PBF Energy, Inc. Class A Stock

Good day, everyone, and welcome to the PBF Energy Third Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this conference is being recorded.

It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

Thank you, Jeanie. Good morning, and welcome to today's call. With me today are Matt Lucey, our President and CEO; Mike Bukowski, our Senior Vice President and Head of Refining; Joe Marino, our CFO; and several other members of our management team. Copies of today's earnings release and our 10-Q filing, including supplemental information, are available on our website.

Before getting started, I'd like to direct your attention to the safe harbor statement contained in today's press release. Statements expressing the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions under federal securities laws. Consistent with our prior periods, we'll discuss our results excluding special items, which are described in today's press release. Also included in the press release is forward-looking guidance information. For any questions on these items or other follow-up questions, please contact Investor Relations.

I'll now turn the call over to Matt Lucey.

Thanks, Colin. Good morning, everyone, and thanks for joining our call. Third quarter earnings speak for themselves. We intend to convert those earnings into lasting improvements in our business. The company reduced net debt by more than $1.2 billion during the quarter and by more than $2 billion this year. As Joe will detail, our balance sheet transformation has put the company on strongest financial footing since our formation.

Over the last 7 years, markets have become increasingly volatile with shorter cycles as evidenced by the 3 once-in-a-generation events over that period. Prudence dictates a deeper balance sheet to navigate this new reality. The company's focus is to execute, execute, execute. Execute our base business and do so efficiently and importantly, through our business improvement initiatives to improve the competitive positioning of each asset we own. extract incremental profitability through all cycles, up or down. We are investing in our assets to improve utilization, reliability and yields, which will translate into stronger through-the-cycle cash flow and make our system more resilient. By executing well on these priorities, we will maximize the resilience of our system, create greater long-term shareholder value and increase our ability to return capital to shareholders.

Turning to the market. The biggest disruption to the oil market have materialized in the availability of refined products. The disruptions have coincided with what was an already structurally tight refining market. On the crude side, the market has adapted reasonably given the circumstances. Flows through the Strait of Hormuz have recovered to roughly 3/4 of pre-war levels with some recent weekly reports higher, but product flows remain well below pre-war levels.

Recently, the dramatic increase in freight rates has really put pressure on the Asian refiners. Freight, coupled with rising natural gas costs overseas, is raising the cost to run international capacity. Headwinds that U.S. refiners are less exposed to due to our shorter transit times and abundant domestic supply of natural gas. Freight dynamics paired with growing production of heavy crudes has widened the light heavy differentials. PBF's crude slate flexibility and close proximity to production is a real tailwind going into the fourth quarter for our cost of crude. The freight realities raised the bar for delivery of imports needed in our product short coastal markets. PBF sells the majority of our products domestically, thereby avoiding costly transits.

The story on products remains a supply story. More than 5 million barrels a day of global capacity is offline, a portion of which with physical damage. With global inventories roughly 500 million barrels below pre-war levels, there is essentially 0 cushion in the system. Policy responses can be helpful on the margin. However, at the core, the world is simply short refined products. Benchmark cracks reflected the tightness. The New York Harbor 2-1-1 averaged nearly $65 a barrel in the third quarter compared with about $26 a year ago. Nowhere are current product dynamics more clear than our coasts, which are structurally short refining capacity and dependent on imports. California alone roughly -- imports roughly 250,000 barrels a day of gasoline, about 30% of its demand. The situation reinforces the point we have made for some time. U.S. refining is critical infrastructure.

Looking ahead, demand has proven resilient, holding up well domestically. Peace may and hopefully will normalize trade flows, but it will not restore damaged capacity, rebuild depleted inventories or reverse years of capacity rationalization. Crude normalization will happen much quicker than stabilization in the product markets. Taken together, we believe that refining has entered a new higher cycle characterized by higher volatility with a bias towards wider crude differentials.

Given our high complex coastal refining system, PBF is well positioned for this market environment. None of this changes what we can control. To be successful and enhance value for our investors, we must operate safely, reliably and responsibly, and we must execute on our process improvement initiatives to maximize market capture.

With that, I'll turn the call over to Mike.

Thank you, Matt. Good morning, everyone. In the third quarter, our throughput averaged approximately 924,000 barrels a day across the system, which is in line with our overall guidance for the quarter. On the West Coast, we began the Martinez hydrocracker turnaround in September and completed it in October as planned. Also in September, we closed the acquisition of the 2 hydrogen plants servicing our Torrance refinery from Air Products.

Owning and operating those assets allows us to more closely integrate their operations, maintenance and turnarounds with the refinery, which we expect will improve the overall reliability of Torrance. On the East Coast, the Paulsboro crude unit turnaround also commenced in September and was completed in October as planned. Both the Martinez and Paulsboro turnarounds were within budget and industry benchmark targets. With Paulsboro back online, we are well positioned to supply our markets as temperatures drop in the Northeast.

At Chalmette, the pretreater and reformer that were taken offline in May are back in service. Chalmette had no impact from Hurricane Isaias. With our turnarounds complete, we have a clear operational runway for the remainder of 2026. For the fourth quarter, we expect total throughput of 925,000 to 985,000 barrels per day. We continue to make progress on our refining business improvement program. RBI generated in excess of $230 million of run rate cost improvements that were included in our 2026 plans, and we expect that to grow to more than $350 million by year-end 2026.

Some recent accomplishments. Our turnaround performance continues to improve as demonstrated by the execution of the Martinez and Paulsboro turnarounds this quarter. Our RBI-driven 2026 capital reductions are tracking approximately $88 million versus $70 million versus our $70 million commitment, including approximately $54 million from turnarounds.

Natural gas intensity across our system is down approximately 11% year-to-date, and for instance, Toledo has improved its overall energy intensity by 10% to 15%. Our strategic sourcing organization has identified approximately $55 million per year of savings across 3 waves of contract renewals. As Matt mentioned, investing in our assets is a key pillar of our strategy to enhance the long-term value of our system. We've identified a number of relatively small to mid-scale projects that will improve utilization, yields and reduce costs, and we've already begun executing this plan. In the third quarter, we completed the first phase of a jet fuel project at Chalmette. By upgrading high sulfur diesel, we are now producing approximately 10,000 barrels per day of jet fuel. And in 2027, we plan to increase that capability to 20,000 barrels per day.

As a further example, we've identified a similar opportunity at Paulsboro included in our 2027 plans, where upgrading lower-value intermediates will increase our gasoline yield and blending capability by about 10,000 barrels per day. To be clear, these are yield improvement projects, not capacity expansions. We are not pursuing high-cost mega projects, and we have no intention of investing in large capacity expansions. RBI is central to improving PBF's future performance, but it will not distract us from our obligation to operate in a safe, reliable and environmentally responsible way every day.

I'll now turn the call over to Joe Marino for our financial overview.

Thanks, Mike. For the third quarter, excluding special items, we reported adjusted net income of $12.78 per share and adjusted EBITDA of approximately $2.3 billion. Our discussion of third quarter results excludes the net effect of special items, which decreased net income by a net after-tax charge of $29 million or $0.24 per share. These primarily consisted of approximately $11 million of costs associated with the RBI initiative and $28 million pretax loss on extinguishment of debt related to the redemption of our 7.875% Senior Notes due 2030 and the write-off of a portion of deferred financing costs in connection with refinancing activities.

PBF results for the quarter are primarily a reflection of the strong product markets driven by tight supply and relatively firm demand. With our full system available this quarter, we were able to improve our capture in an elevated market environment. On the Martinez insurance claim, total recoveries to date are $1.25 billion, net of our deductibles and retention. As expected, we did not receive further payments in the third quarter, and we are working with our insurance group to finalize the claim process before year-end with a final payment expected in a similar range to the recent precedents.

Also included in our results is $62 million of equity income from our investment in SBR or approximately $72 million of EBITDA as the renewable business continues to benefit from strong margins and higher credit prices. SBR produced an average of approximately 19,200 barrels per day of renewable diesel in the third quarter at the upper end of our guidance range, and we expect fourth quarter production of 18,000 to 20,000 barrels per day.

PBF cash from operations for the quarter was approximately $1.9 billion, which includes a modest working capital tailwind of $56 million, primarily driven by the timing and delivery of hydrocarbon purchases. Higher commodity prices are generally a tailwind to working capital, but as a significant portion of the price increases occurred late in the quarter, we are seeing benefits flow through in early Q4. We also expect the cash tax payment to flow through working capital in the fourth quarter. However, the ultimate impact on Q4 working capital will depend on where prices go from here.

Cash invested in consolidated CapEx for the quarter was $177 million, which includes refining, corporate and logistics. This amount excludes approximately $8 million related to the Martinez rebuild and $46.5 million associated with the Air Products asset purchase. Our guidance for 2026 capital expenditures remains $825 million to $875 million, excluding capital related to the Martinez rebuild. Included in that guidance is funding for advanced purchases of materials for the turnarounds we scheduled for 2027.

We ended the quarter with approximately $2.5 billion of cash, approximately $2.1 billion of total debt and $426 million of net cash, reducing net debt by more than $1.2 billion during the quarter. In September, we issued $550 million of 0% exchangeable notes due 2032 and used the proceeds and cash on hand to fully redeem the $500 million of 7.875% Senior Notes due 2030. We also closed the acquisition of the Torrance hydrogen plant, which was financed with the seller's promissory note of approximately $340 million that is included in our total debt.

Subsequent to quarter end, we fully redeemed the outstanding $800 million 9.875% Senior Notes due 2030 using cash on hand. Following this redemption, our gross debt is approximately $1.4 billion, inclusive of the Air Products promissory note. As a result of these actions, interest expense is coming down. However, including refinancing costs, we expect 2026 interest expense to be within our guidance. Importantly, while we are still in the midst of our 2027 budgeting process, we expect this year's refinancing and debt paydown to reduce interest expense by at least $130 million in 2027.

We project using a substantial majority of our NOLs in 2026, and you can continue to use an effective tax rate of approximately 26% for modeling purposes. As Matt mentioned, our capital allocation framework is focused on strengthening the balance sheet, investing in our assets and delivering long-term value and returns to shareholders. While we do envision allocating capital to strategic and margin-enhancing spending at the refinery, our intention is to be prudent stewards of capital and allocate tactically for long-term strategic benefit. Today's 18% increase in our quarterly dividend reflects our confidence in that approach.

Operator, we completed our opening remarks, and we'd be pleased to take any questions.

[Operator Instructions] Your first question comes from the line of Manav Gupta with UBS.

Congrats team and great job. Dividend raised, debt lowered. My first question is, you are one of the biggest users of beneficiaries of quality discounts. We are seeing quality discounts widen across the world. So if you could talk about what is driving that and how PBF benefits from it. And again, on the West Coast, it's a little tricky because ANS is trading at a slight premium to Brent. So I'm just trying to understand how you're managing your crude purchases on the West Coast. So if you can talk about all those things.

Sure. Thanks, Manav. Simply put, crude costs across our system in California and PADD1 and in the Gulf Coast look like real tailwinds for our system. Our strength has always been on the back of our complexity. And as crude differentials widen out, we're certainly the beneficiary of that situation. California is a bit unique because the California grades, in particular, impact our West Coast system. We're maximizing how much California crude we can run. Indeed, the dynamics in California are a bit unique, but we have a proprietary pipeline that has even a little space left. So we try to gobble up as much California crude as we can. But the other aspect is the Gulf Coast and the East Coast will directly benefit from a widening light heavy differential. Follow-up, Tom?

The Latin American heavies are really driving the discounts that everybody is seeing and talking about. We're seeing freight drive the FOB valuations in South America much lower. The Canadian markets are following that, and our system is taking advantage of that everywhere we can. We run a substantial amount of heavies, so very beneficial.

Perfect. My second follow-up is a little more tricky. I'm just trying to understand what's the right level of cash for a company like PBF to hold on the balance sheet look. Too low of a cash is a problem, but too much of the cash on the balance sheet kind of makes you a very interesting acquisition target because you have a unique footprint, the world realizes the benefits of North American refining. And if you start getting to a point where 40%, 50% of your market cap start sitting as cash on the balance sheet, then you become a very interesting acquisition target. So I'm just trying to understand what's the right amount of cash to be holding on the balance sheet?

It is a bit tricky because the volatility has been so severe in the marketplace. As I commented, three once in a generation or once in a career events in 7 years, it gives you pause. And obviously, the up cycle, we've had down cycles on the back of the pandemic. But in refining, there's no replacement for a strong balance sheet. So we intend to maintain that. The sort of percentages you're quoting there, we're a bit a ways from that. So that's not an issue for today. But if you take a step back and get the balance sheet as strong as it possibly can be, then we just bring good, prudent, disciplined management of the capital that we have. We've increased our dividend.

We did that very methodically. We always look at our dividend this time of year. And we stated that we wanted to be competitive and maybe most importantly, sustainable through all markets. And obviously, we've completely reconfigured the debt side of the balance sheet. And so we have tremendous confidence in our dividend and the increase there from as sustainable through all markets. So we addressed the net debt. We increased the competitive dividend this quarter.

Share buybacks are always a critical component of shareholder return programs. But we also think we can benefit significantly from low-hanging fruit. If you think back to PBF history for standing on our feet when we first became public and then growing. We're really at a moment now where as a company across our system, my guess of our inventory of low-hanging fruit is simply larger than others. And when I say low-hanging fruit, I'm really implying no one in these halls are contemplating, as Mike said, mega projects or massive expansions.

But the example of what we did at Chalmette, where we're converting high-sulfur diesel into jet fuel, and we're doing that for under $20 million of capital. That delta of high-sulfur diesel in the Gulf to jet is about $0.20 a gallon. So if you want to say $8, $9 a barrel and 20,000 barrels a day, that really makes us a more resilient company, and that capital has such a high return, that's the best -- that project has such a high return. That's the best allocation of that capital. But we have other projects like that through our system. And so we're going to be evaluating those very prudently, very cautiously, very disciplined. But we think we have a tremendous opportunity to deepen the keel. And so that's where our focus is.

Congrats on a great quarter and looks like the first one will be very, very strong also.

Your next question comes from the line of Doug Leggate with Wolfe Research.

Let me echo, Matt, what a turnaround in the last year after all you've been through. But I do -- if I don't mind, I'm going to follow up on Manav's question and ask the question about cash a little differently. So you've done this 0 cost coupon convertible. You're basically looking, it seems to keep some level of debt on the balance sheet. And you are still quite a volatile business just by the nature of the cost base and everything else. So my question is, why keep any permanent financing? You've taken the net debt to 0. Why have any permanent financing on the balance sheet? Because all it does is exacerbate the volatility of your business. That's my first question.

My second question is, I just wonder, coming out the other side of Martinez, can you give us a refresh on what you think the sustaining capital and the operating cost base of the businesses because on our numbers, your capacity to generate extraordinary free cash flow in this environment continues. But clearly, the market is not giving you credit for that. So we're just trying to figure out where the gap is.

All right. So in regards to why have any debt at all? We have a view that it makes -- again, it's prudent. It makes a lot of sense to maintain access to the capital markets. So we have 2 pieces of paper now. We have a $500 million bond and a $550 million convertible bond. But what we've done over the last year is if you look at our historical interest expense, it's been roughly $175 million a year. The interest expense on those 2 pieces of paper is less than $40 million, $37.5 million a year. So we've dramatically reduced the cost of the fixed charge of carrying the debt. And I think it's absolutely appropriate for our company to maintain access to the capital markets. So that is what really drove the decision to maintain the instruments that we have in place. And I think it just makes the company stronger going forward and maximizes optionality going forward.

In regards to your second question, Martinez, the issue with Martinez is completely behind us. In fact, Martinez just completed its turnaround on its hydrocracker on time. And so in terms of having the full force and effect of our business, we have it. We think we have real tailwinds. The required spending, there's no material change going forward. '27 will be a heavier turnaround schedule than most years. It's never ratable. It's never perfectly ratable, and we were able to move some turnarounds from this year because of the market we've been in. So -- but there's nothing changed. I would say 2027 is probably a higher turnaround year. And actually, I know '28 is going to be a lighter turnaround year. But was there anything else specific you want in regards to that?

Well, I think really what I'm driving at, Matt, is obviously, you've had your business optimization, the benefits coming through there, but you -- we haven't really seen a clean year for capital with Martinez back up and running. So what I was really trying to get to was what is the call on your cash flow to maintain the business, including turnarounds and the operating cost post the business improvement initiatives that you've had underway -- you can take it offline if necessary but I wanted to --

No, I think it's important to address. Happy to. Mike, why don't you speak to the success that we've had with RBI and how that will play out over '27.

So as you look at -- so as we said, RBI was $230 million, and that was broken down between capital and OpEx. So we said that roughly $70 million was going to come out of capital and $160 million was going to come out of OpEx. So let's talk about OpEx first. When we contemplated this program back in the tail end of 2024, there was a couple of things that happened that we didn't anticipate. One, as you mentioned, was the Martinez. And so that delayed some of the savings. And then the other thing that happened was the market that we've had in the past couple of months or past quarters or so.

So as I look at the OpEx, we're like we're maybe about 10%, maybe $8 million to $10 million of savings shy for this year. But then you flip that and look at the capital and the turnarounds, we're up about $20 million. And so net-net, we're meeting our commitment. Turnaround is an interesting thing, and it's difficult to measure year-on-year. As Matt said, it's not usually ratable. But one thing that we look at is we benchmark every turnaround. And prior to kicking off RBI, we were in the bottom half of the industry in terms of our turnaround cost performance. And we put a lot of things together in place in 2024 to get better, to get predictable first and foremost. And then 2026, we focused on competitive. And now '26 current performance is in the top half of the industry benchmarks.

And then when you look at sustaining capital, we took a baseline of where we were spending sustaining capital before, and it was about $230 million, and we saved about $25 million to $30 million on that. So it will change from year-to-year based on the size and the complexity of the turnarounds. So it's not always ratable. And as Matt mentioned, next year is going to be one of our larger turnarounds because of our 2 deferrals that we had into this year. But we continue to make continuous improvement on both the OpEx and the capital side. So that's how we look at it.

And just one final comment -- in that regard, which is we're just stacking these wins, right? So the reduction in interest expense, the RBI savings on the operating cost side, the RBI savings on the capital side, the margin improvement in projects such as the Chalmette jet production. Each one of these is deepening the keel and making our company more resilient. And obviously, it will make us more profitable through -- not only through down cycles, but through up cycles as well.

Your next question comes from the line of Joe Laetsch?with Morgan Stanley.

So I wanted to start on the refining side. And within the regions, one of the areas that came in stronger than we had expected was the West Coast. Could you just talk a bit about how those assets are running post turnaround? And then also what you're seeing just on the ground in that market from a demand perspective as well?

Paul, do you want to quickly comment on demand?

I mean, look, West Coast demand has been resilient. We -- even with these volatile prices that we've seen in the marketplace out there, it's been remarkably resilient. Our wholesale numbers have gone up actually a little bit. We think that's probably some branded going to wholesale. But in general, from a demand standpoint, West Coast has been pretty steady over the last 12 months.

I think broadly on the marketplace, I think our assets are -- now that we're fully up and running with a very clean runway, we're very, very well positioned in the marketplace. And as we've talked about for multiple quarters, it's on the product side, it is a market that requires massive imports into the state just to balance. But importantly, on the crude side as well, where we have not only the 2 refineries, we have our M-70 pipeline where we can maximize our access to California-grade crudes. And obviously, some production has come online, some new production has come online this year. So I think as a competitive positioning, PBF and our access and exposure to California looks very, very attractive going forward.

That's helpful. And then just looking into the fourth quarter, I recognize it's still early in the quarter, and there's a lot of volatility in the market. But could you maybe just walk through some of the puts and takes that you're thinking about on capture relative to 3Q, in particular. How should we think about the benefit from the wider WCS differentials? anything on crude backwardation, secondary product margins that you all are watching? Any color you can provide would be helpful.

Sure. So we're further into the quarter on crude than we are on products just because you buy your crude in advance. And so I think my expectation for the fourth quarter is to have widening crude gaps, which obviously are quite impactful to our business. I think it will be folly for us to predict prompt cracks. Obviously, 1/3 through the quarter, they have been quite strong. And indeed, just my sneak peek into what October looks like, it looks quite strong. But going forward, as we talked about, a [ turn ] around the world is achieved today, none of the problems are solved on the product side. That being said, prompt prices and prompt cracks can jump around, but the fourth quarter looks obviously very constructive with the backdrop we have.

Your next question comes from the line of Phillip Jungwirth with BMO.

Really strong results. Sticking with the fourth quarter, throughput guidance is really strong. I was looking back, and I think there's only one other quarter in PBF history where you were above the midpoint. Obviously, no turnarounds planned, but I was just hoping you could speak to the level of confidence in the system and just what's allowing you to run at a higher rate into the year-end? And separately, is there the ability to run a heavier crude slate into 4Q, just given the continued weakness in differentials? And if so, could you push a higher distillate yield also?

I promise you, we will run the most economic grades that we can get our hand on and push our system in that regard. So there's nothing to discuss on that front other than we will absolutely maximize our economic outcome based on the crudes that are available. And so I'm sorry, your first question was in regards to throughput. The market is dictating it to a great degree. Generally speaking, you do have turnarounds in the fourth quarter. And generally speaking, the market doesn't always incent max runs. But obviously, the world is desperate for our products, and we intend to manufacture as many as we can in this period.

Great. And then coming back to the sourcing of California crude, you referenced your advantageous pipeline into Torrance. But more specifically, how would you see any San Pablo Bay pipeline restart changing crude sourcing at Martinez? And just with the election coming up, how would you characterize current regulatory environment in California? And any expectation whether this could change for better or worse depending on the outcome of the governor election?

Yes. The pipeline one is a funny one only because, as I mentioned before, we have space on our M-70 pipeline. And so now I think the San Pablo pipeline has been sold. So I don't yet know what the new owner's full intent is. But from PBF perspective, we get this a fair amount in California. When are we going to open San Pablo? It's like if you own a hotel in a town and you've got 20% vacancy and someone is saying, "Well, are you going to build a new hotel?" Well, when vacancy becomes a problem, we'll look to increase flows. Obviously, Martinez sits at the end of the San Pablo Bay pipeline. And to the degree that our M-70 pipeline is full, we would certainly look to bring crudes up to Martinez.

But at the moment, you've gotten a lot of legislation through California, which has decreased the friction in getting permits for the producers. So to the degree that production increases, I think the San Pablo Bay pipeline is sitting there in a perfect spot to take incremental grades that can't be taken south. But simply, egress is not the constraint at the moment. It is production. In regards to the election, it's not worth me prognosticating, but I don't see any material shift in the sort of the California political environment.

I do think there's been a great awakening in terms of how important and impactful and how necessary our products are to the economy and to the welfare of all the people that live there. So I think that's a very good thing. I don't see that backtracking. And clearly, California was a microcosm of what the world is going through now. So we'll see where the election goes. We've had a tremendous partnership with the state over the last couple of years sort of navigating all the changes that have existed, and we look forward to working with them going forward regardless of whoever the administration is.

Your next question comes from the line of Josiah Knight with Goldman Sachs.

Maybe just circling back on freight rates. Can you talk about how exposed to the elevated rates we're seeing in the system or in the market right now? And additionally, what steps have you been taking to mitigate these impacts?

So if you think about freight rates for PBF, you think about supplying crude into the East Coast and into Northern California. We have about half of our fleet on time charter, which has obviously insulated us from the massive gyrations that are occurring. And we have closer proximity to much of the rest of the world in regards to where we're delivering our crude from. And obviously, we are in a freight firestorm at the moment. So I don't envision any material changes to that because this is not the time in which you want to go out and get more time charters. But -- so to a great degree, and it's PBF for certain. And to a great degree, U.S. refining is dramatically in a better place than, say, Asia in that regard because of the distance that they have to go. As Tom O'Connor always points out, the Atlantic Basin is -- has crude avail. And so our transit time is much shorter.

That's helpful. And then the follow-up is just on the delayed turnarounds at Chalmette and Toledo. Can you just remind us of the decision-making process here? And then additionally, how should we be framing out the impact of '27 throughput and then '27 CapEx?

So we're not going to get into specific CapEx guidance yet. We usually put that out at a different time, we'll follow that. I mean in regards to the turnaround, it's no different than how we run our business every single day, which is evaluating the condition of our units, which are continuously and meticulously sort of evaluated on a day-by-day basis. And to the degree that we can optimize our turnarounds and our operations, that's what our job is. Mike, do you want to comment in regards to -- anything else in regards to turnarounds?

I think you nailed it right there, and particularly in Toledo, as we stated on the call the last time. We had some downtime -- unplanned downtime in May, and we took advantage of going after a few things during that downtime to set us up to be in a position to defer this turnaround into next year. So there's an example of -- we're not just -- we're being applying rigor and discipline, analyzing performance in the unit, picking things and then moving forward.

Your next question comes from the line of John Royall with Piper Sandler.

So my first question is on the performance of SBR. Obviously, it's a very positive macro for RD, but it looks like a really strong quarter on that equity earnings line for 3Q. Can you talk about that unit kind of operationally, how it's running and what feedstocks look like? And secondly, are you taking any dividend out of that JV right now? Just trying to understand the cash impact given that business is having a more meaningful contribution right now.

Sure. I'll start with the dividend. We did receive our first dividend distribution from SBR during the quarter of about $20 million that is reflected in the results. As far as operations, it's been running well. You can see we're at the top end of our throughput guidance for Q3. So everything going well there. Our feedstock slate obviously changes over time, although we try to source the most economic feet there, and it will move between the higher and lower CI. And I think for Q3, it was more in the lower CI level, which helped from a margin capture standpoint. But overall, as I said in my remarks, the strong margins there, the tightening of the HOBO spread and the RINs price kind of maintaining at high levels has helped to really charge the earnings of that business.

And then my follow-up is on bringing the hydrogen plants back in-house. And I realize you touched on this in 2Q a little bit, but how should we expect to see the returns on that kind of investment? Is it just about reliability and reducing downtime? Does it reduce OpEx overall? Just trying to understand maybe how to model that acquisition. And also, I think there were a few others that were sold to Air Products when you did that initial transaction a few years ago. Was there any thought to bringing those back in-house as well?

Just on your last piece, just on the last piece, I don't expect there to be any other. Torrance was a bit unique because of where it was situated within our refinery and the way it was being operated. Mike, why don't you walk through it?

Yes. So jump on that point. The uniqueness of it was that they were so integrated to the operation of the facility where we shared utilities. The hydrogen plant was a major steam producer, for instance, for the refinery. And so any impact to the operation of the hydrogen plant and because of that refinery so beholden to hydrogen in terms of being able to perform and maximize the refinery had all kinds of impacts. And I would look at it like this. When we did the acquisition, it was firmly just based on increasing the utilization of the refinery. And in the past, because of either planned or unplanned downtime associated with those hydrogen plants and the lack of integrated plants really drove the performance of the refinery. So I would look at it, it's mainly just the utilization.

One thing I would add from a modeling standpoint is nothing changed with the transaction as far as the cash flows go or overall cash flows. It's just really a change in the classification with now -- in the past, it was classified as operating leases and would flow through as such in the P&L. Now it's going to be a debt promissory note that will flow through financing activities. But the cash flows itself remain the same.

We have reached the end of the question-and-answer session. And I will now turn the call over to Matt Lucey for closing remarks.

Thanks for everyone's attention today, and we look forward to speaking to you after a very solid fourth quarter. Have a great day.

This concludes today's conference, and you may disconnect your lines at this time. Thank you all for your participation.

Good day, everyone, and welcome to the PBF Energy Second Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] Please note, this conference is being recorded.

It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

Thank you, Angeline. Good morning, and welcome to today's call.

With me today are Matt Lucey, our President and CEO; Mike Bukowski, our Senior Vice President and Head of Refining; Joe Marino, our CFO; and several other members of our management team.

Copies of today's earnings release and our 10-Q filing, including supplemental information, are available on our website.

Before getting started, I'd like to direct your attention to the safe harbor statement contained in today's press release. Statements expressing the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions under federal securities laws. Consistent with our prior periods, we will discuss our results excluding special items, which are described in today's press release. Also included in the press release is forward-looking guidance information. For any questions on these items or other follow-up questions, please contact Investor Relations after the call.

I'll now turn the call over to Matt Lucey.

Thanks, Colin. Good morning, everyone, and thank you for joining our call.

We clearly have reached a transformative moment for PBF. The ongoing disruptions in the Middle East and Eastern Europe have created one of, if not, the largest dislocation the oil markets have ever seen. None of us welcomes the circumstance behind it, but the effect on our industry is both dramatic and constructive. Indeed, the world is in desperate need of the products we produce.

Let me spend a few minutes on what we are seeing, first in crude, then in refined products, because the story on each is a bit different and both matter to how we think about the quarters ahead.

With the backdrop of the ongoing Ukraine war, hostilities in the Middle East caused initially roughly 15 million barrels a day of crude and 5 million barrels a day of product to be effectively trapped inside the strait. These are significant headline numbers, but we've seen the market exercise some flexibility on the crude side with alternative routing, crude supply coming from national strategic reserves and in some areas outside the U.S., reduced demand as a result of lower utilization. Global refining utilization is down roughly 10% year-on-year.

In the near term, crude flows are still searching for a new equilibrium, and global pricing is doing the work of redirecting barrels along new routes. Until crude reestablishes its historical trade patterns, we cannot predict exactly where a flat price or differentials land. What we can say with more confidence is that this environment favors refiners with crude slate flexibility and proximity to stable crude supply in the Americas. Shorter voyages and quicker, more reliable deliveries are real advantages.

PBF's footprint is well positioned as we have not nor do we expect crude availability to impact our operations. Most importantly, on the product side, product inventories have been drawn down across the globe. Refining utilization outside the U.S. has fallen.

U.S. markets must incentivize products to stay home as products are being pulled into exports. U.S. and West Coast markets are finding it harder to pull the imports they have historically relied on. The West Coast and East Coast are structurally short refining capacity and depend on imports, often from less stable sources to balance. The temporary Jones Act waivers are helping in this regard.

California alone imports on the order of 250,000 barrels a day of gasoline, close to 1/3 of its demand, along with a meaningful volume of its jet fuel. When the global supply tightens, those are precisely the markets that feel first and are most exposed. It reinforces the point we have made for some time. U.S. refining is critical infrastructure and has rarely been more evident than it is today.

It will take time for trade patterns to normalize, both during and after these conflicts, and we expect crude to find its footing sooner than products. Prior to the disruption in the Middle East, there was a constructive setup -- I'm sorry, prior to the disruption in the Middle East, there was a constructive setup for refining -- with tight refining balances and low product inventories worldwide. With the ongoing conflicts, this situation has been magnified.

Product inventories will be slow to rebuild and the restocking that ultimately must occur should provide a favorable backdrop for refining margins over the quarters to come.

What the current environment has provided is the prospect for PBF to generate significant value for our investors. In the second quarter, we reduced our net debt by over $1.4 billion. We ended the quarter with just under $900 million in cash, and I expect we'll end July with approximately $1.5 billion in cash.

So to recap, we had a constructive marketplace prior to the Middle East disruptions with ample crude, tight refining balances and no product inventories worldwide. The disruptions around the world have resulted in over 5 million barrels of refining capacity offline, a portion of which has suffered physical damage, which could take significant time to repair. When the disruption passes and the conflicts end, it will take an extended time for product inventories to normalize, thereby maintaining elevated margins for a time.

As we saw in a small sample size immediately after the signing of the MoU, crude can and will normalize much quicker than products as the dislocated crude will need to compete for market share. This should result in a favorable crude environment. PBF is uniquely positioned to capitalize on the opportunities presented by this extraordinary market.

We've strengthened our balance sheet. We continue to lower our cost structure, and we are executing initiatives that improve reliability and efficiency. The work is being done, and we expect it to translate into meaningful value for shareholders.

And with that, I'll turn it over to Mike.

Thank you, Matt. Good morning, everyone.

Currently, all of our refineries are operating well. In May, we were able to safely restart the fire-affected units at the Martinez refinery and have been producing our full product slate since that time. Again, I thank our Martinez team and all of our partners for their efforts to restore Martinez to full operations.

While the restoration work was underway and the refinery was operating at reduced rates, the Martinez hydrocracker was doing the heavy lifting in terms of keeping the balance of the refinery operating, providing us with the ability to fulfill our commitments to deliver products to our customers. With that said, we will be conducting the upcoming hydrocracker turnaround at Martinez beginning in the third quarter and finishing in October.

Staying on the West Coast, in July, we reached an agreement with Air Products to repurchase 2 hydrogen plants servicing our Torrance refinery. Air Products has been and continues to be a valuable business partner for PBF. The hydrogen plants in Torrance are heavily integrated into the operation of the refinery, and we feel that owning and operating those assets will improve the overall reliability of Torrance as we will be able to closely manage operating details and coordinate maintenance and turnarounds with the rest of the refinery as a whole.

Outside of the West Coast, we contended with a few operational challenges during the quarter. In May, we had a loss of containment event at Chalmette that resulted in a pre-treater and reformer being taken offline until repairs are complete later in Q3. There was no material reduction in throughput as a result of this event and the refinery is able to run at planned rates while we complete the repairs. The primary impact of the event is increased production of naphtha and a slight reduction in our finished gasoline yield. We expect to have a relatively clean run for the remainder of the year at Chalmette as we have shifted after careful evaluation and management of change the scheduled fourth quarter crude unit and coker turnaround to 2027.

In the Mid-continent, we performed unplanned work related to Toledo's FCC during the second quarter, which was the driver of the lower-than-expected throughput. However, we took the opportunity to perform some key maintenance during the outage, which enables us to safely push the planned fourth quarter FCC turnaround to the first half of 2027.

Our East Coast assets ran well in the second quarter, and we expect to have an uninterrupted run until we begin our Paulsboro crude unit turnaround late in the fall.

We continue to implement the RBI program. Here are some examples of key accomplishments. We have implemented a circuit-wide energy efficiency program that resulted in a 20% reduction in purchased natural gas on a per barrel and price-adjusted basis relative to the 2024 baseline. Our turnaround performance has seen a marked improvement. Not only have we become more predictable, based on industry benchmarking, we are moving up among industry leaders in turnaround execution. Our new strategic procurement organization is halfway through renegotiating or rebidding over 60 contracts with a focus on leveraging our spend nationally or regionally, we expect to see savings of about $60 million a year in goods and services such as process chemicals, maintenance and equipment rentals, among others.

RBI is a multiyear effort with periods of focused work in each of the refineries, followed by establishment of new practices to ensure the improvements are sustained. The refining business improvement initiative is essential to improving PBF's results, but it will not distract us from our obligation to operate in a safe, reliable and environmentally responsible way every day.

With that, I'll turn the call over to Joe Marino for our financial overview.

Thanks, Mike.

For the second quarter, excluding special items, we reported adjusted net income of $6.22 per share and adjusted EBITDA of $1.24 billion.

Our discussion of second quarter results excludes the net effect of special items, including $23 million in incremental OpEx related to the Martinez refinery incident, a $250 million gain on insurance recoveries, a $2 million charge related to the repayment of the $800 million senior notes due 2028 and approximately $9 million of charges associated with the RBI initiative, as well as other items detailed in the reconciling tables in today's press release.

PBF's results for the quarter are primarily a reflection of the strong product markets driven by tight supply and relatively firm demand. Globally, refineries that can run are running at high utilization rates. However, a significant portion of refining capacity remains offline or is running at reduced rates due to conflicts or crude availability constraints.

The $250 million gain on insurance recoveries related to the Martinez fire is a result of the fifth unallocated payment agreed to and received in the second quarter. This brings our total insurance recoveries to $1.25 billion, net of our deductibles and retention, including the amounts received in 2025.

Important to note, the bulk of the spending related to the Martinez rebuild is behind us with only some cleanup and demobilization items ahead. However, the claim is ongoing, and we expect to recover additional funds as we continue to work with our insurance providers towards finalization of the claim in the second half of 2026.

Shifting back to our normal quarterly results discussion. Also included in our results is net income of $27.5 million from our investment in SBR or approximately $40 million of EBITDA. SBR produced an average of 15,100 barrels per day of renewable diesel in the second quarter. SBR's production was as expected and reflected reduced rates because of the catalyst change completed in April. Although it has only been a few months since the installation of the new catalyst, we are encouraged by the improved performance we are seeing and expect to achieve a longer run time.

On the market side, we are seeing robust margins for renewable diesel, which are being driven by globally high distillate margins combined with elevated RINs pricing.

PBF's cash from operations for the quarter was $1.6 billion, which includes a working capital benefit of approximately $430 million. The working capital benefit was expected in the second quarter and was driven by a reduction in above-average inventory levels from the first quarter as well as benefits from our net payable position in a higher price environment. We are now at normalized inventory levels and the working capital headwind from the first quarter has reversed.

Going forward, working capital fluctuations will depend largely on movements in commodity prices and inventory levels that may vary due to operational needs.

Cash invested in consolidated CapEx for the second quarter was $189 million, which includes refining, corporate and logistics. This amount excludes second quarter capital of approximately $56 million related to the Martinez rebuild.

Q2 capital expenditures are slightly below expectations as a result of our decision to shift the scheduled hydrocracker turnaround at Martinez from the end of the second quarter to the end of the third quarter. On that note, we reduced our total capital expenditure guidance for 2026 by approximately $75 million to $850 million at the midpoint of our revised guidance. This is primarily a result of the decision to move the Q4 Toledo and Chalmette turnaround to 2027.

We ended the quarter with $894 million in cash and approximately $855 million in net debt. At quarter end, our net debt to cap was 15%. During the second quarter, PBF reduced net debt by over 62% by fully paying down borrowings on our asset-backed lending facility and refinancing $802 million of senior notes due 2028 using available cash and proceeds from the issuance of $500 million of senior notes due 2034, an aggregate gross debt reduction of over $1 billion.

As we mentioned a moment ago, subsequent to the end of the quarter, we entered into an agreement with Air Products to acquire 2 hydrogen plants at our Torrance refinery. This transaction will be financed with an amortizing seller's note. Upon closing of the transaction, this note will appear as incremental debt in our capital structure. The transaction is subject to regulatory review and customary closing conditions and is expected to be finalized in the third quarter.

As mentioned over the past several quarters, our capital allocation framework rests on 3 core elements: invest in the business, invest in our balance sheet and shareholder returns. We continue to invest in our assets to improve efficiency and reliability. We have made significant progress in just a short time with our balance sheet, but the work there is not done. We operate in a cyclical business, and our intention is to continue investing in our balance sheet to ensure we are able to adeptly navigate the next cycle in our industry.

Through our deleveraging over the last several months, we believe we have delivered significant equity value to our investors.

We're intent on maximizing value across the entire refining cycle. While returning capital remains an important pillar in our framework, we believe ensuring our refining assets remain competitive and maintaining a strong balance sheet enhances long-term shareholder returns by reducing risk and increasing strategic flexibility.

Operator, we've completed our opening remarks, and we'd be pleased to take any questions.

[Operator Instructions] The first question comes from Manav Gupta with UBS.

Matt, Joe, congrats to the entire team, a very strong quarter. And the way things are going, probably 3Q would be a replica of 2Q, if not better.

My first question to you was, you talked about refining taking a lot longer to normalize. As you mentioned, over 5 million barrels of capacity has been offline for a sustained time. We don't know when this reopens, but there is a possibility that global product inventories would have depleted significantly before things start to normalize. So one, I wanted to understand from you the time frame of the normalization.

But the bigger question I'm trying to ask is, there are refineries that have been damaged, there are refineries that have been damaged in Russia by Ukraine. Even when flows fully normalize, do you see a scenario where the mid-cycle has moved up because the global supply routes have been impacted, global supply has been impacted? So if you could talk about some of those dynamics, I would be very grateful.

Thanks, Manav. And I agree with everything you commented on. And obviously, every cycle is different. And so then you relate it back to mid-cycle. But in this cycle, I see the floor has been risen unquestionably and the consequence of all the damage, I think, it could be a long time. It is almost unimaginable working in this industry, certainly in places like Russia where you're sort of under attack.

So it's impossible for us to predict exactly how long, but it certainly seems that the consequence of these conflicts is acute in the refining business. And I think it's going to take a considerable amount of time. I haven't quantified that exactly. But certainly, you're well into 2027 before it's even possible to get inventories normalized under sort of normal economic conditions.

Tom, would you make any other?

Yes. I mean, Matt, I mean I think just in terms of adding to that, I mean, I think it goes back to sort of the prepared remarks, right, I mean in terms of the preview that we saw when the MoU was signed in terms of -- obviously, there was a correction in crude, there was a correction in margins, but quite quickly, margins found a floor and started to move back up just as we get really back to the question over really is the refining capacity that's currently offline.

So obviously, when that comes back, I mean, I think it's certainly -- we've seen it in terms of knowing that it is just about crude, that is normalization is sort of in the weeks to months' timeframe. Then when it comes to products, that's certainly in the months to quarters. So I mean just expanding upon that just a little bit, but very consistent thoughts.

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

So if you could talk a little bit about shareholder returns once you have gotten to your net cash position?

Yes. Look, I think you made a comment. It would certainly appear that the third quarter is stronger from a margin perspective than the second quarter, and we've been tracking a bit ahead. But that being said, we don't know what's going to happen. And I think I've made this point historically, we don't like to openly speculate about money that we haven't earned yet. Prospectively, it looks very, very constructive.

And indeed, 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.

The next question comes from Joe Laetsch with Morgan Stanley.

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

Sure. One comment I would make is that the last couple of months have been a bit more calm than the first couple of months. That being said, there are obviously extraordinary markets with massive volatility.

Tom, do you want to make a comment, then Paul?

Yes. I mean think in terms of just examining the market, right, I mean, #1, we have concerns about buying crude every day, even in a right way market. In terms of, obviously, the environment certainly has raised the sort of risk factor on procuring crude. But as we've gone through the cycles of this, right, there's been something that we've haven't yet been able -- we've yet to see a scenario where we've had to impact our refining operations materially due to a lack of avails, right? So it's one of those things we constantly are evaluating it.

And certainly, I think you can probably add that there's a little bit more of sort of upside skew and certainly on the diesel side of the equation. And obviously, we're in the midst of hurricane season right now, which could have a potentially a dramatic effect upon both products and crude, right? I mean if we go back to hard curve of Hurricane Harvey, right, it's not quite easy to forget, right, just the impact that that had on U.S. crude exports and how much crude backed up into the Mid-Continent and Cushing inventories rebuilt at that time frame.

And then, Paul, do you want to make a comment in regards to how everyone is hand to mouth in this environment?

Sure. Look, 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. We have dynamic product demands in the Gulf Coast across the docks, we're participating in that. We have export demand out of the East Coast, we're participating in that. Inventories across the PADDS are at the lowest levels we've seen in many, many, many years.

So primary goal for our commercial team is to keep the refineries full on the inbound and make sure we're empty on the outbound every single day.

That's helpful. And then I wanted to just talk a little bit about your comments around delaying some turnarounds to 2027. So it sounds like you're able to get in and assess Toledo during some unplanned downtime last quarter.

Maybe more broadly, are you seeing longer duration between turnaround intervals? And just given how fast the data technology and monitoring landscape is evolving, is there any change to how you're thinking about planning turnarounds going forward?

Yes, Joe, this is Mike. So the short answer to your question is yes. As part of RBI, we've taken 3 or 4-pronged approach to turnaround improvement and a piece of that is turnaround interval optimization. And so we're certainly looking at techniques such as risk-based inspection and other opportunities to kind of really set durations. But we're also -- we're optimizing that against capabilities of refineries in terms of the contractor manpower available at a given location, the size of the turnaround, as you delay turnarounds, they tend to get bigger. So we're optimizing against those types of things. So in general, yes, interval optimization is a key piece of what we're doing.

And I would say that the industry has been looking at that for the past several years, and we're approaching, I think, some limits in terms of that just based on capabilities of manpower.

The next question comes from Phillip Jungwirth with BMO Capital Markets.

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

Yes, that's really included within our budget for turnaround safety and regulatory spend. So that's kind of -- as a piece of that, roughly $50 million to $100 million of that is discretionary growth, but we'd continue to evaluate that as the market changes and obviously be looking for opportunities always to increase reliability and efficiencies of our system.

I think the focus of the company is obviously safe, reliable, responsible operations. We talk about that all the time, but we must be efficient, as such, where our RBI program has been highlighted. But then it's upon us. Our job is not done. We must make improvements on our margin capture. And if we're able to do that, it doesn't always require a tremendous amount of capital. But that's just always evaluating your plan and making sure not only running efficiently from a cost side, but from an operations side and capturing all of that margin.

So when you stack all these things in regards to positive markets, reduced cost structure, improving margin capture, reduced interest expense, really, really deepening the keel of PBF operating through all different cycles.

Yes. I would also add, we consciously chose to look at our cost structure first because we felt like that our base case was not optimized. And as you start getting to a point where you kind of see and achieve the efficiencies that you expected to get, you start to see open up new opportunities in terms of margin.

So for instance, relative to the comments we made in the prepared remarks, getting that energy efficiency improvement now opens up different opportunities where you can take advantage of that. And it starts to identify constraints or remove constraints that you didn't see you had before and presents opportunities to drive margin improvement. So I would expect to see us to drive in that direction.

Okay. Great. And then any reason the Paulsboro crude unit turnaround can't also be pushed? And just for PBF, is there any ability or consideration to bring back idled units here, FCC, alky unit, delayed coker? Or more broadly, do you think there's much opportunity for the industry to really bring back shuttered or mothballed refining capacity?

In terms of Paulsboro, and obviously, we look at every turnaround individually based on market considerations, but there are some constraints that we have in terms of equipment inspections and mechanical integrity deadlines that really forestall us being able to move that. So that's going to stay in place.

In terms of idled units in Paulsboro, we're always looking at ways to optimize that facility in conjunction with our Delaware City refinery, but there are no short-term plans to bring back any units at that point in time.

And in terms of the rest of the industry, it really depends on situational, how well the units were put away or put up and the costs associated with bringing it back. But it would also take a really a good understanding and a commitment of what the market is going to do longer term because it does take an awful long time to restart idle units, especially ones that have been down for a significant period of time.

Yes. I think there's no question that the duration of the current cycle we're in, I think, could be in an extended period of time. That being said, the duration when you're looking at bringing on new equipment generally exceeds any one cycle. And so the math is a bit more complicated.

The next question comes from Neil Mehta with Goldman Sachs. The next question comes from Doug Leggate with Wolfe Research.

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

We look at hedging 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. And it would have been a very reasonable thing 3 months ago to say, let's hedge it all. And it would have been at a very, very attractive margin, and we would have gotten our face ripped off because it power through it and then some.

But look, we deliver the crack to our investors. Are there times around the edges or where we want to protect downside risk? We certainly, we have a very, very robust risk management business, and I can ask Tom to comment as well. But we do participate in the forward markets, but we also want to deliver the crack to our investor. Tom?

Yes, Doug, I mean, there certainly is unique opportunities that are sort of being presented. I mean, right, when you look at the forward curves, I mean, you are looking at margins that are certainly well above mid-cycle, particularly when you look at distillate and, obviously, another sort of sort of tailwind behind that has been a reasonable correction in the price of RINs as you look at that because, certainly, there is some element of that when you're just examining sort of U.S. cracks, right? Remember that, obviously, we still have quite an elevated RVO. And that's certainly something that needs to be taken into contemplation as well.

I understand that. I thought as I say, the scale of your business, your beta, if you like, it puts you in a bit of a unique situation. I'm going to try this one, but I don't know if you can answer it, Matt. But any -- can you frame for us at least the magnitude of what you think that remaining insurance income could be or cash flow order of magnitude without being too precise?

Sure. Here's my expectation. My expectation is I think there's going to be one more payment, I think, it's going to be very similar to the last payment. And my hope would be that by the time we talk on our next earnings call, it will be in-house. And that will put a bow on the whole situation.

And the final question comes from [ Alexa Brenner ] with Goldman Sachs.

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

Okay. On the latter part first, nothing new there. But I must say -- and again, some of those -- the crisis for California started well before disruptions in the world with the amount of refining capacity that's come off. We have had a much better and more collaborative process with the state in varying degrees between regulators and politicians and the folks in Sacramento. But there's nothing to report there.

In regards to California, broadly in terms of the marketplace, and we've talked a lot about this. Obviously, a significant amount of gasoline and jet has to be imported into the state. It has to attract that. There's real cost to get it there. Those real costs are coming on either historically on a boat from very, very far away. If that's replaced in the future by a pipe that's inland, that will still have a significant cost.

So 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. And we think that's going to be really attractive for our business going forward. But products are only half -- and by the way, so on that, if you look at the last quarter, it's been less than that. And obviously, there's been Jones Act waivers. So that's helped alleviate these temporary waivers, and I expect they will be temporary during this Middle East conflict. That's been able to sort of reduce some of the temperature. So that's been helpful.

In regards to the crude side, look, we are getting -- at Torrance, we're increasing our domestic California crude runs, I'd say, I don't know, 25,000, 30,000 barrels a day. And remember, we have our own proprietary logistics system in California. And so we've seen volumes on our M70 pipeline that were closer to 60,000 barrels a day prior to some of the closures, now averaging about 90,000 barrels a day.

Importantly, we still have room on our M70 pipeline. So we've seen production come online, which is more crude supply into the state, which has been helpful certainly on differentials. And I think PBF is uniquely positioned with our M70 pipeline that services our refinery. So you're sort of getting it on both ends, and we expect the marketplace to be constructive because they desperately need the products. You have to import almost 1/3 of your gas, it is a massive, massive lift.

So that's sort of the marketplace. And obviously, we highlight any legal developments, that's always in the queue, and you can always see any updates there as well.

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

All right. Well, this is good, it is the last question. And for those that are not interested, you can go get your glass of water, ask them now, because I can get on my soapbox on that one. Tom, why don't you manage the first part in regards to how we procure the RINs?

Yes. I mean, Alexa, on a daily basis, just always remember, right, that SBR is producing D4. So we're taking those in. And then we're just actively managing our position in the marketplace. There certainly has been some improvements and advancements sort of in the derivatives of RINs. So there has been a few things that we've been looking at in terms of that. But without getting into absolute specifics, for us, it's certainly the acquisition and different things about RINs is sort of status quo and I think it's really sort of the recent correction in RINs as that presents a new opportunity with the perception that there's going to be some small refinery exemptions are going to come into the marketplace, and that has knocked prices down by 10%, 15% even in the last 2 weeks.

And keep in mind also is that the balances were so constructive in terms of the draw on the RIN bank that certainly the advancements in the financial aspects. It's been a market that has really gotten itself a little bit crowded long in terms of where the spec community has come in acquiring RINs in the marketplace. So -- and that, I think, has contributed also to the most recent sell-off.

So Tom has highlighted the sell-off, it's spot on, and so that's helpful. But let's put it in perspective. The RFS program is still imposing $14 a barrel of cost and much of that is being borne by the consumer. And unfortunately, still -- there's still an equity in the program. And so with the winners and losers in that trade-off, PBF is still bearing a significant cost as a result of that.

And the fear is, and I've talked about this before, and my thinking has evolved a bit and in some degree, it's worse because I've talked about how the program with the volumes that the administration has put on, the volume breaks where it becomes insolvent, that you don't have enough RINs in the RIN bank to satisfy the program. And therefore, the only way to satisfy that because if you can't buy the RIN, you can't produce gasoline, is to throttle supply. Obviously, that would be a disaster in today's marketplace.

But my thinking has evolved a bit on it as we sort of learn more is, well, no, it's actually there are significant bio-based barrels in the world that are being sent to Europe or other places. But the problem is if we need to meet these mandates over this year and into next year, we have to attract those barrels out of Europe and other places. But Europe also has mandates. So it's like a reverse vortex of racing to the top or escalating costs to get the program satisfied.

We continue to talk to people in Washington about it. It is the single easiest thing they can do to adjust the price of gasoline to today, and we'll continue to have those conversations. And the reality is, you can fix the RFS price without impacting ag volumes where you don't have to lower corn consumption or soybean.

By the way, soybean oil, there's more soybean oil going now into fuel than into food, which is sort of hard to wrap your mind around. But you can adjust the RFS without -- and improve prices without impacting the farmers.

With that, we'll leave that there. Anything else?

I appreciate it. I think with that, that concludes the questions for today. So we appreciate everyone's participation. It truly is an extraordinary moment for our company, and we greatly look forward to talking to you again at the end of the third quarter. Thanks.

Good day, everyone, and welcome to the PBF Energy First Quarter 2026 Earnings Conference Call and Webcast. [Operator Instructions] Please note that this conference is being recorded.

It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

Thank you, Anjali. Good morning, and welcome to today's call. With me today are Matt Lucey, our President and CEO; Mike Bukowski, our Senior Vice President and Head of Refining; Joe Marino, our CFO; and several other members of our management team. Copies of today's earnings release and our 10-Q filing, including supplemental information, are available on our website.

Before getting started, I'd like to direct your attention to the safe harbor statement contained in today's press release. Statements that express the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions under federal securities laws. Consistent with our prior periods, we'll discuss our results excluding special items, which are described in today's press release. Also included in the press release is forward-looking guidance information. For any questions on these items or other follow-up questions, please contact Investor Relations after today's call.

I'll now turn the call over to Matt Lucey.

Thanks, Colin. Good morning, everyone, and thank you for joining the call. Indeed, today is a moment. With the disruption in the Middle East, the world is in greater need of the products we produce and therein lies the momentous opportunity for our company to perform and reward our shareholders for owning such critical infrastructure. Within PBF, the spotlight is squarely on Martinez. We are bringing Martinez back online and will shortly be supplying the California market with our full capabilities. This could not be coming at a better time for the West Coast and California markets. There are 3 main areas of focus in terms of the restart of Martinez, the cat feed hydrotreater, the alkylation unit and the FCC.

The cat feed hydrotreater and alky are up and both are running. With the FCC, we expect to be making finished products this weekend. While the rebuild effort was completed in February, there is no question the restart took longer than expected. It was critical for us to ensure that all the work accomplished at Martinez over the last 14 months was capped off with a safe restart.

Moving on to the broader environment. The events in the Middle East have caused the largest disruption ever in the oil markets and the effects are indeed dramatic and constructive for PBF. Initially, approximately 15 million barrels per day of crude and 5 million barrels per day of product were trapped inside the Straits of Hormuz. The loss of crude barrels was most acutely felt in Asia, but the shortages have cascaded to other markets. 80% of the crude flowing through the straits was destined for Asian refineries, and those refineries in turn, supplied products to many markets, including the U.S. West Coast. As refining runs in Asia have been rationing due to lack of inputs, the loss of products has affected every market. Compounding this impact, the products stranded in the Arabian Gulf have tightened markets in Europe and subsequently, the Atlantic Basin.

In the near-term, the markets will continue to adjust in real time to demand signals for both crude and products. Global pricing will dictate trade patterns. Increasingly, markets are calling for both U.S. crude and U.S. products to meet demand. While the U.S. has been somewhat insulated, there are signs that demand is being impacted globally by both pricing and supply issues. It has never been more evident that U.S. refining is critical infrastructure, and this is most apparent in regions like the West Coast and the East Coast that are short refining capacity and rely on imports from unstable sources to meet demand. It will take some time for trade patterns to normalize both during and post the conflict in the Middle East.

Refining fundamentals should remain strong throughout, supported by tight refining balances, coupled with low product inventories around the world. Prior to this event, refining balances looked constructive and the inevitable restocking should provide a favorable backdrop for quarters to come. PBF remains focused on controlling the aspects of our business that we can control. To be successful and enhance value for our investors, we must operate safely, reliably and responsibly, and we must do it as efficiently as possible.

And with that, I'll turn the call over to Mike Bukowski.

Thank you, Matt. Good morning, everyone. Before updating on the progress of our refining business improvement program, I'll provide a few comments on first quarter operations and our Martinez refinery status. Outside of the West Coast, our refining system ran reasonably well. All of our refineries navigated record cold temperatures with minimal disruptions. On the West Coast, as Matt mentioned, Martinez is in the final stages of its phased restart. The process to restart it has been methodical and required many levels of safety and process checks to ensure that all equipment was correctly manufactured and installed before we introduced hydrocarbons.

The cat feed hydrotreater and alkylation unit have been operating and producing finished products as well as the intermediates required for the start-up of the fluid catalytic cracking unit this weekend. The Martinez team and the supporting cash too numerous to mention worked tirelessly to get us to this point. My thanks to all involved in the project. Additionally, while Martinez operations were being restored, Torrance underwent a turnaround early in the first quarter and with that event complete has a clean runway for the remainder of 2026. I'm happy to report that we're seeing progress from our RBI program. We achieved our 2025 target of $230 million of annualized run rate savings. This goal includes approximately $160 million of OpEx reductions against our 2024 benchmark and is incorporated in our full 2026 budget. While the ongoing Martinez process is causing some noise within the first quarter results, we are very comfortable in meeting or even exceeding our stated targets. While we are improving our maintenance and operational efficiency and reducing energy consumption, our main priority will always be to the focus on safe, reliable and responsible operations across our system.

With that, I'll now turn the call over to Joe Marino for our financial overview.

Thanks, Mike. For the first quarter, excluding special items, we reported adjusted net loss of $0.88 per share and adjusted EBITDA of $68.7 million. Our discussion of first quarter results excludes the net effect of special items, including $11.5 million in incremental OpEx related to the Martinez refinery incident, a $106.5 million gain on insurance recoveries, a $313 million LCM inventory adjustment, a $9.4 million gain relating to PBF's 50% share of SBR's LCM adjustment for the quarter and approximately $9.4 million of charges associated with the RBI initiative, as well as other items detailed in the reconciling tables in today's press release.

PBF's results reflect several unfavorable conditions that manifested in the first quarter, both operationally and commercially. Capture rates for the quarter were negatively impacted by West Coast operations, the higher flat price environment, increasing the headwind of low-value products, higher RINs expense and derivative losses recognized in the quarter. These capture headwinds more than offset benefits from improving jet and diesel spreads and certain crude dips. Operationally, our Torrance refinery was in planned turnaround during January and February, while our Martinez refinery restart was delayed. We built up inventory levels in the first quarter, primarily in anticipation of the planned restart of Martinez. This occurred as global pricing for hydrocarbons surged on the back of the conflict in the Middle East, resulting in losses in our typical hedge program.

Our results for the quarter reflect an aggregate derivative loss of a little over $200 million. Approximately half of this loss related to unrealized amounts expected to be mostly offset in the second quarter as the physical barrels run through our refining system. The $106.5 million gain on insurance recoveries related to the Martinez fire is a result of the fourth unallocated payment agreed to and received in the first quarter. This brings our total insurance recoveries to $1 billion, net of our deductibles and retention, including the amounts received in 2025.

Important to note, while the bulk of the spending related to Martinez is behind us, the claim is ongoing, and we expect to recover incremental funds as we continue to work with our insurance providers towards potential additional interim payment and finalization of the claim in an expeditious manner. Shifting back to our normal quarterly results discussion, also included in our results is an approximate $8 million EBITDA benefit, excluding LTM impacts related to PBF's equity investment in St. Bernard Renewables.

FCR produced an average of 16,700 barrels per day of renewable diesel in the first quarter. FCR's production was as expected, but results reflect the impact of improving market condition in the renewable fuel space with the finalization of the RVO in March. With the setting of the 2026, '27 RVO, the market is now the ability to stabilize and should result in favorable margins. PBF's cash used in operations for the quarter was $324 million, which includes a working capital draw of approximately $340 million, mainly due to movements in inventory and the impact on our net payable position as a result of rapidly moving commodity prices.

On our last call, we mentioned our expectations for elevated first quarter CapEx and working capital outflows, primarily related to Martinez restart and normal seasonal inventory patterns. The capital spending for the Martinez rebuild is essentially behind us, and we expect working capital to normalize as operations restart in full. Cash invested in consolidated CapEx for the quarter was $320 million, which includes refining, corporate and logistics. This amount excludes first quarter capital of approximately $189 million related to the Martinez incident. On the surface, the Q1 figure might be slightly higher than expected, and this is because it includes approximately $100 million of net carryover from 2025 that had not been cash settled at year-end. The balance is our normal quarterly incurred amount, including the turnaround at Torrance. Given that and the noise related to Martinez rebuild, it would be helpful to more broadly consider the 2025 and 2026 capital programs over a 2-year period.

We ended the quarter with $542 million in cash and approximately $2.3 billion of net debt. At quarter end, our net debt to cap was 36%, and our current liquidity is approximately $2.4 billion based on current commodity prices, cash and borrowing capacity under our ABL. Our net debt increased in the first quarter due to planned capital expenditures, continued spend on the Martinez restart and working capital outflows primarily related to a build in inventory. Going forward, inventory should normalize as operations ramp up, and we should see a resulting tailwind in working capital cash flows.

Additionally, with our capital spend for the Martinez rebuild predominantly behind us, we expect to further progress our Martinez insurance claim and receive additional payments. Once realized, these factors alone should principally offset the increase in net debt experienced in Q1. Maintaining our firm financial footing and a resilient balance sheet remain priorities. As we look ahead, we expect these periods of strength to focus on reducing both our gross and net debt.

Operator, we completed our opening remarks, and we'd be pleased to take any questions.

[Operator Instructions] The first question comes from Manav Gupta with UBS.

I want to start a little bit on the global macro side. The way we are seeing things, Matt, is 2Q and 3Q are a tale of 2 halves, those who have the crude and who can run and those who don't have crude, and they may have the best kit out there, but they don't have crude. And you are in this category where you have the crude and you can run. So, can you help us understand, given relatively low U.S. nat gas price and availability of crude, does that mean that U.S. refining has an advantage over most of their global peers at this point of time?

Manav, I don't think there's any question on that. I think the outlook for the second quarter and the third quarter look extraordinary only because the world is going to be in desperate need of our products. And as you say, we're insulated from a natural gas perspective, heck we're insulated from a physical security perspective. We have the best steel globally with a very stable workforce. And indeed, we have access to crude. Obviously, the pricing on crude is determined on a global basis. But when you stack up the U.S. industry compared to the rest of the world, it stands out. And then when you look within the U.S., I think particularly PBF's coastal complexity is incredibly well positioned within that.

Perfect. And a quick follow-up here and this is a question we have pretty much got all morning. What gives you the confidence that this time, Martinez will be able to restart within probably a week or so and there will not be any further delays?

I'll turn that over to Mike.

So, the delays that we saw over the past couple of months were primarily focused on the process to verify the equipment to make sure it was constructed, installed properly. And now we're at the point now with 2 units up in operations. We always had a phase start-up. It's always going to be the cat feed hydrotreater. It's always going to be the alkylation unit. Those 2 units started up without incident. They -- we got up safely. And we're essentially -- if you make the analogy of a football game, we're in the fourth quarter on the process on the FCC. The unit is heating up and we're a day or so away from putting feed in the unit. So, it's very close. We've got all the checks that we've done. We've had a lot of the major hurdles that you typically go through in an FCC start-up. So, that gives us the confidence.

The frustration on the duration is certainly understandable. But the alternative simply wasn't considered in terms of rushing through anything. And so, all the steps that we're taking were done in the name of caution and safety and reliability. It obviously was an extraordinarily large disruption. And as such, it took a bit longer. That being said, we're here on the precipice of this whole incident being behind us.

The next question comes from Alexa Petrick with Goldman Sachs.

We wanted to ask on the East Coast dynamics. But that region looks tight from a product perspective, but there's also a lot of moving pieces around crude access, freight rates. So, can you just talk about the exposure there and how you're seeing capture rates shake out?

Yes. It was in my comments. I mean, whether you're talking about the East Coast or West Coast, you're relying on imports and so how critical our infrastructure is within those pads. It's highlighted. It gets highlighted every couple of years, whether it's through hurricanes or other events, whether when Colonial went down clearly in this event now with the global market completely disrupted. But our assets are running well. They -- like I said, they have access to crude. And so, I think we'll be rewarded handsomely for operating them reliably over the coming quarters. Tom?

Yes. I mean I would just add in terms of what we've seen, particularly over the last several reporting weeks, right, where we're seeing draws across the country. And you're at a situation also where even in the past couple of -- in the past month or so, right, where in terms of the U.S. has been exporting product, not just off of the Gulf Coast, but out of the East Coast as well. So, we're at a situation where inventories have been depleted and obviously depends upon how long the disruption in the Straits of Hormuz continues, right? But the longer it goes, obviously, we stay in a very point of friction. But on the flip side of it is that when we would look at it in terms of resolution in terms of the conflict, you then potentially also have OPEC in a fractured state with the announcement of UAE looking to depart the organization. So, I think that all sort of fits within the sort of constructive outlook and the situation where in terms of markets that are deficit products, it is going to be challenging in the short term to find that resupply from any other region, because it certainly would appear at this point that Asia is buying the minimum amount of crude that they can purchase to basically satisfy their local demand or the region's demand, and there's no expectation that they're going to be continuing to pull crude from the Atlantic Basin to then resupply just in terms of the sheer amount of time that takes and the uncertainty in terms of what could happen during that 60, 90, 120-day supply line.

And importantly, also for the East Coast and the West Coast, with the Jones Act being put on the shelf for a period of time, we're actually able to run non-traditional crudes to the East Coast. Indeed, we'll be running some WTI and some other U.S. barrels on the East Coast during the second quarter. So, we'll have access to the crude. At the end of the day, as we said in the comments and Tom highlighted, the world is going to be desperate for our finished products.

Okay. That's helpful. And then our follow-up is just on capital allocation. Any more color you could provide on the optimal capital structure with Martinez back on and elevated margins, how should we just think about that cash flow generation being used?

I'll hand it over to Joe, but just one overriding sort of 10,000-foot comment I would make, consistent with all the comments that we've made for the last number of years. When there are periods of excess cash flow generation, we will look to our balance sheet first as just the core business model of how we run our business in terms of driving to a very conservative balance sheet. Obviously, it's a cyclical business, capital-intensive business. And during periods where the cycle is against us, we have that balance sheet to lean into. But that's requisite on times where we are generating excess cash where we return the balance sheet to our expectation.

Joe, any other?

Yes. No, I would reiterate that we do maintain -- always look at our capital allocation framework comprised of the 3 pillars of invest in the business, invest in the balance sheet and shareholder returns. But as Matt indicated, our current market conditions persist, we'll have an opportunity here to accelerate delevering as a means of transferring value from debt to equity, which would be a priority in the near-term. We did lean into the balance sheet in the last 12, 24 months, and I think we'd be looking to get back to levels we had come into 2025.

The next question comes from Joe Laetsch with Morgan Stanley.

So, I wanted to ask on the West Coast. Can you just talk about what you're seeing from a local crude pricing and availability standpoint here? Are these barrels pricing off of ANS right now? And then is there any competition that you're seeing from Asia pulling barrels away?

I'll make a comment and hand it over to Paul. You have to appreciate our position on the West Coast. And we've talked about this a fair amount in regards to -- and we've spent a lot of time talking about products and 300,000 barrels a day of gasoline and jet that needs to be imported to meet demand. And to the degree you bring in those products, those products -- you have to be able to attract those products from the rest of the world and the logistics to get there are significant. But on the crude side, we talked about it less. We've seen an increase on California production with some production coming on over the last quarter. And importantly, PBF has its own pipeline infrastructure with our M70 pipeline delivering to Torrance. So, the crude pricing in California is particularly interesting because if you look at pricing of crude around the world, the California production coming out of Valley, some of the most attractively priced crude in the world. And we have our own proprietary line that will be bringing that is bringing it to our refinery in Torrance. So, we feel like that's going to be a real competitive advantage for us going forward.

Any other comments, Paul?

I mean on the indigenous crude, it prices against ICE. That's the format that it trades on. It trades at a discount because of the quality. It is a very heavy sweet barrel, high TAM material, somewhat captured because it can't go offshore. So, it trades at a pretty good discount to ICE, which is obviously a pretty good discount to ANS. As far as the pull on the -- from Asia, the Asian program did pull a lot of ANS away from the West Coast in the current trade periods and the next trade period. So, it's a good supplement to some of the air grades that have been lost for those guys. So, yes, we're seeing a pretty good pull.

Great. That's helpful. And then on the refining business improvement program, can you just talk about how that's progressing? So, I understand the $230 million was achieved in 2025. Can you just talk a bit more about the path to the $350 million by year-end '26?

Sure. I'm just happy to report we're on path. But Mike, why don't you give?

Sure. Yes. So, the way we structured the program is we took the savings that we -- the run rate savings that we had achieved last year. That was $230 million that included capital. So, just from an OpEx perspective, it was $160 million. We put that into our budget. And then in the first quarter, we are right on that plan right now. And you'll see as the quarters go by, an increase in savings from quarter-to-quarter as other savings initiatives are implemented as well. So that by the year-end, we would expect to achieve those savings.

The next question comes from Paul Sankey with Sankey Research.

Can you hear me, okay?

Hearing, Paul.

Can you -- you've talked a lot around these questions. So, if I could just sort of keep digging a bit here, please. Matt, did you say -- can you just say when Martinez is going to be completely up and running all units, best guess. Did you say that's happening? And then can we talk a little bit -- you said some interesting stuff about how the crude slate is changing. For example, you mentioned the Jones Act allowing you to take WTI. I was wondering, for example, is that WTI price at Cushing? And can we dig a little bit into how your crude slate is changing given the whole new situation? And again, you've addressed this, but are there major issues where for example, jet fuel, how are you dealing with that? And is that getting exported? Can we kind of go through what the next 2 months will look like? Because I think the current market is guaranteed to be here for the next 2 months. And then if Hormuz starts opening up, I assume that all of that will reverse, but any longer-term comments would be helpful as well.

Okay. There's a lot. So, just in regards to Martinez, as we said, essentially, we expect literally over the next couple of days. And so, we'll be very, very pleased to get there. But as soon as this weekend, we should be up with sort of all our units up and running, which is good news. Again, frustrating on the duration, but very, very good news looking forward.

In regards to running nontraditional crews, everything has been disrupted and the size and scale of this disruption is sort of hard to imagine. I just keep coming back to -- at the end of the day, there's a lot of interesting conversations about crude. But at the end of the day, the only thing that matters is products. The disruption to the product market is extreme, and we're best positioned to capitalize that throughout the country, but particularly our coastal markets. When you look at our based operations and sort of the daily impacts, the U.S. East Coast is probably impacted the most in terms of what crudes it's running. Paulsboro historically ran Aramco barrels, and we've been able to make adjustments there.

But to a great degree, Chalmette, Toledo certainly and the West Coast is running what it traditionally ran. I don't think we're going to give you quite the detail you're looking for in terms of exactly how to pricing, but I commend you for trying. But yes, I mean, at the end of the day, like I said, I just go back to products, products, products. And to the degree that we can reliably produce them, we will be handsomely rewarded because they're in desperate need.

Fair enough, Matt. It was very good say.

Paul, it's Tom. I would just jump in. I mean, I think certainly for us in terms of -- I mean your comment, maybe the next 2 weeks, 2 months or certainty, right? I mean is that I think as we look at the sort of acute problems that the market has been doing or going through, it really depends upon just really how far you are from the Straits of Hormuz, right? So, Asia felt all these pinch points soonest, then it cascaded more so into the European product markets. And then it's now filtered into the U.S. market or the Americas, and we're certainly seeing that on products and particularly in terms of what gasoline has done over the last several weeks in terms of catching up because initially, this was just a crude problem and a distillate problem and a jet problem, right?

Now in terms of the balances, now it's a gasoline problem. And then therefore, also if Straits of Hormuz opens, right, then it's going to be a situation where the recovery is going to happen soonest in terms of how far are you from Straits of Hormuz, right? And obviously, the Americas are the furthest away from the Straits of Hormuz in terms of that. That's the sort of commentary relating around sort of months, quarters, et cetera, in terms of the recovery time.

Yes. It's interesting that the Jones Act is helping you lack of it.

The next question comes from Doug Leggate with Wolfe Research.

I can't tell you how happy I am to hear you talk about translating value from debt to equity, but I'll take that one offline. My 2 questions is, first of all, I'd like to maybe dig in a little bit on capture rate. At the simplest level, what we're trying to -- we've all been through these kind of spikes before, maybe not quite like this. But when you see extraordinary margins, the risk, I think, is that the market takes those extraordinary margins and assumes capture rate remains the same of those margins. You guys talked about headwinds. You talked about RINs. Obviously, you talked about crude slate. I wonder if you could just dumb it down and say, well, how do you anticipate your capture rate on these extraordinary margins to trend? Will it be the same? Will it be higher? Will it be lower? That's my first one. My second one is just real simple on business interruption. And maybe it's just a balance sheet question. You haven't really given us a lot of disclosure on how much of the current balance sheet is still a net positive that will go away. In other words, when you pay out the remainder of the repairs, net it against how much you actually still get in the growth of business interruption. And then the root of my question is, you've been offline during extraordinary margins in the West Coast. You were supposed to come back up in December. Do you still get business interruption in the first quarter? I'll leave it there.

Okay. Sure. So, capture rates in extraordinary periods of time, which we clearly are in, it will be very, very difficult for you, quite frankly, for the investment community to pinpoint capture rates as you have a lot. Obviously, flat price, RINs and massive, massive basis differentials that are swinging wildly on a daily basis. Indeed, jet on the West Coast today is trading over $1 NYMEX distillate mark. So, it will be very difficult task to bring precision to capture rates in these extraordinary periods. Capture rates by them self -- by definition are rules of thumb. And in this period of time, rules of thumb don't necessarily equate perfectly. We'll try to be as helpful as we can in that regard navigating it through. But there are obviously a lots of puts and tails. But at the end of the day, I keep coming back to products, products, products. And the fiscal price for our products will be evident as we go because of how short they are at the moment. And so yes, and on top of that, the last barrel in the plant may look expensive compared to historic sort of runs. But again, the product prices are going to carry that.

In regards to BI, indeed, our coverage does extend into this year and we will continue sort of to work with the insurance companies who've been very, very good partners. I've said that, I think, on every single call. And I'll turn some of the insurance stuff over to Joe. But indeed, it wasn't your question. But again, the addressing the balance sheet and transferring that wealth from leverage into equity is a core principle of how we run this business. So, let there be no confusion on that.

Any other comment on the insurance side?

Yes. I would just say, given the fact that the claim is ongoing and the insurance proceeds we've received to date have not been allocated. I can't really give you any more detail on the breakup between DI at this point. But we'll say that importantly, the rebuild costs are substantially behind us at this point, and we do expect further progress payments on the insurance side through the end of the claim.

I understand there's no precision here, but nevertheless, I appreciate the color.

The next question comes from Philip Jungwirth with BMO.

The turnaround schedule for the year originally contemplated Martinez hydrocracker in 2Q. Is this at all impacted by the later restart? And or just what's the status here? What would this turnaround entail or imply as far as crude throughput for the facility?

Yes. We've been working that, obviously. That was originally like per our last call, we were talking about that in the second quarter. We're working through that now. I would say there's a high degree or a high probability that, that turnaround that we actually move that towards the end of the third quarter. That hasn't been completely finalized yet. They have to go through a number of checks. And again, safety, reliability, responsibility, running responsibly is sort of the prerequisite for everything. And so, we're working through that. But I expect that work will be pushed out towards the end of the third quarter.

Okay. Great. And then can you talk a little bit about SBR and the outlook here? We don't get a ton of detail on profitability, but clearly, the margin profile for RD has improved. Any color as we head into 2Q? And then separately, just how are you viewing your RIN exposure currently net of SBR?

All right. So SBR, look, this is -- it's a happy moment. There's no doubt the reason -- one of the reasons we invested in the project in the first place. So, the prospects, the outlook for SBR is quite strong today. It's quite honestly, the strongest it's ever been since we've been up and operating. So, the first quarter had positive EBITDA, but the outlook going forward, and we just completed a catalyst change, the outlook going forward looks very, very constructive. And to some degree, it holds the story together for PBF as the hedge against RIN prices that we didn't have 3 years ago. And so, we're very pleased to have SBR in our portfolio. And indeed, I think on our next call, you'll see sort of how helpful it is.

In regards to RINs, they seem to be on a one-way freight train going up. RINs are upwards of getting close to $13 a barrel. I've described the program for over a decade as being broken, which is true, maybe nothing is more true than that, but it actually very well may break literally where there's not sufficient RIN generation because, of course, high RIN prices, low RIN prices, you still blend the same amount of ethanol. There is an ethanol blend wall. So, it relies on RD production and bioproduction. And if that doesn't meet the RVO, you could get into a situation where not only is RINs dramatically in pricing the price of gasoline, where it's actually constricting supply because if you can't -- if you import, so if you go to the coast and you need to attract imports, that importer has to buy a RIN. So, the price that he's looking at deducts the RIN price. So, that sort of speaks to the requirement on the coast to be able to attract those products. But if the RIN is unavailable and he can't be compliant, the product won't come.

And so, will we get there this year? I don't know. To a great degree, it will depend on bioproduction and renewable diesel production around the world, I guess, to some degree. The RVL, as I said, is the highest it's ever been and completely stupid in regards to impacting the price of gasoline. The easiest lever the administration has to lower the price of gasoline today would be to address the blend wall, and there is countless ways they could do that. But it is what it is. And as I said, we're very, very pleased to have SBR. We think it's going to be contributing nicely.

The next and final question that's Jason Gabelman with TD Cowen.

You discussed the Martinez hydrocracker turnaround and potential to push that out. But can you talk more broadly about the opportunity to push out maintenance later this year into next year and just how maintenance looks over the next couple of years, given we could be in a period where margins are higher for a decent amount of time here?

Yes, higher for longer. Yes. I'll just say in the short, short term. We obviously -- just looking at the next couple of quarters, we have a very, very clean runway. And so, the opportunity is certainly extraordinary in the near term.

Mike, why don't you make some comments?

Yes. The second and third quarter are pretty clean. We do have some things coming up in the fourth quarter. We always evaluate right around this time, actually moving some things around. There are some things that we may be able to do. There are some things that are kind of locked in. I'm not going to get into specific turnarounds and the likelihood of moving them at this point. I will say that this year was probably one of our heavier turnaround years in terms of our major turnarounds. We consider a major turnaround, whether it's a conversion unit or a crude unit combined together. So, this is one of our heavy years in recent history in terms of the scope. But the next couple of years, we tail off a bit and we're a little bit later in '27 and '28. So, specifically, I'm not going to mention any turnarounds can be moved, but we are -- we do those evaluations right around this time.

My other question is on the results for the quarter. You mentioned derivative losses impacting 1Q, I believe. You didn't quantify it. Can you talk about what that looked like for 1Q and what that maybe will look like for 2Q or how we should think about that going forward, just given in the current environment, I think some of these derivative losses could be a bit outsized.

Yes. So, we recognized a little over $200 million of mark-to-market on derivative losses during the quarter. At the end of the quarter, there was about $100 million of unrealized. So, there's still some offsetting physical barrels that will flow through to offset that and likely be a benefit in Q2. And then as far as Q2 actual derivative impact will depend on where prices go from here.

The derivative program, just so everyone understands is a risk-reducing program in that we will hedge inventory that is above and beyond our normal baseline. And with the disruption we had on the West Coast at -- when we are entering the February 28 or March -- early March, we had approximately 6 million barrels above and beyond what we normally have in our portfolio. And as such, we were managing the price of that. Anecdotally, I think the company did an exceptional job of sort of navigating the unprecedented volatility that we saw in managing those barrels. But as our inventory works down, the need for that hedging exercise is eliminated. And so, I suspect by the end of the second quarter, you're not going to see similar callouts. But again, it's a situation where at the end of the first quarter, you're marking those derivatives to market even though you still have the inventory that you're then going to realize the physical side during the second quarter.

We have reached the end of the question-and-answer session. And I will now turn the call over to Matt Lucey, CEO, for closing remarks. Please go ahead.

Thanks again for your time and attention this morning, and we look forward to speaking with you in July. Have a good day.

Thank you. This concludes today's conference, and you may now disconnect your lines at this time. Thank you for your participation.

Good day, everyone, and welcome to the PBF Energy Fourth Quarter 2025 Earnings Conference Call and Webcast. [Operator Instructions]. Please note, this conference is being recorded.

It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

Thank you, Angelene. Good morning, and welcome to today's call. With me today are Matt Lucey, our President and CEO; Mike Bukowski, our Senior Vice President and Head of Refining; Joe Marino, our CFO; and several other members of our management team. Copies of today's earnings release and our 10-K filing, including supplemental information, are available on our website.

Before getting started, I'd like to direct your attention to the safe harbor statement contained in today's press release. Statements that express the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the safe harbor provisions under federal securities laws.

Consistent with our prior periods, we will discuss our results excluding special items, which are described in today's press release. Also included in the press release is forward-looking guidance information. For any questions on these items or other follow-up questions, please contact Investor Relations after today's call.

I'll now turn the call over to Matt Lucey.

Thanks, Colin. Good morning, everyone, and thanks for joining our call. I want to address 3 key topics: one, status of Martinez; two, our fourth quarter performance; and three, the near-term outlook for the market and our company.

First, the status of Martinez. Bottom line is we're on the cusp of restarting the refinery. All the construction work will be done this weekend. Next week, the plant will be turned over to operations and we will commence a safe and methodical restart.

We expect to be fully operational in early March. We set a high bar for the team that we would not be where we are today without the efforts and ingenuity of all involved. The Martinez team, a representative workforce, our suppliers and many others who work collaboratively along the way.

Our team overcame numerous challenges to get us to this point. And a safe, successful start-up will be the culmination of their efforts. We eagerly look forward to getting back to full operations this quarter and supplying the California market with much needed fuels.

Point two, Q4 performance. PBF exited '25 on a strong trajectory. Our fourth quarter results were a sequential improvement over prior quarters and demonstrate the exposure of our system to torque with improving crude differentials. Even with expected seasonality, product cracks remained relatively strong as the quarter progressed. We directly benefited from improving crude dynamics, increasing supply of heavy and medium crudes improved the light heavy spreads and our predominantly coastal, highly complex refining system directly benefited.

Point three, outlook. The market landscape taking shape in '26 is looking very good. Refining fundamentals should remain supported by tight refining balances with demand growth lining up well compared to transportation fuel capacity additions. Most of the refinery additions are in Asia and have a very high petrochemical yield.

Sour crude differentials began widening in the middle of last year with OPEC+ taper and now have additional tailwind in '26 of Venezuela barrels entering the open market. PBF is particularly well suited and highly leveraged to this improving market dynamic.

And in California, with Martinez almost behind us, we look forward to participating in a market that is tighter on products and looser on crude. The near-term outlook for the company is certainly buttressed by the $230 million in achieved efficiencies that we reached in 2025 and are now firmly in place.

Incidentally, our RBI effort is not complete. We have identified an additional $120 million of run rate savings for a total of $350 million that we expect to achieve by the end of this year. PBF remains focused on controlling the aspects of our business that we can control.

To be successful and enhance value for our investors, we must operate safely, reliably and responsibly, and we must do it as efficiently as possible. With a fully restarted Martinez, constructive market dynamics and $230 million of achieved efficiencies, we should have the company set up to be clicking on all cylinders and drive positive results for our shareholders.

And with that, I'll turn the call over to Mike Bukowski.

Thank you, Matt. Good morning, everyone. Before updating on the progress of RBI, I'll provide a few comments on fourth quarter operations and our Martinez refinery.

On the West Coast, I commend the Martinez team and all who have been involved in the rebuild effort. The unplanned nature of the project created a host of challenges that the organization met through creative problem solving, ingenuity and above all, excellent teamwork.

The team has not only overcome these challenges, but they have executed the work so far at an industry top quartile safety performance. My thanks to all involved in the project and all the safe work that has been done -- has been completed to date.

Outside of Martinez, aside from a few minor issues, our refineries operated reasonably well in the quarter. We kicked off a robust 2026 capital program in January, beginning with the turnaround at Torrance. I'm happy to report that the mechanical portion of the turnaround has been completed per plan and the units are in the start-up phase.

We have a busy year on the turnaround front in 2026. We previously provided guidance on the locations and total anticipated expenditure for the year. These activities are weighted to the beginning and end of the year, leaving Q2 and Q3 relatively light from a planned maintenance perspective. I'm also happy to report that we are seeing results from our RBI program.

By the end of 2025, we achieved our goal of $230 million of annualized run rate savings. This goal represents $0.50 a barrel or approximately $160 million reduction in operating expenses against our 2024 benchmark and is incorporated in our 2026 budget. Additionally, we reduced capital and turnaround expenditures by $70 million. While our 2026 total capital guidance is higher than 2025 on an absolute basis, this is driven by an increased level of turnaround activity. The savings reflect comparison against the year with similar scope.

We view our system-wide turnaround cycle as being in the 5- to 7-year range. And over time, the savings and efficiencies gained on the capital program will become evident. As you may recall, we started this program with centralized efforts in procurement, capital projects, organizational design, turnarounds and site efforts at our Torrance and Delaware Valley refineries.

As of today, all refineries are engaged in RBI and are contributing to the savings goals, and we are also working on a secondary cost initiative. As part of the overall RBI program, we have identified over 1,300 initiatives focused on improving operational and organizational efficiency. Some of these initiatives are small and some are in the millions of dollars in terms of benefits, but they all sum up to a more competitive and improved cost structure.

The average value per initiative is in the $0.5 million range, and we've implemented over 500 initiatives to date. Outside of our capital and energy initiatives, the biggest opportunity we identified is our procurement practices. We are implementing a centrally led procurement team, which brings value by leveraging our purchasing power across our refineries. Through this initiative alone, we expect to realize over $35 million in annual savings by revamping our procurement model.

While we are improving our maintenance efficiency, reducing energy consumption, our main priority will always be to focus on safe, reliable and responsible operations across our system.

With that, I'll now turn the call over to Joe Marino for our financial overview.

Thanks, Mike. For the fourth quarter, excluding special items, we reported adjusted net income of $0.49 per share and adjusted EBITDA of $258 million. Our discussion of fourth quarter results excludes the net effect of special items, including $41 million in incremental OpEx related to Martinez refinery incident. $394 million gain on insurance recoveries, a $313 million LCM inventory adjustment, a $2 million loss related to PBF's 50% share of SBR's LCM adjustment for the quarter and approximately $8 million of charges associated with the RBI initiative as well as other items detailed in the reconciling tables in today's press release.

The $394 million gain on insurance recoveries related to Martinez fire is a result of a third unallocated payment agreed to and received in the fourth quarter. This brings our total insurance recoveries in 2025 to $894 million, net of our deductibles and retention.

Going forward, we will continue to work with our insurance providers for potential additional interim payments. However, the timing and amount of any agreed-upon future payments will be dependent on the amount of incurred covered expenditures plus calculated business interruption losses. Our Q4 P&L reflects incremental OpEx at Martinez of $41 million, $164 million in total year-to-date that we are reflecting as a special item because it relates to the construction of temporary equipment to restart undamaged units and other fire-related noncapital expenses.

While we anticipate recovering a portion of this amount through insurance, the specific amount will be determined as we finalize the claims process. Shifting back to our normal quarterly results discussion. Also included in our results is a $21 million loss related to PBF equity investment in St. Bernard Renewables.

SBR produced an average of 16,700 barrels per day of renewable diesel in the fourth quarter. SBR's production was as expected, but results reflect the impact of broader market conditions in the renewable fuel space. While we saw improved pricing on the credit side, much of this was offset by higher feedstock costs.

Throughout the year, we've seen impacts from tariffs and regulatory uncertainty cascaded to the feed market and the policy landscape continues to shift, adding volatility to the business.

PBF cash flow from operations for the quarter was $367 million, which includes a working capital draw of approximately $80 million, mainly due to movements in inventory and falling commodity prices.

As a preview, we expect first quarter CapEx and working capital outflows primarily related to the Martinez restart and normal seasonal inventory patterns. Our Board of Directors approved a regular quarterly dividend of $0.275 per share. Cash dividends paid totaled $126 million in 2025.

Cash invested in consolidated CapEx for the fourth quarter was $124 million, which includes refining, corporate and logistics. This amount excludes fourth quarter capital expenditures of approximately $273 million related to the Martinez incident. 2025 CapEx, excluding Martinez, was approximately $629 million.

On the surface, this figure is lower than expected due primarily to CapEx pools that had not yet been cash settled as of year-end that will flow through this year. Given that and the noise related to the Martinez rebuild, 2025 and 2026 capital programs should be more broadly considered over a 2-year period. Once the Martinez insurance claim is settled, we will be able to provide additional clarity.

We ended the quarter with $528 million in cash and approximately $1.6 billion of net debt. At quarter end, our net debt to cap was 28%, and our current liquidity is approximately $2.3 billion based on current commodity prices, cash and borrowing capacity under our ABL. Maintaining our firm financial footing and a resilient balance sheet remain priorities. As we look ahead, we expect to use periods of strength to focus on reducing both our gross and net debt.

Operator, we completed our opening remarks, and we'd be pleased to take any questions.

[Operator Instructions]. Your first question comes from the line of Manav Gupta from UBS Financial.

Congrats on the strong result. My first question is when we look at PBF as a percentage of total feedstock, you probably use more medium and heavy SBRs than anybody else out there in the U.S. refining system. Now we are already seeing those dips widen out, could be a function of additional Venezuela barrels coming in and other stuff. But I'm basically trying to understand, Chevron has said they can increase production by 50% from Venezuela. As these additional crude barrels come to U.S. and maybe hit the global markets, can you help us understand the tailwind it will create from PBF from this point on?

Manav, thanks for the question. And you're right on point in regards to PBF's ability and everyone will tout their own numbers and as such. But no one on a relative basis consumes or has the ability to consume as much heavy and sour material as PBF upwards of 55% or 60% of our total throughput capacity. So the famous who's the best boxer? Well, who's the pound for pound the best boxer in regards to relative ability. So you have -- in our system, it's 200 million barrels a year that we process medium sour or heavy sour barrels. That packs a punch going back to my boxy analogy in terms of every dollar you get on crude diff equates to a $200 million improvement for our business.

And as you say, I'm not sure anyone is as levered as we are in that regard. And so as we see incremental barrels come on, and this started back in the spring, OPEC, OPEC+ started to taper, and there's going to be a lag to that. We saw that and even over the fourth quarter, even before the news on the [ Duro ] pit. And then we -- in a number of weeks ago, with Venezuela coming online, that just is more supply into our marketplace. And the reality is the impact to the U.S. refining system with those sanctions being lifted is instantaneous.

Yes, there will be many, many years of investment and potential growth in Venezuela. But overnight, essentially, the market has been opened up from where it was fairly curtailed under the Chevron program prior to essentially all being available into the U.S. Gulf Coast and into the U.S. market. So that's very, very positive for the industry and PBF in particular.

Perfect, sir. My follow-up quickly is on Martinez. I think you actually listed 16th February is the day when all the construction comes to an end, which is just 4 days, which -- so not much can go wrong there, but I'm just trying to understand to make an airtight case, what should we be watching between 16th February and probably March 7 to make sure that the refinery actually is able to fully restart by the first week of March. I mean your competitor, which was looking to close the refinery in April looks like he's closing now.

And then the pipelines, they may get there in 3 years. So you could see much above mid-cycle earnings for 3.5 to 4 years if you can get this project fully up and running. If you could talk a little bit about that.

Absolutely, Manav. And you're right. We're essentially right up against the finish line here. It's been an incredible a process to go through. And I must commend the team out there. And it's not only just the local Martinez team, you've had a large number of PBF employees that even weren't in San Francisco that have dedicated the better part of a year in bringing this facility up much faster, mind you, than outside consultants were saying. But the marketplace in California, I think, is going to be particularly interesting. You have a much tighter product market. We've talked a lot about that.

And that -- what we've talked about prospectively is now upon us. The competitor in San Francisco that you alluded to by press reports, that has now been shut down or ceased operations. And so you've got a very, very tight product market, upwards of 250,000 barrels a day of gasoline that is -- needs to be imported. You've got a significant amount of jet fuel, over 50,000 barrels a day of jet fuel. And indeed, the state imports additional 50,000 barrels a day of RD into the state. And so the logistics constraints just associated with that amount every day, putting aside the floor that is in place that needs to attract those barrels into the market, we think it's set up attractively on the product side. But you can't ignore the crude side as well, where you've got less buyers of California crudes.

As such, we're seeing our pipeline and all the infrastructure that we have in place being more utilization going through that, which is very, very good news. And so we've talked a lot about it. We think California is going to be particularly interesting with the new dynamics, and there's been a lot of shifting dynamics. But in regards to Martinez, as we said, over the next couple of days, we'll wrap up the work. It will be a methodical restart. We haven't run that cat cracker in a year, and we're going to take our time and do it right. And like I said, our full expectation by very early March, we're up and producing products.

It looks like 2026 is going to be a much stronger year for you than 2025.

The next question comes from the line of Ryan Todd from Piper Sandler.

Maybe starting on the refining side on margin capture improved significantly in the fourth quarter. Can you talk about some of the drivers of the improvement and how some of these trends, including things like crude differentials might remain a tailwind for the first quarter of '26 and beyond?

Yes. The crude differentials is the big story. First of all, it's running reliably and nothing beats reliable operations. But in terms of impacts, widening crude differentials, you will simply see our capture rate go up. And when -- I think I said before, to the degree that crude differentials widen, we get 100% of that. And that's where we get paid for the complexity that we have. So it's across our system. Obviously, Toledo has its own dynamics being a Mid-Con refiner. But all of our other refineries being coastal complex refiners, as cost of crude improves on a relative basis to other benchmarks, our capture rate is set to increase. And as I said before, every dollar of improvement equates to $200 million on an annual basis.

Maybe a follow-up on the refinery business improvement initiative, the RBI as well. Can you maybe provide a little more color or granularity of the $230 million the run rate that you've captured to date, could you bucket kind of where you've seen those improvements? What have been the biggest drivers?

And as we look forward towards the incremental improvements expected over the course of this year, kind of where should those improvements show up? And how should we see them flow through the results?

Okay. This is Mike. Thanks for the question. For the $230 million, as we said, $160 million of that is in OpEx. Of that OpEx breakdown, it's largely driven by what we call third-party spend. And so things like our procurement practices, how we interact with our vendors, our suppliers, service providers and material suppliers. That's a big piece of it.

The other piece is in the area of energy consumption. We've made a lot of strides in being able to improve our efficiency across our refineries. On the capital side, it's largely driven by turnaround performance. And this is something that actually we started prior to RBI, where we've implemented rigor and discipline in our turnaround planning and scope development practices. And we've been on this journey, as I said, for over 2 years, where we focused on getting very predictive in our results, but now we're morphing into a phase where we're driving competitiveness. And we're seeing our improvement -- our expected improvement as we move through different benchmark quartiles.

We are also working on our sustaining capital, which is essentially any capital required for regulatory requirements and/or capacity maintenance and to be as efficient as possible in how that spend is allocated. When I think about the $120 million going forward in the future, I think you probably will see most of that in the area of energy and continued improvement in the third-party spend area, not so much in -- on the capital side, mainly because I think from a turnaround perspective, we are pushing towards the boundaries there in terms of first quartile performance.

We don't want to be very, very top quartile. We want to make sure we're spending appropriately and maintaining our units, but we also want to maintain competitiveness with those others in the industry.

The next question comes from Mehta Neil from Goldman Sachs.

Just wanted to build on the balance sheet comments from the opening remarks. I think you said you're at $1.6 billion in net debt. Matt, as you think about the optimal balance sheet, what's the right level of net debt as you think about it either as a percentage of your capital structure or on an absolute basis? And then talk about the path to get there.

Well, what's optimal is a funny question. It sort of depends on the market in which you're operating in. And to the degree you're in a very, very strong market, you need to take that opportunity to not only delever, but somewhat get underlevered just because of the cyclicality of our business.

And you saw that over the last couple of cycles when coming out of '22, we got ourselves underlevered. And even in the difficult part of '24 and part of '25, where we certainly had headwinds on -- from a crude perspective, we never got to an uncomfortable place in regards to leverage as we took on some net debt as a result of that marketplace.

So the capital structure and debt is my personal view, where you're going to allocate capital as you're entering what looks like a very, very constructive marketplace. you start to blend debt repayment with returning cash to shareholders because as we reduce net debt, we should see a dollar-for-dollar essentially return for shareholders as you move value, your enterprise value from debt to equity.

So our near-term focus for sure, as we generate cash will be to reduce debt. And then we don't spend a lot of time talking about money that we don't have in hand yet. So we'll -- as we go through that, we'll value it step by step. But there's a huge value for us in paying down debt as we enter a cyclically strong period.

Yes. Matt, that's the follow-up, which is as I think about the product markets going into this year, we have really good strength in the curve on the distillate heating oil side, and then you've got relative weakness in gasoline and there's some seasonality to that as well. But just as you think about the spread between those 2 products, do you see a scenario where gasoline catches up through the year? And just your thoughts on the fundamentals of the underlying products.

Neil, it's Tom. In terms of addressing that comment sort of really around gasoline, I think starting there is -- obviously, there is seasonal swim sort of coming out of the fourth quarter with gasoline stocks rising with very high utilization. We've now entered the maintenance period, PADD 3 stocks, which were the area probably of the greatest bloating that took place have started their draw. We're into the seasonalities.

And I think it's really kind of coming around the changing dynamic, which has been taking place for the last year or so in the Atlantic Basin and obviously, now the effects of what we'll see on the West Coast, which will -- as Matt was talking about in terms of the 250 a day of gasoline, which needs to be imported there. So that sort of changes a little bit of the dynamic or not a little bit changes the dynamic in the Atlantic Basin, where obviously, there are flows leaving the Atlantic Basin heading to California. So that will be -- sort of continue to sort of drive the bus in terms of that tighter market.

And probably also a little bit underreported, right, just kind of continuous need to be is that we've seen constant revisions basically to the DOE demand side of the equation from the week lease. A little bit more on -- obviously focused more on diesel than on gasoline. And on the diesel equation, I think it's a bit of the same kind of story as gas that we saw in gasoline. You saw inventories rise towards the end of the fourth quarter. But PADD 1 over the last 2 weeks has gone from sort of looking at a moderating space to now we're basically at or below the 5-year in quite some time -- in a very short amount of time, excuse me.

So the incentives are going to continue to be there. I mean we see the refining balances tight. And the additions which are coming this year are more in the second half of the year and very high in the petrochemical side. So the outlook for products, we're certainly constructive.

The next question comes from Doug Leggate with Wolfe Research.

Matt, it's great to see Martinez coming back. It's been a long time coming. But I wonder if I could turn my questions to the insurance part of that. What we're trying to figure out is how much of the insurance proceeds that have come in so far have still to be paid out in terms of repairs?

And I guess related, how do you even begin to quantify the lost opportunity cost given that margins were obviously distorted by the fact that Martinez was offline. So trying to get an idea how the net cash balance normalizes when you've paid out everything and received everything you expect to get? That's my first one. I've got a follow-up, please.

Sure. From an insurance standpoint, the proceeds we received so far have been unallocated, and they will be unallocated likely through the end of the claim. So we don't have a definitive outline of how much we received so far as it relates to capital expenses, RBI or other operating costs that we incurred. So -- but we do feel very good from an insurance standpoint that the -- all the property-related capital rebuild costs will be fully covered.

And then the BI, I think to answer your second part of the question, which covers part of that loss opportunity, that's a bit of a nuanced process where we work through with the insurance and providers, and we have developed a model indicating how we would have performed if no incident occurred and compared to how the market performed and will be paid out accordingly to recover a good portion of the losses during that period.

The reality is on the BI side, and Doug, there's a whole cottage industry around your question, which is there's a lot of nuances, a lot of gray. There is a lot of science and math as well, and it all sort of blends together. Bottom line is I believe we have an extraordinary relationship with the underwriters in terms of something that's been developed over many, many years. I think performance to date in regards to recovering insurance is far better than your sort of average events such as this in regards to how we're doing in regards to recovering.

Once you get towards the end, there will be haggling and negotiating around the edges. We've been able to cover a lot of ground over this year. The good news, and again, we'll come back to the good news is the work is essentially complete here. And so the event should be behind us, which means and then short order thereafter, we should be able to clean up on the insurance side.

Okay. My follow-up, guys, Colin and I have gone backwards and forwards on this, and I'll tell you, honestly, we've removed the liability for RINs from our assessment of your valuation after talking to him. But I wanted to ask a question about your RIN liability -- and why -- if you could articulate for everyone listening, why you believe you would -- that would never have the equivalence of net debt and how it might have been impacted by the fact that RIN costs have obviously ballooned significantly since the new RVO was proposed at the beginning of the year.

I'm sorry, you're going to make my negotiation with Colin's. He's going to be requiring more money now. But what was your connection between RVO and net debt? I missed that, I'm sorry.

Okay. So you have a RIN obligation, a liability on your balance sheet. But my understanding is you never expect to pay that. I'm assuming that the liability will have gone up as a consequence of what's happened to RIN prices. And what I'm asking is, why should we assume that, that is never an actual liability in terms of something you have to pay out, and therefore, it does not have the equivalent of net debt?

Maybe just to clarify a bit there, we do ultimately have to settle on the RINs obligation, and that's an annual settlement process. But it's a rolling liability. In other words, we continue to incur it as we operate our business. So to the extent you settle one period, you're going to be incurring another. So from a cash flow perspective, it's essentially going to be neutral from that standpoint.

Think of it as working capital.

Exactly. It's like any other working capital accrued obligation.

In regards to RINs going up, they have gone up. And the reality is they've gone up. They've essentially doubled since beginning of last year. The RIN fight is different than it was 10 years ago. Obviously, we have SBR, which buttresses our exposure and the market has evolved. It is not perfectly efficient. And so therefore, there are still winners and losers.

So you have that aspect and you also have the potential for rising RIN prices, which go into the price of gasoline. And so we've seen RIN prices double over the last 13 months. We're working very hard, obviously, in Washington, not only on the winners and losers part, but also to make sure they understand that if they're not careful, RINs can escalate even further and really impact the price of gasoline. So we've been pretty active on that front.

The next question comes from Phillip Jungwirth from [ BMO ] Capital Markets.

On the 1Q throughput guidance, East Coast is a bit light versus the annual numbers. There isn't any planned turnaround. So is this just the winter storm impact that we're seeing? And then West Coast would be implied to run mid-90% utilization for the rest of the year after the Torrance turnaround and Martinez startup. So what's the confidence in seeing the higher utilization after the first quarter on the coast to take advantage of what should be a higher margin environment?

So I'm highly confident. Look, Martinez, we do have hydrocracker turnaround in Q2, but Torrance is finishing up work now and is essentially clean for the rest of the year. Martinez will be thereafter. In regards to the East Coast, there's nothing extraordinary that stands out. That's for sure.

Okay. Great. And then coming back to the wider crude diff conversation, is this something that you think can be sustained midyear or into the second half just as we see higher summer demand, Canadian turnaround, OPEC hitting the pause, new complex refinery startups at year-end? Or do you think there's enough tailwinds here with Venezuela rising Canadian crude production where this can be the new normal? Just trying to understand what's seasonal versus structural here on crude dips in your view.

Yes, Philip, it's Tom. I mean I think you raised a great question in terms of the sort of structural versus seasonal aspects. But I mean, I think the way that we're looking at this is that in some aspects, you've had effectively a barrel which has not been able to trade freely. And that's something that's been going on in the marketplace for quite some time, whether it's tied up by sanctions or different aspects, so predominantly Russia, Iranian, Venezuela and you basically have distorted those markets and have effectively forced them and pushed them to the Pacific Basin for consumption.

So I think in that aspect, from everything that we're seeing here today from the Venezuela sort of liberation of their crude market, I think that takes that to putting it sort of into the structural camp as opposed to being seasonal because in some aspects, we're going to be in a scenario where if the U.S. continues on its growth in terms of the imports that are coming from there, it's going to eventually start to tax the ability for coking capacity in the U.S., and we'll start to fill that out. I do not think we're there yet.

But I think the other thing that's important to note through this whole thing when we're talking about the crude differential situation is that what we are starting to see at this point is a sort of persistent improvement in the light side of the barrel, right? I mean we're not sitting here this year talking about prolific growth in the U.S. market for shale.

We've gone through a situation over showing from a -- a little bit more seasonal, but we've seen very, very strong strength in dated Brent, and that's been coming from the disruptions that have been taking place in the Black Sea with CPC. You also had freeze-offs in the United States, but you sort of have a little bit of a -- you got a push and a pull when it really kind of translates to the crude differentials. And I certainly see from our seat that we're not sort of -- I don't think we're missing anything that all of a sudden the U.S. is going to show up and having grown 1 million barrels year-over-year with enough of the information that we see in the marketplace.

Strong Canadian growth, strong America growth that may be sort of under the radar, Venezuela barrels coming into the marketplace. These are dynamics and relatively flat shale. These are dynamics that we haven't seen in a long time.

The next question comes from Paul Cheng from Scotia.

The first question, I think, is maybe for Joe or Mike. With the RBI, the continued benefit and all that, it does look like 2025, your OpEx is down about $100 million versus the 2024. So it does seems like you have shown up some benefit in here. Can you tell us that with the inflation, higher natural gas price, but continued benefit from the RBI, how should we expect in the 2026? Is that you think that you will have enough initiatives that to offset the increase from the higher throughput because Martinez is coming back, the inflation and also the higher natural gas price or that may not be able to fully offset yet? So that's the first question. And the second question is that -- okay. Please go ahead, Joe.

Sorry, I don't mean to cut you off there. But from a -- just to answer the first question, yes, the RBI savings that we put forth out there are net of inflation. And so if you're looking at the 2026 guidance on OpEx versus what we've done in '24, I think one of the key things to point out because the RBI savings are embedded in that guidance is that we are using a natural gas price assumption that if you look compared to what natural gas prices were back in 2024, that is going to be an increase. But if you normalize for that, you'd see that the savings for RBI are baked in for 2026.

Joe, you're saying that a lot of work has been done on the energy intensity. So what is now the sensitivity for every $1 move in natural gas price? What's the impact to your cost structure?

Generally, $1 increase will equal about $100 million.

I'm sorry, $100...

$1 equal $100 million increase.

$100 million. Okay.

$100 million.

All right. Great. And the second question is that sequentially from the third to the fourth quarter, the West Coast margin jumped significantly and that the industry margin actually gone down. So trying to understand that, and you are still in the process of fixing Martinez. So what's causing that big improvement in the margin capture in the fourth quarter? And is there any one-off benefit that we should be aware?

No, not anything one. I mean it speaks to the same thing we've been talking about across the system, which is running reliably, running more efficiently and then lower crude costs is the driver, nothing more complex than that.

Yes. But that the industry margin actually was down and -- but that you capture or that your actual realization up quite meaningfully. And your operation, is it really that much different with Martinez is still under repair. So I mean, is our operation really -- I mean, can you tell us that give us some idea that how the operations have improved in the fourth quarter versus the third quarter that lead to such a big improvement in your capture?

Again, I draw you to the cost of crude. I'm not sure the industry margin that you're looking at. I stick with my answer, reliable efficient operations and the cost of crude are going to be the drivers. And indeed, I sort of view California as a microcosm of our broader business, where you've got a tight product market and a loosening crude market. California is its own unique little market with its own dynamics. And obviously, it's had closures there, which have made the product market much, much tighter. But you also have a dynamic crude market in California that you're unable to export California crude.

So as crude -- as refiners come off and there's less buyers of crude, your crude differentials are set to improve. Now going forward, in terms of getting out of the third quarter to the fourth quarter prospectively and clearly, with Martinez sort of up and running, we view it as an incredibly dynamic and attractive market for us on the look at. Again, we're going to have a clean run rate on Torrance. Martinez does have a hydrocracker turnaround in Q2, but then it will be a clean run there. And you're going to have a very tight market and a loosening crude market.

The next question comes from Jason Gabelman with TD Cowen.

I wanted to ask on CapEx because '25 and '26 turnarounds, as you mentioned, are a bit active. How do you see kind of the turnaround schedule trending after this? Should we take kind of last year and this year as a normalized cadence? Or do you think it's more active and throughput should expand in future years?

I'll make a comment and then hand it over to Mike. This year is particularly large. We have, I think, close to 30%, 28%, I think, was the number I saw, more man hours with all the work we're doing this year over last year. And by the way, I know it's hard to reconcile RBI, but you see a higher turnaround number for this year. But the man hours have gone up 30% and our costs went up 10%.

So if you look closely, and we can help you sort of dissect it, you'll see the benefits of our RBI program. This year is a particularly heavy turnaround year as this is what our business is. It's not ratable in that regard. But we absolutely -- it will normalize going out over the years after, Mike.

Yes. I would look at '27, '28 and '29 to be more in terms of the scope, more indicative to what we had in '24, '25 kind of average together. It's going to come down also that high that we had -- we have in 2026.

Great. And my follow-up is just going back to the insurance proceeds. And I know you've tried to steer us away from trying to break out those proceeds from business interruption insurance and then the cost to fix Martinez. But I noticed in your financials, you do attribute part of it in cash flow from ops and then part of it in cash flow from investing. So is that split indicative of the interruption insurance versus the insurance to fix the equipment? Or should we not look at it that way?

I think at the moment, that's an accounting convention that we've elected to present that. That's not necessarily indicative of where it's going to end out when the claim is settled. So when the claim is settled, that's when the final kind of allocation will be available.

We have reached the end of the question-and-answer session. And we'll now turn the call over to Matt Lucey for closing remarks. Please go ahead.

Thank you very much for participating. And as I said, we look forward to very positive results in the quarters to come. Have a pleasant weekend. Talk to you soon.

Thank you. This concludes today's conference, and you may now disconnect your lines at this time. Thank you for your participation.

Good day, everyone, and welcome to the PBF Energy Third Quarter 2025 Earnings Conference Call and webcast. [Operator Instructions] Please note, this conference is being recorded.

It is now my pleasure to turn the floor over to Colin Murray of Investor Relations. Sir, you may begin.

Thank you, Lilly. Good morning, and welcome to today's call. With me today are Matt Lucey, our CEO; Mike Bukowski, our Head of Refining; Joe Marino, our CFO, and several other members of our management team.

Copies of today's earnings release and our 10-Q filing, including supplemental information, are available on our website.

Before getting started, I'd like to direct your attention to the Safe Harbor statement contained in today's press release. Statements that express the company's or management's expectations or predictions of the future are forward-looking statements intended to be covered by the Safe Harbor provisions under federal securities laws. Consistent with our prior periods, we'll discuss our results excluding special items, which are described in today's press release. Also included in the press release is forward-looking guidance information. For any questions on these items or other follow-up questions, please contact Investor Relations following the call.

I'll now turn the call over to Matt Lucey.

Thanks, Colin. Good morning, everyone, and thank you for joining our call. First, I'd like to welcome and introduce Joe Marino as PBF's new Chief Financial Officer. Many on the call may be familiar with Joe, as he has been with PBF since before our 2012 IPO and has been our Treasurer for the last 5 years. In the same breath, I'd like to thank Karen Davis for her service, and I'm thrilled to welcome her back to the Board of Directors.

I want to address three topics: one, the status of Martinez; two, our third quarter performance; and lastly, the near-term outlook.

Regarding Martinez, consistent with our call in July, we are on schedule for a December restart. Maintenance teams are scheduled to be turning over the impacted units to operations in early December. As units get handed over, we will commence a deliberate and sequential restart of the affected units. Our plan is to have Martinez fully operational by the end of the year. The dedication of the Martinez team in this effort continues to be exemplary.

While PBF's third quarter represented a sequential improvement over the prior few quarters, the real news is the sequential improvement that occurred during the quarter. Unquestionably, there was a shift in September, which represented a significant positive step in the right direction. While product cracks were relatively strong throughout the quarter, crude differentials only began to improve towards the end of the quarter. Now as we sit in what is typically the seasonally weaker period, product cracks are quite strong and crude differentials continue to widen.

As we look past the fourth quarter into '26, refined product supply constraints, coupled with a well-supplied crude market should create a positive theme for domestic and global refining. Global demand continues to outstrip net refining capacity additions, and we expect to see additional capacity rationalizations that will be supportive of tight product balances as we saw this month with the shutdown of another refinery in California.

PBF remains focused on controlling the aspects of our business that we can control. We expect to be well positioned to capture favorable market conditions as we move forward. To be successful and enhance value for our investors, we must operate safely, reliably and responsibly, and we must do it as efficiently as possible. To that end, we are on track with our commitment to our business improvement initiatives. We are working to improve our performance every day.

So to summarize, strong product cracks with improving crude dynamics coupled with the full power of our refining system as Martinez should be up by the end of the year, operating with improved efficiency -- thanks to our RBI program, all of which should come together to create a dynamic environment for the company and our shareholders.

With that, I'll turn it over to Mike.

Thank you, Matt. Good morning, everyone. Before discussing the progress of our Refining Business Improvement Program, or RBI for short, I'll provide a few comments on third quarter operations and our Martinez refinery status.

On the West Coast, we continue to progress with the full repair and restart of Martinez. We plan to begin transitioning from maintenance to operations in early December. This time, we will execute a methodical sequence start-up plan with its primary focus being the safe and environmentally sound restart of the repaired processing units.

Our Martinez team has completed a tremendous amount of work this year. To give you a little bit of an idea as to the scale of this effort, in addition to completing the FCC turnaround, we're installing 130 tons of new steel, laying over 20,000 feet of pipe and over 200,000 feet of electrical and instrument cabling. All major equipment components have arrived on site, and we have completed installation of the two major columns that had to be replaced.

I commend our Martinez team for continuing to execute the repair work safely. While the team is focused on restoring operations, we will not let time be a constraint from executing the start-up safely.

While there has been a lot of focus on Martinez, our team at Torrance successfully and safely completed the hydrocracker turnaround in the third quarter. At Toledo, a mid-summer hydrocracker unplanned outage and pipeline maintenance impacted third quarter throughput. Aside from a few minor issues, the rest of our system operated reasonably well in the quarter, and we have no major turnaround work for the remainder of the year.

Shifting topics to RBI. We are on track to meet our previously announced goal to implement $230 million of annualized run rate savings by the end of 2025. This goal represents $0.50 per barrel or approximately $160 million reduction in operating expenses against our 2024 benchmark and will be fully realized in 2026. In addition, we expect to reduce sustaining capital and turnaround expenditures by $70 million.

As you may recall, we started this program with centralized efforts in procurement, capital projects, organizational design, turnarounds and site efforts at our Torrance and Delaware Valley refineries. As of the third quarter, all refineries are engaged in RBI and are contributing to the savings goals.

One of the recent successes achieved through the RBI program is a 5% cost reduction of our Torrance hydrocracker turnaround through our productivity improvement initiative. This program uses dedicated resources to identify and eliminate waste and remove barriers to job productivity. Additionally, we've achieved approximately $21 million in run rate savings by revamping our procurement model to leverage our spend across the refining circuit. System-wide, we are focusing on improving our maintenance efficiency and reinvesting some of the savings in energy reduction projects while also reducing our maintenance backlogs. The outcome will have the dual effect of improved energy efficiency and reliability.

We are providing enhanced performance monitoring tools to our employees and incorporating them into our site work processes across the fleet. The new tools and processes will drive the organization to not only maintain our savings performance and efficiency but drive continuous improvement.

Our main priority will always be to focus on safe, reliable and responsible operations across our system. RBI will help us improve across all areas and result in a sustainable culture of operational excellence and continuous improvement.

With that, I'll now turn the call over to Joe Marino for our financial overview.

Thanks, Mike. For the third quarter, we reported an adjusted net loss of $0.52 per share and an adjusted EBITDA of $144.4 million. Our discussion of third quarter results excludes the net effect of special items, including $14.6 million in incremental OpEx related to the Martinez refinery event, a $250 million gain on insurance recovery, a $94 million gain on the sale of terminal assets, an $8.5 million loss relating to PBF's 50% share of SBR's LCM inventory adjustment for the quarter and approximately $8 million of charges associated with the RBI initiative. The $250 million gain on insurance recoveries related to Martinez fire is a result of the second unallocated payment agreed to at the end of the third quarter, of which the majority has already been received in Q4.

Going forward, we will continue to work with our insurance providers for potential additional interim payment. However, the timing and amount of any agreed upon future payment will be dependent on the amount of incurred covered expenditures plus calculated business interruption losses.

Our Q3 P&L reflects incremental OpEx at Martinez of $14.6 million that we are reflecting as a special item because it relates to construction of temporary equipment to restart undamaged units and other fire-related non-capital expenses. While we anticipate recovering a portion of this amount through insurance, the specific amount will be determined as we progress further into the claims process.

Generally speaking, any insurance proceeds we received in future periods will be reflected as gain on insurance recoveries on our income statement and reported as a special item.

Shifting back to our normal quarterly results discussion. Also included in our results is a $19.7 million loss related to PBF's equity investment in St. Bernard renewables. SBR produced an average of 15,400 barrels per day of renewable diesel in the third quarter. SBR's production was somewhat below guidance, driven by broader market conditions in renewable fuel space. Throughout the year we've seen impacts from tariffs cascade through the market and the policy landscape continue to shift, adding uncertainty and volatility to the business.

PBF cash flow from operations for the quarter was approximately $25 million, which includes a working capital draw of approximately $74 million, primarily related to the timing of cash interest payments, movements in inventory and falling commodity prices. Also included in our cash flow for the quarter are the previously announced tax refunds of $75 million, including interest, and a $175 million received through the sale of Knoxville and Philadelphia terminal asset, excluding commission and closing cost.

Cash invested in consolidated CapEx for the third quarter was approximately $132 million, which includes refining, corporate, and logistics. This amount excludes third quarter capital expenses of approximately $128 million related to the Martinez incident. Year-to-date rebuild capital expenses through the end of the third quarter are approximately $260 million. Additionally, our Board of Directors approved a regular quarterly dividend of $0.275 per share.

We ended the quarter with $482 million in cash and approximately $1.9 billion of net debt. Maintaining our financial -- our firm financial footing and a resilient balance sheet remain priorities. At quarter end, our net debt to cap was 32% and our current liquidity is approximately $2.1 billion based on current commodity prices, cash and borrowing capacity under our ABL.

If you take into consideration the second installment of our insurance proceeds already received in Q4, our liquidity and net debt position has improved versus the prior quarter. As we look ahead, we expect to use periods of strength to focus on deleveraging and preserving the balance sheet.

Operator, we've completed our opening remarks, and we'd be pleased to take any questions.

[Operator Instructions] Your first question comes from Manav Gupta from UBS.

Would like to first welcome Joe in his new role and wish him all the luck in his role. Matt, maybe for you or somebody else. But just -- I mean, you made some positive comments about Martinz restart. I think there's a lot of focus on that given the capacity closures that are happening. And yes, some new pipelines might get built, but that could take 2, 3 years. So the key here is to get that refinery up and running. And I'm just trying to understand your confidence level in getting this thing across the line.

I understand sometimes there could be regulatory delays, but it looks like the government wants you to get this up and running. So help us understand where we are in the process and your confidence level in getting this asset up and running by year-end.

Thanks, Manav. I don't anticipate any regulatory issues, to be clear. We have all our permits, and we've had a good working relationship with the state. And as you said, I think they're very, very interested in getting the refinery back up and running.

I have tremendous confidence in our team. They have done amazing work to get us to this point. It is a major lift. As Mike Mikowski can detail, any project that a refinery does usually has years of advanced work done. And when you have an unplanned incident like we had, it creates a much more difficult environment to execute because there is no preplanning. And so our team has just distinguished themselves. And indeed, we have -- that requires us doing everything as safely and reliably as we can. If there's a moment in time when we need to take a breath or introduce a bit more time, there's always time for safety. But I have complete confidence in the team. We have all our permits in place. And so I think we just need to let it play out over the next couple of months.

Perfect, sir. All the best for that. And I have come back to one of the comments you made on the call earlier where you said, look, the dips really started to widen out towards the end of the quarter. So just trying to understand the outlook for the heavy light differentials. I think we all acknowledge PBF is one of the most levered to that trend. If that dip does widen, it will lead to material increase in your capture rates.

So help us understand what you're seeing out there. Are there heavier discounted barrels now showing up on the Gulf Coast, which was -- or other parts of your system, which was not the case even 2 or 3 quarters ago? If you could help us talk through that.

Absolutely. I'm going to make a couple of comments and turn it over to Tom.

Look, the market has been constrained if you go back starting over 4 years ago when barrels started getting pulled off the market. So when OPEC made its deliberate shift going back 6 months ago, there's simply a lag. And now obviously, they made their shift at a moment in time where you're going into peak runs and you're also going into crude burn in the Middle East. And so demand is sort of at its highest.

In any scenario, there's going to be a lag. Considering the seasonal time that the tapering began, there was probably even more of a lag, one that was a bit frustrating to us. But indeed, we are now seeing crude loosen as a result of the OPEC moves. Tom?

Yes. Thanks, Manav. I mean -- trying to just go in a little bit further, I mean I think Matt summarized that well in terms of the peak run environment and the crude burn and obviously OPEC is pivoting in terms of where they've been in terms of their policies. That certainly has shifted the dynamics.

As we look at this year, right, I mean, this has been a year where crude stocks have been building, but they've been building in the non-OECD and the Western Basin or the Atlantic Basin has been tight in comparison, right? Stocks are low. But we now have seen at this juncture, right, there's enormous amounts of oil that have been pushed out on water. Freight is very expensive. A lot of the oil going on water is clearly something related around some of the sanctions. But inevitably, that oil then needs to come back onshore. And when that comes onshore, that sort of is a little bit more of the sustaining aspect of what we've been seeing in the near term in terms of the widening of differentials because you got cheap tanks available in the U.S. Cushing and PADD 3 are certainly available to be built at far more economic numbers than putting it on a ship at multiyear highs in terms of freight. And then I think the last kind of couple of comments in terms of barrels that were getting pulled out of the Atlantic Basin to the Pacific, particularly some LatAm barrels. I mean we are seeing the wells and we are buying barrels that we have not bought in several years. And that's coming into our system.

I think one of the larger things also to kind of comment is if we were talking about the market a year ago, we would have been talking about, obviously, the taper and all the different effects, but we would have been talking about underperformance at Brazil. Guyana was just getting its sort of feet under itself. We've had prolific finds and gains in those areas that are certainly contributing to the dynamics where the crude market dynamics certainly look a little bit better or a lot better, excuse me, in terms of their availabilities, particularly to the coastal regions.

Your next question comes from Ryan Todd from Piper Sandler.

Maybe -- this might be hard to answer, but maybe it's great news on the approval of another $250 million installment of the insurance proceeds. Is there a way to think about this from a time line point of view in terms of what it covers or what is -- kind of what is included in the installments up to this point? Does it cover cost and losses implied through year-end under the current plan or through the end of third quarter? I guess as part of it, like how should we think about the possibility of further meaningful installments in the future?

Yes. Happy to address that to some degree, we don't want -- we're not going to get into the detailed accounting over the dissection of it.

Here's how I would describe it. In the third quarter, we got a $250 million payment shortly after the quarter. So it wasn't in the results. So if you look at the third quarter and you take credit for that $250 million that came in just after September 30, we're a little bit in arrears. So if you pull out more broadly and look at the third quarter, -- and we had an asset sale of $175 million -- and you take that out, but then you solve for the insurance payment that came in right after the quarter and you account for us being in a bit of arrears in some insurance collections through the quarter, I look at our operations on a pro forma basis for Q3 as being cash flow positive to the tune of between $100 million and $200 million.

In regards to going forward, all I can say is we've had a tremendous relationship with the insurance markets, with the underwriters. I don't know if that can always be said for other companies and other industries and other incidents. But we've had a long standing relationship with our insurance underwriters. I was along with our team over in London, meeting with the insurance markets over there. We hosted the group here in New Jersey for the U.S. underwriters, and we continue to really value the relationship we have with them. There will be some payments that are in arrears, but it's very, very manageable.

Congratulations on the progress that you've made up to this point. Can you provide a little more color on maybe how much you've been able to capture to date on your OpEx per barrel reduction targets or CapEx run rate targets? What are the big buckets left to achieve as you work towards 2026 kind of target completion on that plan?

So thanks for the question, Ryan. This is Mike. So as I said, we're on target for the $230 million. I think as of today, we're close to about $210 million of implemented savings on a run rate basis throughout the course of the year. That's cash. So that's not just all OpEx. And so roughly think about that, as I said before, 70% on the OpEx, 30% CapEx. And so we look real good to finish up the year to hit our goal of $230 million.

When we look across the system, remember, we just started this in two refineries back in January. And so there's kind of a time basis of this. But I think across the course of the year up to the third quarter, probably captured order of magnitude about $30 million to $40 million of OpEx and then another $10 million to $15 million of turnaround savings.

One thing you may want to take a look at in our earnings release is the third quarter performance of the Delaware City refinery. You'll see that in an era where we had some headwinds on energy prices, utilization was about the same quarter-to-quarter, and we're showing a reduction in OpEx. So we're starting to see it get to the bottom line.

Do you think that there's -- is there another leg to this process as you think beyond kind of the 2026 completion now that you've -- I mean, you're not that far into this process. Is there kind of a second leg in tranche that might be visible at this point that it's more upside in the future?

Yes, definitely. I tend not to think of this as legs or tranches. I tend to think of this as a continuous improvement journey that never really ends. But as I said in my prepared remarks, we added the other refineries in the third quarter to the program. And so initially, it was just Torrance in Delaware City, and then we're bringing on these other refineries.

So a large impact in that $210 million has been through the central and just those two refineries. So additional savings will be coming online from the refineries that we added to the program. And then the way we're doing this, this is not just deferring expenses. This is finding waste, driving efficiency and eliminating costs. And so we will spend the time next year going through another what we call brainstorming or ideation process at all the facilities, one, to ensure we sustain what we have, but also to drive improvement going forward. So as I look towards the end of 2026, I see that run rate savings going up to over $350 million.

Your next question comes from Doug Leggate from Wolfe Research.

I wonder, Matt, if I could hit on the lower turnaround expenses. And I'm wondering, as part of your efficiency drive, do we basically get -- you referenced Delaware in your remarks just there in the last question. Do we think about higher utilization being a new normal, I guess, for PBF going forward? It seems to us that the whole industry has managed to shift up its utilization. Obviously, that resets our view of mid-cycle free cash flow. We're just wondering if that also applies to you guys.

We -- so our turnaround program is set up a couple of different ways. And in the past, we haven't been happy with our performance on cost and schedule. And then also, we have an opportunity to optimize our intervals. And so we think we'll see a lengthening of intervals for one thing. So that will allow more run time.

We are working with a third-party benchmarking firm to really set our turnaround budgets and schedules going forward, and that's how we're going to drive the savings. And so we would expect to see somewhat shorter duration turnarounds and much more effective turnarounds, which ultimately will turn into higher utilization while the units are up.

In regards to utilization broadly, I sort of think of it maybe in a simplified manner. I think you have a confluence of a number of events. One is if you have a winterless winter or if you have a stormless summer, it certainly makes the operating environment easier to operate if you don't have disruptions. And then we've seen that over the last number of seasons where there's been minimal impact, whether it's from storms or from harsh winters. And then you have, obviously, some creep, whether it's capacity creep, debottlenecking, some increases in throughput. And so numerators may be a bit dated. And then you have this pursuit of operational excellence where everyone is trying to become more efficient and become the best operators they can. And in so doing, you're able to increase your reliability and increase your throughput. We are on that journey, and we expect it to pay dividends for sure.

That's -- it seems to be applying. I observed that Phillips and Valero that between them, they replace Lyondell Houston basically with their better utilization. But anyway, I'm grateful for the input.

My follow-up, I'll add my welcome to Joe and ask him maybe to earn his crust a little bit today. Joe, I don't know if this is something you can do. But if we try to simplify all the moving parts on the cost, the money going out the door for the repairs, the insurance proceeds coming in, -- obviously, you took out the short-term loan to navigate through this -- if we normalize the balance sheet, when all is said and done, where do you think your net debt would sit? I'm not talking about contributions from future quarters and so on. When you normalize for the money out and the money in, what would your net debt be if you hadn't had this event?

That's an interesting question. Obviously, there will be a lot of different factors playing into the market and how our results would be if the event didn't happen. And part of the issuing of that additional notes earlier this year was in advance of the potential market that we were looking at, at that point. So some of that was outside of purely just Martinez related.

So I think hard to specifically answer that question to down to a fine detail, but it would be less than it is today, but probably more than, from a net debt standpoint, than entering the year.

I know it's a tough one to answer. Just to clarify what I'm asking. I'm not looking for the lost opportunity cost. I'm looking at for the extraordinary costs and the extraordinary cash inflows from insurance, if those were all taken out, is that a net debt lower number? Or can you put a magnitude on that or no? We're just trying to figure out how much did we deduct in our DCF with pure net debt on a normalized basis.

Yes. I'd say again, it's hard to put a fine point on that. Obviously, the cost, as we've said before, of actual repair costs are going to be substantially covered by our insurance. So that really won't have a meaningful impact on our overall net debt whether you look at it on a pro forma or go-forward basis. There's impact to the business and our net debt profile from the downtime for sure. And we think a good deal of that will be offset by BI insurance when everything is all said and done. But we don't have an exact impact of what that would look like at this point.

The next question comes from Neil Mehta from Goldman Sachs.

There's been a lot of talk about moving product into the West Coast as some of your competitors retire capacity with 3 independent projects talked about either to the Southwest or even into California. Just your perspective on whether that can alleviate some of the pressure on PADD 5? And how do you think about timing and potential impacts of that?

Yes. Thanks, Neil. Good to hear from you. In regards to some of the announced projects, I'm not going to speculate in regards to which, if any, are going to get to the finish line. I would just say in the base case -- in the base case, we're going to be very, very expensive. In the base case, you're going to take a lot of time. And as an observer of the market and as a participant in the market, my guess is that the base case may be aspirational in regards to time and money in regard -- I probably tend to take the over on time as nothing is easy. As a result, it's costing us money, I'd probably take the over.

Regardless of how long it takes, there will be substantial tariffs on any new pipes that are built. And so we continue to think our in-state manufacturing facilities will be the low-cost producer. The state is going to require imports, whether it comes from the water or from pipe, that will be higher-priced imports. And so I think with the sort of rebalancing that has happened within California refining, we're very, very well positioned from a product standpoint, but also from a crude standpoint. If you have one refinery just came down, one refinery is still scheduled to come down, but you then also have less demand on local crudes as a result.

So I think our position in California is particularly attractive and interesting going forward regardless of the potential pipes when they come on, how they come on, they will be coming on because it's a product short market.

All right. Good color. And then early thoughts on 2026 CapEx, recognizing we're going to get a little bit more color in Q4, and you guys have done a good job keeping a lid on spend this year. But how do you think about some of the moving pieces as you move into '26? And is there a soft number that we should be thinking about penciling and recognizing we're going to get a harder number on the Q4 call?

Yes. I would keep to our schedule on that. We do have a heavy turnaround season next year, but we'll get into that in normal course, Neil.

The next question comes from Phillip Jungwirth from BMO.

I was hoping you could just talk to what you're seeing this month in the SoCal market, just given the moving pieces with Phillips L.A. closing down two weeks ago. Are you seeing any benefit here? And obviously, we had the unplanned downtime, which really helped get along with other product prices.

Well, I would say it's hard to tell what the impact of Phillips is this -- there's [ tensions ] because there is a tremendous amount of unplanned outages that are going on currently. So as you highlighted, the market is quite dynamic, there's tensions on everything, gasoline, jet fuels and distillates. So hard to judge these tensions as to what impact the overall markets have with just Phillips going down by itself. But there's a fair amount of planned and unplanned events going on, on the West Coast, this tension. So it is what we call an all-bid market.

Yes. In regards to just pulling yourself out of like the prompt screen, it is hugely impactful. There's going to be 100,000 barrels a day less of gasoline produced in the L.A. region. That now has to be imported from outside the state. And obviously, a significant amount of California crudes are no longer going to be procured by that refinery. And those crudes only home is with California refineries. So it will play out.

The refinery is literally shut, I think, 2 weeks ago, and there's been lots of sort of activity in the marketplace, not related to the shutdown. So hard to unpack exactly. But over time, I think our position in California will prove out to be pretty compelling.

With California now at least trying to stem the decline of local crude production, issuing permits, how optimistic are you that this could be a benefit to PBF and in-state refiners or at least no longer a headwind with declining production?

Yes. My old joke is, as a refining business, we're all big boys and we -- generally, we don't ask for help. You simply ask to stop bashing us in the head with a shovel. And so systematically shutting in crude production was a significant headwind.

I think with all that's going on in California, there's a recognition that that wasn't the single greatest policy to have in place and fixes have been put in place. So I think it's a removal of a headwind. It will allow certainly the valley in California to stem declines. And so my other thing as you find yourself in a hole, the first thing you do is stop digging. So hopefully, we can have declines arrested.

Whether the valley grows, I can't comment on. But simply, it's a very, very positive step to get that legislation through. We work very, very closely with all the parties in Sacramento. It is hugely beneficial to have it in place because the alternative was very poor. And so our team has worked unbelievably and has worked in concert with a number of constituents in Sacramento, whether it's the CEC, the governor's office, with legislators. I think everyone appreciates the importance of supplying reliable, deliverable, affordable energy to the people of California, and they desperately need gasoline and diesel and jet fuel at affordable prices.

The next question comes from Matthew Blair from TPH.

Could you talk about your outlook for refining capture in the fourth quarter? It seems like it could take a big step up. I think you already mentioned that crude diffs are trending a little bit wider, but it seems like other factors might be moving in your favor, less maintenance, less turnaround expense, better market structure, better jet versus diesel spreads, lower RINs. I mean, pretty much everything across the board seems to be moving in your favor. I think you're in the mid-30% range on capture in Q3. Do you think something north of 40% is realistic for the fourth quarter?

We agree with everything you said -- bringing on staff. Look, I think it's very constructive to look ahead. Crude diffs is the single largest thing. There's no question about it. And I think they're set to continually improve over the quarter.

RINs is a tough one in regards to -- they have been relatively stable in regards to RIN prices. RIN prices are eventually going to have to move up. But of course, that goes to the cost to import as well. And if you look at the marketplace at the moment, it's pretty interesting.

European gasoline is pricing higher than the U.S., not only for today, but out on the strip. And that's true for Asia as well. And so it sets up a constructive environment whereas either European prices have to come down, and we don't see that in the short term, or North America, Atlantic Basin PADD 1 prices have to increase to attract those imports. But everything you said, we agree with in regards to an improved marketplace.

Sounds good. And then earlier, you mentioned some of the challenges in the renewable diesel space. One of your competitors just threw in the towel on RD. Do you have any thoughts to shutting down your RD plant? Or what's the thinking there?

Our thinking is that it has been a challenging market. But unlike others, we view our asset as a top quartile asset. And I think there's a lot to juggle in regards to RD. And you've had an administration change where the whole focus of the program has shifted from a low carbon intensity incentive to reduce low-carbon fuels to the new administration, which is really focused on increasing soybean production and use.

That change is more than a subtle one, and it's going to put a number of assets in the pickle. And you couple that with the new rules where imported feeds have a penalty, imported RD doesn't get the producer's tax credit, there's a lot to play out. Much of it points most likely to higher RIN prices. And by the way, higher RIN prices not only because you need to create an environment that makes it economic to manufacture renewable diesel, but also as supply comes off, you have an RVL that's going to -- that's not going to decline.

And so I do think RIN prices -- there's a risk to higher RIN prices. And hopefully, the administration understands that they're taking comment now on reallocation and such. But where we sit, it's no doubt been a very difficult market, but our location and the capabilities that we have at our plant, I think, sets us apart from another -- a number of the other participants.

Your final question comes from Connor Fitzpatrick from PBF (sic) [ Bank of America].

Might have been a mix up there. I apologize if some of this has been touched on before, but we're hearing that the vessels that need to be installed at Martinez have a 60-day time frame to install and construct. Have those been -- have those arrived at the Martinez site yet?

We think they also need to be inspected and blessed by Bay Area Air Quality Management, EPA and OSHA. Can federal sign-off be done during the government shutdown? I know you mentioned permitting before, but should there be any further issues as it relates to shutdown and oversight? I guess, more broadly, can you break down the time line of equipment left to be received, authority to construct and shutdown impacts on that and time to place all the equipment into service?

All right. Look, I'm aware, maybe there was some fake news or stories. I would suggest everyone focus on what the company's official comments are. I'm not entirely sure where you're getting some of your information. But as I said, we have all of our permits to construct. We have a very good relationship with not only the state, but with the county in regards to get us to the finish line. And we have our plan, again, to commence restart in December, which takes into consideration everything that is required.

We're certainly not going to get into explicit details despite you being in-house as a PBF person, you're not a PBF employee. We're not going to get into explicit details on exactly what equipment is being restarted when. But we have a very thoughtful and deliberate plan to restart the equipment, and we'll have all the approvals necessary to do that.

That's very clear. I guess I should correct and say that I'm from Bank of America. I think there was a mix up, if you couldn't tell. I don't know. That's the only question I had.

Well, I appreciate the question. And hopefully, there shouldn't be any confusion in regards to it. And as Mike stated, we'll always make time for safety, but we've got a very, very good plan to get the plant up and running. With that -- I believe that concludes our questions.

So I greatly appreciate everyone's time and attention and look forward to very constructive markets looking forward. Thank you.

This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.