Q3 2021 PBF Logistics LP Earnings Call

S Logistics L. P third quarter 2021 earnings conference call and webcast.

At this time, all participants have been placed in a listen only mode and the floor will be open for your questions. Following the managements prepared remarks, if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.

Please note. This conference is being recorded it is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir you may begin.

Thank you Charlie good morning, and welcome to today's call with me today are Matt Lucey Executive Vice President Erik Young our CFO and several other members of the Partnership's senior management team.

If you would 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'll 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 Lucey. Thanks.

Good morning, everyone and thank you for joining us on today's call.

PBF logistics operated well during the third quarter.

The partnership's consistent results through 2020 in the third quarter of 2021 highlight the stability of our business and the strong relationship with our sponsor.

We continue to expect partnership revenues for 2021 to be in the $350 million range.

The 2021 EBITDA in the $225 million range slightly above our previous guidance range.

Our consistent revenues and cash generation continue to allow the partnership to maintain healthy distribution coverage, while reducing net debt.

By continuing to focus on reducing our revolver balance and strengthening the balance sheet, we are preserving our ability to make meaningful investments to grow the partnership in the future.

In the near term maintaining financial flexibility debt paydown and strengthening liquidity are the priorities.

Today, we announced a distribution of <unk> 30 cents per unit will continue to review our distribution distribution policy going forward with respect to company performance market conditions and alternate use of funds with that I'll turn it over to Eric.

You, Matt Good morning, everyone and thank you for joining us on today's call. We reported third quarter net income attributable to the limited partners of $36 $7 million. This morning.

Adjusted partnership EBITDA was $57 9 million, which includes roughly $1 1 million of noncash unit based compensation and environmental remediation costs associated with the east coast terminals.

During the quarter, we spent roughly $3 4 million and total capex, including approximately $800000 for maintenance.

For 2021, we currently expect capital expenditures to be roughly $10 million to $15 million inclusive of roughly $2 million in multiple small strategic projects.

We ended the quarter with approximately $399 6 million in liquidity after repaying an additional 35 million in debt during the third quarter. Our liquidity consists of a cash balance of $28 6 million and.

And approximately $371 million of availability under our revolving credit facility.

Net debt to annualized adjusted EBITDA was two seven times.

We expect to continue using excess cash to improve our leverage ratios and strengthen the balance sheet.

Operator, we've concluded our opening remarks and now we'll open the call for questions.

In a moment, we will open the call to questions if you'd like to ask a question. Please press star one on your telephone keypad.

A confirmation tone will indicate your line is in the question queue. You May Press Star two if you would 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.

One moment, please while we poll for questions.

Our first question is from Spiro <unk> with credit Suisse. Please proceed with your question.

Thanks, Operator, Hey, Matt Eric.

I don't want to start off with the MLP structure.

On the PBF call.

And it sounds like the MLP structure here and here to stay for now, but you did mention some participation in growth going forward.

And kind of an optionality around keeping the structure around so curious can you just outlined some specific examples of how you're thinking about how <unk> can participate in some of that growth and how contingent that is our capital markets. In other words would the presumption here that PBF X can self fund a lot of this growth or do you see yourselves kind of having to go back tissue cap.

To fund that.

A part of it I'll leave it to Eric on the capital markets, but yeah.

Our business is always dynamic, but to say that the environment. We are in now is dynamic on steroids as to say the latest over the last.

A couple of weeks, we've seen the MLP market news come out that the Congress and the administration of our you know considering the elimination of Mlps to the expansion of our qualified income.

El Pais.

So I.

I believe that Mlps are.

Safe in regards to what the administration is trying to do now that seems to be very clear over the last week.

There's a reasonable chance what qualified income is.

It could be expanded so.

<unk> done what it's supposed to do which is operate operate well delever, which gives us more financial flexibility going forward. We certainly believe we'll have access to capital markets, if that's necessary, but I'll turn that over to Eric Yeah, I think to follow on Matt's comments, we have done the right thing we've now put.

The partnership in a position where if there are incremental growth opportunities, we're not relying on or will not be reliant on the capital markets. However, the biggest growth opportunity will be and it will require a change is if renewable.

Suddenly becomes qualifying income if that happens I think the base assumption should be that there will be some type of quasi rotation into the equities of the existing MLP markets. I don't think we're necessarily banking on that because again, we've got enough financial flexibility here by our leverage ratios.

Below three times, where if there is an opportunity for us to grow we can ultimately just use the existing balance sheet that we have.

Got it that's helpful. Thanks for that guys a second one just thinking about next year.

I know, you're not providing guidance yet for 2022, but obviously just improve the outlook for this year to $225 million for EBITDA and so maybe we just put it in in larger buckets as we think about the puts and takes in 2022, that's either going to drive that number.

Higher or lower.

Good items I'm thinking of a re contracting obviously the recoveries a tailwind I think Tom talked about 2022.

Volumes in demand being stronger than 2021, so maybe just outline some of those big movers as we think about next year.

I would tell you.

P. B FX has demonstrated consistent to our earnings going back over the last year and a half as we just talked about and expect consistent earnings going forward in the past. We have mentioned, we had a processing deal with Maersk that wasn't extended.

And but we have we have options and opportunities to potentially explore providing that service to other parties. So I don't envision big swings other than what's already been contemplated in the market, Yeah, and I think the the only thing that we know of that is concrete at this point is for the Delaware.

Our city or East coast based rail contracts those contracts will be stepping down this has already been outlined in previous calls.

It is ultimately going to go down by easy math is about $20 million in EBITDA.

So I think thats, probably what we know of as of today and then we are in the process of going through 'twenty, two budgeting and we'll sit before our board by the end of the year and then early next year, we'll come out with with guidance for the year, but I think that's a that's a concrete concrete contract stipulation that's already built in.

Got it.

One if I could just just around debt.

At this pace with the credit facility, you're sort of on pace now to repay the entire thing by the end of next year. Then of course, you've got the 2023 notes coming up in May of 2023.

So I'm just curious as we think about the trajectory for that is it sort of ratable pay down over the next year and then maybe just help us think about how you plan on dealing with the 2020 threes and then what happens after that your leverage is pretty low at that point do you want to keep going lower or how to think about it.

The balance sheet.

I think we're really going to be queuing off of what the market tells us in terms of again, if if the MLP market suddenly starts to turn and we suddenly we suddenly have the availability of renewables as qualifying income there's probably one path in the event that that doesn't occur in the MLP market continues to shrink in terms of numbers of companies.

<unk> overall market cap and also I would say just.

Interest in the asset class overall, there's probably a slightly different path I think right now we have been reducing the overall leverage.

We're feeling pretty comfortable about all of the bank relationships that we have with our revolver and I would say in that latter path right you probably don't want to pay up for some type of no call provision and a long term bond you would want to keep your interest expense as low as possible that means a slightly shorter shorter dated piece of paper.

But I think we have enough time here through call. It next summer to determine exactly which way things are going to go and I think we're just.

We're waiting to get some clarity.

From Washington D C. At this point.

Alright, okay.

I'll add thanks for the time today guys. Thank you.

Yeah.

And at this time, we have no further questions and I will now turn the call back to Matt Lucey for closing remarks.

Certainly appreciate everyone listening to today's call and look forward to speaking again.

Next quarter have a great day.

And this concludes today's conference and you may disconnect your lines at this time.

Thank you for your participation.

Okay.

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