PBF Energy Inc. (PBF-NYSE, $30.69). A Potential Move from Small-Cap to Mid-Cap.

PBF Energy Inc. is a pure play on refining in the United States. Two recent acquisitions, one of which is to be funded with a smallish equity component, have been announced in the last three months. The terms of both purchases appear reasonable.



Both refineries to be acquired by PBF can be categorized as either troubled operations, or more generously, as challenged facilities.


A successful integration of the two refinery complexes will provide PBF with a much larger footprint and has the potential to increase EBITDA and profit. Should refining margins continue to remain robust, these acquisitions have the potential to propel PBF into a different cap. It is possible that a market cap above $5 billion can be achieved in the mid-term.

According to the recent prospectus filed with the SEC, Exxon Mobil had committed to investing IN EXCESS of $400 million in the Torrance refinery, prior to turning the keys over to PBF. This level of maintenance capex suggests that PBF is, for lack of a better term, paying about scrap value for a refinery that has been described by some as a “beast” capable of supplying close to 10% of the entire gaaoline supply of California when operationally fit.

“ExxonMobil has invested approximately $400.0 million in the Torrance refinery over the last year. Approximately $400.0 million has been spent completing major turnarounds on the FCC, alkylation plant and related units at the Torrance refinery. ExxonMobil will also be completing repairs to the electrostatic precipitator at the refinery prior to the closing of the Torrance Acquisition. We will be taking over a well-invested in, fully-functioning asset.”

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