PBF Energy’s bonds traded up today after management said it found an alternative and less expensive option to address new air pollution requirements impacting the oil refining’s Martinez plant in Northern California.
On the 2Q21 earnings call, the company said that it does not need to install the wet gas scrubbers to adhere to the new environmental metrics set forth by the Bay Area Air Quality Management Board last week. Instead, to reach the threshold, the company is installing new reactors to the Martinez refinery, which are being paid for by Shell as a part of PBF’s February 2020 acquisition of the plant.
The company has five years to implement the changes and adhere to the new requirements.
The USD 725m 7.25% senior unsecured notes due 2025 last traded today at 60.25 for a yield of 23.4%, up from trades at 57.591 to yield 24.911% yesterday (28 July), but down from trades at 65.75 to yield 20.4% on 21 July before the amendment was announced, according to MarketAxess.
Meanwhile, the company’s USD 1.25bn 9.25% senior secured notes due 2025 last traded at 93.25 to yield 11.488%, up from 91.25 to yield 12.189% yesterday and down from trades at 96 to yield 10.542% on 21 July, according to MarketAxess.
PBF’s stock last traded at USD 9.72 per share for a USD 1.168bn market cap, up 2.64% from yesterday’s close.
On the earnings front, PBF reported positive USD 6.7m in adjusted EBITDA, compared to negative USD 298.4m in 2Q20. Meanwhile, revenue totaled USD 6.898bn for the quarter, compared to USD 2.516bn the prior year.
A recent Debtwire analyst snapshot projects PBF would burn USD 800m over the next 12 months, and that the company should have ample liquidity to refinance, based on the costs projected by an Applied Development Economics report.
While the company is sure to endure higher costs, the projections take into account the costly installation of the wet gas scrubber and other technologies, which the company says is no longer necessary.