three months ended September 30, 2020 in comparison to $31.6 million for the
three months ended September 30, 2019.
Average industry margins and crude oil differentials were generally lower during
the three months ended September 30, 2020 in comparison to the same period in
2019, primarily due to the extent of the impacts of the COVID-19 pandemic on
regional demand and commodity prices.
On the East Coast, the Dated Brent (NYH) 2-1-1 industry crack spread was
approximately $8.30 per barrel, or 43.6% lower, in the three months ended
September 30, 2020, as compared to $14.72 per barrel in the same period in 2019.
Our margins were negatively impacted from our refinery specific slate on the
East Coast by tightening in the Dated Brent/Maya differentials, which decreased
by $2.48 per barrel, offset by an increase in the WTI/Bakken differentials of
$0.49 per barrel, in comparison to the same period in 2019. In addition, the
WTI/WCS differential decreased significantly to $9.29 per barrel in the three
months ended September 30, 2020 compared to $12.79 in the same period in 2019,
which unfavorably impacted the cost of heavy Canadian crude.
Across the Mid-Continent, the WTI (Chicago) 4-3-1 industry crack spread was
$7.08 per barrel, or 57.1% lower, in the three months ended September 30, 2020
as compared to $16.51 per barrel in the same period in 2019. Our margins were
positively impacted from our refinery specific slate in the Mid-Continent by an
increasing WTI/Bakken differential, which averaged $1.23 per barrel in the three
months ended September 30, 2020, as compared to $0.74 per barrel in the same
period in 2019. Additionally, the WTI/Syncrude differential averaged a discount
of $1.94 per barrel during the three months ended September 30, 2020 as compared
to a premium of $0.89 per barrel in the same period of 2019.
On the Gulf Coast, the LLS (Gulf Coast) 2-1-1 industry crack spread was $6.53
per barrel, or 54.4% lower, in the three months ended September 30, 2020 as
compared to $14.32 per barrel in the same period in 2019. Margins on the Gulf
Coast were positively impacted from our refinery specific slate by an increasing
WTI/LLS differential, which averaged a premium of $1.55 per barrel during the
three months ended September 30, 2020 as compared to a premium of $4.20 per
barrel in the same period of 2019.
On the West Coast the ANS (West Coast) 4-3-1 industry crack spread was $11.70
per barrel, or 37.8% lower, in the three months ended September 30, 2020 as
compared to $18.81 per barrel in the same period in 2019. Margins on the West
Coast were positively impacted from our refinery specific slate by a
strengthening WTI/ANS differential, which averaged a premium of $1.84 per barrel
during the three months ended September 30, 2020 as compared to a premium of
$6.58 per barrel in the same period of 2019.
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Favorable movements in these benchmark crude differentials typically result in
lower crude costs and positively impact our earnings while reductions in these
benchmark crude differentials typically result in higher crude costs and
negatively impact our earnings.
Operating Expenses- Operating expenses totaled $471.9 million for the three
months ended September 30, 2020 compared to $436.5 million for the three months
ended September 30, 2019, an increase of $35.4 million, or 8.1%. Of the total
$471.9 million of operating expenses for the three months ended September 30,
2020, $452.4 million, or $6.96 per barrel of throughput, related to expenses
incurred by the Refining segment, while the remaining $19.5 million related to
expenses incurred by the Logistics segment ($411.8 million, or $5.26 per barrel
of throughput, and $24.7 million of operating expenses for the three months
ended September 30, 2019 related to the Refining and Logistics segments,
respectively). Increases in operating expenses were mainly attributed to costs
associated with the Martinez refinery and related logistic assets which totaled
approximately $93.8 million for the three months ended September 30, 2020. Total
operating expenses for the three months ended September 30, 2020, excluding our
Martinez refinery, decreased due to our cost reduction initiatives taken to
strengthen our financial flexibility and offset the negative impact of COVID-19,
such as significant reductions in discretionary activities and third party
services. Operating expenses related to our Logistics segment decreased as a
result of lower discretionary spending, including maintenance and outside
service costs, in response to the COVID-19 pandemic, as well as lower utility
expenses due to lower energy usage.
General and Administrative Expenses- General and administrative expenses totaled
$46.6 million for the three months ended September 30, 2020 compared to $64.7
million for the three months ended September 30, 2019, a decrease of
approximately $18.1 million or 28.0%. The decrease in general and administrative
expenses for the three months ended September 30, 2020 in comparison to the
three months ended September 30, 2019 primarily related to a reduction in
overhead expenses through temporary salary reductions to a large portion of our
workforce. Our general and administrative expenses are comprised of personnel,
facilities and other infrastructure costs necessary to support our refineries
and related logistics assets.
Loss on Sale of Assets- There was a loss of $1.7 million for the three months
ended September 30, 2020 related to the sale of non-operating refinery assets.
There was a gain of $32.6 million on the sale of assets for the three months
ended September 30, 2019 mainly attributed to the sale of a parcel of land at
our Torrance refinery.
Depreciation and Amortization Expense- Depreciation and amortization expense
totaled $133.0 million for the three months ended September 30, 2020 (including
$130.3 million recorded within Cost of sales) compared to $109.8 million for the
three months ended September 30, 2019 (including $107.7 million recorded within
Cost of sales), an increase of $23.2 million. The increase was a result of
additional depreciation expense associated with the assets acquired in the
Martinez Acquisition and a general increase in our fixed asset base due to
capital projects and turnarounds completed since the third quarter of 2019.
Change in Fair Value of Contingent Consideration- Change in fair value of
contingent consideration was a gain of $28.6 million for the three months ended
September 30, 2020. This change represents the decrease in the estimated fair
value of the Martinez Contingent Consideration and the PBFX Contingent
Consideration (as defined in "Note 9 - Commitments and Contingencies" of our
Notes to Condensed Consolidated Financial Statements) associated with
acquisition related earn-out obligations. There were no such costs in the same
period of 2019.
Change in Fair Value of Catalyst Obligations- Change in fair value of catalyst
obligations represented a loss of $2.4 million for the three months ended
September 30, 2020 compared to a loss of $3.8 million for the three months ended
September 30, 2019. These losses relate to the change in value of the precious
metals underlying the sale and leaseback of our refineries' precious metal
catalysts, which we are obligated to repurchase at fair market value upon lease
termination.
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Impairment expense- Impairment expense totaled $7.0 million for the three months
ended September 30, 2020, resulting from an impairment charge related to the
write-down of certain PBFX long-lived assets.
Change in Tax Receivable Agreement Liability- Change in Tax Receivable Agreement
liability for the three months ended September 30, 2020 represented a gain of
$252.2 million. This gain was primarily the result of a deferred tax asset
valuation allowance recorded in accordance with ASC 740, Income Taxes related to
the reduction of deferred tax assets associated with the payments made or
expected to be made in connection with the Tax Receivable Agreement liability.
There was no change in the Tax Receivable Agreement liability for the three
months ended September 30, 2019.
Interest Expense, net- PBF Energy interest expense totaled $70.4 million for the
three months ended September 30, 2020 compared to $39.7 million for the three
months ended September 30, 2019, an increase of approximately $30.7 million.
This net increase is mainly attributable to higher interest costs associated
with the issuance of the 2028 Senior Notes in February 2020, the 2025 Senior
Secured Notes in May 2020 and higher outstanding borrowings on our Revolving
Credit Facility. Interest expense includes interest on long-term debt including
the PBFX credit facilities, costs related to the sale and leaseback of our
precious metal catalysts, financing costs associated with the Inventory
Intermediation Agreements with J. Aron, letter of credit fees associated with
the purchase of certain crude oils and the amortization of deferred financing
costs. PBF LLC interest expense totaled $73.0 million and $42.3 million for the
three months ended September 30, 2020 and September 30, 2019, respectively
(inclusive of $2.6 million and $2.6 million, respectively, of incremental
interest expense on the affiliate note payable with PBF Energy that eliminates
in consolidation at the PBF Energy level).
Income Tax Expense- PBF LLC is organized as a limited liability company and PBFX
is an MLP, both of which are treated as "flow-through" entities for federal
income tax purposes and therefore are not subject to income tax. However, two
subsidiaries of Chalmette Refining, L.L.C. ("Chalmette Refining") and our
Canadian subsidiary are treated as C-Corporations for income tax purposes and
may incur income taxes with respect to their earnings, as applicable. The
members of PBF LLC are required to include their proportionate share of PBF
LLC's taxable income or loss, which includes PBF LLC's allocable share of PBFX's
pre-tax income or loss, on their respective tax returns. PBF LLC generally makes
distributions to its members, per the terms of PBF LLC's amended and restated
limited liability company agreement, related to such taxes on a pro-rata basis.
PBF Energy recognizes an income tax expense or benefit in our Condensed
Consolidated Financial Statements based on PBF Energy's allocable share of PBF
LLC's pre-tax income or loss, which was approximately 99.2% and 99.0%, on a
weighted-average basis for the three months ended September 30, 2020 and 2019,
respectively. PBF Energy's Condensed Consolidated Financial Statements do not
reflect any benefit or provision for income taxes on the pre-tax income or loss
attributable to the noncontrolling interests in PBF LLC or PBFX (although, as
described above, PBF LLC must make tax distributions to all its members on a
pro-rata basis). PBF Energy's effective tax rate, excluding the impact of
noncontrolling interests, for the three months ended September 30, 2020 and 2019
was (129.7)% and 24.0%, respectively. The effective tax rate for the three
months ended September 30, 2020 was significantly impacted by the recording of a
$348.6 million deferred tax asset valuation allowance.
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Noncontrolling Interest- PBF Energy is the sole managing member of, and has a
controlling interest in, PBF LLC. As the sole managing member of PBF LLC, PBF
Energy operates and controls all of the business and affairs of PBF LLC and its
subsidiaries. PBF Energy consolidates the financial results of PBF LLC and its
subsidiaries, including PBFX. With respect to the consolidation of PBF LLC, the
Company records a noncontrolling interest for the economic interest in PBF LLC
held by members other than PBF Energy, and with respect to the consolidation of
PBFX, the Company records a noncontrolling interest for the economic interests
in PBFX held by the public unitholders of PBFX, and with respect to the
consolidation of PBF Holding, the Company records a 20% noncontrolling interest
for the ownership interests in two subsidiaries of Chalmette Refining held by a
third party. The total noncontrolling interest on the Condensed Consolidated
Statements of Operations represents the portion of the Company's earnings or
loss attributable to the economic interests held by members of PBF LLC other
than PBF Energy, by the public common unitholders of PBFX and by the third-party
stockholders of certain of Chalmette Refining's subsidiaries. The total
noncontrolling interest on the Condensed Consolidated Balance Sheets represents
the portion of the Company's net assets attributable to the economic interests
held by the members of PBF LLC other than PBF Energy, by the public common
unitholders of PBFX and by the third-party stockholders of the two Chalmette
Refining subsidiaries. PBF Energy's weighted-average equity noncontrolling
interest ownership percentage in PBF LLC for the three months ended
September 30, 2020 and 2019 was approximately 0.8% and 1.0%, respectively. The
carrying amount of the noncontrolling interest on our Condensed Consolidated
Balance Sheets attributable to the noncontrolling interest is not equal to the
noncontrolling interest ownership percentage due to the effect of income taxes
and related agreements that pertain solely to PBF Energy.
Nine Months Ended September 30, 2020 Compared to the Nine Months Ended
September 30, 2019
Overview- PBF Energy net loss was $1,047.3 million for the nine months ended
September 30, 2020 compared to net income of $306.1 million for the nine months
ended September 30, 2019. PBF LLC net loss was $1,304.4 million for the nine
months ended September 30, 2020 compared to net income of $399.6 million for the
nine months ended September 30, 2019. Net loss attributable to PBF Energy
stockholders was $1,094.0 million, or $(9.15) per diluted share, for the nine
months ended September 30, 2020 ($(9.15) per share on a fully-exchanged,
fully-diluted basis based on adjusted fully-converted net loss, or $(7.25) per
share on a fully-exchanged, fully-diluted basis based on adjusted
fully-converted net loss excluding special items, as described below in Non-GAAP
Financial Measures) compared to net income attributable to PBF Energy
stockholders of $266.4 million, or $2.20 per diluted share, for the nine months
ended September 30, 2019 ($2.20 per share on a fully-exchanged, fully-diluted
basis based on adjusted fully-converted net income, or $0.33 per share on a
fully-exchanged, fully-diluted basis based on adjusted fully-converted net loss
excluding special items, as described below in Non-GAAP Financial Measures). The
net loss attributable to PBF Energy stockholders represents PBF Energy's equity
interest in PBF LLC's pre-tax loss, less applicable income tax expense. PBF
Energy's weighted-average equity interest in PBF LLC was 99.1% and 99.0% for the
nine months ended September 30, 2020 and 2019, respectively.
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Our results for the nine months ended September 30, 2020 were positively
impacted by special items consisting of a gain on the sale of hydrogen plants of
$471.1 million, or $347.2 million net of tax, a change in fair value of the
contingent consideration related to both the Martinez Acquisition and the PBFX
CPI acquisition of $93.5 million, or $68.9 million net of tax, and a pre-tax
change in the Tax Receivable Agreement liability of $240.6 million, or $177.3
million net of tax. Our results for the nine months ended September 30, 2020
were negatively impacted by special items consisting of a non-cash, pre-tax LCM
inventory adjustment of approximately $691.5 million, or $509.6 million net of
tax, pre-tax, debt extinguishment costs associated with the early redemption of
our 2023 Senior Notes of $22.2 million, or $16.4 million net of tax, severance
costs related to second quarter reductions in workforce of $12.9 million, or
$9.5 million net of tax, impairment expense of $7.0 million or $5.2 million net
of tax, related to the write-down of certain PBFX long-lived assets in the third
quarter of the current year and net tax expense of $282.3 million associated
with the remeasurement of certain deferred tax assets. Our results for the nine
months ended September 30, 2019 were positively impacted by a non-cash pre-tax
LCM inventory adjustment of approximately $277.0 million, or $203.7 million net
of tax and a pre-tax gain on the sale of land at our Torrance refinery of
$33.1 million, or $24.3 million net of tax. The LCM inventory adjustments were
recorded due to movements in the price of crude oil and refined products in the
periods presented.
Excluding the impact of these special items, our results were negatively
impacted by the ongoing COVID-19 pandemic which has caused a significant decline
in the demand for our refined products and a decrease in the prices for crude
oil and refined products, both of which have negatively impacted our revenues,
cost of products sold and operating income. In addition, during the nine months
ended September 30, 2020 we experienced unfavorable movements in certain crude
differentials and overall lower throughput volumes and barrels sold across our
refineries, as well as lower refining margins. All our operating regions
experienced lower refining margins for the nine months ended September 30, 2020
compared to the nine months ended September 30, 2019. Our results for the nine
months ended September 30, 2020 were negatively impacted by higher general and
administrative expenses associated with severance charges and integration costs
associated with the Martinez Acquisition and increased depreciation and
amortization expense associated with the Martinez Acquisition and our continued
investment in our refining assets.
Revenues- Revenues totaled $11.5 billion for the nine months ended September 30,
2020 compared to $18.2 billion for the nine months ended September 30, 2019, a
decrease of approximately $6.7 billion, or 36.8%. Revenues per barrel were
$48.67 and $70.23 for the nine months ended September 30, 2020 and 2019,
respectively, a decrease of 30.7% directly related to lower hydrocarbon
commodity prices. For the nine months ended September 30, 2020, the total
throughput rates at our East Coast, Mid-Continent, Gulf Coast and West Coast
refineries averaged approximately 274,300 bpd, 91,900 bpd, 144,000 bpd and
234,400 bpd, respectively. For the nine months ended September 30, 2019, the
total throughput rates at our East Coast, Mid-Continent, Gulf Coast and West
Coast refineries averaged approximately 329,500 bpd, 154,100 bpd, 181,400 bpd
and 151,400 bpd, respectively. For nine months ended September 30, 2020, the
total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast
refineries averaged approximately 310,100 bpd, 113,800 bpd, 169,000 bpd and
266,500 bpd, respectively. For the nine months ended September 30, 2019, the
total barrels sold at our East Coast, Mid-Continent, Gulf Coast and West Coast
refineries averaged approximately 374,200 bpd, 164,400 bpd, 227,700 bpd and
183,300 bpd, respectively.
The throughput rates at our refineries were lower in the nine months ended
September 30, 2020 compared to the same period in 2019. Our Martinez refinery
was not acquired until the first quarter of 2020 and is therefore not included
in the prior period West Coast throughput. We operated our refineries at reduced
rates beginning in March, and, based on current market conditions, we plan on
continuing to operate our refineries at lower utilization until such time that
sustained product demand justifies higher production. Total refined product
barrels sold were higher than throughput rates, reflecting sales from inventory
as well as sales and purchases of refined products outside our refineries.
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Consolidated Gross Margin- Consolidated gross margin totaled $(1,449.2) million
for the nine months ended September 30, 2020, compared to $677.9 million for the
nine months ended September 30, 2019, a decrease of approximately $2,127.1
million. Gross refining margin (as described below in Non-GAAP Financial
Measures) totaled $108.0 million, or $0.53 per barrel of throughput for the nine
months ended September 30, 2020 compared to $2,106.6 million, or $9.45 per
barrel of throughput for the nine months ended September 30, 2019, a decrease of
approximately $1,998.6 million. Gross refining margin excluding special items
totaled $799.5 million or $3.92 per barrel of throughput for the nine months
ended September 30, 2020 compared to $1,829.6 million or $8.21 per barrel of
throughput for the nine months ended September 30, 2019, a decrease of $1,030.1
million.
Consolidated gross margin and gross refining margin were negatively impacted by
a non-cash LCM adjustment of approximately $691.5 million on a net basis
resulting from the decrease in crude oil and refined product prices from the
year ended 2019 to the end of the third quarter of 2020. Gross refining margin
excluding the impact of special items decreased due to unfavorable movements in
certain crude differentials, an overall decrease in throughput rates and
refining margins. For the nine months ended September 30, 2019, special items
impacting our margin calculations included a non-cash LCM inventory adjustment
of approximately $277.0 million on a net basis, resulting from an increase in
crude oil and refined product prices.
Additionally, our results continue to be impacted by significant costs to comply
with the RFS. Total RFS costs were $183.4 million for the nine months ended
September 30, 2020 in comparison to $92.0 million for the nine months ended
September 30, 2019.
Average industry margins were mixed during the nine months ended September 30,
2020 in comparison to the same period in 2019, primarily due to varying timing
and extent of the impacts of the COVID-19 pandemic on regional demand and
commodity prices in 2020, in addition to impacts related to 2019 planned
turnarounds, all of which were completed in the first half of the prior year.
On the East Coast, the Dated Brent (NYH) 2-1-1 industry crack spread was
approximately $9.30 per barrel, or 26.9% lower, in the nine months ended
September 30, 2020, as compared to $12.73 per barrel in the same period in 2019.
Our margins were positively impacted from our refinery specific slate on the
East Coast by stronger Dated Brent/Maya and WTI/Bakken differentials, which
increased by $0.37 per barrel and $2.04 per barrel, respectively, in comparison
to the same period in 2019. The WTI/WCS differential slightly decreased
to $10.58 per barrel in 2020 compared to $11.78 in 2019, which unfavorably
impacted our cost of heavy Canadian crude.
Across the Mid-Continent, the WTI (Chicago) 4-3-1 industry crack spread
was $6.56 per barrel, or 60.7% lower, in the nine months ended September 30,
2020 as compared to $16.69 per barrel in the same period in 2019. Our margins
were positively impacted from our refinery specific slate in the Mid-Continent
by an increasing WTI/Bakken differential, which averaged a discount of $2.57 per
barrel in the nine months ended September 30, 2020, as compared to a discount of
$0.53 per barrel in the same period in 2019. Additionally, the WTI/Syncrude
differential averaged a discount of $1.58 per barrel during the nine months
ended September 30, 2020 as compared to a premium of $0.30 per barrel in the
same period of 2019.
On the Gulf Coast, the LLS (Gulf Coast) 2-1-1 industry crack spread was $7.79
per barrel, or 36.8% lower, in the nine months ended September 30, 2020 as
compared to $12.32 per barrel in the same period in 2019. Margins on the Gulf
Coast were positively impacted from our refinery specific slate by a
strengthening WTI/LLS differential, which averaged a premium of $2.01 per barrel
during the nine months ended September 30, 2020 as compared to a premium of
$6.27 per barrel in the same period of 2019.
On the West Coast, the ANS (West Coast) 4-3-1 industry crack spread was $11.41
per barrel, or 38.3% lower, in the nine months ended September 30, 2020 as
compared to $18.49 per barrel in the same period in 2019. Additionally, margins
on the West Coast were positively impacted from our refinery specific slate by a
strengthening WTI/ANS differential, which averaged a premium of $3.20 per barrel
during the nine months ended September 30, 2020 as compared to a premium of
$8.15 per barrel in the same period of 2019.
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Favorable movements in these benchmark crude differentials typically result in
lower crude costs and positively impact our earnings while reductions in these
benchmark crude differentials typically result in higher crude costs and
negatively impact our earnings.
Operating Expenses- Operating expenses totaled $1,445.7 million for the nine
months ended September 30, 2020 compared to $1,348.7 million for the nine months
ended September 30, 2019, an increase of approximately $97.0 million, or 7.2%.
Of the total $1,445.7 million of operating expenses for the nine months ended
September 30, 2020, $1,383.6 million or $6.78 per barrel of throughput, related
to expenses incurred by the Refining segment, while the remaining $62.1 million
related to expenses incurred by the Logistics segment ($1,274.9 million or $5.72
per barrel of throughput, and $73.8 million of operating expenses for the nine
months ended September 30, 2019 related to the Refining and Logistics segments,
respectively). Increases in operating expenses were mainly attributed to costs
associated with the Martinez refinery and related logistic assets which totaled
approximately $262.0 million for the nine months ended September 30, 2020. Total
operating expenses for the nine months ended September 30, 2020, excluding our
Martinez refinery, decreased due to our cost reduction initiatives taken to
strengthen our financial flexibility and offset the negative impact of COVID-19,
such as significant reductions in discretionary activities and third party
services. Operating expenses related to our Logistics segment decreased as a
result of lower discretionary spending, including maintenance and outside
service costs, in response to the COVID-19 pandemic, as well as lower
environmental clean-up remediation costs and lower utility expenses due to
reduced energy usage.
General and Administrative Expenses- General and administrative expenses totaled
$187.0 million for the nine months ended September 30, 2020 compared to $175.9
million for the nine months ended September 30, 2019, an increase of
approximately $11.1 million or 6.3%. The increase in general and administrative
expenses for the nine months ended September 30, 2020 in comparison to the nine
months ended September 30, 2019 primarily related to headcount reduction
severance costs across the refineries as well as integration costs pertaining to
the Martinez Acquisition. These costs increases were offset by a reduction in
overhead expenses through temporary salary reductions to a large portion of our
workforce. Our general and administrative expenses are comprised of personnel,
facilities and other infrastructure costs necessary to support our refineries
and related logistics assets.
Gain on Sale of Assets- There was a gain of $469.4 million for the nine months
ended September 30, 2020 related primarily to the sale of five hydrogen plants.
There was a gain of $31.8 million on the sale of assets for the nine months
ended September 30, 2019, primarily attributable to the sale of a parcel of land
at our Torrance refinery.
Depreciation and Amortization Expense- Depreciation and amortization expense
totaled $377.7 million for the nine months ended September 30, 2020 (including
$369.3 million recorded within Cost of sales) compared to $322.7 million for the
nine months ended September 30, 2019 (including $314.9 million recorded within
Cost of sales), an increase of approximately $55.0 million. The increase was a
result of additional depreciation expense associated with the assets acquired in
the Martinez Acquisition and a general increase in our fixed asset base due to
capital projects and turnarounds completed since the third quarter of 2019.
Change in Fair Value of Contingent Consideration- Change in fair value of
contingent consideration represented a gain of $93.5 million for the nine months
ended September 30, 2020. This change represents the decrease in the estimated
fair value of the Martinez Contingent Consideration and the PBFX Contingent
Consideration, both associated with acquisition related earn-out obligations.
There were no such costs in the same period of 2019.
Impairment expense- Impairment expense totaled $7.0 million for the nine months
ended September 30, 2020, resulting from a write-down of certain PBFX long-lived
assets.
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Change in Tax Receivable Agreement Liability- Change in Tax Receivable Agreement
liability for the nine months ended September 30, 2020 represented a gain of
$240.6 million. This gain was primarily the result of a deferred tax asset
valuation allowance recorded in accordance with ASC 740, Income Taxes related to
the reduction of deferred tax assets associated with the payments made or
expected to be made in connection with the Tax Receivable Agreement liability.
There was no change in the Tax Receivable Agreement liability for the nine
months ended September 30, 2019.

Change in Fair Value of Catalyst Obligations- Change in fair value of catalyst
obligations represented a gain of $4.2 million for the nine months ended
September 30, 2020 compared to a loss of $6.4 million for the nine months ended
September 30, 2019. These gains and losses relate to the change in value of the
precious metals underlying the sale and leaseback of our refineries' precious
metal catalysts, which we are obligated to repurchase at fair market value upon
lease termination.
Debt Extinguishment Costs- Debt extinguishment costs of $22.2 million incurred
in the nine months ended September 30, 2020 relate to the early redemption of
our 2023 Senior Notes. There were no such costs in the same period of 2019.
Interest Expense, net- PBF Energy interest expense totaled $185.1 million for
the nine months ended September 30, 2020 compared to $121.3 million for the nine
months ended September 30, 2019, an increase of approximately $63.8 million.
This net increase is mainly attributable to higher interest costs associated
with the issuance of the 2028 Senior Notes in February 2020, the issuance of the
2025 Senior Secured Notes in May 2020 and higher outstanding borrowings on our
Revolving Credit Facility. Interest expense includes interest on long-term debt
including the PBFX credit facilities, costs related to the sale and leaseback of
our precious metal catalysts, financing costs associated with the Inventory
Intermediation Agreements with J. Aron, letter of credit fees associated with
the purchase of certain crude oils and the amortization of deferred financing
costs. PBF LLC interest expense totaled $192.8 million and $128.3 million for
the nine months ended September 30, 2020 and September 30, 2019, respectively
(inclusive of $7.7 million and $7.0 million, respectively, of incremental
interest expense on the affiliate note payable with PBF Energy that eliminates
in consolidation at the PBF Energy level).
Income Tax Expense- PBF LLC is organized as a limited liability company and PBFX
is an MLP, both of which are treated as "flow-through" entities for federal
income tax purposes and therefore are not subject to income tax. However, two
subsidiaries of Chalmette Refining and our Canadian subsidiary are treated as
C-Corporations for income tax purposes and may incur income taxes with respect
to their earnings, as applicable. The members of PBF LLC are required to include
their proportionate share of PBF LLC's taxable income or loss, which includes
PBF LLC's allocable share of PBFX's pre-tax income or loss, on their respective
tax returns. PBF LLC generally makes distributions to its members, per the terms
of PBF LLC's amended and restated limited liability company agreement, related
to such taxes on a pro-rata basis. PBF Energy recognizes an income tax expense
or benefit in our Condensed Consolidated Financial Statements based on PBF
Energy's allocable share of PBF LLC's pre-tax income or loss, which was
approximately 99.1% and 99.0%, on a weighted-average basis for the nine months
ended September 30, 2020 and 2019, respectively. PBF Energy's Condensed
Consolidated Financial Statements do not reflect any benefit or provision for
income taxes on the pre-tax income or loss attributable to the noncontrolling
interests in PBF LLC or PBFX (although, as described above, PBF LLC must make
tax distributions to all its members on a pro-rata basis). PBF Energy's
effective tax rate, excluding the impact of noncontrolling interests, for the
nine months ended September 30, 2020 and 2019 was 0.1% and 25.7%, respectively.
The effective tax rate for the nine months ended September 30, 2020 was
significantly impacted by the recording of a $348.6 million deferred tax asset
valuation allowance.
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Noncontrolling Interest- PBF Energy is the sole managing member of, and has a
controlling interest in, PBF LLC. As the sole managing member of PBF LLC, PBF
Energy operates and controls all of the business and affairs of PBF LLC and its
subsidiaries. PBF Energy consolidates the financial results of PBF LLC and its
subsidiaries, including PBFX. With respect to the consolidation of PBF LLC, the
Company records a noncontrolling interest for the economic interest in PBF LLC
held by members other than PBF Energy, and with respect to the consolidation of
PBFX, the Company records a noncontrolling interest for the economic interests
in PBFX held by the public unitholders of PBFX, and with respect to the
consolidation of PBF Holding, the Company records a 20% noncontrolling interest
for the ownership interests in two subsidiaries of Chalmette Refining held by a
third party. The total noncontrolling interest on the Condensed Consolidated
Statements of Operations represents the portion of the Company's earnings or
loss attributable to the economic interests held by members of PBF LLC other
than PBF Energy, by the public common unitholders of PBFX and by the third-party
stockholders of certain of Chalmette Refining's subsidiaries. The total
noncontrolling interest on the Condensed Consolidated Balance Sheets represents
the portion of the Company's net assets attributable to the economic interests
held by the members of PBF LLC other than PBF Energy, by the public common
unitholders of PBFX and by the third-party stockholders of the two Chalmette
Refining subsidiaries. PBF Energy's weighted-average equity noncontrolling
interest ownership percentage in PBF LLC for the nine months ended September 30,
2020 and 2019 was approximately 0.9% and 1.0%, respectively. The carrying amount
of the noncontrolling interest on our Condensed Consolidated Balance Sheets
attributable to the noncontrolling interest is not equal to the noncontrolling
interest ownership percentage due to the effect of income taxes and related
agreements that pertain solely to PBF Energy.
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Non-GAAP Financial Measures
Management uses certain financial measures to evaluate our operating performance
that are calculated and presented on the basis of methodologies other than in
accordance with GAAP ("Non-GAAP"). These measures should not be considered a
substitute for, or superior to, measures of financial performance prepared in
accordance with accounting principles generally accepted in the United States of
America ("GAAP"), and our calculations thereof may not be comparable to
similarly entitled measures reported by other companies. Such Non-GAAP financial
measures are presented only in the context of PBF Energy's results and are not
presented or discussed in respect to PBF LLC.
Special Items
The Non-GAAP measures presented include Adjusted Fully-Converted Net Income
(Loss) excluding special items, EBITDA excluding special items and gross
refining margin excluding special items. Special items for the periods presented
relate to LCM inventory adjustments, changes in the Tax Receivable Agreement
liability, debt extinguishment costs, changes in fair value of contingent
consideration, gain on sale of hydrogen plants, severance costs related to
reductions in workforce, impairment expense, net tax expense on remeasurement of
deferred tax assets and gain on sale of assets at our Torrance refinery. See
"Notes to Non-GAAP Financial Measures" below for more details on all special
items disclosed. Although we believe that Non-GAAP financial measures, excluding
the impact of special items, provide useful supplemental information to
investors regarding the results and performance of our business and allow for
helpful period-over-period comparisons, such Non-GAAP measures should only be
considered as a supplement to, and not as a substitute for, or superior to, the
financial measures prepared in accordance with GAAP.
Adjusted Fully-Converted Net Income (Loss) and Adjusted Fully-Converted Net
Income (Loss) Excluding Special Items
PBF Energy utilizes results presented on an Adjusted Fully-Converted basis that
reflects an assumed exchange of all PBF LLC Series A Units for shares of PBF
Energy Class A common stock. In addition, we present results on an Adjusted
Fully-Converted basis excluding special items as described above. We believe
that these Adjusted Fully-Converted measures, when presented in conjunction with
comparable GAAP measures, are useful to investors to compare PBF Energy results
across different periods and to facilitate an understanding of our operating
results. Neither Adjusted Fully-Converted Net Income (Loss) nor Adjusted
Fully-Converted Net Income (Loss) excluding special items should be considered
an alternative to net income presented in accordance with GAAP. Adjusted
Fully-Converted Net Income (Loss) and Adjusted Fully-Converted Net Income (Loss)
excluding special items presented by other companies may not be comparable to
our presentation, since each company may define these terms differently. The
differences between Adjusted Fully-Converted and GAAP results are as follows:
1.  Assumed exchange of all PBF LLC Series A Units for shares of PBF Energy
Class A common stock. As a result of the assumed exchange of all PBF LLC Series
A Units, the noncontrolling interest related to these units is converted to
controlling interest. Management believes that it is useful to provide the
per-share effect associated with the assumed exchange of all PBF LLC Series A
Units.
2.  Income Taxes. Prior to PBF Energy's initial public offering ("IPO"), PBF
Energy was organized as a limited liability company treated as a "flow-through"
entity for income tax purposes, and even after PBF Energy's IPO, not all of its
earnings are subject to corporate-level income taxes. Adjustments have been made
to the Adjusted Fully-Converted tax provisions and earnings to assume that PBF
Energy had adopted its post-IPO corporate tax structure for all periods
presented and is taxed as a C-corporation in the U.S. at the prevailing
corporate rates. These assumptions are consistent with the assumption in clause
1 above that all PBF LLC Series A Units are exchanged for shares of PBF Energy
Class A common stock, as the assumed exchange would change the amount of PBF
Energy's earnings that are subject to corporate income tax.
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The following table reconciles PBF Energy's Adjusted Fully-Converted results
with its results presented in accordance with GAAP for the three and nine months
ended September 30, 2020 and 2019 (in millions, except share and per share
amounts):

                                                         Three Months Ended September 30,                 Nine Months Ended September 30,
                                                            2020                     2019                   2020                   2019
Net income (loss) attributable to PBF Energy Inc.
stockholders                                       $            (417.2)     

$ 69.5 $ (1,094.0) $ 266.4 Less: Income allocated to participating securities

                   -                   0.2                    0.1                    0.4
Income (loss) available to PBF Energy Inc.
stockholders - basic                                            (417.2)                 69.3               (1,094.1)                 266.0
Add: Net income (loss) attributable to
noncontrolling interest (1)                                       (3.5)                  0.9                  (13.6)                   3.6
Less: Income tax benefit (expense) (2)                             0.9                  (0.3)                   3.6                   (0.9)
Adjusted fully-converted net income (loss)         $            (419.8)     

$ 69.9 $ (1,104.1) $ 268.7 Special Items: (3) Add: Non-cash LCM inventory adjustment

                            (9.9)                 47.0                  691.5                 (277.0)
Add: Change in Tax Receivable Agreement liability               (252.2)                    -                 (240.6)                     -
Add: Debt extinguishment costs                                       -                     -                   22.2                      -
Add: Change in fair value of contingent
consideration                                                    (28.6)                    -                  (93.5)                     -
Add: Gain on sale of hydrogen plants                                 -                     -                 (471.1)                     -
Add: Severance costs                                                 -                     -                   12.9                      -
Add: Impairment expense                                            7.0                     -                    7.0                      -
Add: Gain on Torrance land sale                                      -                 (33.1)                     -                  (33.1)
Add: Net tax expense on remeasurement of deferred
tax assets                                                       282.3                     -                  282.3                      -
Add: Recomputed income taxes on special items                     74.6                  (3.7)                  18.8                   82.0
Adjusted fully-converted net income (loss)
excluding special items                            $            (346.6)     

$ 80.1 $ (874.6) $ 40.6

Weighted-average shares outstanding of PBF Energy
Inc.                                                       119,684,030           119,921,346            119,561,388            119,897,504
Conversion of PBF LLC Series A Units (4)                       975,133             1,206,325              1,066,849              1,206,325
Common stock equivalents (5)                                         -               461,508                      -                768,035
Fully-converted shares outstanding-diluted                 120,659,163           121,589,179            120,628,237            121,871,864

Diluted net income (loss) per share                $             (3.49)         $       0.57          $       (9.15)         $        2.20
Adjusted fully-converted net income (loss) per
fully exchanged, fully diluted shares outstanding
(5)                                                $             (3.49)     

$ 0.57 $ (9.15) $ 2.20 Adjusted fully-converted net income (loss) excluding special items per fully exchanged, fully diluted shares outstanding (3) (5)

                 $             (2.87)     

$ 0.66 $ (7.25) $ 0.33

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See Notes to Non-GAAP Financial Measures.

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Gross Refining Margin and Gross Refining Margin Excluding Special Items
Gross refining margin is defined as consolidated gross margin excluding refinery
depreciation, refinery operating expense, and gross margin of PBFX. We believe
both gross refining margin and gross refining margin excluding special items are
important measures of operating performance and provide useful information to
investors because they are helpful metric comparisons to the industry refining
margin benchmarks, as the refining margin benchmarks do not include a charge for
refinery operating expenses and depreciation. In order to assess our operating
performance, we compare our gross refining margin (revenues less cost of
products and other) to industry refining margin benchmarks and crude oil prices
as defined in the table below.
Neither gross refining margin nor gross refining margin excluding special items
should be considered an alternative to consolidated gross margin, income from
operations, net cash flows from operating activities or any other measure of
financial performance or liquidity presented in accordance with GAAP. Gross
refining margin and gross refining margin excluding special items presented by
other companies may not be comparable to our presentation, since each company
may define these terms differently.
The following table presents our GAAP calculation of gross margin and a
reconciliation of gross refining margin to the most directly comparable GAAP
financial measure, consolidated gross margin, on a historical basis, as
applicable, for each of the periods indicated (in millions, except per barrel
amounts):
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