Q1 2025 PBF Energy Inc Earnings Call
Good day, everyone and welcome to the E. B F energy first quarter, 'twenty 25 earnings conference call and webcast.
At this time, all participants have been placed in a listen only mode.
And the floor will be opened for questions. Following.
Management's prepared remarks.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Speaker Change: Please note that 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.
Colin Murray: Thank you John good.
Speaker Change: Morning, and welcome to today's call with me today are Matt Lucey, our president and CEO, Mike The casket, our senior Vice President and head of refining Karen Davis, our CFO and several other members of our management team.
Speaker Change: Copies of today's earnings release, and our 10-Q filing including supplemental information are available on our website before getting started I'd like to direct your attention to the safe Harbor statement contained in today's press release.
Speaker Change: Statements that express the company'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.
Speaker Change: Consistent with our prior periods, we will discuss our results excluding special items, which are described in today's press release.
Speaker Change: Also included in the press release as forward looking guidance information for any questions on these items or other follow up questions. Please contact investor relations.
Speaker Change: For reconciliations of any non-GAAP measures mentioned on today's call. Please refer to the supplemental tables provided in the press release I'll now turn the call over to Matt Lucey.
Matt Lucey: Thanks, John Good morning, everyone and thank you for joining the call.
Speaker Change: To say the first quarter was tumultuous would be an understatement.
Speaker Change: Between the uncertain economic environment, and our Martinez Martinez event Theres been a lot to digest.
Speaker Change: I'm happy to report that phase one of our restart plans from our kids were recently completed.
Speaker Change: Consistent with our March update.
Speaker Change: We safely restarted a number of the unaffected goods, including the crude unit hydro cracker and delayed coker.
Speaker Change: The refinery will be running in this limited configuration and the 85 to 105000 barrels per day range.
Speaker Change: Getting to this point was no small lift for the Martinez team.
Speaker Change: Actually given they were simultaneously continuing their initial work to rebuild the fire damaged areas conducting that planned FCC turnaround as repair and preparing it successfully executing the startup.
Speaker Change: In the current configuration will be supplying limited quantities of finished gasoline and jet fuel to the California markets.
Speaker Change: It will also be producing intermediates, which mean judge a further process into finished products at Torrance.
Speaker Change: Our business interruption waiting period ended on April 3rd and we expect that we from that date forward, we'll see the portion of our insurance program respond as well.
Speaker Change: As mentioned in our press release, our insurers have agreed to pay the first installment of.
Speaker Change: $250 million.
Speaker Change: Which we expect to receive this quarter.
Speaker Change: We are appreciative of the willingness of our insurance carriers to provide interim payments.
Speaker Change: Those directly to the quality of our programs and the relationships that have been established.
Speaker Change: In many cases more than a decade ago.
Speaker Change: Despite the broader concerns in the market the fundamentals are.
Speaker Change: Our improving as we approach driving season.
Speaker Change: Demand is resilient and showing signs of strength.
Speaker Change: Gasoline stocks are below the five year average and just the stocks are at the bottom of the range.
Speaker Change: Cracks are constructive.
Speaker Change: That said differentials for our preferred heavy and sour feedstocks are definitely a headwind.
Speaker Change: These narrow differentials reduced catch rates for complex refiners, such as P. B S.
Speaker Change: We are encouraged however, with the reintroduction of incremental OPEC plus barrels.
With the prospect of more to come.
Speaker Change: As he said differentials begin to loosen.
Speaker Change: <unk> will be a direct beneficiary.
Speaker Change: Longer term, we continue to see incremental demand growth exceeding net refining capacity additions.
Speaker Change: This is a constructive set up for the global refining environment.
Speaker Change: We're seeing more rationalizations that expected in 2025 and 26.
New additions declining as we look further out.
Speaker Change: Yeah.
Speaker Change: PBF is focus on controlling the aspects of our business that we can control to best position ourselves going forward.
Speaker Change: In this current cycle Pbf's balance sheet provides us with the flexibility to weather challenging markets and look ahead to the next market cycle.
Speaker Change: To be successful and it adds value for our investors.
Speaker Change: Must operate safely reliably and responsibly and we must do it as efficiently as possible.
Speaker Change: As part of our ongoing review of our portfolio of assets to maximize value for investors today, we announced the sale of our Knoxville, and Philadelphia terminal assets for $175 million.
Speaker Change: This process began last year and we expect the transaction will close in the second half of this year.
Speaker Change: I'll now turn the call over to Mike Mcaliskey for comments on the operations.
Speaker Change: And our cost savings program, which are which are tracking ahead of plan.
Speaker Change: Thank you Matt Good morning, everyone before updating the progress we've made on our refining business improvement program or RBI for short.
Speaker Change: To provide some additional commentary on our first quarter operations.
Speaker Change: The West Coast.
Speaker Change: During our mid March weather event loss of steam occurred that's hearts, which shut down the majority of the refinery.
Speaker Change: Initial expectations were for five to seven days of downtime.
Speaker Change: After the initial repairs were completed within seven days, we began a sequence of restart of the refinery units late March.
Speaker Change: Unfortunately issues occurred during restart attempts, which primarily resulted from the initial rapid shutdown.
Speaker Change: The restart was completed in mid April.
Speaker Change: In addition to the work on the West Coast, we executed turnarounds at the Chalmette and Delaware City refineries.
Speaker Change: In Chalmette, the turnaround was completed on time and on budget.
Speaker Change: I'd like to I would also like to congratulate and thank the Chalmette refinery are successfully and safely managing operations to a record breaking snowstorm and freezing temperatures in January.
Speaker Change: At Delaware City turnaround of the Hydrocracker was performed according to plan.
Speaker Change: Work was completed in the first week of April.
Speaker Change: Shifting topics to RBI.
Speaker Change: Earlier in 2025, we announced the initiative as part of our ongoing strategic process to extract incremental value across our business.
Speaker Change: Since then we have generated over 500 cost saving ideas, so more than 40 idea generation sessions.
Speaker Change: Our teams are building out these ideas with actionable quantifiable and measurable plants.
Speaker Change: Initially we are focused on five main areas, including projects and turnarounds strategic.
Speaker Change: Nick procurement opportunities.
Speaker Change: East Coast refining system, the Torrance refinery and the refining organizational structure.
Speaker Change: Our stated goal is to generate and deliver more than $200 million.
Speaker Change: Annualized run rate sustainable cost savings by year end 2025.
Speaker Change: This effort will also ultimately touch all our locations, including some centralized functions.
Speaker Change: That said in the four months since our initial announcement.
Speaker Change: We've had teams at Torrance and on the East Coast.
Speaker Change: And when you are looking at various centralized groups such as capital turnarounds at procurement.
Speaker Change: We are currently on track to exceed our stated goal of $200 million of run rate savings by year end 2025.
Speaker Change: As a reminder, we will realize the full value of these savings in 2026 and a prorated portion in 2025 as we move through implementation.
Speaker Change: In terms of next steps, we will continue implementing initiatives in tracking success.
Speaker Change: While progressing the program through our remaining locations and functions to generate additional actionable ideas that will translate to real cost savings.
Speaker Change: Lastly, we've reviewed our 2025 capital program and have elected to eliminate a number of discretionary it's small strategic projects from the 'twenty two 'twenty 'twenty five planned without affecting our maintenance environmental and safety related programs.
Speaker Change: Our revised total capital budget for 2025, it's now in the $750 million to $775 million range capital.
Speaker Change: Expenditures to rebuild Martinez and bring it back to full operations are separate as these costs will be covered by insurance.
Speaker Change: We will continue to look at our capital going forward and make adjustments as needed depending on operations and market conditions.
Speaker Change: We have a number of positive initiatives going on across our organizations, but I remain priority will always be to focus on safe reliable and responsible operations across the system with that now I'll turn the call over to Karen Davis for a financial overview.
Karen Davis: Thanks, Mike.
Karen Davis: In the first quarter, we reported an adjusted net loss of $3.09 per share and adjusted EBITDA loss of $258 8 million.
Karen Davis: Our discussion of first quarter results excludes $78 1 million special item related to expenses, resulting from the Martinez refinery incident.
And an $8 $7 million gain relating to Pbf's itchy Prince share of SBR is lower.
Karen Davis: Cost or market adjustment for the quarter.
Karen Davis: As Matt said earlier, we received notice that our insurers have agreed to pay an unallocated first installment at insurance proceeds of $250 million, which we should receive in the second quarter.
Karen Davis: In fact that we will negotiate additional interim payments most likely on a quarterly basis. However, the timing and amount of any agreed upon future payments will be dependent on the amount of covered expenditures that we actually incur plus calculated business interruption losses.
Karen Davis: We are very early in the recovery and claim process and we expect that cash recoveries could lag to a certain extent are expenses incurred and covered losses.
Karen Davis: Our Q1 P&L reflects incremental opex at Martinez of $78 1 million related to fire response recovery and cleanup efforts, which are reflected as of Q1 special item.
Karen Davis: We anticipate recovering a portion of this amount through insurance, but the specific amount of the recovery will be determined as we progress further into the claims process.
Karen Davis: We also wrote down the net book value at the fire damaged assets 556 million and recorded a corresponding insurance receivable for the same amount plus an additional <unk>.
Speaker Change: What's the cost.
Speaker Change: Generally speaking any insurance proceeds that we receive in future periods, including the $250 million upfront payment expected this quarter that.
Speaker Change: That is in excess of the $61 million insurance receivable will B E.
Speaker Change: Reflected as other operating income on our income statement. It is our intent to percent insurance proceeds that we report in other operating income as a special item going forward.
Speaker Change: Shifting back to our normal quarterly results discussion also included in our results is a 17 million dollar loss related to Pbf's equity investment and St. Bernard Byrne from renewables F C.
Speaker Change: <unk> produced an average of 10000 barrels per day of renewable diesel in the first quarter.
Speaker Change: Second quarter Rd production is expected to be 12 to 14000 barrels per day as a result of planned catalyst change that began in March and ended in April.
Speaker Change: Cash flow used in operations for the quarter was $661 4 million, which includes a working capital headwind of approximately $330 million primarily related to the January 2025 tax receivable agreement payment of $131 million and a temporary increase in.
Speaker Change: Hydrocarbon inventory levels related to the Martinez and Torrance downtime.
Speaker Change: We expect inventory levels to be reduced by approximately 2 million barrels by the end of the second quarter as compared to March 31.
Speaker Change: Cash invested in consolidated Capex for the first quarter was $218 3 million, which includes refining corporate and logistics.
Speaker Change: [noise] amount also includes approximately $28 million of Capex related to the Martinez incident.
Speaker Change: Additionally, our board of directors approved a regularly quarterly dividend of 27, and a half cents per share.
Speaker Change: We ended the quarter with approximately $469 million in cash and approximately $1 77 billion of net debt.
Speaker Change: Maintaining our firm financial footing and a resilient balance sheet remain priorities.
Speaker Change: In the first quarter, we accessed the capital markets through our $800 million Upsized senior notes offering.
Speaker Change: This issuance bolsters, our balance sheet and ensures that we have sufficient liquidity as we navigate a turbulent turbulent commodities markets and rebuild from the Martinez incident.
Speaker Change: At quarter end, our net debt to cap was 29% and our current liquidity is approximately $2 4 billion based on a cash balance of $469 million and 2 billion of available borrowing capacity under our ABL.
Speaker Change: Our liquidity position is ample and our plans to reduce inventory receipt of the first Martinez insurance payment.
Speaker Change: And receipt of the proceeds from the pending sale of the terminals should bolster this further.
Speaker Change: As we look ahead, we expect to use periods of strength to focus on delevering and preserving the balance sheet.
Speaker Change: Operator, we've completed our opening remarks, and we'd be pleased to take questions.
Speaker Change: Thank you in a moment, we'll open the call for questions.
Speaker Change: When they request that all callers.
Speaker Change: Limit each turn to one question and one follow up.
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Speaker Change: One moment, please while we're all for questions.
Speaker Change: Thank you we now have our first question.
Speaker Change: It comes from the line of Roger read from Wells Fargo. Your line is now open. Please go ahead.
Speaker Change: Thank you good morning, everybody.
Speaker Change: Good morning, Roger.
Speaker Change: Hi, Matt.
Speaker Change: Let's I guess, let's let's at Martinez right.
Speaker Change: Yeah.
Speaker Change: You've been in there enough now to get a feel for what the damage was what the repair process ought to be.
Speaker Change: Think the expectation at the time or at least the initial expectation on the last time, we talked about this was beginning of Q4 or in Q4, you could get back up and running so I'm just curious as you look at the units the repair process.
Speaker Change: Permitting in California, all that stuff how is it how is it looking on that front.
Speaker Change: No change at this point are long lead items have been ordered.
Speaker Change: And so once you get into the execution of some of the rebuild.
Speaker Change: You know when that equipment arise.
Speaker Change: The schedule.
Speaker Change: Well you know Titan.
Speaker Change: We're stress what we put on the schedule, but at this point there's.
Speaker Change: There is no change.
Speaker Change: Okay and then.
Speaker Change: In terms of moving the product like you said the intermediates down from Martinez Torrance is that actually occurred yet like you're comfortable with the way that the system will be integrated for the interim period.
Speaker Change: It's happening today.
Speaker Change: Orange is okay, it's fully up and running and fully operational.
Speaker Change: Great. Thanks, and then.
Karen Davis: Karen since you gave this guidance I'm just sort of curious.
Karen Davis: Volume guidance on renewable diesel, but how should we think about this whole confusing.
Karen Davis: Confusing status with rents and.
Karen Davis: So there are sort of <unk>.
Karen Davis: PTC to PTC change and in other parts of how that's operating.
Speaker Change: I know you said sure.
She did you hit a.
Speaker Change: Hi, Budd with me that I can.
Speaker Change: Okay, Okay got it.
Speaker Change: You said the word residents like something off with me.
The current market is.
Speaker Change: This has been stable or unstable to say the least.
Speaker Change: The deep what RIN prices surged.
Speaker Change: 75% since the beginning of the year.
Speaker Change: Is that I guess, there's three primary reasons.
Speaker Change: And this is the <unk> right so.
Speaker Change: You've got the PTC questions Theres no clarity fine.
Speaker Change: Now tariffs imposed on some of those feedstocks, so that increases costs.
Speaker Change: Reduces supply and then you have the elimination or.
Speaker Change: Credits for imported fuel. So you have much less R&D supply. So the default rate has to go up.
Speaker Change: The problem is.
Speaker Change: The <unk> is tied to the before.
Speaker Change: They are linked.
Speaker Change: And so all indications suggest that we're going to be all the potential of another rent Zane event.
Speaker Change: Yes.
Speaker Change: And it's sort of interesting certainly with the current administration.
Speaker Change: <unk>.
Speaker Change: Because you have this massive contradiction.
Speaker Change: With the current administration, where.
Speaker Change: Maybe the two strongest pillars.
Speaker Change: Oh there.
Speaker Change: The whole platform.
Speaker Change: His commitment to low energy prices.
Speaker Change: And then 10 to incentivize domestic manufacturer.
Speaker Change: Well this situation.
Speaker Change: It doesn't get rectified all the D. Six rens then.
Speaker Change: You know the American consumer.
Speaker Change: It's very so unintended consequences.
Speaker Change: With higher gasoline prices higher energy prices and then we can get back to the <unk> rens, threatening refining capacity, which we've been through before.
Speaker Change: And what's great about it is just so easily be rectified.
Speaker Change:
You know all you have to do and you can do it in a number of ways and entered a number of ways.
Speaker Change: Is right sized the ethanol mandate.
Speaker Change: So that reflects reality.
Speaker Change: As opposed to setting at above.
Speaker Change: The blend wall, which simply decoupled the sexual before which is the original tenants of D for should be inserting new manufacturing of renewable diesel because you need those government support to to get the product in the marketplace.
Speaker Change: But the amount of ethanol in the fuel pools that J&J is not driven by RIN prices. So the desex being connected to the D for Paccar.
Accomplishes two things it raises the price of gasoline.
Speaker Change: And then potentially threatens.
Speaker Change: Refineries.
Speaker Change: So I will be doing everything in my power to get that message out.
Speaker Change: Going down to Washington, and making sure that they understand the contradictions exist.
Speaker Change:
Speaker Change: I'm not sure that that's exactly what that drag was what youre looking for but I wanted to get it off my chest.
Speaker Change: Well, maybe if we could hone in on just a little bit on SBR there though.
Speaker Change: Understand catalyst change outs and stuff like that but if we were to look at SVR in isolation I mean, how do you think it's performing in this.
Speaker Change: Waiting for as you mentioned clarity on some of the new.
Speaker Change: The new rules.
Speaker Change: Yes.
Speaker Change: How are you with that.
Speaker Change: Just I think that in isolation.
Speaker Change: Yeah.
Speaker Change: The net net is actually the landscape is improved for SBR.
Speaker Change: Because you know the blenders tax credit.
Speaker Change: Which was a dollar with PTC is that certain nebulous guidance is now.
Speaker Change: We'll receive.
Speaker Change: A little less than half of that.
Speaker Change: But the <unk> RIN has risen more than that.
Speaker Change: Paul off and the blenders tax credit so the outlook for <unk>.
Speaker Change: SPR specifically.
Speaker Change: Especially coming out of the catalyst change, which by the way we are expecting improvements from the catalyst itself as youll pay has been making.
Speaker Change: Investments in an improving mccandless, so the outlook for SVR onto itself.
Speaker Change: Certainly improve going forward with the higher RIN price.
Speaker Change: But then that that just creates six problems that need to get addressed.
Speaker Change: Great. Thank you I'll turn it back.
Speaker Change: Thank you and the next question comes from Manav Gupta from UBS. Your line is now open. Please go ahead.
Manav Gupta: Good morning, guys I wanted to get your view on the crude quality discounts looks like OPEC is raising volumes. We've also seen some rebound in refining cracks, but the reason refining estimates.
Manav Gupta: Moving up are probably even slightly moving down is because these crude quality discounts are very low and including Yahoo opinion as a big Big box. These battles.
Manav Gupta: What do you expect to happen for the heavy light spreads are on the Gulf Coast are all of course right now.
Tom O'connor: Tom O'connor.
Tom O'connor: Yeah. Thanks, Manav I mean, I think it's certainly taking all that's been sort of a positive note from the words, we've seen from OPEC.
Tom O'connor: The last couple of weeks.
Tom O'connor: Sort of the.
Tom O'connor: Official reactions for the increases for May.
Tom O'connor: We should be receiving more news next week.
Tom O'connor: AMC see moves.
Tom O'connor: Through clearly theres a lot of.
Tom O'connor: Commentary and information that's been a market that is talking about an increased paper.
Tom O'connor: Next week also we should receive OSP and all those other nice things as they come along there.
Speaker Change: Broadly speaking as you mentioned, yes, we've been in a very narrow range, but that's certainly our expectation with the changes that are coming to the market with OPEC policy, but we should see differentials start to widen out.
Speaker Change: From yeah from a 100000 and flip to you I mean, Tom Tom covers it.
Speaker Change: We're down to two.
Zero, but.
Speaker Change: You know real high level view.
Speaker Change: What's in the marketplace now.
Speaker Change: Immediately some speculation.
Speaker Change: Luiz evoke back over the next couple of months could overwhelm a lot of the headwinds that we've had you know whether it's as well or are those tariffs and sanctions that have disrupted R. R.
Max: This is Max.
Speaker Change: In Mexico.
Max: Production coming off of it.
Max: But that taper move from OPEC plus.
Max: It is a big big factor.
Max: And your question and I don't know, if there's a more levered beneficiary to it.
Max: Yeah.
Max: Yeah.
Max: Perfect.
Speaker Change: I'm going to repeat this question because I had asked you I think to your fourth quarter call as again.
Max: We took basically that.
Speaker Change: It looks like the state of California is trying to push out the refineries and I think Mac irresponsible as whether they are trying to do this or not we are needed. If you pushed keep pushing us out it will create a lot more water is the default product prices and consumers who suffer I'm just trying to understand the way things have gone in the last three or four.
Max: Four quarters, it's becoming increasingly clear from your peers.
This is a relentless push to get rid of refineries in the state of California, and I. Just wanted your comments on it are you also feeling the same way that how do you think you know something my team here and they might realize they're doing the wrong thing here.
Manav Gupta: I appreciate the question and I'd say manav.
Max: He called the situation, California dynamic would be.
Manav Gupta: A huge understatement.
Max: And maybe just maybe it's.
Max: It's a case of you know nothing focus his mind like dependent hanging or.
Max: But looming energy crisis.
Max: But I actually think theres been recognized a recognition in the state certainly in the last couple of months, how critical our products are for the well being of the people in the state.
Max: And indeed, not only about how important they are but indeed, the recognition that they gave me and demand for many decades to come.
Max: And if you go and look at the states numbers.
Max: Pro forma for the announced closures.
Max: By next year.
Max: We see the market sure.
Max: 250000 barrels a day of gasoline or over 250000 barrels a day of gasoline, which will force the market to attract higher cost imports.
Max: So we believe that.
Speaker Change: Three or four quarters ago whenever it was that.
Speaker Change: Our system of two refineries, we drove towards Martinez has been.
Speaker Change: And then today going forward one of the best systems out there in California and.
Speaker Change: But whatever I said, three or four quarters ago, our system is even more critical to the state today.
Speaker Change: And certainly for the situation not to deteriorating further there.
Speaker Change: There must be recognition by the stakeholders there has to be a level playing field for the participants in the market.
Speaker Change: So I will tell you.
Speaker Change: I have been more than pleased.
Speaker Change: And encouraged.
Speaker Change: While the recent conversations we've had where it's like we need to work collaboratively.
Speaker Change: Which is somewhat unthinkable not not too long ago.
Speaker Change: But the refinery zilkha vendor that they need to execute a business plan.
Speaker Change: That makes sense.
Speaker Change: Otherwise this trend of closures will continue.
Speaker Change:
Speaker Change: We believe I think I said, there's probably some time ago defining best use of our assets are in refining.
Speaker Change: With that absolutely requires a business environment that allows us to succeed.
Speaker Change: And I've gotten some indications of that as well understood within the state.
Speaker Change: So.
Speaker Change: Because the reality is the alternative values in California are compelling.
Speaker Change: <unk>.
Speaker Change: It's not.
Speaker Change: Like many other situations the underlying value of these assets.
Speaker Change: It's fairly extraordinary so that creates a high bar what must be made in refining.
Speaker Change: So I've been encouraged by the state I've had a we are we have a team embedded there are people.
Speaker Change: Focused on it for 100% of what they do and indeed I've had a number of conversations.
Speaker Change: With them and so at the moment I believe our refineries are well positioned to not only deliver the.
Speaker Change: Low cost products that the state is desperately need going forward, but just to provide strong returns and results for our shareholders.
Speaker Change: Thank you so much.
Speaker Change: Thank you and the next question comes from the line of Doug Leggate from Wolfe Research. Your line is now open.
Speaker Change: Go ahead.
Speaker Change: Okay.
Speaker Change: Doug Your line is now open you May go ahead and ask your question.
John Abbott: Hey, Good morning. This is John Abbott on for Doug Leggate.
Speaker Change: Our first question is on your net debt. Our first question is on your net that trajectory could.
John Abbott: Could you walk us through on how that plays out and whether or not you may think you may need additional financing.
Speaker Change: Yeah.
John Abbott: Sure. Thanks, Thanks, John Thanks for the thanks.
Speaker Change: Thanks for the question.
Speaker Change: It's as we've said in the past our capital allocation policy is to prioritize the balance sheet and supporting operations Capex and maintaining our dividend.
Speaker Change: And our approach to the balance sheet has been to use up cycles like we saw in 2022 and 23 to reduce debt and to build a balance sheet preserve our balance sheet. So that we can be resilient through down cycles like we've experienced in the past three quarters few quarters. So.
Speaker Change: Going forward as the market continues to improve as we believe the macro suggests it will and as cash generative generation correspondingly improve and when we receive proceeds from the terminal sale, we expect that our focus will again pivot to de lever de.
Speaker Change: Leveraging and prioritizing the balance sheet.
Speaker Change: As you know, we did access the capital market and raised $800 million in an unsecured offering that.
Speaker Change: That bolstered our liquidity and to a level, where we are comfortable and at this point in time, we don't anticipate.
Speaker Change: Accessing capital markets.
Speaker Change: Appreciate it and then for a follow up question.
Speaker Change: On the capital reduction how.
Speaker Change: How much it how much of that could be permanent or is it all transitory.
Speaker Change: Well.
Speaker Change: Let me say it's.
Speaker Change: Permanent in regards to lowering our capital program.
Speaker Change: Going forward, our capital program and our turnaround spend as part of our RBI Kroger.
Speaker Change: Program.
Speaker Change: And so we are expecting to see.
Speaker Change: Again within the confines of.
Speaker Change: The.
Speaker Change: Still though we provided it in regards to RBI, we expect to receive real benefits on reducing capital.
Speaker Change: The cost curve permanently in regards to the specific cuts that were made here. They were they were discretionary projects. If you want to comment.
Speaker Change: Went through our portfolio optimization process, and we did defer some spending and some of them were cuts.
Speaker Change: Mentioned as part of the RBI program, we have developed a longer term initiatives to lower the capital spend going forward.
Speaker Change: It's probably premature at this point to say to what extent, that's going to be relative to these cuts, but there are as an expectation that going forward. We will have a sustainable reductions in how we spend capital and spending the money to spend and more efficiently.
Speaker Change: I appreciate it thank you for taking our questions.
Speaker Change: Thank you.
Speaker Change: Next question comes from Paul Cheng from Scotia Bank. Your line is now open. Please go ahead.
Speaker Change: Thank you good morning.
Speaker Change: Hmm.
Speaker Change: Matt and Kevin.
Speaker Change: With the uncertainty in the economy because of the panic warn that everything in the event you are.
Speaker Change: The economy took a more sour note and correspondingly demand in March and will not improve to.
Speaker Change: The kind of weight that we all thing in me.
Speaker Change: At what point that the dividend would become a question on the table for us.
Speaker Change: The company and I mean, what is the criteria for that you think that this is a secret then you will do everything else that and not touching the stupid thing.
Speaker Change: That's the first question.
Speaker Change: The second question is that in the second quarter.
Speaker Change: How should we look at the Opry, we finding operating cost, particularly in California, and also that the ones we.
Speaker Change: Finish the business improvement plan by the end of the year you get to that 200 million one way once the finding of that one way we should reasonably expect thank you.
Speaker Change: On the first one tough too tough to answer and.
Speaker Change: A hypothetical situation, obviously, we're watching the economy very very closely and we always.
Speaker Change: Hope for the best prepare for the worst.
Speaker Change: The realized.
Speaker Change: 15 years, we've seen downturns in the economy that have come in different forms and fashion networks, who are unfathomable.
Speaker Change: Two zero hypothetically talk about.
Speaker Change: Oh, a recessionary period, it's hard to do in a vacuum that being said we set our dividend.
Speaker Change: So rather than through cycle.
Speaker Change: Dividend if there is a major turn down the marketplace.
Speaker Change: We're going to manage our business as conservatively as appropriately as we possibly can.
Speaker Change: In regards to how we run our refineries, how we invest the capital.
Speaker Change: And and how we manage the balance sheet. So.
Speaker Change: But we're comfortable with where we are and like I said the original design.
Speaker Change: The dividend was certainly through through cycles.
Mike Mcaliskey: Mike do you want to yeah relative to the RPI program.
Mike Mcaliskey: So our baseline is 2023, our opex is what we used to set up the Howard deviate or how we're using the differentiations when a corner opex savings.
Mike Mcaliskey: And I would look at the $200 million and consider about.
Mike Mcaliskey: One fourth of it is going to come from capital and turnarounds as well so that should give you. Some information on how you want to look at Opex going forward that being said the program doesn't stop in 2025, we will continue driving additional additional reductions in opex going forward.
Mike Mcaliskey: I mean, our expectations are as high as $350 million of.
Mike Mcaliskey: Run rate savings by the end of 2026.
Mike Mcaliskey: Yeah, because you know.
Mike Mcaliskey: Importantly, Mike's comments instead of one should understand that.
Mike Mcaliskey: Team is essentially circled over $200 million.
Mike Mcaliskey: Run rate savings to date are they ever been achieved yet they're gonna be achieved over the course of this year, but Dave.
Mike Mcaliskey: Dave categorized them and they've been circled in terms of we're going to execute on those and we haven't been to all our plants yet so the number of savings will go up as we complete the program.
Mike Mcaliskey: It might migrate up that number you can share in terms of California, opex in the second quarter.
Mike Mcaliskey: We're not we're not ready to share that number yet.
Mike Mcaliskey: That's it would be very very difficult to dissect Paul because again you're.
Mike Mcaliskey: It's one region, we don't report on individual assets.
And then with the turnaround and the insurers.
Mike Mcaliskey: It becomes somewhat.
Mike Mcaliskey: Difficult to forensically dissect for you.
Mike Mcaliskey: Okay. Thank you.
Speaker Change: Thank you. The next question comes from Matthew Blair from <unk>.
Speaker Change: Your line is now open. Please go ahead.
Speaker Change: Thank you and good morning on the RBI program, you mentioned that you're on track to exceed the $200 million.
Speaker Change: Goal here, which seems quite encouraging do you have any examples you could share of areas, where youre seeing more opportunity than you originally expected.
Speaker Change: It's actually quite frankly, when we did the due diligence or initially.
Speaker Change: From a from the category basis, we're actually.
Speaker Change: Right, where we want it to be from each code nothing's really standing out as jumping out as a big surprise, we saw the energy would be a big opportunity and it is a.
Speaker Change: We thought that.
Speaker Change: Our turnaround performance would be an opportunity and we're seeing significant opportunity there as well and then lastly, we have not in the past really leveraged our our spend across the organization and so the strategic procurement opportunities are a big focus for us as well, but it's roughly kind of evenly.
Speaker Change: Divided among those areas so far.
Speaker Change: Yeah.
Speaker Change: Sounds good.
Speaker Change: And then could I just clarify two points from your Q1.
Speaker Change: Reporting I guess first do you have an EBITDA estimate associated with the logistics asset sale and then second could you also provide the your share of the R&D EBITDA in the first quarter. Thank you.
Speaker Change: I'll take the first part and you have to earn the second part.
Speaker Change: So in regards to the asset sales these were two terminals.
Speaker Change: PBF logistics, when we had our MLP.
Speaker Change: As you know going back.
Speaker Change: You know eight or nine years ago.
Speaker Change: First of all at the Plains assets.
Speaker Change: Philadelphia terminal that we agreed to sell yesterday.
Speaker Change: Was one of three terminals in that package of assets.
Speaker Change: And then subsequently PBF logistics MLP.
Speaker Change: <unk> acquired the Knoxville terminal.
From a strategic standpoint.
Speaker Change: They've made real sense for are published publicly traded MLP and there were some ancillary benefits to our connection to our refining business.
Speaker Change: But we were able to accomplish the benefits through contracts and maintaining access to the terminals so from a.
Speaker Change: For what.
Speaker Change: TJ standpoint, the terminals, where the family 94.
Speaker Change: And they're going to a third party that that you know has a different cost of capital and good value and a more attractive way.
Speaker Change: I mean, we're selling these two terminals where.
Speaker Change: More than 10 times our EBITDA.
Speaker Change: And then with respect to SDR Str's Standalone EBITDA was $717 million loss.
Speaker Change: And so are our half of that would be half and half of that and then also circling back to a question that Roger read asked we did like so many of our peers. We did record 45 Z revenue.
Speaker Change: Based on the provisional guidance, that's out there, but as Matt mentioned.
Speaker Change: Whereas we were receiving about a dollar on DTC, it's less in Manhattan that under the PTC program.
Speaker Change: Alright, great. Thanks for all the information.
Speaker Change: Thank you.
Speaker Change: And the next question comes from the line of Neil Mehta from Goldman Sachs. Your line is now open. Please go ahead.
Neil Mehta: Yeah, Thanks, Matt Kerin and team I guess the first question is just on working capital. It looked like it was a headwind this quarter typically in a lower commodity price environment, you could see that that headwind continue. So just your perspective on the Q2 set up for working capital and then is that a reverse.
Speaker Change: So the 300 from this quarter.
Neil Mehta: Well pricing.
Neil Mehta: Oh price constant would that reverse over the course of the year.
Neil Mehta: I mentioned in the debt.
Neil Mehta: The headwind from inventory was around $200 million as we reduce those two and our plans are to reduce 2 million barrels, but as you rightly point out that's in a lower price environment. So we might not get the full benefit of that reduction.
Neil Mehta: It could in fact, even be a headwind, but at this point based on our projections it looks like there will be some.
Neil Mehta: This benefit.
Neil Mehta: Yeah.
Neil Mehta: And then.
Neil Mehta: [laughter] yeah.
Neil Mehta: And then maybe the follow up is just on the credit side, we have gotten a significant amount of incoming about liquidity I E.
Neil Mehta: The asset sales and some of the adjustments that you guys have talked about we've.
Neil Mehta: We've seen you know these are steps to help allay some of the concerns that the.
Neil Mehta: Credit market might have but maybe you could address that directly because the bonds have sold off here and why you have so much confidence in the liquidity picture.
Neil Mehta: Well as we mentioned I'm worried.
Neil Mehta: Working capital should be fairly stable going forward, we don't really see any.
Neil Mehta: Unusual items impacting that area, it's really kind of just the hydrocarbon prices.
Karen Davis: Hi, Karen.
Karen Davis: Speaking about the credit credit picture.
Karen Davis: Well you know as I said in my prepared remarks, you know, we believe that our current liquidity levels are sufficient and that didnt include having the ability to pay our dividend and we are really focused on everything that we can control. We're normalizing our inventory levels, we've reduced our capex program by 100 million.
Karen Davis: We we expect to begin seeing the benefits of the RBI initiatives should start feathering in.
Karen Davis: Or actually even starting in the second quarter.
Karen Davis: We've talked about the $250 million upfront insurance payment and importantly, we have a dedicated team working on the Martinez insurance claim it.
Karen Davis: Engineers forensic accountants insurance expert so that we can very timely present, the information to our carriers. So that they can make timely decisions on future payments.
Karen Davis: Okay. That's great. Thanks, so much.
Speaker Change: Thank you. The next question comes from Ryan Todd from Piper Sandler. Please go ahead.
Karen Davis: Great.
Speaker Change: Maybe following up on on your last comments are there Karen on uninsured proceeds congrats on the $250 million.
Karen Davis: First installation payment that you received.
Karen Davis: I guess, it's safe to say is it safe to assume that this is largely associated with the capital costs for repair and maybe any I know, it's really hard to because it's very uncertain, but any color on how you think about potential size or cadence of additional proceeds as we look out over the remainder of the year.
Karen Davis: Well I think it's I think it's important to note that the $250 million payment is actually seen by the insurance companies as an upfront payment of 280 less the 30 million dollar deductible. So so that that is now behind us.
Karen Davis: It's also important to note that it's unallocated. So at this point, we can't tell you how much is for the property piece of it how much of it is is is for B I.
Karen Davis:
Karen Davis: And future payments are going to be based on us demonstrating actual expenditures.
Karen Davis: On the rebuild and whatnot in excess of that amount plus whatever the calculation is N V. I, we shouldn't do it covers our fixed expenses.
Karen Davis: And lost profit opportunity and in terms of the cadence as I mentioned, we have a dedicated team and we expect we have weekly meetings with the insurance companies and we.
Our very.
Karen Davis: I expect that we'll be able to or we will be seeking a quarterly payment.
Karen Davis: It's important to note that.
Karen Davis: They're not too different policies and so as Karen said, we're gonna be working closely with them and now here. We are the very end of April.
Karen Davis: And this is really the first month.
Karen Davis: Where the B I coverage is present, so you know in a short period of time will be sitting down with them and reviewing April.
Karen Davis: And setting up a program for the success of months April May June and July going forward and at the same time you're doing.
Karen Davis: The rebuild and expanding dollars and that's being tracked in dollars or blend together at some point, so theres not going to be sort of explicit this dollars for that one theres going be one claim to our group of underwriters, who are working very very closely with them and I will tell you that from a work.
Karen Davis: Capital standpoint, and it goes to Neil's point earlier, it's just very good news that we've got this collaborative arrangement with them where.
Karen Davis: They're putting the dollars in some case.
Karen Davis: Some of the dollars are in front of those spend are that that.
That is in front of us so.
Karen Davis: Pleased with the relationships, we have not only with.
Karen Davis: You know our underwriters for a broker as well the whole team has been working well together.
Karen Davis: Great. Thank you and maybe.
Karen Davis: One follow up on the West Coast I know, obviously, you've got your hands full right now with the Martinez refinery, but as we think about.
Karen Davis: About balances in general right.
Karen Davis: Expectations are that the market is.
Karen Davis: Tight this year you have two more refinery closures come in late this year and early next year.
Scheduled to close there in California.
Karen Davis: And.
Karen Davis: Again, the outlook looks increasingly think can you maybe talk about how you view that.
Karen Davis: Look for product balances and.
Karen Davis: Whether you've seen anything in the behavior of imports over the last.
Karen Davis: 12 months it would that would.
Karen Davis: Change, how you think about what that might mean for.
Karen Davis: For margins and pricing going forward.
Karen Davis: Well look this is.
Speaker Change: Adam Smith, 101 balances, where you say it's tight.
Speaker Change: Market is definitively short and is going to be fairly short in a major way in a way that the state has never been before and so on the gasoline side.
Speaker Change: You're going to be increasing the short by upwards of 185000 barrels a day.
Speaker Change: Form a basis so every day.
Speaker Change: The state of California is going to have to attract over 250000 barrels a day of gasoline.
Speaker Change: That is a big number in the resupply is coming from far away. So you're going to have a lot of boats on the water.
Speaker Change: Not insignificantly jet as well.
Speaker Change: You're talking about on a pro forma basis upwards of needing to attract 70000 barrels a day of jet on a daily basis short and every day.
Speaker Change: It's going to create a volatile market because.
Speaker Change: Imports don't run like a Swiss clock.
Speaker Change: And there's delays.
Speaker Change: The market needs to be able to attract barrels which is going to require a premium to where its gone historically.
Speaker Change: And then there'll be ebbs and flows and how it is.
Speaker Change: Unfortunately the market.
From our perspective towards some of our Chinas are very very well positioned in regards to being able to be a low cost producer for the state and deliver these products every day I must just also comment it's a product story for sure but justice.
Speaker Change: Maybe.
Speaker Change: Maybe rivaling a bigger.
Speaker Change: That's the story on the crude side.
Speaker Change: Because you're taking a two refineries.
Speaker Change: Off that were consuming in California grades.
Speaker Change: Crude, which historically have been the most attractive barrels.
Speaker Change: For this date, we've gotten some indications from the state that they're actually encouraging our production, which we have been encouraging as well for them to do.
Speaker Change: But just you know.
Speaker Change: With the refinery in the north in the refinery this out you have them.
Speaker Change: A fair amount of crude that's going to be.
Speaker Change: <unk> opened up to the rest of the market to the refiners are there because it's California is the alternative on its crude production it needs to be consumed in the state. So we think the dynamic between on the crude side.
Speaker Change: The product realities.
Speaker Change: Create a pretty interesting market.
Speaker Change: Perfect. Thanks, Matt.
Speaker Change: Thank you. Our next question comes from Connor Fitzpatrick from.
Speaker Change: Bank of America. Your line is now open. Please go ahead.
Connor Fitzpatrick: Good morning, Thanks for taking my question.
Speaker Change: This is a heavy repair and maintenance year for your west coast footprint, but I was wondering if those activities.
Speaker Change: Improve those assets reliability going forward once they're completed should we expect Martinez and Torrance uptime to change over the next few years relative to the prior several years.
Speaker Change: So for Martinez.
Speaker Change: We'll go through a major turnaround there on the FCC block and a big piece of that is work that's being done on the regenerate or the FCC. So we certainly looked at every turn around as an opportunity to to improve the reliability of the facility on the tourist side. It's we have a hydro.
Speaker Change: Tracker turnarounds in the second half of the year.
Speaker Change: And.
Speaker Change: It's not as big as as the as the FCC at Martinez, but it certainly does provide an opportunity to improve the reliability on top of that we have several reliability initiatives.
Speaker Change: That are occurring across the entire system and as we stated last year in an a and a call sometime over the summer time that was one of our major goals is to drive continuous improvement mindset and operational excellence across the system.
Speaker Change: Great that's clear and you.
Speaker Change: You mentioned earlier and news reports degree the state of California is at least after these recent closures, becoming more open to working with refiners to maintain fuel supply.
Speaker Change: Which California regulations are in your opinion, the most onerous financially that would be most impactful to be modified compete you know assuming that these conversations involve those regulations.
Speaker Change: I think they they go across the spectrum.
Speaker Change: You know when you look at it.
Speaker Change:
Speaker Change: Some of the costs with AB 32.
Speaker Change: Has to be looked at in regards to is it.
Speaker Change: Creating a level playing field for the refiners in the state as compared to.
Speaker Change: The amount of the fuel that's imported into the state you can absorb quickly wrap your mind around.
Speaker Change: They've gotten themselves into a situation where regulatory leaders squeezing there.
Speaker Change: In the state.
Speaker Change: <unk> and to some degree ignoring.
Speaker Change: The importers that will have to change.
Speaker Change: There has to be a level playing field.
Speaker Change: And in regards to continually raising the bar and the amount of capital.
Speaker Change: That is that is on specific projects I think they have to take a closer look again and making sure that they're not making the in state refiners uncompetitive.
Speaker Change: As I said theres been collaborative conversations.
Speaker Change: But.
Speaker Change: Yeah proof will be in the pudding.
Speaker Change: I've been pleased with our with the dialogue I think we've got a.
Speaker Change: The team did.
Speaker Change: Has done extraordinary work in sort of building bridges and building relationships in.
Speaker Change: And like I said working collaboratively, but at the end of the day, we need a business plan that makes sense and we need to be successful.
Speaker Change: And our success will create success for the people there and lowering energy prices. So there is to some degree it's across the across the spectrum.
Speaker Change: So we'll see as we go.
Speaker Change: Thanks, that's all I have.
Speaker Change: Thank you and the final question comes from Jason Scott Bowman from Cowen. Your line is now open. Please go ahead.
Speaker Change: Yeah, Hey, good morning, Thanks for taking my questions.
Speaker Change: I had a few clean up questions on the Martinez outage I was hoping you could help with.
Speaker Change: Do you have an estimate of the total cost of repairs.
Speaker Change: And then can you also just it's unclear if the business insurance proceeds are being negotiated and paid out monthly or if that happens once the outages over if you could just confirm that and then it seems like the startup timing was pushed out.
Speaker Change: Slightly from by <unk> during <unk>. So can you just discuss about the critical path is to fully restarting Martinez.
Speaker Change: Alright, so the last point my intention was not to do a sleight of hand.
Speaker Change: And I'm not I'm not trying to parse words.
Speaker Change: We're circling the end of September.
Speaker Change: Is it time to bring the plant up and that Hasnt changed to the degree it does or it needs. It we'll certainly communicate that in a prompt fashion, but there's no indication at this point that that has changed.
Speaker Change: In regards to the total rebuild costs.
Speaker Change: We're not can't get into that at the moment, primarily because the.
Speaker Change: The numbers.
Speaker Change: Our somewhat fluid, but to a great degree its mood.
Karen Davis: For our shareholders, because as Karen alluded to before.
Karen Davis: The $30 million of deductible and retention has been paid.
Karen Davis: And so the costs going forward will be covered by our property program with the with the coverage that we have so.
Karen Davis: Obviously those numbers are being worked and were being worked hard.
Karen Davis: We're not in a position to share them at the moment in regards to a specific monthly payments.
Karen Davis: There's there's no hard fast schedule. It is a collaborative effort with our underwriters.
Karen Davis: We've got the appropriate programs in place.
Karen Davis: We'll be working closely with them sort of as we expand money or as the bi claims pile up to lay them out for them and then they'll be working with us.
Karen Davis: Really.
Karen Davis: Okay, Great and then my follow up is just.
Karen Davis: Non core divestments, and you announced the sale of those terminals and I'm wondering within logistics EBITDA bucket, how much you would consider kind of non core to the to the refining business.
Karen Davis: Yeah.
Karen Davis: I don't have that number for you, but these were.
Karen Davis: These were sort of obvious we thought they'd like I said before they they would have would just carry more value.
Karen Davis: For others and they worked for us.
Karen Davis: As an example.
Karen Davis: We bought the Plains terminal.
Karen Davis: Those are three terminals really bought it.
Karen Davis: One is connected to our poles, where a refinery.
Karen Davis: We named chain that refiner that that terminal because again, it's more intertwined not to say it could be sold.
Karen Davis: But the.
Karen Davis: The noncore nature was different than the.
Karen Davis: It says that were included in the package. So it's something that we're continually looking at.
Karen Davis: And to the degree that we feel like we can create value and.
Karen Davis: Wherever there's an opportunity where you can sell something for 10 times and obviously, you see where we're trading or historically trade that should create value.
Karen Davis: Sure.
Karen Davis: For our shareholders.
Karen Davis: Great. Thanks for the answers.
Speaker Change: Thank you we have reached the end of the question and answer session I will now turn the call over to Matt Lucey for closing remarks. Please go ahead Sir.
Matt Lucey: Well, thank you and thank you for everyone participating and we look forward to speaking to you again in July for the second quarter, where you have a great day.
Speaker Change: Thank you. This concludes our conference call for today.
Matt Lucey: Thank you all for participating you may now disconnect.
Matt Lucey: Okay.
Matt Lucey: Okay.
Matt Lucey: Yeah.
Matt Lucey: Okay.