PBF Energy Inc.

PBF

US69318G1067

Oil & Gas Refining and Marketing

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

July 29, 2021 at 07:03 am EDT

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, 2020 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 June 30, 2021. 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 June 30, 2021, PBF LLC also holds a 47.9% 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
June 30, 2021, we own and operate six domestic oil refineries and related
assets. Based on the current configuration our refineries have a combined
processing capacity, known as throughput, of approximately 1,000,000 barrels per
day ("bpd"), and a weighted-average Nelson Complexity Index of 13.2 based on
current operating conditions. The complexity and throughput capacity of our
refineries are subject to change dependent upon configuration changes we make to
respond to market conditions, as well as a result of investments made to improve
our facilities and maintain compliance with environmental and governmental
regulations. 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. In 2020, we reconfigured our Delaware City and Paulsboro refineries,
temporarily idling certain of our major processing units at the Paulsboro
refinery, in order to operate the two refineries as one functional unit that we
refer to as the "East Coast Refining System". Each refinery is briefly described
in the table below:
                                                                        Throughput Capacity (in
Refinery            Region                Nelson Complexity Index (1)   bpd) (1)                 PADD       Crude Processed (2)   Source (2)
                                                                                                            light sweet through
Delaware City       East Coast            13.6                          180,000                  1          heavy sour            water, rail
                                                                                                            light sweet through
Paulsboro           East Coast            10.4(3)                       105,000(3)               1          heavy sour            water
Toledo              Mid-Continent         11.0                          180,000                  2          light sweet           pipeline, truck, rail
                                                                                                            light sweet through
Chalmette           Gulf Coast            13.0                          185,000                  3          heavy sour            water, pipeline
Torrance            West Coast            13.8                          166,000                  5          medium and heavy      pipeline, water, truck
Martinez            West Coast            16.1                          157,000                  5          medium and heavy      pipeline and water


________
(1) Reflects operating conditions at each refinery as of the date of this
filing. Changes in complexity and throughput capacity reflect the result of
current market conditions such as our east coast refining reconfiguration
described below (the "East Coast Refining Reconfiguration"), in addition to
investments made to improve our facilities and maintain compliance with
environmental and governmental regulations. Configurations at each of our
refineries are evaluated and updated accordingly.
(2) Reflects the typical crude and feedstocks and related sources utilized under
normal operating conditions and prevailing market environments.
(3) Under normal operating conditions and prevailing market environments, our
Nelson Complexity Index and throughput capacity for the Paulsboro refinery would
be 13.1 and 180,000, respectively. As a result of the East Coast Refining
Reconfiguration, our Nelson Complexity Index and throughput capacity were
reduced.
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As of June 30, 2021, PBF Energy owned 120,269,226 PBF LLC Series C Units and our
current and former executive officers and directors and certain employees and
others held 994,192 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 (99.2% and 0.8%
as of December 31, 2020, 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 continues to negatively impact worldwide
economic and commercial activity and financial markets. The COVID-19 pandemic
and the related governmental and consumer responses 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 global demand for refined petroleum and petrochemical products. We have
seen the demand for these products starting to rebound as a result of the
lifting or easing of governmental restrictions in response to decreasing
COVID-19 infection rates and the distribution of COVID-19 vaccines. Despite
these signs of improvements, the resulting economic consequences of the COVID-19
pandemic remains uncertain and will depend on the ongoing severity, location and
duration of the outbreak, the effectiveness of the vaccine programs and other
actions undertaken by national, regional 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 actively responding to the impacts from these matters on our business.
Starting in late March 2020, we reduced 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. We have been operating our
refineries at reduced rates, while constantly monitoring and adjusting our
production to correlate to increases in product demand. Throughput across our
refineries was higher in the three months ended June 2021 in comparison to the
three months ended June 2020, reflecting gradual improvement in market
conditions. We expect near-term throughput to be in the 845,000 to 905,000
barrel per day range for our refining system. Despite the measures we have
taken, we have been, and likely will continue to be, adversely impacted by the
COVID-19 pandemic for the foreseeable future. We are unable to predict the
ultimate outcome of the economic impact of the COVID-19 pandemic and can provide
no assurance that measures taken to mitigate the impact of the COVID-19 pandemic
will be effective.
We continue to adjust our operational plans to the evolving market conditions
and continue to monitor and maintain lower operating expenses through
significant reductions in discretionary activities and third-party services. We
successfully reconfigured our East Coast Refining System to maintain the most
profitable elements of two refineries while reducing costs and improving our
competitive position. Our overall market outlook for the second half of 2021
remains constructive, with continued gradual improvement in demand, and our
full-year capital expenditures are expected to be approximately $400.0 million
to $450.0 million. Should market conditions change from our current
expectations, we expect that we will review our capital requirements and adjust
as needed.
Adoption of Rule 6-5
On July 21,2021, the board of Bay Area Air Quality Management District
("BAAQMD") voted to adopt Proposed Amended Rule ("PAR") 6-5 requiring compliance
with more stringent standards for particulate emissions from Fluid Catalytic
Cracking ("FCC") units at refineries in the Bay Area by 2026. The regulation,
which impacts our Martinez refinery, does not require that any specific
technology be utilized to meet the new standards. We have a previously approved
capital project that will significantly lower the particulate emissions from
Martinez's FCC and we have identified and will be evaluating potential process
changes that could potentially reduce emissions further in advance of the
compliance date. If these measures prove ineffective, the costs incurred by us
to achieve the new emissions standards at our Martinez refinery within the
required timeframe may be significant, and there can be no assurance that the
measures we implement will achieve the required emissions reductions.
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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 and Market Developments
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 resulted in significant demand reduction for our refined
products and atypical volatility in oil commodity prices. In 2021, as a result
of the lifting or easing of restrictions by many governmental authorities in
response to decreasing COVID-19 infection rates and the distribution of COVID-19
vaccines, the demand for refined petroleum products has started to recover,
consequently improving our refining margins in comparison to the prior year.
While our results for the three and six months ended June 30, 2021 continue to
be impacted by lower demand for refined products, we have experienced gradual
improvements when compared to the same period in 2020 and favorable impacts on
our revenues, cost of products sold, operating income and liquidity. Although we
currently continue to operate our refineries at reduced rates, throughput rates
across our refining system have increased in the current year to correlate with
the gradual increase in demand.
East Coast Refining Reconfiguration
On December 31, 2020, we completed the East Coast Refining Reconfiguration. As
part of the reconfiguration process, we idled certain of our major processing
units at the Paulsboro refinery, resulting in lower overall throughput and
inventory levels in addition to decreases in capital and operating costs. Based
on this reconfiguration, our East Coast throughput capacity is approximately
285,000 barrels per day.
Debt and Credit Facilities
Senior Notes
On May 13, 2020, we issued $1.0 billion in aggregate principal amount of 9.25%
senior secured notes due 2025 (the "initial 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 December 21, 2020, we issued an additional $250.0 million in aggregate
principal amount of 9.25% senior secured notes due 2025, in a tack-on offering,
(together with the initial 2025 Senior Secured Notes, the "2025 Senior Secured
Notes"). The net proceeds from this offering were approximately $245.7 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 $517.5 million
of the proceeds to fully redeem our 7.00% senior notes due 2023 (the "2023
Senior Notes") and the balance 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 was classified as Debt
extinguishment costs in the Condensed Consolidated Statement of Operations as of
June 30, 2020.
Revolving Credit Facility
During the six months ended June 30, 2020, we used advances under 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 both June 30, 2021 and December 31, 2020 were $900.0 million.
PBFX Revolving Credit Facility
During the six months ended June 30, 2021, PBFX made net repayments of
$40.0 million on the PBFX five-year, $500.0 million amended and restated
revolving credit facility (the "PBFX Revolving Credit Facility"), resulting in
outstanding borrowings as of June 30, 2021 of $160.0 million. There was
$200.0 million of outstanding borrowings under the PBFX Revolving Credit
Facility as of December 31, 2020.
Martinez Acquisition
We acquired the Martinez refinery and related logistics assets from Equilon
Enterprises LLC d/b/a Shell Oil Products US ("Shell") on February 1, 2020 (the
"Martinez Acquisition") for an aggregate purchase price of $1,253.4 million,
including final working capital of $216.1 million and the obligation to make
certain post-closing earn-out payments to Shell based on certain earnings
thresholds of the Martinez refinery for a period of up to four years (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.
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.
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.
Severance Costs
Following the onset of the COVID-19 pandemic, we implemented a number of cost
reduction initiatives to strengthen our financial flexibility and rationalize
overhead expenses, including workforce reduction. During the three months ended
June 30, 2020, we reduced headcount across our refineries, which resulted in
approximately $12.9 million of severance related costs included in General and
administrative expenses.
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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, which
was followed by the execution of long-term supply agreements in August 2020,
through which Air Products will exclusively supply hydrogen, steam, carbon
dioxide and other products to the Martinez, Torrance and Delaware City
refineries for a term of fifteen years.

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Results of Operations
The tables below reflect our consolidated financial and operating highlights for
the three and six months ended June 30, 2021 and 2020 (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 segment as, apart from
PBFX's third-party acquisitions, our Logistics segment does not have significant
third-party revenues and a significant portion of its operating results are
eliminated in consolidation.
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PBF Energy                                         Three Months Ended June 30,                    Six Months Ended June 30,
                                                     2021                  2020                   2021                    2020
Revenues                                       $      6,897.9          $ 2,515.8          $     11,822.7              $  7,793.3

Cost and expenses:
Cost of products and other                            6,100.7            1,753.1                10,291.7                 7,716.4
Operating expenses (excluding depreciation and
amortization expense as reflected below)                483.8              442.1                   965.1                   973.8
Depreciation and amortization expense                   111.6              122.3                   225.7                   239.0
Cost of sales                                         6,696.1            2,317.5                11,482.5                 8,929.2
General and administrative expenses (excluding
depreciation and amortization expense as
reflected below)                                         55.0               57.9                   102.8                   140.4
Depreciation and amortization expense                     3.3                2.8                     6.7                     5.7
Change in fair value of contingent
consideration                                            (4.0)             (12.1)                   26.1                   (64.9)

Gain on sale of assets                                      -             (471.1)                   (0.6)                 (471.1)
Total cost and expenses                               6,750.4            1,895.0                11,617.5                 8,539.3

Income (loss) from operations                           147.5              620.8                   205.2                  (746.0)
Other income (expense):
Interest expense, net                                   (80.8)             (65.5)                 (161.1)                 (114.7)
Change in Tax Receivable Agreement liability                -                  -                       -                   (11.6)
Change in fair value of catalyst obligations              5.8               (5.1)                   (4.2)                    6.6
Debt extinguishment costs                                   -                  -                       -                   (22.2)
Other non-service components of net periodic
benefit cost                                              1.9                1.1                     3.9                     2.1
Income (loss) before income taxes                        74.4              551.3                    43.8                  (885.8)
Income tax expense (benefit)                              4.5              138.3                    (3.9)                 (236.3)
Net income (loss)                                        69.9              413.0                    47.7                  (649.5)
Less: net income attributable to
noncontrolling interests                                 22.0               23.9                    41.1                    27.3
Net income (loss) attributable to PBF Energy
Inc. stockholders                              $         47.9          $   389.1          $          6.6              $   (676.8)

Consolidated gross margin                      $        201.8          $   198.3          $        340.2              $ (1,135.9)

Gross refining margin (1)                      $        711.3          $   678.3          $      1,361.5              $    (95.1)

Net income (loss) available to Class A common
stock per share:
Basic                                          $         0.40          $    3.24          $         0.05              $    (5.66)
Diluted                                        $         0.39          $    3.23          $         0.05              $    (5.67)

(1) See Non-GAAP Financial Measures.


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PBF LLC                                            Three Months Ended June 30,                    Six Months Ended June 30,
                                                     2021                  2020                    2021                    2020
Revenues                                       $      6,897.9          $ 2,515.8          $     11,822.7               $ 7,793.3

Cost and expenses:
Cost of products and other                            6,100.7            1,753.1                10,291.7                 7,716.4
Operating expenses (excluding depreciation and
amortization expense as reflected below)                483.8              442.1                   965.1                   973.8
Depreciation and amortization expense                   111.6              122.3                   225.7                   239.0
Cost of sales                                         6,696.1            2,317.5                11,482.5                 8,929.2
General and administrative expenses (excluding
depreciation and amortization expense as
reflected below)                                         54.1               57.6                   101.6                   140.1
Depreciation and amortization expense                     3.3                2.8                     6.7                     5.7
Change in fair value of contingent
consideration                                            (4.0)             (12.1)                   26.1                   (64.9)

Gain on sale of assets                                      -             (471.1)                   (0.6)                 (471.1)
Total cost and expenses                               6,749.5            1,894.7                11,616.3                 8,539.0

Income (loss) from operations                           148.4              621.1                   206.4                  (745.7)

Other income (expense):
Interest expense, net                                   (83.2)             (68.1)                 (166.1)                 (119.8)
Change in fair value of catalyst obligations              5.8               (5.1)                   (4.2)                    6.6
Debt extinguishment costs                                   -                  -                       -                   (22.2)
Other non-service components of net periodic
benefit cost                                              1.9                1.1                     3.9                     2.1
Income (loss) before income taxes                        72.9              549.0                    40.0                  (879.0)
Income tax (benefit) expense                             (4.3)              (4.4)                  (14.9)                    9.8
Net income (loss)                                        77.2              553.4                    54.9                  (888.8)
Less: net income attributable to
noncontrolling interests                                 21.6               19.5                    41.1                    37.5
Net income (loss) attributable to PBF Energy
Company LLC                                    $         55.6          $   533.9          $         13.8               $  (926.3)



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Operating Highlights                            Three Months Ended June 30,               Six Months Ended June 30,
                                                   2021                2020                2021                2020
Key Operating Information
Production (bpd in thousands)                       894.5              676.0                824.6              770.1
Crude oil and feedstocks throughput (bpd in
thousands)                                          874.2              675.1                810.4              764.0
Total crude oil and feedstocks throughput
(millions of barrels)                                79.6               61.4                146.7              139.0
Consolidated gross margin per barrel of
throughput                                   $       2.53           $   3.23          $      2.31           $  (8.17)
Gross refining margin, excluding special
items, per barrel of throughput (1)          $       5.62           $   1.54          $      4.72           $   4.36
Refinery operating expense, per barrel of
throughput                                   $       5.81           $   6.90          $      6.29           $   6.70

Crude and feedstocks (% of total throughput)
(2)
Heavy                                                  36   %             44  %                36   %             44  %
Medium                                                 25   %             31  %                28   %             26  %
Light                                                  23   %             13  %                21   %             17  %
Other feedstocks and blends                            16   %             12  %                15   %             13  %
Total throughput                                      100   %            100  %               100   %            100  %

Yield (% of total throughput)
Gasoline and gasoline blendstocks                      54   %             46  %                54   %             48  %
Distillates and distillate blendstocks                 29   %             32  %                30   %             32  %
Lubes                                                   1   %              1  %                 1   %              1  %
Chemicals                                               2   %              1  %                 2   %              1  %
Other                                                  16   %             20  %                15   %             19  %
Total yield                                           102   %            100  %               102   %            101  %





(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 June 30,               Six Months Ended June 30,
                                                      2021                 2020                 2021                2020
                                                                   (dollars per barrel, except as noted)
Dated Brent crude oil                           $        68.87          $  29.57          $       65.08          $  39.55
West Texas Intermediate (WTI) crude oil         $        66.19          $  27.96          $       62.22          $  36.69
Light Louisiana Sweet (LLS) crude oil           $        68.05          $  30.19          $       64.22          $  38.93
Alaska North Slope (ANS) crude oil              $        68.58          $  30.28          $       64.89          $  40.59
Crack Spreads
Dated Brent (NYH) 2-1-1                         $        17.40          $   9.66          $       14.77          $   9.81
WTI (Chicago) 4-3-1                             $        18.84          $   5.25          $       15.26          $   6.30
LLS (Gulf Coast) 2-1-1                          $        15.87          $   6.49          $       13.99          $   8.44
ANS (West Coast-LA) 4-3-1                       $        21.28          $   9.18          $       18.56          $  11.26
ANS (West Coast-SF) 3-2-1                       $        21.21          $   8.76          $       17.13          $   9.20
Crude Oil Differentials
Dated Brent (foreign) less WTI                  $         2.68          $   1.61          $        2.86          $   2.86
Dated Brent less Maya (heavy, sour)             $         4.72          $   5.34          $        5.25          $   7.01
Dated Brent less WTS (sour)                     $         2.41          $   1.42          $        2.34          $   3.04
Dated Brent less ASCI (sour)                    $         3.13          $   0.35          $        2.95          $   2.30
WTI less WCS (heavy, sour)                      $        13.09          $   5.77          $       12.61          $  11.21
WTI less Bakken (light, sweet)                  $         0.23          $   3.03          $        0.35          $   3.25
WTI less Syncrude (light, sweet)                $         1.24          $   1.22          $        1.17          $   1.37
WTI less LLS (light, sweet)                     $        (1.86)         $  (2.23)         $       (2.00)         $  (2.24)
WTI less ANS (light, sweet)                     $        (2.39)         $  (2.32)         $       (2.67)         $  (3.90)
Natural gas (dollars per MMBTU)                 $         2.98          $

1.75 $ 2.85 $ 1.81





Three Months Ended June 30, 2021 Compared to the Three Months Ended June 30,
2020
Overview- PBF Energy net income was $69.9 million for the three months ended
June 30, 2021 compared to net income of $413.0 million for the three months
ended June 30, 2020. PBF LLC net income was $77.2 million for the three months
ended June 30, 2021 compared to net income of $553.4 million for the three
months ended June 30, 2020. Net income attributable to PBF Energy was $47.9
million, or $0.39 per diluted share, for the three months ended June 30, 2021
($0.39 per share on a fully-exchanged, fully-diluted basis based on adjusted
fully-converted net income, or $(1.26) 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 $389.1 million, or $3.23 per diluted share, for
the three months ended June 30, 2020 ($3.23 per share on a fully-exchanged,
fully-diluted basis based on adjusted fully-converted net income, or $(3.19) 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 income attributable to PBF Energy represents PBF
Energy's equity interest in PBF LLC's pre-tax income, less applicable income tax
(benefit) expense. PBF Energy's weighted-average equity interest in PBF LLC was
99.2% for the three months ended June 30, 2021 and June 30, 2020.
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Our results for the three months ended June 30, 2021 were positively impacted by
special items consisting of a non-cash, pre-tax lower of cost or market ("LCM")
inventory adjustment of approximately $264.0 million, or $193.8 million net of
tax, a change in fair value of contingent consideration primarily related to the
Martinez Acquisition of $4.0 million, or $2.9 million net of tax and a $4.1
million tax benefit associated with the remeasurement of certain deferred tax
assets. Our results for the three months ended June 30, 2020 were positively
impacted by special items consisting of a non-cash, pre-tax LCM inventory
adjustment of approximately $584.2 million, or $430.6 million net of tax, the
change in the fair value of the contingent consideration primarily related to
the Martinez Acquisition of $12.1 million, or $8.9 million net of tax and the
gain on the sale of hydrogen plants of $471.1 million, or $347.2 million net of
tax. These favorable impacts were offset by severance costs related to a
reduction in our workforce of $12.9 million, or $9.5 million net of tax.
Excluding the impact of these special items, our results continue to be
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. However, when
comparing our results to the three months ended June 30, 2020, demand for our
products has started to recover, evidenced by overall higher throughput volumes
and barrels sold at the majority of our refineries, as well as higher refining
margins in comparison to the prior year.
Revenues- Revenues totaled $6.9 billion for the three months ended June 30, 2021
compared to $2.5 billion for the three months ended June 30, 2020, an increase
of approximately $4.4 billion, or 176.0%. Revenues per barrel were $78.46 and
$35.77 for the three months ended June 30, 2021 and 2020, respectively, an
increase of 119.3% directly related to higher hydrocarbon commodity prices. For
the three months ended June 30, 2021, the total throughput rates at our East
Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged
approximately 250,000 bpd, 150,400 bpd, 174,600 bpd and 299,200 bpd,
respectively. For the three months ended June 30, 2020, the total throughput
rates at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries
averaged approximately 242,300 bpd, 76,900 bpd, 132,300 bpd and 223,600 bpd,
respectively. For the three months ended June 30, 2021, the total barrels sold
at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged
approximately 286,700 bpd, 149,300 bpd, 191,300 bpd and 338,800 bpd,
respectively. For the three months ended June 30, 2020, the total barrels sold
at our East Coast, Mid-Continent, Gulf Coast and West Coast refineries averaged
approximately 277,900 bpd, 91,900 bpd, 156,200 bpd and 246,900 bpd,
respectively.
The throughput rates at our refineries were higher in the three months ended
June 30, 2021 compared to the same period in 2020. We operated our refineries at
reduced rates beginning in March 2020, and, based on current market conditions,
we have adjusted throughput rates across our entire refining system to correlate
with the gradual increases in demand during the three months ended June 30,
2021, while still running below historic levels. We plan on continuing to
operate our refineries at lower utilization levels 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.
Consolidated Gross Margin- Consolidated gross margin totaled $201.8 million for
the three months ended June 30, 2021 compared to $198.3 million for the three
months ended June 30, 2020, an increase of approximately $3.5 million. Gross
refining margin (as described below in Non-GAAP Financial Measures) totaled
$711.3 million, or $8.94 per barrel of throughput for the three months ended
June 30, 2021 compared to $678.3 million, or $11.05 per barrel of throughput for
the three months ended June 30, 2020, an increase of approximately $33.0
million. Gross refining margin excluding special items totaled $447.3 million or
$5.62 per barrel of throughput for the three months ended June 30, 2021 compared
to $94.1 million or $1.54 per barrel of throughput for the three months ended
June 30, 2020, an increase of $353.2 million.
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Consolidated gross margin and gross refining margin were positively impacted by
a non-cash LCM adjustment of approximately $264.0 million on a net basis,
resulting from the increase in crude oil and refined product prices at the end
of the second quarter of 2021 in comparison to the prices at the end of the
first quarter of 2021. Gross refining margin excluding the impact of special
items increased due to favorable movements in certain crude differentials and an
overall increase in throughput rates and refining margins. For the three months
ended June 30, 2020, special items impacting our margin calculations included a
non-cash LCM inventory benefit of approximately $584.2 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 Renewable Fuel Standard. Total Renewable Fuel Standard compliance costs
were $297.6 million for three months ended June 30, 2021 in comparison to $60.0
million for three months ended months ended June 30, 2020.
Overall average industry margins were higher during the three months ended
June 30, 2021 in comparison to the same period in 2020, primarily due to varying
timing and extent of the impacts of the COVID-19 pandemic on regional demand and
commodity prices. During the three months ended June 30, 2021, we started to
experience an increase in demand for our products in connection with the lifting
or easing of restrictions by many governmental authorities in response to
decreasing COVID-19 infection rates and the distribution of COVID-19 vaccines.
Favorable movements in 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.
On the East Coast, the Dated Brent (NYH) 2-1-1 industry crack spread was
approximately $17.40 per barrel, or 80.1% higher, in the three months ended
June 30, 2021, as compared to $9.66 per barrel in the same period in 2020. Our
margins were negatively impacted from our refinery specific slate on the East
Coast by weakened Dated Brent/Maya and WTI/Bakken differentials, which decreased
by $0.62 per barrel and $2.80 per barrel, respectively, in comparison to the
same period in 2020. The WTI/WCS differential increased to $13.09 per barrel in
the three months ended June 30, 2021 compared to $5.77 in the same period in
2020, which favorably impacted our cost of heavy Canadian crude.
Across the Mid-Continent, the WTI (Chicago) 4-3-1 industry crack spread was
$18.84 per barrel, or 258.9% higher, in the three months ended June 30, 2021 as
compared to $5.25 per barrel in the same period in 2020. Additionally, the
WTI/Syncrude differential averaged a discount of $1.24 per barrel during the
three months ended June 30, 2021 as compared to a discount of $1.22 per barrel
in the same period of 2020. Our margins were negatively impacted from our
refinery specific slate in the Mid-Continent by a decreasing WTI/Bakken
differential, which averaged $0.23 per barrel in the three months ended June 30,
2021, as compared to $3.03 per barrel in the same period in 2020.
On the Gulf Coast, the LLS (Gulf Coast) 2-1-1 industry crack spread was $15.87
per barrel, or 144.5% higher, in the three months ended June 30, 2021 as
compared to $6.49 per barrel in the same period in 2020. Margins on the Gulf
Coast were positively impacted from our refinery specific slate by a
strengthening WTI/LLS differential, which averaged a premium of $1.86 per barrel
during the three months ended June 30, 2021 as compared to a premium of $2.23
per barrel in the same period of 2020.
On the West Coast the ANS (West Coast) 4-3-1 industry crack spread was $21.28
per barrel, or 131.8% higher, in the three months ended June 30, 2021 as
compared to $9.18 per barrel in the same period in 2020. Additionally, the ANS
(West Coast) 3-2-1 industry crack spread was $21.21 per barrel, or 142.12%
higher, in the three months ended June 30, 2021 as compared to $8.76 per barrel
in the same period in 2020. Our margins on the West Coast were negatively
impacted from our refinery specific slate by weakened WTI/ANS differential,
which averaged a premium of $2.39 per barrel during the three months ended
June 30, 2021 as compared to a premium of $2.32 per barrel in the same period of
2020.
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Operating Expenses- Operating expenses totaled $483.8 million for the three
months ended June 30, 2021 compared to $442.1 million for the three months ended
June 30, 2020, an increase of $41.7 million, or 9.4%. Of the total $483.8
million of operating expenses for the three months ended June 30, 2021, $462.3
million, or $5.81 per barrel of throughput, related to expenses incurred by the
Refining segment, while the remaining $21.5 million related to expenses incurred
by the Logistics segment ($423.7 million, or $6.90 per barrel, and $18.4 million
of operating expenses for the three months ended June 30, 2020 related to the
Refining and Logistics segments, respectively). Increases in operating expenses
were mainly attributable to higher energy costs as a result of increases in both
natural gas volumes and prices across our refineries when compared to the same
period in 2020. These increases were partially offset by reductions in
discretionary activities and third-party services. Operating expenses related to
our Logistics segment also increased as a result of increased maintenance
activity.
General and Administrative Expenses- General and administrative expenses totaled
$55.0 million for the three months ended June 30, 2021 compared to $57.9 million
for the three months ended June 30, 2020, a decrease of approximately $2.9
million or 5.0%. The decrease in general and administrative expenses for the
three months ended June 30, 2021 in comparison to the three months ended
June 30, 2020 is primarily related to reductions in outside service costs and
lower salaries, wages and benefits. 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 no gain or loss on sale of assets for the
three months ended June 30, 2021. There was a gain $471.1 million for the three
months ended June 30, 2020 related to the sale of five hydrogen plants.
Depreciation and Amortization Expense- Depreciation and amortization expense
totaled $114.9 million for the three months ended June 30, 2021 (including
$111.6 million recorded within Cost of sales) compared to $125.1 million for the
three months ended June 30, 2020 (including $122.3 million recorded within Cost
of sales), a decrease of $10.2 million. The decrease was a result of reduced
depreciation and amortization expense associated with certain units idled as a
result of the East Coast Refining Reconfiguration.
Change in Fair Value of Contingent Consideration- Change in fair value of
contingent consideration represented a gain of $4.0 million for the three months
ended June 30, 2021 in comparison to a gain of $12.1 million for the three
months ended June 30, 2020. These gains primarily relate to changes in estimated
fair value of the Martinez Contingent Consideration associated with the
acquisition related earn-out obligations.
Change in Fair Value of Catalyst Obligations- Change in fair value of catalyst
obligations represented a gain of $5.8 million for the three months ended
June 30, 2021 compared to a loss of $5.1 million for the three months ended
June 30, 2020. 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.
Interest Expense, net- PBF Energy interest expense totaled $80.8 million for the
three months ended June 30, 2021 compared to $65.5 million for the three months
ended June 30, 2020, an increase of approximately $15.3 million. This net
increase is mainly attributable to higher interest costs associated with the
issuance of the 2025 Senior Secured Notes in May 2020 and December 2020.
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 $83.2 million and $68.1 million for the three months
ended June 30, 2021 and June 30, 2020, respectively (inclusive of $2.4 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).
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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, PBF Energy Limited ("PBF Ltd.") 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 consolidated financial statements based on PBF Energy's allocable
share of PBF LLC's pre-tax income or loss, which was approximately 99.2% on a
weighted-average basis for both the three months ended June 30, 2021 and 2020.
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
interest, for the three months ended June 30, 2021 and 2020 was 8.6% and 26.2%,
respectively, reflecting tax adjustments for discrete items during the quarters.
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 both the three months ended
June 30, 2021 and 2020 was approximately 0.8%. 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.
Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020
Overview- PBF Energy net income was $47.7 million for the six months ended
June 30, 2021 compared to net loss of $649.5 million for the six months ended
June 30, 2020. PBF LLC net income was $54.9 million for the six months ended
June 30, 2021 compared to net loss of $888.8 million for the six months ended
June 30, 2020. Net income attributable to PBF Energy stockholders was $6.6
million, or $0.05 per diluted share, for the six months ended June 30, 2021
($0.05 per share on a fully-exchanged, fully-diluted basis based on adjusted
fully-converted net income, or $(3.87) 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 loss
attributable to PBF Energy stockholders of $676.8 million, or $(5.67) per
diluted share, for the six months ended June 30, 2020 ($(5.67) per share on a
fully-exchanged, fully-diluted basis based on adjusted fully-converted net loss,
or $(4.38) 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 income attributable to PBF Energy stockholders
represents PBF Energy's equity interest in
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PBF LLC's pre-tax income, less applicable income tax benefit. PBF Energy's
weighted-average equity interest in PBF LLC was 99.2% and 99.1% for the six
months ended June 30, 2021 and 2020, respectively.
Our results for the six months ended June 30, 2021 were positively impacted by
special items consisting of a non-cash, pre-tax LCM inventory adjustment of
approximately $669.6 million, or $491.5 million net of tax, and a $2.4 million
tax benefit associated with the remeasurement of certain deferred tax assets,
offset by a change in fair value of contingent consideration primarily related
to the Martinez Acquisition of $26.1 million, or $19.2 million net of tax. Our
results for the six months ended June 30, 2020 were negatively impacted by
special items consisting of a non-cash, pre-tax LCM inventory adjustment of
approximately $701.4 million, or $516.9 million net of tax, a pre-tax change in
the Tax Receivable Agreement liability of $11.6 million, or $8.5 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 and
severance costs related to reductions in workforce of $12.1 million, or
$9.5 million net of tax. These unfavorable impacts were partially offset by the
gain on the sale of hydrogen plants of $471.1 million, or $347.2 million net of
tax and the change in the fair value of the contingent consideration primarily
related to the Martinez Acquisition of $64.9 million, or $47.8 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 continue to be
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. However, when
comparing our results to the six months ended June 30, 2020, demand for our
products has started to recover, evidenced by higher throughput volumes and
barrels sold at the majority of our refineries, as well as overall higher
refining margins, despite weakening margins on the East and Gulf coasts.
Additionally, our results for the six months ended June 30, 2021 were positively
impacted by lower general and administrative expenses when compared to the same
period in 2020. During the six months ended June 30, 2020 we 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 $11.8 billion for the six months ended June 30, 2021
compared to $7.8 billion for the six months ended June 30, 2020, an increase of
approximately $4.0 billion, or 51.3%. Revenues per barrel were $73.47 and $48.25
for the six months ended June 30, 2021 and 2020, respectively, an increase of
52.3% directly related to higher hydrocarbon commodity prices. For the six
months ended June 30, 2021, the total throughput rates at our East Coast,
Mid-Continent, Gulf Coast and West Coast refineries averaged approximately
246,400 bpd, 133,900 bpd, 164,400 bpd and 265,700 bpd, respectively. For the six
months ended June 30, 2020, the total throughput rates at our East Coast,
Mid-Continent, Gulf Coast and West Coast refineries averaged approximately
285,800 bpd, 83,500 bpd, 153,400 bpd and 241,300 bpd, respectively. For the six
months ended June 30, 2021, total barrels sold at our East Coast, Mid-Continent,
Gulf Coast and West Coast refineries averaged approximately 278,800 bpd, 139,700
bpd, 172,700 bpd and 297,800 bpd, respectively. For the six months ended
June 30, 2020, total barrels sold at our East Coast, Mid-Continent, Gulf Coast
and West Coast refineries averaged approximately 321,600 bpd, 111,600 bpd,
185,000 bpd and 269,200 bpd, respectively.
The throughput rates at the majority of our refineries were higher in the six
months ended June 30, 2021 compared to the same period in 2020, slightly offset
by lower rates in the East Coast as a result of the East Coast Refining
Reconfiguration. We operated our refineries at reduced rates beginning in March
2020, and, based on current market conditions, we have adjusted throughput rates
across our entire refining system to correlate with the gradual increases in
demand experienced during the six months ended June 30, 2021, while still
running below historic levels. We plan on continuing to operate our refineries
at lower utilization levels 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 $340.2 million for
the six months ended June 30, 2021, compared to $(1,135.9) million for the six
months ended June 30, 2020, an increase of approximately $1,476.1 million. Gross
refining margin (as described below in Non-GAAP Financial Measures) totaled
$1,361.5 million, or $9.29 per barrel of throughput for the six months ended
June 30, 2021 compared to $(95.1) million, or $(0.68) per barrel of throughput
for the six months ended June 30, 2020, an increase of approximately $1,456.6
million. Gross refining margin excluding special items totaled $691.9 million or
$4.72 per barrel of throughput for the six months ended June 30, 2021 compared
to $606.3 million or $4.36 per barrel of throughput for the six months ended
June 30, 2020, an increase of $85.6 million.
Consolidated gross margin and gross refining margin were positively impacted by
a non-cash LCM adjustment of approximately $669.6 million on a net basis
resulting from the increase in crude oil and refined product prices from the
year ended December 31, 2020 to the end of the second quarter of 2021. Gross
refining margin excluding the impact of special items increased due to favorable
movements in certain crude differentials and an overall increase in throughput
rates and refining margins. For the six months ended June 30, 2020, special
items impacting our margin calculations included a non-cash LCM inventory charge
of approximately $701.4 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. Total Renewable Fuel Standard compliance costs
were $580.7 million for the six months ended June 30, 2021 in comparison to
$96.8 million for the six months ended June 30, 2020.
Average industry margins were mostly favorable during the six months ended
June 30, 2021 in comparison to the same period in 2020, primarily due to varying
timing and extent of the impacts of the COVID-19 pandemic on regional demand and
commodity prices. During the six months ended June 30, 2021, we started to
experience an increase in demand for our products in connection with the lifting
or easing of restrictions by many governmental authorities in response to
decreasing COVID-19 infection rates and the distribution of COVID-19 vaccines.
Favorable movements in 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.
On the East Coast, the Dated Brent (NYH) 2-1-1 industry crack spread was
approximately $14.77 per barrel, or 50.6% higher, in the six months ended
June 30, 2021, as compared to $9.81 per barrel in the same period in 2020. Our
margins were negatively impacted from our refinery specific slate on the East
Coast by weakened Dated Brent/Maya and WTI/Bakken differentials, which
decreased by $1.76 per barrel and $2.90 per barrel, respectively, in comparison
to the same period in 2020. The WTI/WCS differential increased to $12.61 per
barrel in 2021 compared to $11.21 in 2020, which favorably impacted our cost of
heavy Canadian crude.
Across the Mid-Continent, the WTI (Chicago) 4-3-1 industry crack spread
was $15.26 per barrel, or 142.2% higher, in the six months ended June 30, 2021
as compared to $6.30 per barrel in the same period in 2020. Our margins were
negatively impacted from our refinery specific slate in the Mid-Continent by a
decreasing WTI/Bakken differential, which averaged $0.35 per barrel in the six
months ended June 30, 2021, as compared to $3.25 per barrel in the same period
in 2020. Additionally, the WTI/Syncrude differential averaged $1.17 per barrel
during the six months ended June 30, 2021 as compared to $1.37 per barrel in the
same period of 2020.
On the Gulf Coast, the LLS (Gulf Coast) 2-1-1 industry crack spread was $13.99
per barrel, or 65.8% higher, in the six months ended June 30, 2021 as compared
to $8.44 per barrel in the same period in 2020. Margins on the Gulf Coast were
positively impacted from our refinery specific slate by a strengthening WTI/LLS
differential, which averaged a premium of $2.00 per barrel during the six months
ended June 30, 2021 as compared to a premium of $2.24 per barrel in the same
period of 2020.
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On the West Coast, the ANS (West Coast) 4-3-1 industry crack spread was $18.56
per barrel, or 64.8% higher, in the six months ended June 30, 2021 as compared
to $11.26 per barrel in the same period in 2020. Additionally (West Coast) 3-2-1
industry crack spread was $17.13 per barrel, or 86.2% higher, in the six months
ended June 30, 2021 as compared to $9.20 per barrel in the same period in 2020.
Our margins on the West Coast were positively impacted from our refinery
specific slate by a strengthening WTI/ANS differential, which averaged a premium
of $2.67 per barrel during the six months ended June 30, 2021 as compared to a
premium of $3.90 per barrel in the same period of 2020.
Operating Expenses- Operating expenses totaled $965.1 million for the six months
ended June 30, 2021 compared to $973.8 million for the six months ended June 30,
2020, a decrease of approximately $8.7 million, or 0.9%. Of the total $965.1
million of operating expenses for the six months ended June 30, 2021, $922.5
million or $6.29 per barrel of throughput, related to expenses incurred by the
Refining segment, while the remaining $42.6 million related to expenses incurred
by the Logistics segment ($931.2 million or $6.70 per barrel of throughput, and
$42.6 million of operating expenses for the six months ended June 30, 2020
related to the Refining and Logistics segments, respectively). Decreases in
operating expenses were mainly attributable to cost reductions associated with
the East Coast Refining Reconfiguration (East Coast operating expenses decreased
by $36.8 million when compared to the same period in 2020) as well as reductions
in discretionary activities and third-party services, which are in line with our
cost reduction initiatives taken to strengthen our financial flexibility and
offset the negative impact of COVID-19. These decreases were partially offset by
increases in natural gas volumes and prices across our refineries when compared
to the same period in 2020.
General and Administrative Expenses- General and administrative expenses totaled
$102.8 million for the six months ended June 30, 2021 compared to $140.4 million
for the six months ended June 30, 2020, a decrease of approximately $37.6
million or 26.8%. The decrease in general and administrative expenses for the
six months ended June 30, 2021 in comparison to the six months ended June 30,
2020 primarily related to reductions in outside service costs and lower
salaries, wages and benefits. Additionally, general and administrative expenses
for the six months ended June 30, 2020 included headcount reduction severance
costs across the refineries as well as integration costs pertaining to the
Martinez Acquisition. 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 $0.6 million for the six months
ended June 30, 2021 related primarily to the sale of non-operating refinery
assets. There was a gain of $471.1 million for the six months ended June 30,
2020 related to the sale of five hydrogen plants.
Depreciation and Amortization Expense- Depreciation and amortization expense
totaled $232.4 million for the six months ended June 30, 2021 (including $225.7
million recorded within Cost of sales) compared to $244.7 million for the six
months ended June 30, 2020 (including $239.0 million recorded within Cost of
sales), a decrease of approximately $12.3 million. The decrease was a result of
reduced depreciation and amortization expense associated with certain units
idled as a result of the East Coast Refining Reconfiguration.
Change in Fair Value of Contingent Consideration- Change in fair value of
contingent consideration represented a loss of $26.1 million for the six months
ended June 30, 2021 in comparison to a gain of $64.9 million for the six months
ended June 30, 2020. These losses and gains were primarily related to the
changes in estimated fair value of the Martinez Contingent Consideration
associated with the acquisition related earn-out obligations.
Change in Tax Receivable Agreement Liability- There was no change in the Tax
Receivable Agreement liability for the six months ended June 30, 2021. Change in
the Tax Receivable Agreement liability for the six months ended June 30, 2020
represented a loss of $11.6 million.

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Change in Fair Value of Catalyst Obligations- Change in fair value of catalyst
obligations represented a loss of $4.2 million for the six months ended June 30,
2021 compared to a gain of $6.6 million for the six months ended June 30, 2020.
These losses and gains 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- We incurred debt extinguishment costs of $22.2
million in the six months ended June 30, 2020 related to the early redemption of
our 2023 Senior Notes. There were no such costs in the six months ended June 30,
2021.
Interest Expense, net- PBF Energy interest expense totaled $161.1 million for
the six months ended June 30, 2021 compared to $114.7 million for the six months
ended June 30, 2020, an increase of approximately $46.4 million. This net
increase is mainly attributable to higher interest costs associated with the
issuance of the 2025 Senior Secured Notes in May 2020 and December 2020.
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 $166.1 million and $119.8 million for the six months
ended June 30, 2021 and 2020, respectively (inclusive of $5.0 million and $5.1
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, PBF Ltd., 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 99.1%, on a weighted-average
basis for the six months ended June 30, 2021 and June 30, 2020, 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 six months ended June 30, 2021 and June 30, 2020 was (144.4%)
and 25.9%, respectively.
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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 six months ended June 30, 2021
and 2020 was approximately 0.8% and 0.9%, 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.
                                       74
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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 fair value of contingent
consideration, changes in the Tax Receivable Agreement liability, debt
extinguishment costs, gain on sale of hydrogen plants, severance costs related
to reduction in workforce and net tax benefit on remeasurement of deferred tax
assets. 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 (loss) 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
                                       75
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common stock, as the assumed exchange would change the amount of PBF Energy's
earnings that are subject to corporate income tax.
The following table reconciles PBF Energy's Adjusted Fully-Converted results
with its results presented in accordance with GAAP for the three and six months
ended June 30, 2021 and 2020 (in millions, except share and per share amounts):
                                                         Three Months Ended June 30,                     Six Months Ended June 30,
                                                         2021                    2020                   2021                   2020
Net income (loss) attributable to PBF Energy Inc.
stockholders                                       $         47.9

$ 389.1 $ 6.6 $ (676.8) Less: Income allocated to participating securities

              -                      -                      -                    0.1
Income (loss) available to PBF Energy Inc.
stockholders - basic                                         47.9                  389.1                    6.6                 (676.9)
Add: Net income (loss) attributable to
noncontrolling interest (1)                                   0.4                    4.5                      -                  (10.1)
Less: Income tax (expense) benefit (2)                       (0.1)                  (1.2)                     -                    2.7

Adjusted fully-converted net income (loss) $ 48.2 $ 392.4 $ 6.6 $ (684.3) Special Items: (3) Add: Non-cash LCM inventory adjustment

                     (264.0)                (584.2)                (669.6)                 701.4
Add: Change in fair value of contingent
consideration                                                (4.0)                 (12.1)                  26.1                  (64.9)
Add: Gain on sale of hydrogen plants                            -                 (471.1)                     -                 (471.1)
Add: Severance costs                                            -                   12.9                      -                   12.9
Add: Debt extinguishment costs                                  -                      -                      -                   22.2
Add: Change in Tax Receivable Agreement liability               -                      -                      -                   11.6

Add: Net tax benefit on remeasurement of deferred
tax assets                                                   (4.1)                     -                   (2.4)                     -
Add: Recomputed income tax on special items                  71.3                  277.3                  171.2                  (55.8)
Adjusted fully-converted net income (loss)
excluding special items                            $       (152.6)

$ (384.8) $ (468.1) $ (528.0)



Weighted-average shares outstanding of PBF Energy
Inc.                                                  120,230,133            120,010,882            120,211,219            119,499,392
Conversion of PBF LLC Series A Units (4)                  994,138              1,017,620                986,834              1,113,209
Common stock equivalents (5)                              691,904                400,398                489,183                      -
Fully-converted shares outstanding-diluted            121,916,175            121,428,900            121,687,236            120,612,601

Diluted net income (loss) per share                $         0.39          $        3.23          $        0.05          $       (5.67)
Adjusted fully-converted net income (loss) per
fully exchanged, fully diluted shares outstanding
(5)                                                $         0.39

$ 3.23 $ 0.05 $ (5.67) Adjusted fully-converted net income (loss) excluding special items per fully exchanged, fully diluted shares outstanding (3) (5)

$        (1.26)

$ (3.19) $ (3.87) $ (4.38)

----------

See Notes to Non-GAAP Financial Measures.


                                       76
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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):

                                       77

--------------------------------------------------------------------------------

Latest news about PBF Energy Inc.

Elliott weighs Citgo bid as creditor group eyes Conoco for own offer	Apr. 18	RE
Wells Fargo Adjusts Price Target on PBF Energy to $71 From $65, Maintains Overweight Rating	Apr. 11	MT
Piper Sandler Raises Price Target on PBF Energy to $61 From $50, Maintains Neutral Rating	Apr. 05	MT
JPMorgan Adjust Price Target on PBF Energy to $59 From $54, Keeps Overweight Rating	Apr. 01	MT
Pbf Energy Insider Sold Shares Worth $571,500, According to a Recent SEC Filing	Mar. 27	MT
North American Morning Briefing : Tech in Focus on -2-	Mar. 25	DJ
Mizuho Securities Downgrades PBF Energy to Neutral From Buy, Price Target is $58	Mar. 22	MT
Pbf Energy Insider Sold Shares Worth $2,234,600, According to a Recent SEC Filing	Mar. 21	MT
Wells Fargo Adjusts Price Target on PBF Energy to $65 From $64, Maintains Overweight Rating	Mar. 20	MT
PBF Energy Insider Sold Shares Worth $2,202,922, According to a Recent SEC Filing	Mar. 18	MT
North American Morning Briefing : Investors -2-	Mar. 18	DJ
JPMorgan Trims Price Target on PBF Energy to $54 From $55, Keeps Overweight Rating	Feb. 20	MT
Analysis-US refinery M&A stalls as buyers shun aging assets, uncertain future	Feb. 16	RE
Sector Update: Energy Stocks Rise Pre-Bell Thursday	Feb. 15	MT
Exchange-Traded Funds, Equity Futures Higher Pre-Bell Thursday on Hopes of Encouraging Economic Data Ahead	Feb. 15	MT
Transcript : PBF Energy Inc., Q4 2023 Earnings Call, Feb 15, 2024	Feb. 15
PBF Energy's Q4 Swings to Adjusted Loss, Revenue Falls; Approves Additional $750 Million for Buyback	Feb. 15	MT
Tranche Update on PBF Energy Inc.'s Equity Buyback Plan announced on December 12, 2022.	Feb. 15	CI
PBF Energy Inc. Reports Earnings Results for the Full Year Ended December 31, 2023	Feb. 15	CI
PBF Energy Inc. Provides Production Guidance for the First Quarter and Full Year of 2024	Feb. 15	CI
Refiner PBF Energy reports fourth-quarter loss	Feb. 15	RE
Earnings Flash (PBF) PBF ENERGY Posts Q4 Revenue $9.14B, vs. Street Est of $8.65B	Feb. 15	MT
PBF Energy Inc. Reports Earnings Results for the Fourth Quarter Ended December 31, 2023	Feb. 15	CI
PBF Energy Inc. Announces Quarterly Dividend, Payable on March 14, 2024	Feb. 15	CI
Futures tepid ahead of economic data	Feb. 15	RE

PBF Energy Inc. is an independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. The Company sells its 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. The Company operates through two business segments: Refining and Logistics. Its Refining segment includes the operations of its six refineries, which produces unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. The Companyâs Logistics segment includes PBF Logistics LP (PBFX), a partnership, formed to own or lease, operate, develop and acquire crude oil and refined products terminals, pipelines, storage facilities and similar logistics assets.

Sector

Oil & Gas Refining and Marketing

Calendar

2024-04-30 - Annual General Meeting

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Mean consensus

OUTPERFORM

Number of Analysts

Last Close Price

57.78 USD

Average target price

58.62 USD

Spread / Average Target

+1.45%

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Sector Other Oil & Gas Refining and Marketing

	1st Jan change	Capi.
PBF ENERGY INC.	+31.44%	6.87B
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VALERO ENERGY CORPORATION	+27.54%	55.06B
INDIAN OIL CORPORATION LIMITED	+32.11%	28.14B
FORMOSA PETROCHEMICAL CORPORATION	-11.77%	21.04B
REPSOL S.A.	+9.44%	19.56B

Other Oil & Gas Refining and Marketing

PBF Energy Inc.

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PBF

US69318G1067

Oil & Gas Refining and Marketing

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

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Sector Other Oil & Gas Refining and Marketing