PBF Energy Inc. (PBF) Earnings Call Transcript & Summary

Good day, everyone. And welcome to the PBF Energy Inc., Annual Meeting of Stockholders. At this time, I'd like to turn the conference call over to Thomas Nimbley, Chairman of the Board, Chief Executive Officer. Please go ahead.

Good morning, ladies and gentlemen. I'm Tom Nimbley, Chairman and CEO of PBF Energy. And it's my pleasure to welcome all of you to the PBF Energy 2020 Annual Stockholders Meeting. Due to the public health risks related to the coronavirus pandemic, we have elected to host today's meeting through this virtual online platform, which allows us to open access and participation in the meeting to all stockholders and employees in a safe and responsible manner. We have stockholders attending via the web portal and the number that we have provided. The rules of conduct for this meeting have been provided on the web portal. As is our custom, we will conduct the business portion of our meeting first and then answer questions germane to the business of the meeting. We will not answer questions that do not relate to the business of the meeting. We also may not be able to answer every question, but we will do our best to provide a response to as many as possible. In keeping with the digital approach to this year's meeting, it is now shortly after 10:00 a.m. Eastern Standard Time on June 4, and this meeting is officially called to order. Please remember that you may vote your shares online at any time during this meeting prior to the closing of the polls. At this time, please let me take the opportunity to introduce you to the members of PBF Energy's Board of Directors, all of them are participating today. In addition to myself, the members of our Board present today are Spencer Abraham, Chief Executive Officer and Chairman of The Abraham Group and former Secretary of Energy under President George W. Bush, and he has served on our Board since 2012; Wayne Budd, Senior Counsel of Goodwin Procter LLP and Senior -- former Senior Executive Vice President and General Counsel of John Hancock Financial Services, Inc., he has served on our Board since 2014; Karen Davis, former Executive Vice President and Chief Financial Officer of Western Refining, Inc., has served on our Board since January 2020; Gene Edwards, former Executive Vice President and Chief Development Officer of Valero Energy Corporation, has served on our Board since 2014; William Hantke, former Executive Vice President and Chief Financial Officer of Premcor, Inc., has served on our Board since 2016; Edward Kosnik, former President and Chief Executive Officer of Berwind Corporation, has served on our Board since 2013; Robert Lavinia, former Chief Executive Officer of Petroplus Holdings AG, has served on our Board since 2016; Kimberly Lubel, former Chairman, Chief Executive Officer and President of CST Brands, Inc., has served on our Board since 2017; and finally, George Ogden, former Senior Vice President of Tosco Corporation, who has served on our Board since 2018. I'd like to thank all Board members for their dedication and their willingness to serve. Next, I'd like to introduce you to the members of the PBF executive leadership team. I am joined today by Trecia Canty, our Senior Vice President, General Counsel and Corporate Secretary, who will act as secretary of the meeting and handle any procedural issues that may arise. In addition, the remaining members of the executive leadership team are also present today, and they are Matt Lucey, President; Erik Young, Chief Financial Officer; Paul Davis, President, Western Region; Herman Seedorf, Senior Vice President, Refining; Tom O'Connor, Senior Vice President, Commercial. We are also joined today by Deloitte & Touche, our independent auditors. They will be available during the question-and-answer session to respond to appropriate questions. I now call the formal part of the annual meeting to order. We will present the 3 proposals submitted by management for approval. After the formal part of the meeting is complete, we will provide time for general questions. Only validated stockholders may ask questions via the designated field on the web portal. Out of consideration for others, please limit yourself to one question. Please note that this meeting is being recorded; however, no one attending via the webcast or telephone is permitted to use any audio recording device. Trecia, can you report whether a quorum is present for the conduct of business and address the other procedural requirements for the meeting?

Thank you, Mr. Chairman. The company has appointed American Election Services LLC to act as Inspector of Election. Thomas Ferrari from American Election Services is with us today and has taken the oath of inspector of election earlier today. Our Inspector of Elections reports that stockholders entitled to cast more than 71% of the votes eligible to be cast at this meeting are present or represented by proxy. Therefore, a quorum is present for purposes of transacting business and the meeting [indiscernible]. The Board of Directors fixed April 6, 2020, as the record date for determining stockholders entitled to vote at this meeting. An affidavit has been delivered attesting to the fact that either one, a notice of Internet availability of the notice of meeting, the proxy statement and the 2019 Annual Report to Stockholders or the documents themselves were mailed on or about April 17, 2020, to all stockholders as of the record date and will be incorporated into the minutes of this meeting.

Thank you, Trecia. The meeting will now consider the 3 business items as described in our proxy statement. We will present each of the business items one at a time. Item 1 is a proposal to elect 10 Directors to serve for a term of 1 year or until their successors are duly elected and qualified. As indicated in the proxy statement, the Board of Directors recommends that the stockholders elect the Director nominees to hold office until the 2021 Annual Meeting of Stockholders or until their successors are duly elected and qualified. Item 2 is a proposal to ratify the appointment of Deloitte & Touche LLP as the company's independent registered public accounting firm for 2020. The Audit Committee reappointed Deloitte to serve as PBF Energy's independent registered public accounting firm for 2020 and seeks ratification of that appointment by the stockholders. As I previously mentioned, representatives of Deloitte are participating today and available to answer questions you may have for them during the Q&A session. As indicated in the proxy statement, the Board of Directors recommends that the stockholders vote in favor of this proposal. Item 3 is an advisory proposal to approve the 2019 compensation of our named executive officers as disclosed in the proxy statement. This vote is often called a Say-on-Pay vote. Last year, the stockholders voted that their preference was to hold such a vote and -- on an annual basis, and the Board elected to do so. The Say-on-Pay vote is a nonbinding vote, although the Compensation Committee and the Board will certainly take the results of the vote into account when making future compensation decisions. As indicated in the proxy statement, the Board of Directors recommends that the stockholders vote in favor of this proposal. Now if you have not already voted online, please do so at this time, and I will close the polls at the end of the Q&A session. We will now take questions from the stockholders regarding the business of the meeting. Trecia, do we have any questions submitted online?

Yes, Mr. Chairman, we have one question that has been submitted online. I'm going to read the question verbatim. And just as a reminder to our listeners, if we're not able to address or answer your question in the time we have today, we will post answers to all of your unanswered questions on our website within 72 hours. And the first question [indiscernible] is Mr. Chairman, department and union pension funds have a collective ownership position of 241,300 shares of company common stock. As long-term shareholders, we appreciate the company's prioritizing of employee safety and health during the COVID-19 pandemic. A strong liquidity position during these turbulent times is critically important. Could you repeat any actions taken to solidify the company's financial liquidity? Thank you.

Thank you very much. And thank you for your investment and your faith in the company. As you know, there has been significant impact to the economy because of the pandemic. And as a result, we, in fact, have taken as a company significant steps in anticipation of the demand destruction that we were going to be seeing. We reported previously when we put our first quarter results out, that, in fact, we had executed a deal with Air Products to sell some of our assets, 5 hydrogen plants in our refineries for cash proceeds of $530 million. We have reduced capital expenditures for 2020 by approximately 50% or more than a $350 million reduction. We've also cut operating costs and other cash conservation measures resulting in decreases in expenditures of $250 million. And finally, and importantly, we were able to improve liquidity with a successful $1 billion notes offering in May.

Thank you, Mr. Chairman. We have one other question. It comes from Mr. John Norwood of West Des Moines, Idaho. Dear PBS, my question has to do with the rise of electric vehicles. Is it beginning to accelerate? How is PBF positioned to compete? And what will likely be a more competitive marketplace to service and provide fuel for internal combustion engines?

PBF, in fact, the entire oil industry, refining industry is taking measures to be more competitive in -- or equally competitive in an environment where there's a penetration, deeper penetration of electric vehicles. The best way for us to do that is to improve the efficiency of the internal combustion engine. And there are efforts underway by moving to higher octane fuels to support -- being burned in high compression engines that will improve the mileage and reduce the emissions of the internal combustion engine, and we believe that, that will allow us to continue to be the main supplier of fuels for transportation in the automotive sector.

Mr. Norwood had one other question, and seeing as we have no other questions, a follow-up with his backup question. What are your thoughts on renewable diesel? And whether there is a role for that at PBF or in partnership with other companies?

Very good. Yes, and renewable diesel is certainly going to be a growth opportunity for people who can invest in it. You may recall or at least I can tell you that when we consummated the deal with Shell on Martinez, we had previous to closing that talked to Shell about doing a joint venture opportunity in a renewable diesel facility inside the fence line of the Martinez refinery. Obviously, at this point, we have not developed that further since we are concentrating on dealing with the outfall of the pandemic, but we certainly see opportunities for PBF to take part in renewable diesel on a go-forward basis.

Thank you, Mr. Chairman. That was our final question. And so that will conclude our Q&A.

We appreciate all the stockholders' participation today, and now we'll get back to the business of the meeting. I now declare the polls have closed. The inspection of elections has filed certifications of our preliminary results of the voting. Trecia, would you please read those results.

Mr. Chairman, preliminary votes based on the voting of shares represented by valid proxies on file and tabulated at the meeting this morning show that each of the 10 nominees for election have been elected as directors to serve until next year's annual meeting or until their successors are duly elected and qualified. Each director nominee received at least approximately 90% of the votes present at today's meeting. The appointment of Deloitte & Touche LLP as the independent registered public accounting firm for PBF Energy for 2020 has been ratified, having received a favorable vote of more than 98% of the votes present at today's meeting. The advisory approval of the 2019 compensation of our named executive officers was passed with more than 93% of the votes present at today's meeting cast for the proposal. The Compensation Committee and the Board will take the outcome of this vote into account when considering future executive compensation arrangements. Mr. Chairman, that concludes the report of preliminary voting. Details of the final results will be available for all stockholders in a Form 8-K filing with the SEC that we will make within 4 business days.

Thank you, Trecia. That completes the business scheduled for today. There being no further business to come before this meeting, the 2020 Annual Meeting of Stockholders of PBF Energy is now adjourned. I want to thank you all for attending and for your participation. Our meeting is now concluded.

Ladies and gentlemen, that does conclude today's presentation. We do thank you for joining, you may now disconnect your lines.