PBF Holding LLC Earnings 2020-12-31
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended: December 31 , 2020
or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File Number: 001-35764
Commission File Number: 333-206728-02
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(973 ) 455-7500
(Registrants’ telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act.
| Title of Each Class | Trading Symbol | Name of Each Exchange on Which Registered | |||||||||
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
PBF Energy Inc. x Yes o No
PBF Energy Company LLC o Yes x No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
PBF Energy Inc. o Yes x No
PBF Energy Company LLC o Yes x No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
PBF Energy Inc. x Yes o No
PBF Energy Company LLC x Yes o No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
PBF Energy Inc. x Yes o No
PBF Energy Company LLC x Yes o No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| PBF Energy Inc. | filer | ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | Smaller reporting company | Emerging growth company | ||||||||||||||||||||||||
| PBF Energy Company LLC | Large accelerated filer | ☐ | Accelerated filer | ☐ | ☒ | Smaller reporting company | Emerging growth company | |||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
PBF Energy Inc. o
PBF Energy Company LLC o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
PBF Energy Inc. ☒
PBF Energy Company LLC ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
PBF Energy Inc. ☐ Yes ☒ No
PBF Energy Company LLC ☐ Yes ☒ No
The aggregate market value of the Common Stock of PBF Energy Inc. held by non-affiliates as of June 30, 2020 was approximately $1.2 billion based upon the New York Stock Exchange Composite Transaction closing price.
As of February 12, 2021, PBF Energy Inc. had outstanding 120,103,360 shares of Class A common stock and 16 shares of Class B common stock. PBF Energy Inc. is the sole managing member of, and owner of an equity interest representing approximately 99.2 % of the outstanding economic interest in PBF Energy Company LLC as of December 31, 2020. There is no trading in the membership interest of PBF Energy Company LLC and therefore an aggregate market value based on such is not determinable. PBF Energy Company LLC has no common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
PBF ENERGY INC. AND PBF ENERGY COMPANY LLC
TABLE OF CONTENTS
| PART I | |||||||||||
| PART II | |||||||||||
| PART III | |||||||||||
| PART IV | |||||||||||
2
GLOSSARY OF SELECTED TERMS
Unless otherwise noted or indicated by context, the following terms used in this Annual Report on Form 10-K have the following meanings:
“AB32” refers to the greenhouse gas emission control regulations in the state of California to comply with Assembly Bill 32.
“ASCI” refers to the Argus Sour Crude Index, a pricing index used to approximate market prices for sour, heavy crude oil.
“Bakken” refers to both a crude oil production region generally covering North Dakota, Montana and Western Canada, and the crude oil that is produced in that region.
“barrel” refers to a common unit of measure in the oil industry, which equates to 42 gallons.
“blendstocks” refers to various compounds that are combined with gasoline or diesel from the crude oil refining process to make finished gasoline and diesel; these may include natural gasoline, FCC unit gasoline, ethanol, reformate or butane, among others.
“bpd” refers to an abbreviation for barrels per day.
“CAA” refers to the Clean Air Act.
“CAM Pipeline” or “CAM Connection Pipeline” refers to the Clovelly-Alliance-Meraux pipeline in Louisiana.
“CARB” refers to the California Air Resources Board; gasoline and diesel fuel sold in the state of California are regulated by CARB and require stricter quality and emissions reduction performance than required by other states.
“catalyst” refers to a substance that alters, accelerates, or instigates chemical changes, but is not produced as a product of the refining process.
“coke” refers to a coal-like substance that is produced from heavier crude oil fractions during the refining process.
“complexity” refers to the number, type and capacity of processing units at a refinery, measured by the Nelson Complexity Index, which is often used as a measure of a refinery’s ability to process lower quality crude in an economic manner.
“COVID-19” refers to the 2019 outbreak of the novel coronavirus pandemic.
“crack spread” refers to a simplified calculation that measures the difference between the price for light products and crude oil. For example, we reference (a) the 2-1-1 crack spread, which is a general industry standard utilized by our Delaware City, Paulsboro and Chalmette refineries that approximates the per barrel refining margin resulting from processing two barrels of crude oil to produce one barrel of gasoline and one barrel of heating oil or ULSD, (b) the 4-3-1 crack spread, which is a benchmark utilized by our Toledo and Torrance refineries that approximates the per barrel refining margin resulting from processing four barrels of crude oil to produce three barrels of gasoline and one-half barrel of jet fuel and one-half barrel of ULSD and (c) the 3-2-1 crack spread, which is a benchmark utilized by our Martinez refinery that approximates the per barrel refining margin resulting from processing three barrels of crude oil to produce two barrels of gasoline and three-quarters of a barrel jet fuel and one-quarter of a barrel ULSD.
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“Dated Brent” refers to Brent blend oil, a light, sweet North Sea crude oil, characterized by an American Petroleum Institute (“API”) gravity of 38° and a sulfur content of approximately 0.4 weight percent that is used as a benchmark for other crude oils.
“distillates” refers primarily to diesel, heating oil, kerosene and jet fuel.
“DNREC” refers to the Delaware Department of Natural Resources and Environmental Control.
“downstream” refers to the downstream sector of the energy industry generally describing oil refineries, marketing and distribution companies that refine crude oil and sell and distribute refined products. The opposite of the downstream sector is the upstream sector, which refers to exploration and production companies that search for and/or produce crude oil and natural gas underground or through drilling or exploratory wells.
“EPA” refers to the United States Environmental Protection Agency.
“ethanol” refers to a clear, colorless, flammable oxygenated liquid. Ethanol is typically produced chemically from ethylene, or biologically from fermentation of various sugars from carbohydrates found in agricultural crops. It is used in the United States as a gasoline octane enhancer and oxygenate.
“Ethanol Permit” refers to the Coastal Zone Act permit for ethanol issued to our Delaware City refinery.
“FASB” refers to the Financial Accounting Standards Board which develops U.S. generally accepted accounting principles.
“FCC” refers to fluid catalytic cracking.
“feedstocks” refers to crude oil and partially refined petroleum products that are processed and blended into refined products.
“FERC” refers to the Federal Energy Regulatory Commission.
“GAAP” refers to U.S. generally accepted accounting principles developed by FASB for nongovernmental entities.
“GHG” refers to greenhouse gas.
“Group I base oils or lubricants” refers to conventionally refined products characterized by sulfur content less than 0.03% with a viscosity index between 80 and 120. Typically, these products are used in a variety of automotive and industrial applications.
“heavy crude oil” refers to a relatively inexpensive crude oil with a low API gravity characterized by high relative density and viscosity. Heavy crude oils require greater levels of processing to produce high value products such as gasoline and diesel.
“IDRs” refers to incentive distribution rights.
“IMO” refers to the International Maritime Organization.
“IPO” refers to the initial public offering of PBF Energy Class A common stock which closed on December 18, 2012.
“J. Aron” refers to J. Aron & Company, a subsidiary of The Goldman Sachs Group, Inc.
“KV” refers to Kilovolts.
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“LCM” refers to a GAAP requirement for inventory to be valued at the lower of cost or market.
“light crude oil” refers to a relatively expensive crude oil with a high API gravity characterized by low relative density and viscosity. Light crude oils require lower levels of processing to produce high value products such as gasoline and diesel.
“light-heavy differential” refers to the price difference between light crude oil and heavy crude oil.
“light products” refers to the group of refined products with lower boiling temperatures, including gasoline and distillates.
“LLS” refers to Light Louisiana Sweet benchmark for crude oil reflective of Gulf coast economics for light sweet domestic and foreign crudes. It is characterized by an API gravity of between 35° and 40° and a sulfur content of approximately .35 weight percent.
“LPG” refers to liquefied petroleum gas.
“Maya” refers to Maya crude oil, a heavy, sour crude oil characterized by an API gravity of approximately 22° and a sulfur content of approximately 3.3 weight percent that is used as a benchmark for other heavy crude oils.
“MLP” refers to the master limited partnership.
“MMBTU” refers to million British thermal units.
“MOEM Pipeline” refers to a pipeline that originates at a terminal in Empire, Louisiana approximately 30 miles north of the mouth of the Mississippi River. The MOEM Pipeline is 14 inches in diameter, 54 miles long and transports crude from South Louisiana to the Chalmette refinery and transports Heavy Louisiana Sweet (HLS) and South Louisiana Intermediate (SLI) crude.
“MW” refers to Megawatt.
“Nelson Complexity Index” refers to the complexity of an oil refinery as measured by the Nelson Complexity Index, which is calculated on an annual basis by the Oil and Gas Journal. The Nelson Complexity Index assigns a complexity factor to each major piece of refinery equipment based on its complexity and cost in comparison to crude distillation, which is assigned a complexity factor of 1.0. The complexity of each piece of refinery equipment is then calculated by multiplying its complexity factor by its throughput ratio as a percentage of crude distillation capacity. Adding up the complexity values assigned to each piece of equipment, including crude distillation, determines a refinery’s complexity on the Nelson Complexity Index. A refinery with a complexity of 10.0 on the Nelson Complexity Index is considered ten times more complex than crude distillation for the same amount of throughput.
“NYH” refers to the New York Harbor market value of petroleum products.
“NYMEX” refers to the New York Mercantile Exchange.
“PADD” refers to Petroleum Administration for Defense Districts.
“Platts” refers to Platts, a division of The McGraw-Hill Companies.
“PPM” refers to parts per million.
“refined products” refers to petroleum products, such as gasoline, diesel and jet fuel, that are produced by a refinery.
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“Renewable Fuel Standard” refers to the Renewable Fuel Standard issued pursuant to the Energy Independence and Security Act of 2007 implementing mandates to blend renewable fuels into petroleum fuels produced and sold in the United States.
“RINs” refers to renewable fuel credits required for compliance with the Renewable Fuel Standard.
“Saudi Aramco” refers to Saudi Arabian Oil Company.
“SEC” refers to the United States Securities and Exchange Commission.
“sour crude oil” refers to a crude oil that is relatively high in sulfur content, requiring additional processing to remove the sulfur. Sour crude oil is typically less expensive than sweet crude oil.
“Sunoco” refers to Sunoco, LLC.
“sweet crude oil” refers to a crude oil that is relatively low in sulfur content, requiring less processing to remove the sulfur than sour crude oil. Sweet crude oil is typically more expensive than sour crude oil.
“Syncrude” refers to a blend of Canadian synthetic oil, a light, sweet crude oil, typically characterized by API gravity between 30° and 32° and a sulfur content of approximately 0.1-0.2 weight percent.
“TCJA” refers to the U.S. government comprehensive tax legislation enacted on December 22, 2017 and commonly referred to as the Tax Cuts and Jobs Act.
“throughput” refers to the volume processed through a unit or refinery.
“turnaround” refers to a periodically required shutdown and comprehensive maintenance event to refurbish and maintain a refinery unit or units that involves the cleaning, repair, and inspection of such units and occurs generally on a periodic cycle.
“ULSD” refers to ultra-low-sulfur diesel.
“WCS” refers to Western Canadian Select, a heavy, sour crude oil blend typically characterized by API gravity between 20° and 22° and a sulfur content of approximately 3.5 weight percent that is used as a benchmark for heavy Western Canadian crude oil.
“WTI” refers to West Texas Intermediate crude oil, a light, sweet crude oil, typically characterized by API gravity between 38° and 40° and a sulfur content of approximately 0.3 weight percent that is used as a benchmark for other crude oils.
“WTS” refers to West Texas Sour crude oil, a sour crude oil characterized by API gravity between 30° and 33° and a sulfur content of approximately 1.28 weight percent that is used as a benchmark for other sour crude oils.
“yield” refers to the percentage of refined products that is produced from crude oil and other feedstocks.
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Explanatory Note
This Annual Report on Form 10-K is filed by PBF Energy Inc. (“PBF Energy”) and PBF Energy Company LLC (“PBF LLC”). Each Registrant hereto is filing on its own behalf all of the information contained in this report that relates to such Registrant. Each Registrant hereto is not filing any information that does not relate to such Registrant, and therefore makes no representation as to any such information. PBF Energy is a holding company whose primary asset is an equity interest in PBF LLC. PBF Energy is the sole managing member of, and owner of an equity interest representing approximately 99.2% of the outstanding economic interests in PBF LLC as of December 31, 2020. PBF Energy operates and controls all of the business and affairs and consolidates the financial results of PBF LLC and its subsidiaries. PBF LLC is a holding company for the companies that directly and indirectly own and operate the business. As of December 31, 2020, PBF LLC also holds a 48.0% limited partner interest and a non-economic general partner interest in PBF Logistics LP (“PBFX”), a publicly-traded MLP.
PART I
This Annual Report on Form 10-K is filed by PBF Energy and PBF LLC. Discussions or areas of this report that either apply only to PBF Energy or PBF LLC are clearly noted in such sections. Unless the context indicates otherwise, the terms “Company”, “we,” “us,” and “our” refer to both PBF Energy and PBF LLC and its consolidated subsidiaries, including PBF Holding Company LLC (“PBF Holding”), PBF Investments LLC (“PBF Investments”), Toledo Refining Company LLC, Paulsboro Refining Company LLC (“Paulsboro Refining” or “PRC”), Delaware City Refining Company LLC (“DCR”), Chalmette Refining, L.L.C. (“Chalmette Refining”), PBF Energy Western Region LLC (“PBF Western Region”), Torrance Refining Company LLC (“Torrance Refining”), Torrance Logistics Company LLC, Martinez Refining Company LLC (“Martinez Refining”), PBF Logistics GP LLC (“PBF GP”) and PBFX.
In this Annual Report on Form 10-K, we make certain forward-looking statements, including statements regarding our plans, strategies, objectives, expectations, intentions, and resources, under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 to the extent such statements relate to the operations of an entity that is not a limited liability company or a partnership. You should read our forward-looking statements together with our disclosures under the heading: “Cautionary Statement for the Purpose of Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.” When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements set forth in this Annual Report on Form 10-K under “Risk Factors” in Item 1A.
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ITEM. 1 BUSINESS
Overview and Corporate Structure
We are one of the largest independent petroleum refiners and suppliers of unbranded transportation fuels, heating oil, petrochemical feedstocks, lubricants and other petroleum products in the United States. We sell our products throughout the Northeast, Midwest, Gulf Coast and West Coast of the United States, as well as in other regions of the United States, Canada and Mexico and are able to ship products to other international destinations. We were formed in 2008 to pursue acquisitions of crude oil refineries and downstream assets in North America. As of December 31, 2020, we own and operate six domestic oil refineries and related assets, which we acquired in 2010, 2011, 2015, 2016 and 2020. Based on the current configuration (as disclosed in “Recent Developments - East Coast Refining Reconfiguration”) our refineries have a combined processing capacity, known as throughput, of approximately 1,000,000 bpd, and a weighted-average Nelson Complexity Index of 13.2 based on current operating conditions. The complexity and throughput capacity of our refineries are subject to change dependent upon configuration changes we make to respond to market conditions, as well as a result of investments made to improve our facilities and maintain compliance with environmental and governmental regulations. We operate in two reportable business segments: Refining and Logistics.
PBF Energy was formed on November 7, 2011 and is a holding company whose primary asset is a controlling equity interest in PBF LLC. We are the sole managing member of PBF LLC and operate and control all of the business and affairs of PBF LLC. We consolidate the financial results of PBF LLC and its subsidiaries and record a noncontrolling interest in our consolidated financial statements representing the economic interests of the members of PBF LLC other than PBF Energy. PBF LLC is a holding company for the companies that directly or indirectly own and operate our business. PBF Holding is a wholly-owned subsidiary of PBF LLC and is the parent company for our refining operations. PBF Energy, through its ownership of PBF LLC, also consolidates the financial results of PBFX and records a noncontrolling interest for the economic interests in PBFX held by the public common unitholders of PBFX.
As of December 31, 2020, PBF Energy held 120,122,872 PBF LLC Series C Units and our current and former executive officers and directors and certain employees and others held 970,647 PBF LLC Series A Units (we refer to all of the holders of the PBF LLC Series A Units as “the members of PBF LLC other than PBF Energy”). As a result, the holders of PBF Energy’s issued and outstanding shares of its Class A common stock have approximately 99.2% of the voting power in PBF Energy, and the members of PBF LLC other than PBF Energy through their holdings of Class B common stock have approximately 0.8% of the voting power in PBF Energy.
On May 14, 2014, PBFX completed its initial public offering. As of December 31, 2020, PBF LLC held a 48.0% limited partner interest (consisting of 29,953,631 common units) in PBFX, with the remaining 52.0% limited partner interest held by the public unitholders. PBF LLC also indirectly owns a non-economic general partner interest in PBFX through its wholly-owned subsidiary, PBF GP, the general partner of PBFX.
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The following map details the locations of our refineries and the location of PBFX’s assets as of December 31, 2020 (each as defined below):
9
Refining
Our six refineries are located in Delaware City, Delaware, Paulsboro, New Jersey, Toledo, Ohio, Chalmette, Louisiana, Torrance, California and Martinez, California. In 2020, we reconfigured our Delaware and Paulsboro refineries, temporarily idling certain of our major processing units at the Paulsboro refinery, in order to operate the two refineries as one functional unit that we refer to as the “East Coast Refining System”. Refer to “Recent Developments” below for additional information. Each refinery is briefly described in the table below:
| Refinery | Region | Nelson Complexity Index (1) | Throughput Capacity (in barrels per day) (1) | PADD | Crude Processed (2) | Source (2) | ||||||||||||||
| Delaware City | East Coast | 13.6 | 180,000 | 1 | light sweet through heavy sour | water, rail | ||||||||||||||
| Paulsboro | East Coast | 10.4(3) | 105,000(3) | 1 | light sweet through heavy sour | water | ||||||||||||||
| Toledo | Mid-Continent | 11.0 | 180,000 | 2 | light sweet | pipeline, truck, rail | ||||||||||||||
| Chalmette | Gulf Coast | 13.0 | 185,000 | 3 | light sweet through heavy sour | water, pipeline | ||||||||||||||
| Torrance | West Coast | 13.8 | 166,000 | 5 | medium and heavy | pipeline, water, truck | ||||||||||||||
| Martinez | West Coast | 16.1 | 157,000 | 5 | medium and heavy | pipeline and water | ||||||||||||||
________
(1) Reflects operating conditions at each refinery as of the date of this filing. Changes in complexity and throughput capacity reflect the result of current market conditions such as our East Coast Refining Reconfiguration (defined below), in addition to investments made to improve our facilities and maintain compliance with environmental and governmental regulations. Configurations at each of our refineries are evaluated and updated accordingly.
(2) Reflects the typical crude and feedstocks and related sources utilized under normal operating conditions and prevailing market environments.
(3) Under normal operating conditions and prevailing market environments, our Nelson Complexity Index and throughput capacity for the Paulsboro refinery would be 13.1 and 180,000, respectively. As a result of the east coast refining reconfiguration described below (the “East Coast Refining Reconfiguration”), our Nelson Complexity Index and throughput capacity were reduced.
Logistics
PBFX is a fee-based, growth-oriented, publicly-traded Delaware MLP formed by PBF Energy to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. PBFX engages in the receiving, handling, storage and transferring of crude oil, refined products, natural gas and intermediates from sources located throughout the United States and Canada for PBF Energy in support of its refineries, as well as for third-party customers. As of December 31, 2020, a substantial majority of PBFX’s revenues are derived from long-term, fee-based commercial agreements with PBF Holding, which include minimum volume commitments, for receiving, handling, storing and transferring crude oil, refined products and natural gas. PBF Energy also has agreements with PBFX that establish fees for certain general and administrative services and operational and maintenance services provided by PBF Holding to PBFX. These transactions, other than those with third parties, are eliminated by us in consolidation.
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See “Item 1A. Risk Factors” and “Item 13. Certain Relationships and Related Transactions, and Director Independence.”
Recent Developments
COVID-19
The outbreak of the COVID-19 pandemic and certain developments in the global oil markets negatively impacted worldwide economic and commercial activity and financial markets in 2020 and is expected to continue in 2021. The COVID-19 pandemic and the related governmental and consumer responses resulted in significant business and operational disruptions, including business and school closures, supply chain disruptions, travel restrictions, stay-at-home orders and limitations on the availability of workforces and has resulted in significantly lower global demand for refined petroleum and petrochemical products. We believe, but cannot guarantee, that demand for refined petroleum products will ultimately rebound as governmental restrictions are lifted. However, the continued negative impact of the COVID-19 pandemic and these market developments on our business and operations will depend on the ongoing severity, location and duration of the effects and spread of COVID-19, the effectiveness of the vaccine programs and the other actions undertaken by national, regional and local governments and health officials to contain the virus or treat its effects, and how quickly and to what extent economic conditions improve and normal business and operating conditions resume.
We are actively responding to the impacts from these matters on our business. Starting in late March through the end of 2020, we reduced the amount of crude oil processed at our refineries in response to the decreased demand for our products and we temporarily idled various units at certain of our refineries to optimize our production in light of prevailing market conditions. As of the date of this filing, our refineries are still operating at reduced throughput levels and we expect them to continue to do so until market conditions substantially improve. Despite the measures we have taken, we have been, and likely will continue to be, adversely impacted by the COVID-19 pandemic. We are unable to predict the ultimate outcome of the economic impact and can provide no assurance that measures taken to mitigate the impact of the COVID-19 pandemic will be effective.
Over the course of 2020 we adjusted our operational plans to the evolving market conditions and executed our plan to lower our 2020 operating expenses through significant reductions in discretionary activities and third party services. We successfully reduced our 2020 operating expenses by $235.0 million, excluding energy savings, and exceeded our full-year goal of $140.0 million in total operating expense reductions. Including energy expenses, our full-year operating expenses reductions for 2020 totaled approximately $325.0 million. We expect to continue to target and execute these expense reduction measures in 2021. We expect operating expenses on a system-wide basis for 2021 to be reduced by $200.0 million to $225.0 million annually as a result of our efforts versus historic levels, including the East Coast reconfiguration. We operated our refineries at reduced rates during the year ended December 31, 2020 and, based on current market conditions, we plan on continuing to operate our refineries at lower utilization until such time that sustained product demand justifies higher production. We expect near-term throughput to be in the 675,000 to 725,000 barrel per day range for our refining system.
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East Coast Refining Reconfiguration
The East Coast Refining Reconfiguration was announced on October 29, 2020 and completed on December 31, 2020. It is expected to provide us with crude optionality and increased flexibility to respond to evolving market conditions. Our East Coast Refining System throughput capacity is approximately 285,000 barrels per day, reflecting the new configuration and idling of certain major processing units. Annual operating and capital expenditures savings are expected to be approximately $100.0 million and $50.0 million, respectively, relative to average historic levels.
Available Information
Our website address is www.pbfenergy.com. Information contained on our website is not part of this Annual Report on Form 10-K. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any other materials filed with (or furnished to) the SEC by us are available on our website (under “Investors”) free of charge, soon after we file or furnish such material. In this same location, we also post our corporate governance guidelines, code of business conduct and ethics, and the charters of the committees of our board of directors. These documents are available free of charge in print to any stockholder that makes a written request to the Secretary, PBF Energy Inc., One Sylvan Way, Second Floor, Parsippany, New Jersey 07054.
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The diagram below depicts our organizational structure as of December 31, 2020:
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Operating Segments
We operate in two reportable business segments: Refining and Logistics. Our six oil refineries, including certain related logistics assets that are not owned by PBFX, are engaged in the refining of crude oil and other feedstocks into petroleum products, and are aggregated into the Refining segment. PBFX operates certain logistics assets such as crude oil and refined petroleum products terminals, pipelines and storage facilities. Certain of PBFX’s assets were previously operated and owned by various subsidiaries of PBF Holding and were acquired by PBFX in a series of transactions since its inception. PBFX is reported in the Logistics segment. A substantial majority of PBFX’s revenues are derived from long-term, fee-based commercial agreements with PBF Holding and its subsidiaries and these intersegment related revenues are eliminated in consolidation. See “Note 22 - Segment Information” of our Notes to Consolidated Financial Statements, for detailed information on our operating results by business segment.
Refining Segment
We own and operate six refineries (two of which are operated as a single unit) that provide us with geographic and market diversity. We produce a variety of products at each of our refineries, including gasoline, ULSD, heating oil, jet fuel, lubricants, petrochemicals and asphalt. We sell our products throughout the Northeast, Midwest, Gulf Coast and West Coast of the United States, as well as in other regions of the United States, Canada and Mexico, and are able to ship products to other international destinations.
Our refinery assets as of December 31, 2020 are described below.
East Coast Refining System (Delaware City Refinery and Paulsboro Refinery)
Overview. The Delaware City refinery is located on an approximately 5,000-acre site, with access to waterborne cargoes and an extensive distribution network of pipelines, barges and tankers, truck and rail. The Delaware City refinery is a fully integrated operation that receives crude via rail at crude unloading facilities owned by PBFX, or via ship or barge at the docks owned by the Delaware City refinery located on the Delaware River. The crude and other feedstocks are stored in an extensive tank farm prior to processing. In addition, there is a 15-lane, 76,000 bpd capacity truck loading rack (the “DCR Truck Rack”) located adjacent to the refinery and a 23-mile interstate pipeline (the “DCR Products Pipeline”) that are used to distribute clean products. The DCR Products Pipeline and DCR Truck Rack were sold to PBFX in May 2015 and PBFX owns additional assets that support the Delaware City refinery. The Paulsboro refinery is located on approximately 950 acres on the Delaware River in Paulsboro, New Jersey, near Philadelphia and approximately 30 miles away from Delaware City. Paulsboro receives crude and feedstocks via its marine terminal on the Delaware River.
As a result of its configuration and process units, Delaware City has the capability of processing a slate of heavy crudes with a high concentration of high sulfur crudes, as well as other high sulfur feedstock when economically viable, and is one of the largest and most complex refineries on the East Coast. The Delaware City refinery is one of two heavy crude processing refineries, the other being our Paulsboro refinery, on the East Coast of the United States. The Delaware City coking capacity is equal to approximately 25% of crude capacity.
The Delaware City refinery primarily processes a variety of medium to heavy, sour crude oils, but can run light, sweet crude oils as well. The refinery has large conversion capacity with its 82,000 bpd FCC unit, 54,500 bpd fluid coking unit and 24,000 bpd hydrocracking unit.
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The following table approximates the East Coast Refining System’s current major process unit capacities. Unit capacities are shown in barrels per stream day.
| Delaware Refinery Units | Nameplate Capacity | |||||||
| Crude Distillation Unit | 180,000 | |||||||
| Vacuum Distillation Unit | 105,000 | |||||||
| Fluid Catalytic Cracking Unit | 82,000 | |||||||
| Hydrotreating Units | 180,000 | |||||||
| Hydrocracking Unit | 24,000 | |||||||
| Catalytic Reforming Unit | 43,000 | |||||||
| Benzene / Toluene Extraction Unit | 15,000 | |||||||
| Butane Isomerization Unit | 6,000 | |||||||
| Alkylation Unit | 12,500 | |||||||
| Polymerization Unit | 16,000 | |||||||
| Fluid Coking Unit | 54,500 | |||||||
| Paulsboro Refinery Units | Nameplate Capacity | |||||||
Crude Distillation Units (1) | 105,000 | |||||||
Vacuum Distillation Units (1) | 50,000 | |||||||
Fluid Catalytic Cracking Unit (1) | Idled | |||||||
Hydrotreating Units (1) | 61,000 | |||||||
Catalytic Reforming Unit (1) | Idled | |||||||
Alkylation Unit (1) | Idled | |||||||
| Lube Oil Processing Unit | 12,000 | |||||||
Delayed Coking Unit (1) | Idled | |||||||
| Propane Deasphalting Unit | 11,000 | |||||||
__________________________
(1) Current Nameplate Capacity was fully or partially reduced to reflect the idled units as part of the East Coast Refining Reconfiguration.
Feedstocks and Supply Arrangements. We source our crude oil needs for Delaware City primarily through short-term and spot market agreements. We have a contract with Saudi Aramco pursuant to which we have purchased up to approximately 100,000 bpd of crude oil from Saudi Aramco that is processed at Paulsboro. The crude purchased under this contract is priced off the ASCI.
Refined Product Yield and Distribution. The Delaware City refinery predominantly produces gasoline, jet fuel, ULSD and ultra-low sulfur heating oil as well as certain other products. Products produced at the Delaware City refinery are transferred to customers through pipelines, barges or at its truck rack. We market and sell all of our refined products independently to a variety of customers on the spot market or through term agreements. The Paulsboro refinery predominantly manufactures Group I base oils or lubricants and asphalt and jet fuel. Products produced at the Paulsboro refinery are transferred to customers primarily through pipelines, barges, or at its truck rack. We market and sell all of our refined products independently to a variety of customers on the spot market or through term agreements.
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Inventory Intermediation Agreement. On August 29, 2019, we entered into amended and restated inventory intermediation agreements with J. Aron, (as amended from time to time, the “Inventory Intermediation Agreements”), to support the operations of the Delaware City and Paulsboro refineries. The Inventory Intermediation Agreement by and among J. Aron, PBF Holding and DCR expires on June 30, 2021, which term may be further extended by mutual consent of the parties to June 30, 2022. The Inventory Intermediation Agreement by and among J. Aron, PBF Holding and PRC expires on December 31, 2021, which term may be further extended by mutual consent of the parties to December 31, 2022.
Pursuant to each Inventory Intermediation Agreement, J. Aron purchases and holds title to certain inventory, including crude oil, intermediate and certain finished products (the “J. Aron Products”), produced by the refinery and delivered into our storage tanks at the Delaware City and Paulsboro refineries and at PBFX’s assets acquired from Crown Point International, LLC (“Crown Point”) in October 2018 (the “East Coast Storage Assets” and together with our storage tanks at the Delaware City and Paulsboro refineries, the “J. Aron Storage Tanks”). The J. Aron Products are sold back to us as the J. Aron Products are discharged out of our J. Aron Storage Tanks. At expiration or termination of each of the Inventory Intermediation Agreements, we will have to repurchase the inventories outstanding under the Inventory Intermediation Agreement at that time.
Tankage Capacity. The Delaware City refinery has total storage capacity of approximately 10.0 million barrels. Of the total, approximately 3.6 million barrels of storage capacity are dedicated to crude oil and other feedstock storage with the remaining 6.4 million barrels allocated to finished products, intermediates and other products. The Paulsboro refinery has total storage capacity of approximately 7.5 million barrels. Of the total, approximately 2.1 million barrels are dedicated to crude oil storage with the remaining 5.4 million barrels allocated to finished products, intermediates and other products.
Energy and Other Utilities. Under normal operating conditions, the Delaware City refinery consumes approximately 75,000 MMBTU per day of natural gas supplied via pipeline from third parties. The Delaware City refinery has a 280 MW power plant located on site that consists of two natural gas-fueled turbines with combined capacity of approximately 140 MW and four turbo generators with combined nameplate capacity of approximately 140 MW. Collectively, this power plant produces electricity in excess of Delaware City’s refinery load of approximately 90 MW. Excess electricity is sold into the Pennsylvania-New Jersey-Maryland, or PJM, grid. Steam is primarily produced by a combination of three dedicated boilers, two heat recovery steam generators on the gas turbines, and is supplemented by secondary boilers at the FCC and Coker. Hydrogen is currently provided via the refinery’s steam methane reformer and continuous catalytic reformer.
Under projected normal operating conditions for the reconfiguration, the Paulsboro refinery will consume approximately 38,000 MMBTU per day of natural gas supplied via pipeline from third parties. The Paulsboro refinery will be mostly self-sufficient for electrical power through a mix of gas and steam turbine generators. The Paulsboro refinery generation is projected to supply all of the 20MW total refinery load. There are circumstances where available generation is greater than the total refinery load, and the Paulsboro refinery can export up to about 40MW of power to the utility grid if warranted. If necessary, supplemental electrical power is available on a guaranteed basis from the local utility. The Paulsboro refinery is connected to the grid via three separate 69KV aerial feeders and has the ability to run entirely on imported power. Steam is produced in three boilers and a heat recovery steam generator fed by the exhaust from the gas turbine. In addition, there are a number of waste heat boilers and furnace stack economizers throughout the refinery that supplement the steam generation capacity. The Paulsboro refinery’s hydrogen needs will be met by the steam methane reformer as the catalytic reformer will be idled.
Hydrogen Plant Project. During 2018, we signed an agreement with a third-party for an additional supply of 25.0 million standard cubic feet per day of hydrogen from a new hydrogen generation facility constructed on the Delaware City site, which was completed in the second quarter of 2020. This additional hydrogen provides additional complex crude and feedstock processing capabilities.
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Toledo Refinery
Overview. The Toledo refinery primarily processes a slate of light, sweet crudes from Canada, the Mid-Continent, the Bakken region and the U.S. Gulf Coast. The Toledo refinery is located on a 282-acre site near Toledo, Ohio, approximately 60 miles from Detroit. Crude is delivered to the Toledo refinery through three primary pipelines: (1) Enbridge from the north, (2) Patoka from the west and (3) Mid-Valley from the south. Crude is also delivered to a nearby terminal by rail and from local sources by truck to a truck unloading facility within the refinery.
The following table approximates the Toledo refinery’s current major process unit capacities. Unit capacities are shown in barrels per stream day.
| Refinery Units | Nameplate Capacity | |||||||
| Crude Distillation Unit | 180,000 | |||||||
| Fluid Catalytic Cracking Unit | 82,000 | |||||||
| Hydrotreating Units | 95,000 | |||||||
| Hydrocracking Unit | 52,000 | |||||||
| Catalytic Reforming Units | 52,000 | |||||||
| Alkylation Unit | 11,000 | |||||||
| Polymerization Unit | 7,000 | |||||||
| UDEX Unit | 16,300 | |||||||
Feedstocks and Supply Arrangements. We source our crude oil needs for Toledo primarily through short-term and spot market agreements.
Refined Product Yield and Distribution. Toledo produces finished products, including gasoline, jet and ULSD, in addition to a variety of high-value petrochemicals including benzene, toluene, xylene, nonene and tetramer. Toledo is connected, via pipelines, to an extensive distribution network throughout Ohio, Illinois, Indiana, Kentucky, Michigan, Pennsylvania and West Virginia. The finished products are transported on pipelines owned by Sunoco Logistics Partners L.P. and Buckeye Partners L.P. In addition, we have proprietary connections to a variety of smaller pipelines and spurs that help us optimize our clean products distribution. A significant portion of Toledo’s gasoline and ULSD are distributed through various terminals in this network.
We have an agreement with Sunoco whereby Sunoco purchases gasoline and distillate products representing approximately one-third of the Toledo refinery’s gasoline and distillates production. The agreement had an initial three-year term, subject to certain early termination rights. In March 2019, the agreement was renewed and extended for a three-year term. We sell the bulk of the petrochemicals produced at the Toledo refinery through short-term contracts or on the spot market and the majority of the petrochemical distribution is done via rail.
Tankage Capacity. The Toledo refinery has total storage capacity of approximately 4.5 million barrels. The Toledo refinery receives its crude through pipeline connections and a truck rack. Of the total, approximately 1.3 million barrels are dedicated to crude oil storage with the remaining 3.2 million barrels allocated to intermediates and products. A portion of storage capacity dedicated to crude oil and finished products was sold to PBFX in conjunction with its acquisition of a tank farm related facility, which included a propane storage and loading facility (the “Toledo Storage Facility”) in December 2014.
Energy and Other Utilities. Under normal operating conditions, the Toledo refinery consumes approximately 25,000 MMBTU per day of natural gas supplied via pipeline from third parties. The Toledo refinery purchases its electricity from the PJM grid and has a long-term contract to purchase hydrogen and steam from a local third-party supplier. In addition to the third-party steam supplier, Toledo consumes a portion of the steam that is generated by its various process units.
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Chalmette Refinery
Overview. The Chalmette refinery is located on a 400-acre site near New Orleans, Louisiana. It is a dual-train coking refinery and is capable of processing both light and heavy crude oil through its 185,000 bpd crude units and downstream units. Chalmette Refining owns 100% of the MOEM Pipeline, providing access to the Empire Terminal, as well as the CAM Connection Pipeline, providing access to the Louisiana Offshore Oil Port facility through a third-party pipeline. Chalmette Refining also owns 80% of each of the Collins Pipeline Company (“Collins”) and T&M Terminal Company (“T&M”), both located in Collins, Mississippi, which provide a clean products outlet for the refinery to the Plantation and Colonial Pipelines. In addition, there is also a marine terminal capable of importing waterborne feedstocks and loading or unloading finished products. There is also a clean products truck rack that provides access to local markets and crude storage that are owned by PBFX.
The following table approximates the Chalmette refinery’s current major process unit capacities. Unit capacities are shown in barrels per stream day.
| Refinery Units | Nameplate Capacity | |||||||
| Crude Distillation Units | 185,000 | |||||||
| Vacuum Distillation Unit | 114,000 | |||||||
| Fluid Catalytic Cracking Unit | 75,000 | |||||||
| Hydrotreating Units | 189,000 | |||||||
| Delayed Coking Unit | 42,000 | |||||||
| Catalytic Reforming Unit | 42,000 | |||||||
| Alkylation Unit | 17,000 | |||||||
| Aromatics Extraction Unit | 17,000 | |||||||
Feedstocks and Supply Arrangements. We source our crude oil and feedstock needs for Chalmette through connections to the CAM Pipeline and MOEM Pipeline as well as our marine terminal. On November 1, 2015, we entered into a market-based crude supply agreement with Petróleos de Venezuela S.A. (“PDVSA”) that has a ten-year term with a renewal option for an additional five years, subject to certain early termination rights. The pricing for the crude supply is market based and is agreed upon on a quarterly basis by both parties. We have not sourced crude oil under this agreement since 2017 as PDVSA has suspended deliveries due to the parties’ inability to agree to mutually acceptable payment terms and because of U.S. government sanctions against PDVSA.
Refined Product Yield and Distribution. The Chalmette refinery predominantly produces gasoline and diesel fuels and also manufactures high-value petrochemicals including benzene and xylene. Products produced at the Chalmette refinery are transferred to customers through pipelines, the marine terminal and truck rack. The majority of our clean products are delivered to customers via pipelines. Our ownership of the Collins pipeline and T&M terminal provides Chalmette with strategic access to Southeast and East Coast markets through third-party logistics.
Tankage Capacity. Chalmette has a total tankage capacity of approximately 8.1 million barrels. Of this total, approximately 2.6 million barrels are allocated to crude oil storage with the remaining 5.5 million barrels allocated to intermediates and products.
Energy and Other Utilities. Under normal operating conditions, the Chalmette refinery consumes approximately 25,000 MMBTU per day of natural gas supplied via pipeline from third parties. The Chalmette refinery purchases its electricity from a local utility and has a long-term contract to purchase hydrogen from a third-party supplier.
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Torrance Refinery
Overview. The Torrance refinery is located on 750 acres in Torrance, California. It is a high-conversion crude, delayed-coking refinery capable of processing both heavy and medium crude oils through its crude unit and downstream units. In addition to refining assets, the Torrance refinery acquisition included a number of high-quality logistics assets including a sophisticated network of crude and products pipelines, product distribution terminals and refinery crude and product storage facilities. The most significant logistics asset is a crude gathering and transportation system which delivers San Joaquin Valley crude oils directly from the field to the refinery, which is now owned by PBFX. Additionally, there are several pipelines serving the refinery that provide access to sources of waterborne crude oils including the Ports of Long Beach and Los Angeles, as well as clean product outlets with a direct pipeline that supplies jet fuel to the Los Angeles airport that are held by affiliates of the refinery.
The following table approximates the Torrance refinery’s current major process unit capacities. Unit capacities are shown in barrels per stream day.
| Refinery Units | Nameplate Capacity | |||||||
| Crude Distillation Unit | 166,000 | |||||||
| Vacuum Distillation Unit | 102,000 | |||||||
| Fluid Catalytic Cracking Unit | 90,000 | |||||||
| Hydrotreating Units | 155,500 | |||||||
| Hydrocracking Unit | 25,000 | |||||||
| Alkylation Unit | 25,500 | |||||||
| Delayed Coking Unit | 58,000 | |||||||
Feedstocks and Supply Arrangements. The Torrance refinery primarily processes a variety of medium and heavy crude oils. On July 1, 2016, we entered into a crude supply agreement with Exxon Mobil Oil Corporation (“ExxonMobil”) for approximately 60,000 bpd of crude oil that can be processed at our Torrance refinery. This crude supply agreement has a five-year term with an automatic renewal feature unless either party gives thirty-six months written notice of its intent to terminate the agreement. Additionally, we obtain crude and feedstocks from other sources through connections to third-party pipelines as well as ship docks and truck racks.
Refined Product Yield and Distribution. The Torrance refinery predominantly produces gasoline, jet fuel and diesel fuels. Products produced at the Torrance refinery are transferred to customers through pipelines, the marine terminal and truck rack. The majority of clean products are delivered to customers via pipelines. We currently market and sell all of our refined products independently to a variety of customers either on the spot market or through term agreements.
Tankage Capacity. Torrance has a total tankage capacity of approximately 8.6 million barrels. Of this total, approximately 2.1 million barrels are allocated to crude oil storage with the remaining 6.5 million barrels allocated to intermediates and products.
Energy and Other Utilities. Under normal operating conditions, the Torrance refinery consumes approximately 47,000 MMBTU per day of natural gas supplied via pipeline from third parties. The Torrance refinery generates some power internally using a combination of steam and gas turbines and purchases any additional needed power from the local utility. The Torrance refinery has a long-term contract to purchase hydrogen from a third-party supplier.
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Martinez Refinery
We acquired the Martinez refinery and related logistics assets from Equilon Enterprises LLC d/b/a Shell Oil Products US (“Shell Oil Products”) on February 1, 2020 for an aggregate purchase price of $1,253.4 million, including final working capital of $216.1 million and the obligation to make certain post-closing earn-out payments to Shell Oil Products based on certain earnings thresholds of the Martinez refinery for a period of up to four years (the “Martinez Acquisition”).
Overview. The Martinez refinery is located on an 860-acre site in the City of Martinez, 30 miles northeast of San Francisco, California. The refinery is a high-conversion, dual-coking facility with a Nelson Complexity Index of 16.1, making it one of the most complex refineries in the United States. The facility is strategically positioned in Northern California and provides for operating and commercial synergies with the Torrance refinery located in Southern California. In addition to refining assets, the Martinez Acquisition includes a number of high-quality onsite logistics assets including a deep-water marine facility, product distribution terminals and refinery crude and product storage facilities with approximately 8.8 million barrels of shell capacity.
The following table approximates the Martinez refinery’s current major process unit capacities. Unit capacities are shown in barrels per stream day.
| Refinery Units | Nameplate Capacity | |||||||
| Crude Distillation Unit | 157,000 | |||||||
| Vacuum Distillation Unit | 102,000 | |||||||
| Fluid Catalytic Cracking Unit | 72,000 | |||||||
| Hydrotreating Units | 268,000 | |||||||
| Hydrocracking Unit | 42,900 | |||||||
| Alkylation Unit | 12,500 | |||||||
| Delayed Coking Unit | 25,500 | |||||||
| Flexi Coking Unit | 22,500 | |||||||
| Isomerization Unit | 15,000 | |||||||
Feedstocks and Supply Arrangements. We have entered into various five-year crude supply agreements with Shell Oil Products for approximately 150,000 bpd, in the aggregate, to support our West Coast and Mid-Continent refinery operations. Additionally, we obtain crude and feedstocks from other sources through connections to third-party pipelines as well as ship docks.
Refined Product Yield and Distribution. We entered into certain offtake agreements for our West Coast system with Shell Oil Products for clean products with varying terms up to 15 years. We currently market and sell all of our refined products independently to a variety of customers either on the spot market or through term agreements.
Tankage Capacity. Martinez has a total tankage capacity of approximately 8.8 million barrels. Of this total, approximately 2.5 million barrels are allocated to crude oil storage with the remaining 6.3 million barrels allocated to intermediates and products.
Energy and Other Utilities. Under normal operating conditions, the Martinez refinery consumes approximately 80,000 MMBTU per day of natural gas (including natural gas consumed in hydrogen production) supplied via pipeline from third parties. The Martinez refinery generates some power internally using a combination of steam and gas turbines and purchases any additional needed power from the local utility. The Martinez refinery has a long-term contract to purchase hydrogen from a third-party supplier.
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Logistics Segment
We formed PBFX, a publicly-traded MLP, to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. PBFX’s operations are aggregated into the Logistics segment. PBFX engages in the receiving, handling, storage and transferring of crude oil, refined products, natural gas and intermediates from sources located throughout the United States and Canada for PBF Energy in support of its refineries, as well as for third-party customers. A substantial majority of PBFX’s revenues is derived from long-term, fee-based commercial agreements with PBF Holding, which include minimum volume commitments for receiving, handling, storing and transferring crude oil, refined products and natural gas. PBFX’s third-party revenue is primarily derived from its third-party acquisitions. PBF Energy also has agreements with PBFX that establish fees for certain general and administrative services and operational and maintenance services provided by PBF Holding to PBFX. These transactions, other than those with third parties, are eliminated by PBF Energy and PBF LLC in consolidation.
As of December 31, 2020, PBFX’s assets consist of the following:
| Asset | Capacity | Products Handled | PBF Location Supported | ||||||||
| Transportation and Terminaling | |||||||||||
| DCR Rail Facility (a)(b) | various throughput capacity (a) | Crude | East Coast Refining System | ||||||||
| Toledo Truck Terminal (b) | 22,500 bpd unloading capacity | Crude | Toledo Refinery | ||||||||
| Toledo Storage Facility - propane loading facility (b) | 11,000 bpd throughput capacity | Propane | Toledo Refinery | ||||||||
| DCR Products Pipeline (b) | 125,000 bpd pipeline capacity | Refined products | Delaware City Refinery | ||||||||
| DCR Truck Rack (b) | 76,000 bpd throughput capacity | Gasoline, distillates and LPGs | Delaware City Refinery | ||||||||
| East Coast Terminals | various throughput capacity and approximately 4.2 million barrel aggregate shell capacity | Refined products | East Coast Refining System | ||||||||
| Torrance Valley Pipeline (b) | 110,000 bpd pipeline capacity and approximately 700,000 barrel aggregate shell capacity (c) | Crude | Torrance Refinery | ||||||||
| Paulsboro Natural Gas Pipeline (b) | 60,000 dth/d pipeline capacity | Natural gas | Paulsboro Refinery | ||||||||
| Toledo Products Terminal | various throughput capacity and 110,000 barrel aggregate shell capacity | Refined products | Toledo Refinery | ||||||||
| Knoxville Terminals | various throughput capacity and 520,000 barrel aggregate shell capacity | Gasoline, distillates and LPGs | Chalmette Refinery | ||||||||
| Toledo Rail Products Facility (b)(d) | 16,000 bpd loading capacity | Crude, LPGs, gasoline and distillates | Toledo Refinery | ||||||||
| Chalmette Truck Rack (b)(d) | 20,000 bpd loading capacity | Gasoline and distillates | Chalmette Refinery | ||||||||
| Chalmette Rosin Yard (b)(d) | 17,000 bpd unloading capacity | LPGs | Chalmette Refinery | ||||||||
| Paulsboro Lube Oil Terminal (b)(d) | various throughput capacity and 229,000 barrel aggregate shell capacity | Lubes | Paulsboro Refinery | ||||||||
| Delaware Ethanol Storage Facility (b)(d) | various throughput capacity and 100,000 barrel aggregate shell capacity | Ethanol | Delaware City Refinery | ||||||||
| Storage | |||||||||||
| Toledo Storage Facility (b) | approximately 3.9 million barrel aggregate shell capacity (e) | Crude, refined products and intermediates | Toledo Refinery | ||||||||
| Chalmette Storage Tank | 625,000 barrel shell capacity | Crude | Chalmette Refinery | ||||||||
| East Coast Storage Assets | approximately 4.0 million barrel aggregate shell capacity (f) and various throughput capacity | Crude, feedstock, asphalt and refined products | East Coast Refining System | ||||||||
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(a)Included within the DCR Rail Facility are the DCR Rail Terminal, a rail unloading terminal with an unloading capacity of 130,000 bpd, and the DCR West Rack, an unloading facility with an unloading capacity of 40,000 bpd.
(b)These assets represent the assets that PBFX acquired from PBF LLC.
(c)Includes storage capacity at the PBFX Midway, Emidio and Belridge stations.
(d)These assets are collectively referred to as the “Development Assets”.
(e)Of the approximately 3.9 million barrel aggregate shell capacity, approximately 1.3 million barrels are dedicated to crude and approximately 2.6 million barrels are allocated to refined products and intermediates.
(f)Of the approximately 4.0 million barrel aggregate shell capacity, approximately 3.0 million barrels are dedicated to crude and feedstocks and approximately 1.0 million barrels are allocated to asphalt.
Transactions with PBFX
Since the inception of PBFX in 2014, PBF LLC and PBFX have entered into a series of drop-down transactions. Such transactions occurring in the three years ended December 31, 2020 are discussed below.
On April 24, 2019, PBFX entered into a contribution agreement with PBF LLC (the “TVPC Contribution Agreement”), pursuant to which PBF LLC contributed to PBFX all of the issued and outstanding limited liability company interests of TVP Holding Company LLC (“TVP Holding”) for total consideration of $200.0 million in cash (the “TVPC Acquisition”). Prior to the TVPC Acquisition, TVP Holding owned a 50% membership interest in Torrance Valley Pipeline Company LLC (“TVPC”) . Subsequent to the closing of the TVPC Acquisition on May 31, 2019, PBFX owns 100% of the membership interests in TVPC. The transaction was financed through a combination of proceeds from the 2019 Registered Direct Offering (as defined in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations”) and borrowings under the $500.0 million amended and restated revolving credit facility (as amended, the “PBFX Revolving Credit Facility”).
On July 16, 2018, PBFX entered into four contribution agreements with PBF LLC, pursuant to which PBF LLC contributed all of the issued and outstanding limited liability company interests of the Development Assets to PBFX effective July 31, 2018 (the “Development Assets Contribution Agreements”). In consideration for the Development Assets limited liability company interests, PBFX delivered to PBF LLC total consideration of $31.6 million consisting of 1,494,134 common units of PBFX.
In connection with the foregoing transactions and other transactions with PBFX, PBF Holding entered into commercial agreements with PBFX entities for the provision of services which require minimum monthly throughput volumes. Subsequent to the transactions described above, as of December 31, 2020, PBF LLC holds a 48.0% limited partner interest in PBFX consisting of 29,953,631 common units.
PBFX IDR Restructuring Agreement
On February 28, 2019, PBFX closed on the transaction contemplated by the equity restructuring agreement (the “IDR Restructuring Agreement”) with PBF GP, pursuant to which the IDRs held by PBF LLC were canceled and converted into 10,000,000 newly issued PBFX common units. Subsequent to the closing of the IDR Restructuring, no distributions were made to PBF LLC with respect to the IDRs and the newly issued PBFX common units are entitled to normal distributions by PBFX.
Principal Products
Our refineries make various grades of gasoline, distillates (including diesel fuel, jet fuel and ULSD) and other products from crude oil, other feedstocks, and blending components. We sell these products through our commercial accounts, and sales with major oil companies. For the years ended December 31, 2020, 2019 and 2018, gasoline and distillates accounted for 84.7%, 86.8% and 84.7% of our revenues, respectively.
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Customers
We sell a variety of refined products to a diverse customer base. The majority of our refined products are primarily sold through short-term contracts or on the spot market. However, we do have product offtake arrangements for a portion of our clean products. For the year ended December 31, 2020, only one customer, Royal Dutch Shell, accounted for 10% or more of our revenues (approximately 13%). For the years ended December 31, 2019 and 2018, no single customer accounted for 10% or more of our revenues. As of December 31, 2020, only one customer, Royal Dutch Shell, accounted for 10% or more of our total trade accounts receivable (approximately 16.0%). No single customer accounted for 10% or more of our total trade accounts receivable as of December 31, 2019.
Seasonality
Traditionally, demand for gasoline and diesel is generally higher during the summer months than during the winter months due to seasonal increases in highway traffic and construction work. Decreased demand during the winter months can lower gasoline and diesel prices. However, during 2020, due to the COVID-19 pandemic and related governmental responses, the effects of seasonality on our operating results were skewed. Our operating results have been negatively impacted by the ongoing COVID-19 pandemic which has caused a significant decline in the demand for our refined products and a decrease in the prices for crude oil and refined products.
Competition
The refining business is very competitive. We compete directly with various other refining companies on the East, Gulf and West Coasts and in the Mid-Continent, with integrated oil companies, with foreign refiners that import products into the United States and with producers and marketers in other industries supplying alternative forms of energy and fuels to satisfy the requirements of industrial, commercial and individual consumers. Some of our competitors have expanded the capacity of their refineries and internationally new refineries are coming on line which could also affect our competitive position.
Profitability in the refining industry depends largely on refined product margins, which can fluctuate significantly, as well as crude oil prices and differentials between the prices of different grades of crude oil, operating efficiency and reliability, product mix and costs of product distribution and transportation. Certain of our competitors that have larger and more complex refineries may be able to realize lower per-barrel costs or higher margins per barrel of throughput. Several of our principal competitors are integrated national or international oil companies that are larger and have substantially greater resources. Because of their integrated operations and larger capitalization, these companies may be more flexible in responding to volatile industry or market conditions, such as shortages of feedstocks or intense price fluctuations. Refining margins are frequently impacted by sharp changes in crude oil costs, which may not be immediately reflected in product prices.
The refining industry is highly competitive with respect to feedstock supply. Unlike certain of our competitors that have access to proprietary controlled sources of crude oil production available for use at their own refineries, we obtain all of our crude oil and substantially all other feedstocks from unaffiliated sources. The availability and cost of crude oil and feedstock are affected by global supply and demand. We have no crude oil reserves and are not engaged in the exploration or production of crude oil. We believe, however, that we will be able to obtain adequate crude oil and other feedstocks at generally competitive prices for the foreseeable future.
Pursuant to its Renewable Fuel Standard, the EPA has implemented mandates to blend renewable fuels into the petroleum fuels produced and sold in the United States. However, unlike certain of our competitors, we currently do not produce renewable fuels, and increasing the volume of renewable fuels that must be blended into our products displaces an increasing volume of our refinery’s product pool, potentially resulting in lower earnings and profitability. In addition, in order to meet certain of these and future EPA requirements, we may be required to continue to purchase RINs, which historically had, and we expect to have, fluctuating costs based on market conditions. The price of RINS has increased in 2020 and could increase further in 2021.
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Corporate Offices
We currently lease approximately 63,000 square feet for our principal corporate offices in Parsippany, New Jersey. The lease for our principal corporate offices expires in 2022. Functions performed in the Parsippany office include overall corporate management, refinery and health, safety and environmental management, planning and strategy, corporate finance, commercial operations, logistics, contract administration, marketing, investor relations, governmental affairs, accounting, tax, treasury, information technology, legal and human resources support functions.
We lease approximately 4,000 square feet for our regional corporate office in Long Beach, California. The lease for our Long Beach office expires in 2021. Functions performed in the Long Beach office include overall regional corporate management, planning and strategy, commercial operations, logistics, contract administration, marketing and governmental affairs.
We lease approximately 5,000 square feet for our regional corporate office in The Woodlands, Texas. The lease for The Woodlands office expires in 2022. Functions performed in The Woodlands include pipeline control center operations and logistics operations, engineering and regulatory support functions.
Employees and Human Capital
Safety
We believe our responsibility to our employees, neighbors, shareholders and the environment is only fulfilled through our commitment to safety and reliability. Through rigorous training, sharing of expertise across our sites, continuous monitoring and through promoting a culture of excellence in operations, we continuously strive to keep our people, the communities in which we operate in and the environment safe.
Our focus on safety is also evident in our response to the COVID-19 pandemic. We continue to utilize our COVID-19 response team to implement additional social distancing measures across the workplace in addition to the continued enhancement of personal protective equipment and the cleanliness of our facilities. Through the guidance of our COVID-19 response team, we have started to bring back a portion of our workforce to their primary locations on a phased in approach, and we will continue to rely on our team and the evolution of the COVID-19 pandemic as we evaluate the appropriate time and way in which we will phase in the return of the rest of our workforce.
We are subject to the requirements of the Occupational Safety and Health Administration of the U.S. Department of Labor (“OSHA”) and comparable state statutes that regulate the protection of the health and safety of workers. In addition, the OSHA Hazard Communication Standard requires that information be maintained about hazardous materials used or produced in operations and that this information be provided to employees, state and local government authorities and citizens. We believe that our operations are in compliance with OSHA requirements, including general industry standards, record keeping requirements and monitoring of occupational exposure to regulated substances.
Development and Retention
The development, attraction and retention of employees is a critical success factor for our Company. To support the advancement of our employees, we offer rigorous training and development programs and encourage the sharing of expertise across our sites. We actively promote inclusion and diversity in our workforce at each of our locations and provide our employees with opportunities to give back through engagement in our local communities through supportive educational programs, philanthropic and volunteer activities.
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We believe that a combination of competitive compensation and career growth and development opportunities help increase employee morale and reduce voluntary turnover. Our comprehensive benefit packages are competitive in the marketplace and we believe in recognizing and rewarding talent through our various cash and equity compensation programs.
Headcount
As of December 31, 2020, we had approximately 3,729 employees, of which 1,964 are covered by collective bargaining agreements. Our hourly employees are covered by collective bargaining agreements through the United Steel Workers (“USW”), the Independent Oil Workers (“IOW”) and the International Brotherhood of Electrical Workers (“IBEW”). We consider our relations with the represented employees to be satisfactory.
| Location | Number of employees | Employees covered by collective bargaining agreements | Collective bargaining agreements | Expiration date | ||||||||||||||||||||||
| Headquarters | 397 | — | N/A | N/A | ||||||||||||||||||||||
| Delaware City refinery | 518 | 358 | USW | January 2022 | ||||||||||||||||||||||
| Paulsboro refinery | 442 | 260 | IOW | March 2022 | ||||||||||||||||||||||
| Toledo refinery | 483 | 313 | USW | February 2022 | ||||||||||||||||||||||
| Chalmette refinery | 543 | 307 | USW | January 2022 | ||||||||||||||||||||||
| Torrance refinery | 564 | 297 12 | USW IBEW | January 2022 January 2022 | ||||||||||||||||||||||
| Torrance logistics | 106 | 42 4 | USW USW | April 2021 January 2022 | ||||||||||||||||||||||
| Martinez refinery | 585 | 314 24 | USW IBEW | February 2022 February 2022 | ||||||||||||||||||||||
| PBFX | 91 | 23 10 | USW-East Coast Storage Assets USW- East Coast Terminals | January 2022 April 2024 | ||||||||||||||||||||||
| Total employees | 3,729 | 1,964 | ||||||||||||||||||||||||
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Information About Our Executive Officers
The following is a list of our executive officers as of February 18, 2021:
| Name | Age (as of December 31, 2020) | Position | ||||||||||||
| Thomas J. Nimbley | 69 | Chief Executive Officer and Chairman of the Board of Directors | ||||||||||||
| Matthew C. Lucey | 47 | President | ||||||||||||
| Erik Young | 43 | Senior Vice President, Chief Financial Officer | ||||||||||||
| Paul Davis | 58 | President, Western Region | ||||||||||||
| Thomas L. O’Connor | 48 | Senior Vice President, Commercial | ||||||||||||
| Herman Seedorf | 69 | Senior Vice President, Refining | ||||||||||||
| Trecia Canty | 51 | Senior Vice President, General Counsel & Corporate Secretary | ||||||||||||
Thomas J. Nimbley has served as our Chief Executive Officer since June 2010 and on our Board of Directors since October 2014. He has served as the Chairman of our Board since July 2016. He was our Executive Vice President, Chief Operating Officer from March 2010 through June 2010. In his capacity as our Chief Executive Officer, Mr. Nimbley also serves as a director and the Chief Executive Officer of certain of our subsidiaries and our affiliates, including Chairman of the Board of PBF GP. Prior to joining us, Mr. Nimbley served as a Principal for Nimbley Consultants LLC from June 2005 to March 2010, where he provided consulting services and assisted on the acquisition of two refineries. He previously served as Senior Vice President and head of Refining for Phillips Petroleum Company (“Phillips”) and subsequently Senior Vice President and head of Refining for ConocoPhillips (“ConocoPhillips”) domestic refining system (13 locations) following the merger of Phillips and Conoco Inc. Before joining Phillips at the time of its acquisition of Tosco Corporation (“Tosco”) in September 2001, Mr. Nimbley served in various positions with Tosco and its subsidiaries starting in April 1993.
Matthew C. Lucey has served as our President since January 2015 and was our Executive Vice President from April 2014 to December 2014. Mr. Lucey served as our Senior Vice President, Chief Financial Officer from April 2010 to March 2014. Mr. Lucey joined us as our Vice President, Finance in April 2008. Mr. Lucey is also a director of certain of our subsidiaries, including PBF GP. Prior thereto, Mr. Lucey served as a Managing Director of M.E. Zukerman & Co., a New York-based private equity firm specializing in several sectors of the broader energy industry, from 2001 to 2008. Before joining M.E. Zukerman & Co., Mr. Lucey spent six years in the banking industry.
Erik Young has served as our Senior Vice President and Chief Financial Officer since April 2014 after joining us in December 2010 as Director, Strategic Planning where he was responsible for both corporate development and capital markets initiatives. Mr. Young is also a director of certain of our subsidiaries, including PBF GP. Prior to joining the Company, Mr. Young spent eleven years in corporate finance, strategic planning and mergers and acquisitions roles across a variety of industries. He began his career in investment banking before joining J.F. Lehman & Company, a private equity investment firm, in 2001.
Paul Davis has served as our President, PBF Western Region since September 2017. Mr. Davis joined us in April of 2012 and held various executive roles in our commercial operations, including Co-Head of Commercial, prior to serving as Senior Vice President, Western Region Commercial Operations from September 2015 to September 2017. Previously, Mr. Davis was responsible for managing the U.S. clean products commercial operations for Hess Energy Trading Company from 2006 to 2012. Prior to that, Mr. Davis was responsible for Premcor’s U.S. Midwest clean products disposition group. Mr. Davis has over 29 years of experience in commercial operations in crude oil and refined products, including 16 years with the ExxonMobil Corporation in various operational and commercial positions, including sourcing refinery feedstocks and crude oil and the disposition of refined petroleum products, as well as optimization roles within refineries.
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Thomas L. O’Connor has served as our Senior Vice President, Commercial since September 2015. Mr. O’Connor joined us as Senior Vice President in September 2014 with responsibility for business development and growing the business of PBFX, and from January to September 2015, served as our Co-Head of commercial activities. Prior to joining us, Mr. O’Connor worked at Morgan Stanley since 2000 in various positions, most recently as a Managing Director and Global Head of Crude Oil Trading and Global Co-Head of Oil Flow Trading. Prior to joining Morgan Stanley, Mr. O’Connor worked for Tosco from 1995 to 2000 in the Atlantic Basin Fuel Oil and Feedstocks group.
Herman Seedorf has served as our Senior Vice President of Refining since May 2014. Mr. Seedorf originally joined us in February of 2011 as the Delaware City Refinery Plant Manager and served as Senior Vice President, Eastern Region Refining, from September 2013 to May 2014. Prior to 2011, Mr. Seedorf served as the refinery manager of the Wood River Refinery in Roxana, Illinois, and also as an officer of the joint venture between ConocoPhillips and Cenovus Energy Inc. Mr. Seedorf’s oversight responsibilities included the development and execution of the multi-billion dollar upgrade project which enabled the expanded processing of Canadian crude oils. He also served as the refinery manager of the Bayway Refinery in Linden, New Jersey for four years during the time period that it was an asset of Tosco. Mr. Seedorf began his career in the petroleum industry with Exxon Corporation in 1980.
Trecia Canty has served as our Senior Vice President, General Counsel and Corporate Secretary since September 2015. In her role, Ms. Canty is responsible for the legal department and outside counsel, which provide a broad range of support for the Company’s business activities, including corporate governance, compliance, litigations and mergers and acquisitions. Previously, Ms. Canty was named Vice President, Senior Deputy General Counsel and Assistant Secretary in October 2014 and led our commercial and finance legal operations since joining us in November 2012. Ms. Canty is also a director of certain of our subsidiaries. Prior to joining us, Ms. Canty served as Associate General Counsel, Corporate and Assistant Secretary of Southwestern Energy Company, where her responsibilities included finance and mergers and acquisitions, securities and corporate compliance and corporate governance. She also provided legal support to the midstream marketing and logistics businesses. Prior to joining Southwestern Energy Company in 2004, she was an associate with Cleary, Gottlieb, Steen & Hamilton.
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Environmental, Health and Safety Matters
Our refineries, pipelines and related operations are subject to extensive and frequently changing federal, state and local laws and regulations, including, but not limited to, those relating to the discharge of materials into the environment or that otherwise relate to the protection of the environment, waste management and the characteristics and the compositions of fuels. Compliance with existing and anticipated laws and regulations can increase the overall cost of operating the refineries, including remediation, operating costs and capital costs to construct, maintain and upgrade equipment and facilities. Permits are also required under these laws for the operation of our refineries, pipelines and related operations and these permits are subject to revocation, modification and renewal. Compliance with applicable environmental laws, regulations and permits will continue to have an impact on our operations, results of operations and capital requirements. We believe that our current operations are in substantial compliance with existing environmental laws, regulations and permits.
We incorporate by reference into this Item the environmental disclosures contained in the following sections of this report:
•Item 1A. “Risk Factors”
◦ We may incur significant liability under, or costs and capital expenditures to comply with, environmental and health and safety regulations, which are complex and change frequently;
◦ Environmental clean-up and remediation costs of our sites and environmental litigation could decrease our net cash flow, reduce our results of operations and impair our financial condition;
◦ We may have capital needs for which our internally generated cash flows and other sources of liquidity may not be adequate;
◦ We are subject to strict laws and regulations regarding employee and process safety, and failure to comply with these laws and regulations could have a material adverse effect on our results of operations, financial condition and profitability;
◦ Changes in laws or standards affecting the transportation of North American crude oil by rail could significantly impact our operations, and as a result cause our costs to increase.
◦ We could incur substantial costs or disruptions in our business if we cannot obtain or maintain necessary permits and authorizations or otherwise comply with health, safety, environmental and other laws and regulations.
•Item 3. “Legal Proceedings”,
•Item 8. “Financial Statements and Supplementary Data”
◦ Note 9 - Accrued Expenses,
◦ Note 12 - Other Long-Term Liabilities and
◦ Note 14 - Commitments and Contingencies
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Applicable Federal and State Regulatory Requirements
As is the case with all companies engaged in industries similar to ours, we face potential exposure to future claims and lawsuits involving environmental and safety matters. These matters include soil and water contamination, air pollution, personal injury and property damage allegedly caused by substances which we manufactured, handled, used, released or disposed of.
Current and future environmental regulations are expected to require additional expenditures, including expenditures for investigation and remediation, which may be significant, at our refineries and at our other facilities. To the extent that future expenditures for these purposes are material and can be reasonably determined, these costs are disclosed and accrued.
Our operations are also subject to various laws and regulations relating to occupational health and safety. We maintain safety training and maintenance programs as part of our ongoing efforts to ensure compliance with applicable laws and regulations. Compliance with applicable health and safety laws and regulations has required and continues to require substantial expenditures.
We cannot predict what additional health, safety and environmental legislation or regulations will be enacted or become effective in the future or how existing or future laws or regulations will be administered or interpreted with respect to our operations. Compliance with more stringent laws or regulations or adverse changes in the interpretation of existing requirements or discovery of new information such as unknown contamination could have an adverse effect on the financial position and the results of our operations and could require substantial expenditures for the installation and operation of systems and equipment that we do not currently possess.
We incorporate by reference into this Item the federal and state regulatory requirements disclosures contained in the following sections of this report:
•Item 8. “Financial Statements and Supplementary Data”
◦ Note 14 - Commitments and Contingencies
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ITEM 1A. RISK FACTORS
Summary of Risk Factors
Investing in our common stock involves a high degree of risk. These risks are discussed more fully below and include, but are not limited to, the following, any of which could have a material adverse effect on our financial condition, results of operations and cash flows:
Risks Related to the COVID-19 Pandemic
•The COVID-19 pandemic and its effects on our liquidity, business, financial condition and results of operations.
Risks Relating to Our Business and Industry
•The price volatility of crude oil, other feedstocks, blendstocks, refined products and fuel and utility services.
•Volatility in commodity prices and refined product demand.
•Crude oil differentials and related factors, which fluctuate substantially.
•Renewable fuels mandates and the cost of RINs.
•Existence of capital needs for which our internally generated cash flows and other sources of liquidity may not be adequate.
•Volatility and uncertainty in the credit and capital markets.
•Ability to obtain financing on acceptable terms or at all.
•Significant interruptions or casualty losses at any of our refineries and related assets or logistics terminals, pipelines or other facilities.
•