PBF Energy(PBF)2023-08-03 18:35Financial Data and Key Metrics Changes - The company reported adjusted net income of $2.29 per share and adjusted EBITDA of more than $560 million for the second quarter [58] - The cumulative impact of special items increased second quarter net income by approximately $729 million or $5.59 per share, primarily due to the gain from the formation of the St. Bernard Renewables joint venture [34][50] - The company ended the quarter with over $1.5 billion in cash and approximately $1.44 billion of gross debt, indicating a strong balance sheet [67] Business Line Data and Key Metrics Changes - The second quarter saw a build of inventory related to the St. Bernard Renewables (SBR) joint venture amounting to $75 million, which will be managed within the joint venture going forward [3] - Consolidated CapEx for the second quarter was approximately $367 million, with $260 million allocated for refining, corporate, and logistics, and approximately $107 million related to SBR [65] - The SBR unit began operations in July, with planned throughput rates expected to be around 20,000 barrels per day [66] Market Data and Key Metrics Changes - The current diesel market is characterized as softer, with diesel inventories remaining below five-year averages, while gasoline demand has been stronger [11][42] - The company noted that refinery margins remained well above historical mid-cycle levels, with a rebound from relative lows experienced in the second quarter [41] - The West Coast gasoline markets are expected to experience volatility due to supply constraints and pricing adjustments [1] Company Strategy and Development Direction - The company aims to strengthen its business, cash flows, and balance sheet, with a goal of achieving an investment-grade rating [46][49] - There is a commitment to rigorous capital allocation, focusing on maximizing long-term shareholder value through disciplined investments and potential share buybacks [48][55] - The company is exploring growth opportunities beyond refining, including renewable diesel and hydrogen initiatives [47][109] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's position, highlighting stable to growing demand for products at refinery gates and the need for high utilization of assets [27] - The outlook for the diesel market is cautiously optimistic, with expectations of increased production to meet seasonal demand despite current softness [72][82] - The company anticipates that crude differentials will relax post-summer as the industry heads into turnarounds [39] Other Important Information - The company has reduced environmental credits payables by about 40% since the beginning of the year, from over $1.3 billion to just under $800 million [61] - The company has repurchased approximately $440 million worth of shares, including $100 million in the second quarter, reducing the total share count to just under 124 million shares [62] - The company is entitled to potentially receive up to an additional $30 million of contingent consideration from the SBR joint venture if certain performance conditions are met [79] Q&A Session Summary Question: Can you discuss the diesel markets and the ability to deliver enough diesel into the market? - Management noted a recent rebound in diesel crack spreads, indicating that the market will incentivize diesel production as the agricultural season approaches [72][82] Question: How do you see the portfolio today and any potential shifts? - Management emphasized that manufacturing renewable diesel is the best way to mitigate RIN exposure, which is a significant focus for the company [102] Question: What are the expectations for working capital in the second half of the year? - Management indicated that there is no specific concern, but a significant turnaround in Q4 at Torrance will impact throughput [113] Question: Can you quantify the changes in inventory control and the impact of achieving an investment-grade rating? - Management stated that achieving an investment-grade rating would lower the cost of capital and improve liquidity with counterparties, adding value to the company [96][98]