PBF Energy Second Quarter 2026 Earnings

Good day, everyone, and welcome to the PBF Energy second quarter 2026 earnings conference call and webcast. At this time, all participants have been placed in listen-only mode, and the floor will be open for questions following management's 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 Colleen Marais of Investor Relations. Sir, you may begin.

Thank you, Angeline. Good morning and welcome to today's call. With me today are Matt Lucey, our President and CEO, Mike Bukowski, our Senior Vice President and Head of Refining, Joe Marino, our CFO, and several other members of our management Copies of today's earnings release and our 10Q 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. Statements expressing 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. Consistent with our prior periods, we will discuss our results, excluding special items, which are described in today's press release. Also included in the press release is forward-looking guidance information. For any questions on these items or other follow-up questions, please contact Investor Relations after the call. I'll now turn the call over to Matt Lucey.

Matt Lucey Thanks, Colin. Good morning, everyone, and thank you for joining. We clearly have reached a transformative moment for PBF. The ongoing disruptions in the Middle East and Eastern Europe have created one of, if not the largest dislocation behind it but the effect on our indeed the world is in desperate need of the products we produce let me spend a few minutes a few minutes on what we are saying first in crude then in refined products because the story on each is a bit different and both matter to how we think about the quarters ahead during ukraine war hostilities in the middle east caused initially roughly 15 million barrels a day of crude and 5 million barrels a day of product to be effectively trapped inside the strait. These are significant headline numbers, but we've seen the market exercise some flexibility on the crude side with alternative routing, crude supply coming from national strategic reserves, and some areas outside the U.S. reduced demand as a result of lower utilization. Global refining utilization is down roughly 10% year-on-year. In the near term, crude flows are still searching for a new equilibrium, and global pricing is doing the work of redirecting barrels along new routes. Until crude reestablishes its historical trade patterns, we cannot predict exactly where flat price or differentials land. What we can say with more confidence is that this environment favors refiners with crude slate flexibility and proximity to stable crude supply in America. Shorter voyages and quicker, more reliable deliveries, PBS footprint is well positioned as we have not, nor do we expect crude availability to impact on the product side. Product inventories have been drawn down across the globe. Refining utilization outside the U.S. has fallen. U.S. markets must incentivize products to stay home as products are being pulled into exports. U.S. and West Coast markets are finding it harder to pull the imports they have historically relied on. The West Coast and East Coast are structurally short refining capacity and depend on imports. often from less stable sources to balance. The temporary Jones Act waivers are helping in this regard. California alone imports on the order of 250,000 barrels a day of gasoline, close to a third of its demand, along with a meaningful volume of its jet fuel. When the global supply tightens, those are precisely the markets that deal first and are most exposed. it reinforces the point we have made for some time u.s refining is critical infrastructure has rarely been more evident than it is today it will take time for trade patterns to normalize both during and after these conflicts and we expect crude to find its footing sooner than product prior to the disruption in the middle east in the middle east there was a constructive setup i'm sorry prior to the disruption in the middle east there was a constructive setup for refining with type refining balances and low product inventories worldwide. With the ongoing conflicts, this situation and the restocking that ultimately must occur should provide a favorable with the current environment. What the current environment has provided is the prospect for PBF to generate significant value for our investors. In the second quarter, we reduced our net debt by over 1.4 billion. We ended the quarter with just under $900 million in cash and I expect 1 July with approximately 1.5 billion in cash. So to recap, we had to construct a marketplace prior to the Middle East disruptions with ample crude, tight refining balances and low product inventories over 5 million barrels of refining capacity offline, a portion of which has suffered physical damage, which could take significant time to repair. When the disruption passes and the conflicts end, it will take an extended time for product inventories to normalize, thereby maintaining elevated margins for a time. And we'll normalize much quicker as the dislocated crude will need to compete for market share. This should result in a favorable crude investment. PBF is uniquely positioned to capitalize on the opportunities presented by this extraordinary market. We've strengthened our balance sheet, we continue to lower our cost structure, executing initiatives that improve reliability and efficiency. The work is being done and we expect it to translate into meaningful value.

Thank you, Matt. Good morning, everyone. Currently, all of our refineries are operating well. In May, we were able to safely restart the fire-affected units at the Martinez refinery and have been producing our full product slate since that time. Again, I thank our Martinez team and all of our partners for their efforts to restore Martinez to full operations. While the restoration work was underway and the refinery was operating at reduced rates, the Martinez Hydrocracker was doing the heavy lifting in terms of keeping the balance of the refinery operating, providing us with the ability to fulfill our commitments to deliver products to our customers. With that said, we will be conducting the upcoming Hydrocracker turnaround at Martinez beginning in the third quarter and finishing in October. Staying on the West Coast, in July, we reached an agreement with Air Products to repurchase two hydrogen plants servicing our torrents refinery. Air Products has been and continues to be a valuable business partner for PBF. The hydrogen plants and torrents are heavily integrated into the operation of the refinery, and we feel that owning and operating those assets will improve the overall reliability of torrents, as we will be able to closely manage operating details and coordinate maintenance and turnarounds with the rest of the refinery as a whole. Outside of the West Coast, we contended with a few operational challenges during the quarter. In May, we had a loss of containment event at Chalmette that resulted in a pretreater and reformer being taken offline until repairs are complete later in q3 there was no material reduction in throughput as a result of this event and the refinery is able to run at planned rates the primary impact of the event is increased production of nafta and a slight reduction in our finished gasoline related to toledo's fcc during the second quarter which was the driver of the lower than it took the opportunity to perform some key maintenance during the outage which enables us to safely push the planned fourth quarter FCC turnaround to the first. Our East Coast assets ran well in the second quarter and we expect to continue to implement the RBI program. Here are some examples of key accomplishments. We have implemented a circuit-wide energy efficiency program that resulted in a 20% reduction in purchased natural gas. Our turnaround performance has seen a marked improvement. Not only have we become more predictable, based on industry benchmarking we are moving up among industry leaders in turnaround execution. Our new strategic procurement organization is halfway through renegotiating or rebidding with the focus on leveraging our spend nationally or regionally. We expect to see savings of about $60 million a year in goods and services, such as processed chemicals, maintenance, and equipment rentals, among others. RBI is a multi-year effort with periods of focused work in each of the refineries, followed by establishment of new practices to to ensure the improvements are sustained. The Refining Business Improvement Initiative is central to improving PPS results, but it will not distract us from our obligation to operate in a safe, reliable, and environmentally responsible way every day.

With that, I'll turn- Our discussion of second quarter results excludes the net effect of special items, including $23 million in incremental OPEX related to the Martinez refinery incident, a $250 million gain on insurance recovery, a $2 million charge related to the repayment of the $800 million senior notes due 2028, and approximately $9 million of charges associated with the RBI initiative, as well as other items detailed in the reconciling table in today's press release. PBS results for the quarter are primarily a reflection of the strong product market driven by tight supply and relatively firm demand. Globally, refineries that can run are running at high utilization rates. However, a significant portion of refining capacity remains offline or is running at a reduced rate due to conflicts or crude availability constraints. The $250 million gain on insurance recoveries related to the Martinez fire is a result of the fifth unallocated payment agreed to and received in the second quarter. This brings our total insurance recoveries to $1.25 billion net of our deductibles and retention, including the amounts received in 2025. Important to note, the bulk of the spending related to the Martinez rebuild is behind us, with only some cleanup and demobilization items ahead. However, the claim is ongoing and we expect to recover additional funds as we continue to work with our insurance providers towards finalization of the claim in the second half of 2026. Shifting back to our normal quarterly results discussion, also included in our results is net income of 27.5 million dollars from our investment in SBR for approximately 40 million dollars of EBITDA. SBR produced an average of 15,100 barrels per day of renewable diesel in the second quarter. SBR's production was as expected and reflected reduced rates because of a catalyst change completed in April. Although it has only been a few months since the installation of the new catalyst, we are encouraged by the improved performance we are seeing and expect to achieve a longer runtime. On the market side, we are seeing robust margins for renewable diesel, which are being driven by globally high distillate margins combined with elevated RINs pricing. PVF cash from operations for the quarter was $1.6 billion, which includes a working capital benefit of approximately $430 million. The working capital benefits was expected in the second quarter and was driven by a reduction in above average inventory levels from the first quarter, as well as benefits from our net payable position in a higher price environment. We are now at normalized inventory levels, and the working capital headwinds in the first quarter has reversed. Going forward, working capital fluctuations will depend largely on movements in commodity prices and inventory levels that may vary due to operational needs. Cash invested in a consolidated CapEx for the second quarter was $189 million, which includes refining, corporate, and logistics. This amount excludes second quarter capitals of approximately $56 million related to the Martinez rebuild. Q2 capital expenditures are slightly below expectations as a result of our decision to shift the scheduled hydrocracker turnaround at Martinez from the end of the second quarter to the end of the third quarter. On that note, we reduced our total capital expenditure guidance for 2026 by approximately $75 million to $850 million at the midpoint of our revised guidance. This is primarily a result of the decision to move the Q4 Toledo and Chalmette turnaround to 2027. We ended the quarter with $894 million in cash and approximately $855 million in net At quarter end, our net debt to cap was 15%. During the second quarter, PBF reduced net debt by over 62% by fully paying down borrowings on our asset-backed lending facility and refinancing $802 million of senior notes due to 2028 using available cash and proceeds from the issuance of $500 million of senior notes due to 2034. report, an aggregate gross debt reduction of over $1 billion. As we mentioned a moment ago, subsequent to the end of the quarter, we entered into an agreement with our products to acquire two hydrogen plants at our Torrance Refinery. This transaction will be financed with an amortizing seller's note. Upon closing of the transaction, this note will appear as incremental debt in our capital The transaction is subject to regulatory review and customary closing conditions and is expected to be finalized in the third quarter. As mentioned over the past several quarters, our capital allocation framework rests on three core elements, invest in the business, invest in our balance sheet, and shareholder We continue to invest in our assets to improve efficiency and reliability. We have made significant progress in just a short time with our balance sheet, but the work there is not done. We operate in a cyclical business, and our intention is to continue investing in our balance sheet to ensure we are able to adeptly navigate the next cycle in our industry. Through our deleveraging over the last several months, we believe we have delivered significant equity value to our investors. We're intent on maximizing value across the entire refining cycle. While returning capital remains an important pillar in our framework, we believe ensuring our refining assets remain competitive and maintaining a strong balance sheet enhances long-term shareholder returns by reducing risk and increasing strategic flexibility. Operator, we've completed our opening remarks, and we'd be pleased to take any questions.

Thank you. In a moment, we will open the call to questions. The company requests that all callers limit its turn to one question and one follow-up. You may rejoin the queue with additional questions. If you would 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 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 key. One moment, please, while we call for questions. The first question comes from Manav Gupta with UBS. Please go ahead.

Matt, George, congrats to the entire team. a very strong quarter and the way things are going probably 3q would be a replica of 2q if not better my first question to you was you talked about you know refining taking a lot longer to normalize as you mentioned over 5 million barrels of capacity has been offline for a sustained time we don't know when this reopens but there is a possibility that global product inventories would have depleted significantly before things start to normalize. So one, I wanted to understand from you the timeframe of the normalization, but the bigger question I'm trying to ask is, you know, there are refineries that have been damaged, there are refineries that have been damaged in Russia, by Ukraine. Even when flows fully normalized, do you see a scenario where the mid-cycle has moved up because the global supply routes have been impacted, global supply has been impacted. So if you could talk about some of those dynamics, I would be very grateful.

Thanks, Manav. And I agree with everything. You kind of look different, and so then you relate it back to mid-sign. I think it could be a long time. It is almost unimaginable working. It's impossible for us to predict exactly how long, and I think it's going to...

Yeah, I mean, Matt, I mean, I think just in terms of adding that, I mean, I think it almost goes to the preview that we saw in the margins but you know quite quickly margins found a floor and started to get really back to that and i think it's certainly we we've seen it in terms of knowing that it is just about crude that is normalization is sort of in the weeks to months time frame and when it comes to products that's certainly in the months because my second question is your

net debt to cap special items was 36% in 1Q. You dropped it to 15% in 2Q. You talked a little bit about the cash generation in July. You would be in a net cash position by the end of third quarter, if not the fourth quarter. So I'm just trying to understand how much cash would you like to build on the balance sheet. And you should, after which you would also say, okay, this is just too much cash. We probably should go back and look at some of our buybacks or something.

So if you could talk little bit about shareholder returns once you have gotten to your net cash position yeah i look i i think you made a comment it would certainly appear that the third quarter but that being said we don't we don't know what's going to happen we don't like to we haven't earned that looks very very constructive and indeed i believe it's never been and that's where we're focused thank you so

much and congrats on a great quarter. Thanks.

Thank you. The next question comes from Joe Lash with Morgan Stanley. Please go ahead.

Good morning, Matt and team, and thanks for taking my questions. So I wanted to go back to the refining macro, just building on your opening comments. Could you just talk a bit more about how the commercial organization is navigating the disruption? And then could you also just talk about what you're seeing from a physical, financial market perspective, freight rate impact, maybe where you're seeing some of the biggest dislocations currently? Thank you.

Sure. One comment I would make is that the last, that being said, obviously, extraordinary markets.

Yeah. I mean, I think in terms of just examining the market, right, I mean, you know, number one, we have concerns about buying crude every day, even in a right-way market. You know, in terms Obviously, the environment certainly has raised the sort of risk factor on procuring crude. But as we've gone through, it's something that we've yet to see a scenario where we've had to impact our refining operations materially due to those things we constantly are evaluating. I think you can probably add that there's a little bit more of, you know, sort of upside skew and certainly on the diesel side of the equation. And obviously, we're in the midst of hurricane season, potentially a dramatic effect upon both products and crude, right?

The backwardations that we see on products, inclusive of the backwardation we see on crude, everything is hand them out. We have dynamic, we have export to make the refineries full on the inbound and make sure we're empty on the outbound.

That's helpful. Thank you. And then I wanted to just talk a little bit about your comments around delaying some turnarounds to 2027. So it sounds like you were able to get in and assess Toledo during some unplanned downtime last quarter. Maybe more broadly, are you seeing longer duration between turnaround intervals? And just given how fast the data, technology, and monitoring landscape is evolving, is there any change to how you're thinking about planning turnarounds going forward?

Yeah, Joe, this is Mike. So the short answer to your question is yes. As part of RBI, we've taken a three- or four-pronged approach to turnaround improvement, And a piece of that is turnaround interval optimization. And so we're certainly looking at techniques such as risk-based inspection and other opportunities to kind of really set durations. But we're also, you know, we're optimizing that against capabilities of refineries in terms of the contract or manpower available at a given location, the size of the turnaround. As you delay turnarounds, they tend to get bigger. So we're optimizing against those types of things. So in general, yes, interval optimization is a key piece of what we're doing. And I would say that the industry has been looking at that for the past several years, and we're approaching, I think, some limits in terms of that just based on capabilities of making.

That all makes sense. Thank you, guys.

Thank you. The next question comes from Philip Juneworth with Vivo Capital Markets. Please go ahead.

Thanks. The PPF had initially budgeted $235, $250 million of capital projects for 26. I was just hoping you could remind us the nature of these, and more importantly, is this an area where you could see more investment in the future, given the stronger margin environment for refining, which we think should last for some time?

Yeah, that's really included within our budget for turnaround safety and regulatory spend. And so that's kind of, you know, there's a piece of that roughly 50 to 100 million that is discretionary growth. But we'd, you know, continue to evaluate that as the market changes and obviously be looking for opportunities always to increase reliability and efficiencies of our system.

I think the focus of the company, safe, reliable, responsible operations, we talk about that all the time, but we must be efficient. but then it's upon us. Our job is not done. We must make. It doesn't always require a tremendous amount of capital, but that's just always not only running for efficient positive markets, reduced cost structure, improving margin capture, reduced interest expense, keeping the keel of PVF operating through.

Yeah, I would also add we consciously chose to look at our cost structure first because we felt like that our base case was not optimized. And as you start getting to a point where you kind of see and achieve the efficiencies that you expected to get, you start to see open up new opportunities in terms of margins. So, for instance, relative to the comments we made in the prepared remarks, getting that energy efficiency improvement now opens up different opportunities where you can take advantage of that. And it starts to identify constraints or remove constraints.

Okay, great. And then any reason the Paulsboro crude unit turnaround can't also be pushed? And just for PDF, is there any ability or consideration to bring back idle units here, SCC, ELKI unit, delayed coker? Or more broadly, do you think there's much opportunity for the industry to really bring back shuttered or mothball refining capacity?

In terms of Paulsboro, and obviously we look at every turnaround individually based on market considerations, but there are some constraints that we have in terms of equipment inspections and mechanical integrity deadlines that really forestall us from being able to move that. So that's going to stay in place. In terms of idle units in Paulsboro, we're always looking at ways to optimize that facility in conjunction with our Delaware City refinery, but there are no short-term plans to bring back any units at that point in time. And in terms of the rest of the industry, it really depends on situational, how well the units were put away or put up, and the costs associated with bringing them back. But it would also take a really good understanding and a commitment of what the market's going to do longer term, because it does take an awful long time to them and down for current cycle we're at.

Makes sense.

Thank you. The next question comes from Neil Mehta with Goldman Sachs. Please go ahead. Hello, Neil. All right. Thank you. The next question comes from Doug LeCate with Wolf Research. Please go ahead.

Good morning, everyone. I'll take that. How are you doing, Matt? It must be very gratifying to you to have all your facilities running in these times. So, congratulations on getting everything up. You have a bit of a unique situation insofar as your market cap is a little under $7 billion. You're probably headed towards, if our numbers are anywhere close to being right, to wiping out your balance sheet on a net basis by potentially in the next quarter or two, which then puts you in a position where the level of cash flow you're generating, albeit you could argue peak margins or whatever, but you could take out a lot of your stock. My question is, we don't know how long this is going to last. Why wouldn't you consider hedging?

We look at hedging, let's hedge it up. Look, we deliver the crack to our investors but you know we we do uh participate yeah doc i mean this certainly is a you know unique opportunities that are sort of being presented i mean right when you look at the

forward looking at margins that are that are certainly well above mid-cycle sort of tailwind behind that has been a you know a reasonable correction there is some i understand that i thought it was a you know as i said the scale of your business um your beta if you like is

puts you in a bit of a unique situation. I'm going to try this one, but I don't know if you can answer it, Matt. But can you frame for us at least the magnitude of what you think that remaining insurance income could be or cash flow order magnitude? Does that have been too precise? Sure. We'll be happy to see that. Thanks, guys. Appreciate the answer.

Thank you. And the final question comes from Alexa Breno with Goldman Sachs. Please go ahead.

Hey, team, and thanks for taking our question. We wanted to ask on the West Coast, your margins there were particularly strong this quarter. Can you just talk about some of the regional dynamics and product pricing trends? And then at Martinez, now that the facility has transitioned back to full operations, any update on the current status of some of the ongoing agency investigations and any outlook there?

Okay, and the latter part first, nothing new. But I must say, again, some of the we have had, there's real 25,000, 30,000 barrels a day. And remember, we have our own proprietary logistics system in California. And so we've seen volumes on that were closer to 60,000 barrels a day to some of the closures, now averaging about 90,000 barrels a day. But importantly, we still have room on our same production come online, the state, and PDF with our M70 pipeline that services. You're sort of getting it on both ends, and we expect the marketplace to be.

Thanks. We appreciate that. And then just to follow up, can you just talk about how you're managing your RINs purchasing strategy? Do you expect any regulatory relief or structural changes in the market there?

All right. Well, this is good. It's the last question. And for those that are not interested, you can go get your glass of water in the bathroom now, because I can get on my soapbox on that one. Tom, why don't you manage?

Yeah, I mean, Alexa, on a daily basis, taking those in. And then we're just actively managing our position in the marketplace. There's a rinse of, you know, without getting into absolute. Keep in mind also, it's been a market that has really gotten itself a little bit crowded long.

So Tom's highlighted itself, and much of that is thinking has evolved a bit on it. as he sort of learned more, is, well, no, it's actually bio that are being sent to Europe or other places. But the problem is, if we need to meet these mandates over this year and into next year, we have to attract those barrels out of Europe. But Europe also has mandates. So it's like of racing to the top to get we continue to talk to people in Washington about impacting but you can adjust our with that we'll leave that there thanks that was very helpful we'll turn it back I appreciate it we appreciate everyone's part