PBF Energy (PBF) Q2 FY26 earnings call: guidance and Q&A

What is the timeframe for product market normalization, and have mid-cycle margins structurally moved up due to global supply impacts and damaged refineries?

Management confirmed that the floor for mid-cycle margins has risen due to acute and long-lasting impacts of global conflicts on refining capacity. Crude normalization is expected in weeks to months, while product normalization, particularly for inventories, will take months to quarters, extending well into 2027.

“I see the floor has been risen unquestionably and the consequence of all the damage, I think, it could be a long time.”

asked by Manav Gupta · answered by Matthew Lucey

How much cash does PBF aim to build before considering shareholder returns like buybacks, given the strong cash generation?

Matt Lucey stated the company is focused on getting its balance sheet to a potentially unprecedented strong position. He refrained from speculating on specific shareholder return actions until the cash is earned, but acknowledged the very constructive prospective outlook.

“I believe we will be able to get our balance sheet potentially to a place that it's never been, and that's where we're focused on at the moment.”

asked by Manav Gupta · answered by Matthew Lucey

How is the commercial organization navigating market disruption, and what are the physical/financial market impacts, including freight rates and dislocations?

The commercial team is navigating extraordinary markets with high volatility. Concerns exist regarding crude procurement, but operations have not been materially impacted. Backwardation in product and crude markets indicates a 'hand-to-mouth' situation, with low inventories across PADDS. The primary goal is to keep refineries full and empty product daily.

“The market structure is telling you what everybody should be doing. The backwardations that we see on products, inclusive of the backwardation we see on crude, everything is hand to mouth.”

asked by Joseph Laetsch · answered by Paul Davis

Are turnaround intervals lengthening, and how is PBF planning turnarounds given evolving technology and monitoring?

Mike Bukowski confirmed that interval optimization is a key part of their RBI program, utilizing techniques like risk-based inspection. They optimize turnaround durations against factors like contractor availability and size, acknowledging that the industry is approaching limits in this area.

“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 manpower.”

asked by Joseph Laetsch · answered by Michael A. Bukowski

Given strong cash generation and potential net debt elimination, why not consider hedging some of the crack spread?

Matt Lucey stated that PBF evaluates hedging daily, but excessive hedging can limit upside. While they use forward markets for downside protection, their primary goal is to deliver the crack spread to investors. An executive added that forward curves show margins well above mid-cycle, especially for distillate.

“We look at hedging every day, and it's a very reasonable question. And I will say there are times where if you get carried away, you can cut off the tops.”

asked by Douglas Leggate · answered by Matthew Lucey

What are the West Coast regional dynamics and product pricing trends, and is there an update on Martinez agency investigations?

No new updates on Martinez agency investigations. For the West Coast, significant gasoline and jet fuel imports are required, costing $10-$15 per barrel to attract barrels. Jones Act waivers have temporarily eased pressure. PBF is increasing domestic California crude runs at Torrance by 25,000-30,000 bbl/day and seeing M70 pipeline volumes at 90,000 bbl/day, up from 60,000 bbl/day.

“We've historically talked about $12 to $13, $10 to $15 cost to import products into the state. It has to elevate to that level to attract those barrels.”

asked by Alexa Brenner · answered by Matthew Lucey

How is PBF managing RINs purchasing, and what are the expectations for regulatory relief or structural changes in the market?

SBR produces D4 RINs, and PBF actively manages its position. Recent RINs sell-off is attributed to perceptions of small refinery exemptions and a crowded long speculative community. Matt Lucey highlighted that the RFS program still imposes a $14/barrel cost, largely borne by consumers, and advocates for RFS reform to lower gasoline prices without impacting agriculture.

“The RFS program is still imposing $14 a barrel of cost and much of that is being borne by the consumer.”

asked by Alexa Brenner · answered by Matthew Lucey