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Edited Transcript of PBFX earnings conference call or presentation 31-Oct-19 3:00pm GMT

Q3 2019 PBF Logistics LP Earnings Call

Parsippany Nov 18, 2019 (Thomson StreetEvents) -- Edited Transcript of PBF Logistics LP earnings conference call or presentation Thursday, October 31, 2019 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* C. Erik Young

PBF Logistics LP - Senior VP, CFO & Director of PBF Logistics GP LLC

* Colin Murray

PBF Logistics LP - Head of IR

* Matthew C. Lucey

PBF Logistics LP - Executive VP & Director of PBF Logistics GP, LLC

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Conference Call Participants

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* Ryan Michael Levine

Citigroup Inc, Research Division - Equity Analyst

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Presentation

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Operator [1]

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Welcome to the PBF Logistics Third Quarter 2019 Earnings Conference Call and Webcast. (Operator Instructions) Please note, this call may be recorded. It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

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Colin Murray, PBF Logistics LP - Head of IR [2]

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Thank you, Katherine. Good morning. Happy Halloween, 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'd like a copy of our earnings release, it is 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 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.

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Matthew C. Lucey, PBF Logistics LP - Executive VP & Director of PBF Logistics GP, LLC [3]

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Thank you, Colin. Good morning, everyone, and thanks for joining the call. We enjoyed a strong quarter driven by solid operations, execution of organic projects and positive market conditions.

On the East Coast, we experienced increased volumes in a number of our locations as a result of the shutdown of the PES refinery. We are continuing to see increased local demand for space in Philadelphia region terminals and storage assets as well as higher throughput at our marketing racks. We announced earlier today the start of the Maersk processing arrangement, our East Coast storage assets. We are processing Maersk-provided feedstock today.

In addition to the incremental revenue for the partnership, the start of the processing agreement represents a tangible signal that market participants are preparing for IMO 2020. Our strategically located coastal storage assets and marine terminals are seeing increased customer interest as other market participants prepare to meet the demands of the IMO fuel specification change on January 1, 2020.

We are pleased to announce our 20th consecutive distribution increase to $0.52 per unit for the current quarter. Our 2019 EBITDA guidance of approximately $195 million reflects the expected contributions from the Torrance Valley pipeline and ratable project contributions as those assets have come online.

In 2020, our expected annual EBITDA increase is to approximately $210 million to $220 million. This figure incorporates the pro rata contributions of all our ongoing organic projects as they come online and also the contributions of our completed acquisitions and the ongoing Maersk processing agreement.

With that, I'll turn it over to Erik with some more detail.

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C. Erik Young, PBF Logistics LP - Senior VP, CFO & Director of PBF Logistics GP LLC [4]

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Thank you, Matt. This morning, we reported third quarter net income attributable to the limited partners of $31 million. Adjusted partnership EBITDA was $55.5 million, excluding $2 million of transaction costs associated with the Torrance Valley Pipeline acquisition, environmental remediation costs associated with our East Coast terminals and noncash unit-based compensation.

During the quarter, we spent approximately $3 million in maintenance CapEx and roughly $5 million on growth projects. Our total CapEx for 2019 is expected to be approximately $30 million to $35 million. Our third quarter coverage was 1.2x, and we maintain our long-term outlook for targeted coverage of 1.15x and expect to meet and exceed this as contributions from recent acquisitions and investments in our organic projects provide incremental DCF over the next 12 to 15 months.

We ended the quarter with roughly $265 million in liquidity, including $53 million of cash and approximately $212 million of availability under our revolving credit facility. Net debt to annualized adjusted EBITDA was 3.4x. Included in our cash balance was roughly $32 million borrowed from our revolver, which was used on the 1st of October to make the final payment for the East Coast storage assets acquired from Crown Point International a year ago.

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

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Questions and Answers

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Operator [1]

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(Operator Instructions) And your first question today comes from Ryan Levine with Citi.

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Ryan Michael Levine, Citigroup Inc, Research Division - Equity Analyst [2]

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Can you speak to where you see the biggest opportunities for organic growth CapEx today and how that's evolved over the last few months as we move into the new year?

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C. Erik Young, PBF Logistics LP - Senior VP, CFO & Director of PBF Logistics GP LLC [3]

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Yes. I think the vast bulk of our organic CapEx was really associated with the projects that we announced during the second quarter of 2018. That was all very much forward-looking, so we were essentially investing in the business over the past 12 to 15 months. And we're now starting to see really the harvesting of that free cash flow as those assets are coming online. So I think as we go forward, right, our CapEx is going to continue to kind of be in the very low maintenance CapEx range that we've provided for the year. We don't see material increases on top of that. And we're going to continue to try to identify potential organic projects in connection with our existing assets but also trying to leverage the parent's refining footprint and then still, obviously, looking at third-party acquisition opportunities. But we really don't have a lot to talk about on that front today.

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Ryan Michael Levine, Citigroup Inc, Research Division - Equity Analyst [4]

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Okay. And then on the call this morning, there was some comments around evaluating plans going forward. Can you elaborate as to what those comments were referencing?

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Matthew C. Lucey, PBF Logistics LP - Executive VP & Director of PBF Logistics GP, LLC [5]

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It was simply addressing a question that our competitors have done some -- made strategic decisions that we certainly have not. We always look at the market, and we've been disappointed in the unit performance of the MLP. But markets go up, markets go down, and the MLP has absolutely provided attributes and benefits to our structure. That being said, we continually look at the best use and the best structure on a going-forward basis. So it was brought up in the other call as a question, certainly not something that we're -- was initiated by us.

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C. Erik Young, PBF Logistics LP - Senior VP, CFO & Director of PBF Logistics GP LLC [6]

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I think we're continuing to focus, right? It's only been less than a year since we did our IDR restructuring. We obviously announced the Torrance Valley Pipeline drop in the second quarter. Our view right now is to continue to operate the assets well, which we feel like we've done. And we've quadrupled the size of this business in a little over 5 years. And so I think, from our perspective, we're going to continue to try to hit singles and doubles here and -- as we go forward. To Matt's point, we have to respond to what the market is telling us, and our comments this morning were purely in response to a question from another analyst.

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Ryan Michael Levine, Citigroup Inc, Research Division - Equity Analyst [7]

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Okay. I appreciate that. And then, I guess, one, to follow-up. Is the C-corp conversion something that is a potential outcome? Or do you still have the view that MLP as the preferred security?

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Matthew C. Lucey, PBF Logistics LP - Executive VP & Director of PBF Logistics GP, LLC [8]

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I think, from our perspective, the status quo is where we are. Depending on the size of your company and the direction you're going at, you can look at a whole host of different things, whether it's a C-corp, whether it's an Up-C, whether it's a take private. And we -- like I said earlier, we continuously evaluate all of our alternatives, and the status quo is where we are. And that's our path. So there's nothing new in the comment, and it's simply how we run our business.

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Operator [9]

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This concludes the question-and-answer session. I would now like to turn the call over to Matt Lucey for closing remarks.

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Matthew C. Lucey, PBF Logistics LP - Executive VP & Director of PBF Logistics GP, LLC [10]

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Well, as always, we appreciate your participation in the call, and we look forward to continued success going forward. Appreciate it. Have a good day.

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Operator [11]

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This does conclude today's program. Thank you for your participation. You may disconnect at any time.