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PBF Logistics LP Common Units representing limited partner interests
Q4 2020 Earnings Conference Call
2/11/2021
spk00: Welcome to the PBS Logistics fourth quarter 2020 earnings conference call and webcast. At this time, all participants have been placed in the listen-only mode, and the floor will be open for your questions following management's prepared remarks. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It's now my pleasure to turn the floor over to Colin Murray, Investor Relations. Please go ahead, sir.
spk04: Thank you, Melissa. Good morning and welcome to today's call. With me today are Matt Lucey, our Executive Vice President, Eric Young, our CFO, and several other members of the partnership's senior management team. If you'd like a copy of our earnings release, it is available on our website. Before we begin, I would like to direct your attention to the forward-looking statements disclaimer contained in today's press release. In summary, it outlines the statements in the press release and on this conference call that state the partnership's or management's expectations or predictions of the future, are forward-looking statements intended to be covered by the safe harbor provisions under federal securities laws. There are many factors that could cause actual results to differ from our expectations, including those we've described in our filings with the SEC. As noted in our press release, we will be using certain non-GAAP measures while describing the partnership's operating performance and financial results. For reconciliations of non-GAAP measures to the appropriate GAAP figure, please refer to the supplemental tables provided in today's press release. I'll now turn the call over to Matt Lucy.
spk01: Thanks, Colin. Good morning, everyone. Even with 2020 now behind us, the pandemic near-term challenges, even as we see signs of improvement in terms of progress of vaccine rollouts and the prospect of eventually being able to return to a more normal daily routine. Despite the challenges, PBF Logistics continues to operate well as can be seen in the consistency of our earnings in 2020. Our assets operated well, and we were able to reduce operating and capital expenses. We have seen an overall modest decline in throughput levels, but much less than what can be seen in a drop in demand nationally for the products we move, store, and deliver. One of the highlights of the year was the processing agreement at our East Coast storage assets with Maersk. We were able to support Maersk for the duration of the one-year agreement. However, as a result of the pandemic, Maersk did not extend the agreement beyond its initial term, which ended in the fourth quarter. That being said, Maersk remains a valued customer, and we continue to provide processing services on a spot basis. Last October, our sponsor and partner, PVF Energy, announced a strategic restructuring of its East Coast refining system whereby the Paulsboro Refinery idled several major processing units and expected output from the refinery will decrease. For 21, the impact of this configuration change is expected to equate to less than 1 percent of partnership EBITDA. Going forward, with changes I just mentioned, we expect partnership revenues for 21 to be in the $330 to $350 million range, with 21 EBITDA in the $210 to $220 million range. This will allow the partnership to maintain healthy distribution coverage and continue generating ample cash flow to deliver the business. Debt pay down and strengthening liquidity are the priorities. Today, we maintain our distribution of 30 cents per unit. We will continue to review our distribution policy going forward with respect to the company performance, market conditions, and alternate use of funds. I'll now turn it back over to Eric.
spk02: Thank you, Matt. Good morning, everyone, and thank you for joining us on today's call. We reported fourth quarter net income attributable to the limited partners of $31 million. Adjusted partnership EBITDA was $58.5 million, which includes roughly $3 million of transaction-related expenses, non-cash unit-based comp, and environmental remediation costs associated with the East Coast terminals. During the quarter, we spent roughly $1.1 million in maintenance capex, and incurred $2.7 million in total CapEx. Our 2020 total CapEx was $12.3 million. For 2021, we currently expect CapEx to be approximately $15 million. We ended the quarter with approximately $331 million in liquidity, including a cash balance of $36 million and approximately $295 million of availability under our revolving credit facility. During the quarter, we repaid roughly $13 million on our revolver. Net debt to annualized adjusted EBITDA was 2.9 times. We expect to continue using excess cash to improve leverage ratios and strengthen our balance sheet. Operator, we've concluded our opening remarks, and now we'll open the call for questions.
spk00: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question comes from the line of Spiro Dunas with Credit Suisse. Please proceed with your question.
spk03: Hey, morning, guys. Thanks for taking the question. I wanted to start off with just options around brooding through the remaining challenging environment here as we sort of get back to normal. And Matt, I know in the past you talked about or saying all options are more or less on the table as you think about different options between PBF and PBFX. And so curious as time has gone on and the vaccine is out and things have maybe improved narrowly, can you narrow the bands on what some of the options are and perhaps exclude some of the things you were thinking about in the past?
spk01: No. Not necessarily. I would describe it clearly in the eye of the storm. We did not make any strategic decisions that alter the course of the company. I absolutely believe we're now in a position where every day the world will get a bit healthier than it was the day before. And as a result, there will be sort of daily improvements to our industry. As we look forward, we'll continue to, you know, our view will continue to evolve based on the market outlook and the way the market values us. And so I do think there will be opportunities for interesting capital projects at PBFX. But in regards to strategic alternatives, we haven't eliminated anything. The whiteboard you know, remains as it was. And we'll continue to, you know, but nothing is static. So we'll continue to react to what the market is. We're in unprecedented times. So we look forward to, like I said, seeing and hopefully watching the world get better. And we'll continue to evolve in our thinking in regards to strategic moves for PBFX.
spk03: Got it. Okay. I appreciate that. Second one, I wasn't able to listen to the PBF call, but I understand that the Shellmet Refinery was maybe mentioned as a potential candidate for renewable diesel conversion. I believe you've got a pretty sizable crude storage contract there, still a few years left on it. Can you walk through any potential impact to PBFX and if that were to convert to renewable diesel?
spk01: Well, just to be clear, so everyone listening to this call, it wasn't It wasn't converting the refinery to a renewable diesel project. There's a standalone renewable diesel prospective project at Chalmette that would not impact, certainly wouldn't impact the crude contract between PBF or PBFX. It wouldn't impact any of the refining operations. So, you know, if you then extend the question is, okay, well, will not affect PBF and PBFX contracts or base refining operations, is there a pathway for PBFX to participate in the project in some way? And the answer to that is it's possible. We're still in the early stages of development, but it's certainly possible, and PBFX, And once you get into that arena, you have to be careful about what's qualified income and what's not qualified income. But PBF has a clean slate in regards to non-qualified income with our non-qualified income at zero. So we have some flexibility if we want to use PBFX, but it's way too early in that process to be talking about that at this point.
spk03: Got it. Thanks for the clarification, Matt. Be well, guys. Thanks. Take care.
spk00: Thank you. Ladies and gentlemen, that concludes our time allowed for questions. I'll turn the floor back to Mr. Lacey for any final comments.
spk01: Well, I appreciate it. And as I just mentioned, we look forward to the world getting healthier every single day. And by extension, that will certainly extend to our industry. And I look forward to speaking to you next quarter. Thank you very much.
spk00: Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
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