PBF Logistics LP (PBFX) 2022 Q1 法說會逐字稿

Good day, everyone, and welcome to the PBF Logistics LP First Quarter 2022 Earnings Conference Call and Webcast.

(Operator Instructions)

Please note this conference is being recorded. It is now my pleasure to turn the floor over to Colin Murray, Vice President of Investor Relations.

Sir, you may begin.

Thank you, Maria. Good morning, and welcome to today's call. With me today are Matt Lucey and Erik Young from our management team and several other members of the partnership senior management. If you would like a copy of our earnings release or 10-Q filing, they are available on our website.

Before we begin, I'd like to direct your attention to the forward-looking statements disclaimer contained in today's press release. In summary, it outlines that 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, Colin. PBF Logistics operated well in the first quarter. Our operations continue to be driven by the reliability of our assets and our safety-oriented workforce. In addition to our strong relationship with our sponsor and high percentage of contracted volumes, these are the foundations that provide for our consistent financial performance. We expect partnership full year 2022 revenue to be approximately $320 million to $340 million.

As mentioned on previous calls, the 2022 partnership revenues reflect the lower minimum volume commitments for the East Coast rail facilities, which took effect as of January 1. Revenues in this range are expected to generate EBITDA of approximately $200 million to $210 million. The partnership's consistent revenues and cash generation provide strong distribution coverage and the ability to continue reducing our net debt. We will remain focused on our balance sheet.

In doing so, we maintain flexibility and increase our ability to potentially grow the partnership in the future. Today, we announced a distribution of $0.30 per unit. We will continue to review our distribution policy going forward with respect to company performance, market conditions and alternate use of funds.

With that, I'll turn it over to Erik.

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

We reported first quarter net income attributable to the limited partners of $36.3 million. Adjusted partnership EBITDA was $56.6 million, which includes approximately $700,000 of noncash unit-based compensation and environmental remediation costs associated with the East Coast Terminals. During the first quarter, we spent approximately $1.4 million in total CapEx, including roughly $1 million for maintenance.

For the full year 2022, we currently expect capital expenditures to be approximately $14 million, including $12 million for maintenance and $2 million of regulatory spend. We ended the quarter with roughly $475 million in liquidity after repaying an additional $25 million in debt during the first quarter. Our liquidity consists of a cash balance of $53 million and roughly $422 million of availability under our revolving credit facility.

Net debt to annualized adjusted EBITDA was 2.4x. We expect to continue using excess cash to improve leverage ratios and strengthen the balance sheet. Consistent with our commentary on the PBF Energy earnings call this morning, our near-term efforts are focused on a successful refinancing and credit extension of the revolver and unsecured notes due 2023.

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

(Operator Instructions) Our first question comes from Spiro Dounis with Credit Suisse.

First question, 2-part question just on capital allocation and leverage. I guess if you think about the current pace of deleveraging, you guys just took down another $25 million. If that pace continues, it looks like the credit facility will basically be repaid in about 3 quarters. So I'm just curious, is that maybe when you start looking at alternative uses of cash and potentially recommencing distribution growth?

Second part of this question, you mentioned the 2023 notes. It doesn't sound like you're waiting until May to refinance those. So maybe just help us think about the timing and how you're thinking about getting that done.

I'll take the first, and then Erik can take the second, which is, obviously, we're in the midst of historically disruptive times in the world and to predict what the world is going to look like in a year is not telling in our purview at the moment. We're focused on what we're doing today. And today, we're continuing to pay debt. And once we get to that point where all the revolver debt will be repaid, we can evaluate other opportunities. But good operations and focusing on paying down debt is where our focus is today. Erik?

On the revolver, the concept that we started to employ a few years ago was to provide as much flexibility as possible in terms of what may come at us in the future. And as we sit here today, we are trying to balance what the appropriate level of floating rate along with fixed-rate debt, at the same time, matching up tenor with contract life. And ultimately, the overall mix between revolving debt that can be borrowed to pay down versus term debt that ultimately has an unsecured structure, assume some type of no-call provision, but we believe there are multiple ways to finance PBF Logistics. First priority, quite frankly, is to focus on the PBF Energy ABL getting that done. There's a lot of bank crossover between the 2 facilities. So our view has been, let's get priority #1 done on the large ABL, and then we will be able to transition and use that positive momentum with a successful refinancing effort on PBF Logistics.

Got it. Helpful color. Second one, just moving to inflation. Curious how you guys are thinking about the impact of any inflation or even supply chain issues on the system. I imagine you've got escalators in your contracts to help pass that on, but just curious if you're seeing any impact yet.

Certainly seeing some impact. But yes, the way our contracts were constructed, it didn't have the concept of escalators built in. So I think the partnership is pretty well insulated. Inflation is not equal across the board. So you're seeing it stronger in certain areas and less than others. And we've been working certainly with and we'll continue to work with our largest customer being PBF to make sure that we've got a relationship that works on both sides, but it's been manageable from PBFX' perspective.

Great. Last one for me. I guess last where we left off on the Chalmette renewable diesel facility. It sounds like it was possible for you all to participate there, but of course, limited by the unqualified income given you're an MLP. I guess just curious, anything to new report on that front and how you're thinking about PBFX' participation in that project?

Yes. There's certainly optionality around the -- as you said, the portion. We don't have any nonqualified income today. I don't know what the prospects of the law being changed are, and that can obviously shift things in a dramatic way. But yes, we can -- nothing's changed in that regard for evaluating the project. Nothing to report here.

We have reached the end of the question-and-answer session, and I will now turn the call over to Matt Lucey for closing remarks.

Appreciate everyone's participation today and look forward to speaking with you next quarter. Have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.