PBF LOGISTICS LP You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and the notes thereto included elsewhere in this Form 10-Q. The following information and such unaudited condensed consolidated financial statements should also be read in conjunction with the audited consolidated financial statements and related notes, together with our discussion and analysis of financial condition and results of operations in our 2021 Form 10-K. This discussion contains forward-looking statements that are based on management's current expectations, estimates and projections about our business and operations. The cautionary statements made in this Form 10-Q should be read as applying to all related forward-looking statements wherever they appear in this Form 10-Q. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of a number of factors. You should read "Risk Factors" in our 2021 Form 10-K and "Cautionary Note Regarding Forward-Looking Statements" in this Form 10-Q. In this Item 2, all references to "we," "us," "our," the "Partnership," "PBFX" or similar terms for periods prior to the effective dates of each of the Acquisitions from PBF (as defined below) refer to the Predecessor. For periods subsequent to the effective dates of each of the Acquisitions from PBF, these terms refer to the Partnership and its subsidiaries.
Overview
We are a fee-based, growth-oriented, Delaware MLP formed inFebruary 2013 by subsidiaries ofPBF Energy to own or lease, operate, develop and acquire crude oil and refined petroleum products terminals, pipelines, storage facilities and similar logistics assets. PBF GP is our general partner and is wholly-owned byPBF LLC .PBF Energy is the sole managing member ofPBF LLC and, as ofMarch 31, 2022 , owned 99.2% of the total economic interest inPBF LLC . As ofMarch 31, 2022 ,PBF LLC owned 29,953,631 PBFX common units constituting an aggregate of 47.9% limited partner interest in PBFX, with the remaining 52.1% limited partner interest owned by public unitholders. Our business includes the assets, liabilities and results of operations of certain crude oil, refined products, natural gas and intermediates terminaling, pipeline, storage and processing assets, including those previously operated and owned byPBF Holding's subsidiaries andPBF Holding's previously held subsidiaries.
Principles of Combination and Consolidation and Basis of Presentation
In general, our Predecessor did not historically operate its assets for the purpose of generating revenue independent of otherPBF Energy businesses that we support. In connection with, and subsequent to, our initial public offering ("IPO"), we have acquired certain assets fromPBF LLC (collectively referred to as the "Contributed Assets"). Such acquisitions completed subsequent to the IPO were made through a series of dropdown transactions withPBF LLC (collectively referred to as the "Acquisitions from PBF"). Upon the closing of the IPO and the Acquisitions from PBF, we entered into commercial and service agreements with subsidiaries ofPBF Energy , under which we operate our assets for the purpose of generating fee-based revenue. We receive, handle and transfer crude oil, refined products and natural gas from sources located throughout theU.S. andCanada and store crude oil, refined products and intermediates forPBF Energy in support of its refineries. In addition, we generate third-party revenue from certain of our assets. 24
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Agreements with PBF Energy Entities
Commercial Agreements
We currently derive a majority of our revenue from long-term, fee-based agreements withPBF Holding , which generally include minimum volume commitment ("MVC") stipulations and contractual fee escalations for inflation adjustments and certain increases in operating costs. We believe the terms and conditions under these agreements, as well as the Omnibus Agreement and the Services Agreement (each as defined below), each withPBF Holding , are generally no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services.
Refer to our 2021 Form 10-K and Note 10 "Related Party Transactions" of the
Notes to Condensed Consolidated Financial Statements included in "Item 1.
Financial Statements" in this Form 10-Q for a more complete description of our
commercial agreements with
Other Agreements
In addition to the commercial agreements described above, we entered into an omnibus agreement with PBF GP,PBF LLC andPBF Holding , which has been amended and restated in connection with certain of the Acquisitions from PBF (as amended, the "Omnibus Agreement"). This agreement addresses the payment of an annual fee for the provision of various general and administrative services and reimbursement of salary and benefit costs for certainPBF Energy employees. We have also entered into an operation and management services and secondment agreement withPBF Holding and certain of its subsidiaries (as amended, the "Services Agreement"), pursuant to whichPBF Holding and its subsidiaries provide us with the personnel necessary for us to perform our obligations under our commercial agreements. We reimbursePBF Holding for the use of such employees and the provision of certain infrastructure-related services to the extent applicable to our operations. The Services Agreement will terminate upon the termination of the Omnibus Agreement, provided that we may terminate any service upon 30-days' notice.
Refer to our 2021 Form 10-K for a more complete description of the Omnibus Agreement and the Services Agreement.
Factors Affecting the Comparability of Our Financial Results
Our results of operations may not be comparable to our historical results of operations due to certain debt transactions and our annual inflation adjustment to our commercial agreements.
Other Factors That Will Significantly Affect Our Results
Supply and Demand for Crude Oil,Refined Products and Natural Gas . We generate revenue by charging fees for receiving, handling, transferring, storing, throughputting and processing crude oil, refined products and natural gas. A majority of our revenue is derived from MVC, fee-based commercial agreements with subsidiaries ofPBF Energy with initial terms ranging from one to fifteen years, which enhance the stability of our cash flows. The volume of crude oil, refined products and natural gas that is throughput or stored depends substantially onPBF Energy's operational needs which are largely impacted by refining margins. Refining margins are greatly dependent upon the price of crude oil or other refinery feedstocks, refined products and natural gas. 25 -------------------------------------------------------------------------------- Factors driving the prices of petroleum-based commodities include supply and demand for crude oil, gasoline and other refined products. Supply and demand for these products depend on numerous factors outside of our control, including changes in domestic and foreign economies, weather conditions, domestic and foreign political affairs, production levels, logistics constraints, availability of imports, marketing of competitive fuels, crude oil price differentials and government regulation. Refer to "Risk Factors" included in "Item 1A." of our 2021 Form 10-K. Acquisition and Organic Growth Opportunities. We may acquire additional logistics assets fromPBF Energy or third parties. Under our Omnibus Agreement, subject to certain exceptions, we have a right of first offer on certain logistics assets owned byPBF Energy to the extentPBF Energy decides to sell, transfer or otherwise dispose of any of those assets. We also have a right of first offer to acquire additional logistics assets thatPBF Energy may construct or acquire in the future. Our commercial agreements provide us with options to purchase certain assets atPBF Holding's refineries related to our business in the eventPBF Energy permanently shuts downPBF Holding's refineries. In addition, our commercial agreements provide us with the right to use certain assets atPBF Holding's refineries in the event of a temporary shutdown. Furthermore, we may pursue strategic asset acquisitions from third parties or organic growth projects to the extent such acquisitions or projects complement our orPBF Energy's existing asset base or provide attractive potential returns. Identifying and executing acquisitions and organic growth projects is a key part of our strategy, and we believe that we are well-positioned to acquire logistics assets fromPBF Energy and third parties should such opportunities arise. However, there is no guarantee that we will be able to identify attractive organic growth projects or acquisitions in the future, or be able to consummate any such opportunities identified. Additionally, if we do not complete acquisitions or organic growth projects on economically acceptable terms, our future growth will be limited, and the acquisitions or projects we do complete may reduce, rather than increase, our cash available for distribution. These acquisitions and organic growth projects could also affect the comparability of our results from period to period. We expect to fund future growth capital expenditures primarily from a combination of cash-on-hand, borrowings under our$500.0 million amended and restated revolving credit facility (as amended, the "Revolving Credit Facility") and the issuance of additional equity or debt securities. To the extent we issue additional units to fund future acquisitions or expansion capital expenditures, the payments of distributions on those additional units may increase the risk that we will be unable to maintain or increase our per unit distribution level. Third-Party Business. As ofMarch 31, 2022 ,PBF Holding accounts for a substantial majority of our revenue and we continue to expect that a majority of our revenue for the foreseeable future will be derived from operations supportingPBF Holding's refineries. We continue to explore further diversification of our customer base by potentially developing additional third-party throughput volumes in our existing system and continuing to explore expanding our asset portfolio to service third-party customers. Unless we are successful in attracting additional third-party customers, our ability to increase volumes will be dependent onPBF Holding , which has no obligation under our commercial agreements to supply our facilities with additional volumes in excess of its MVCs. If we are unable to increase throughput or storage volumes, future growth may be limited.
How We Evaluate Our Operations
Our management uses a variety of financial and operating metrics to analyze our
business and segment performance. These metrics are significant factors in
assessing our operating results and profitability and include, but are not
limited to, volumes, including terminal and pipeline throughput and storage
capacity; operating and maintenance expenses; and EBITDA, EBITDA attributable to
PBFX, Adjusted EBITDA and distributable cash flow. We define EBITDA, EBITDA
attributable to PBFX, Adjusted EBITDA and distributable cash flow below.
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Volumes. The amount of revenue we generate primarily depends on the volumes of
crude oil, refined products and natural gas that we throughput at our
terminaling and pipeline operations and our available and utilized storage
capacity. These volumes are primarily affected by the supply of and demand for
crude oil, refined products and natural gas in the markets served directly or
indirectly by our assets. Although PBF Energy has MVCs under certain commercial
agreements, our results of operations will be impacted by:
•PBF Energy's utilization of our assets in excess of MVCs;
•our ability to identify and execute accretive acquisitions and organic
expansion projects and capture incremental
•our ability to increase throughput or storage volumes at our facilities and provide additional ancillary services at those terminals and pipelines.
Operating and Maintenance Expenses. Our management seeks to maximize the profitability of our operations by effectively managing operating and maintenance expenses. These expenses are comprised primarily of labor and outside contractor costs, utilities, insurance premiums, repairs and maintenance charges and related property taxes. These expenses generally remain relatively stable across broad ranges of throughput volumes but can fluctuate from period to period depending on the mix of activities performed during that period and the timing of these expenses. We will seek to manage our maintenance expenditures on our assets by scheduling maintenance over time to avoid significant variability in our maintenance expenditures and to minimize their impact on our cash flow. EBITDA, EBITDA Attributable to PBFX, Adjusted EBITDA and Distributable Cash Flow. We define EBITDA as net income (loss) before net interest expense (including amortization of loan fees and debt premium and accretion on discounted liabilities), income tax expense, depreciation, amortization and change in contingent consideration. We define EBITDA attributable to PBFX as net income (loss) attributable to PBFX before net interest expense (including amortization of loan fees and debt premium and accretion on discounted liabilities), income tax expense, depreciation, amortization and change in contingent consideration attributable to PBFX, which excludes the results of Acquisitions from PBF prior to the effective dates of such transactions and earnings attributable to theCPI Operations LLC ("CPI") earn-out (the portion of earnings associated with an earn-out provision related to the purchase of CPI). We define Adjusted EBITDA as EBITDA attributable to PBFX excluding acquisition and transaction costs, non-cash unit-based compensation expense and items that meet the conditions of unusual, infrequent and/or non-recurring charges. We define distributable cash flow as EBITDA attributable to PBFX plus non-cash unit-based compensation expense, less cash interest, maintenance capital expenditures attributable to PBFX and income taxes. Distributable cash flow will not reflect changes in working capital balances. EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow are not presentations made in accordance withU.S. generally accepted accounting principles ("GAAP"). EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow are non-GAAP supplemental financial measures that management and external users of our condensed consolidated financial statements, such as industry analysts, investors, lenders and rating agencies, may use to assess: •our operating performance as compared to other publicly traded partnerships in the midstream energy industry, without regard to historical cost basis or, in the case of EBITDA, financing methods;
•the ability of our assets to generate sufficient cash flow to make distributions to our unitholders;
•our ability to incur and service debt and fund capital expenditures; and
•the viability of acquisitions and other capital expenditure projects and the economic returns on various investment opportunities.
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We believe that the presentation of EBITDA, EBITDA attributable to PBFX and
Adjusted EBITDA provides useful information to investors in assessing our
financial condition and results of operations and assists in evaluating our
ongoing operating performance for current and comparative periods. We believe
that the presentation of distributable cash flow provides useful information to
investors as it is a widely accepted financial indicator used by investors to
compare partnership performance and provides investors with another perspective
of the operating performance of our assets and the cash our business is
generating. EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and
distributable cash flow should not be considered alternatives to net income,
income from operations, net cash provided by operating activities or any other
measure of financial performance or liquidity presented in accordance with GAAP.
EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow
have important limitations as analytical tools because they exclude some, but
not all, items that affect net income and net cash provided by operating
activities. Additionally, because EBITDA, EBITDA attributable to PBFX, Adjusted
EBITDA and distributable cash flow may be defined differently by other companies
in our industry, our definitions of such measures may not be comparable to
similarly titled measures of other companies, thereby diminishing their utility.
EBITDA, EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow
are reconciled to net income and net cash provided by operating activities in
"Results of Operations" below.
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--------------------------------------------------------------------------------Results of Operations
A discussion and analysis of the factors contributing to our results of operations are presented below. The financial statements, together with the following information, are intended to provide investors with a reasonable basis for assessing our historical operations but should not serve as the only criteria for predicting our future performance.
Combined Overview. The following tables summarize our results of operations and financial data for the three months endedMarch 31, 2022 and 2021. The following data should be read in conjunction with our Condensed Consolidated Financial Statements and the notes thereto included in "Item 1. Financial Statements." Three Months Ended March 31, 2022 2021 (In thousands) Revenue: Affiliate$ 75,985 $ 75,933 Third-party 13,458 11,572 Total revenue 89,443 87,505 Costs and expenses: Operating and maintenance expenses 29,415
25,048
General and administrative expenses 3,911
4,464
Depreciation and amortization 9,484
9,405
Change in contingent consideration 238 655 Total costs and expenses 43,048 39,572 Income from operations 46,395 47,933 Other expense: Interest expense, net (9,713) (10,287) Amortization of loan fees and debt premium (418)
(429)
Accretion on discounted liabilities (5)
(6)
Net income attributable to
$ 37,211 Other data: EBITDA attributable to PBFX$ 55,862 $ 57,923 Adjusted EBITDA 56,581 58,996 Distributable cash flow 45,700 48,178 Capital expenditures 1,433 1,254 29
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Reconciliation of Non-GAAP Financial Measures
As described in "How We Evaluate Our Operations," our management uses EBITDA,
EBITDA attributable to PBFX, Adjusted EBITDA and distributable cash flow to
analyze our performance. The following table presents a reconciliation of
EBITDA, EBITDA attributable to PBFX and distributable cash flow to net income,
which is the most directly comparable GAAP financial measure of operating
performance on a historical basis, for the periods indicated.
Three Months Ended
March 31,
2022 2021
(In thousands)
Net income $ 36,259 $ 37,211
Interest expense, net 9,713 10,287
Amortization of loan fees and debt premium 418 429
Accretion on discounted liabilities 5 6 Change in contingent consideration 238
655
Depreciation and amortization 9,484
9,405
EBITDA 56,117
57,993
Less: Earnings attributable to the CPI earn-out 255
70
EBITDA attributable to PBFX 55,862
57,923
Non-cash unit-based compensation expense 654
989
Cash interest (9,756)
(10,346)
Maintenance capital expenditures (1,060) (388) Distributable cash flow$ 45,700 $ 48,178 The following table presents a reconciliation of EBITDA, EBITDA attributable to PBFX and distributable cash flow to net cash provided by operating activities, which is the most directly comparable GAAP financial measure of liquidity on a historical basis, for the periods indicated. Three Months Ended March 31, 2022 2021 (In thousands) Net cash provided by operating activities$ 67,322 $
54,822
Change in operating assets and liabilities (20,264)
(6,127)
Interest expense, net 9,713
10,287
Non-cash unit-based compensation expense (654)
(989)
EBITDA 56,117
57,993
Less: Earnings attributable to the CPI earn-out 255
70
EBITDA attributable to PBFX 55,862
57,923
Non-cash unit-based compensation expense 654
989
Cash interest (9,756)
(10,346)
Maintenance capital expenditures (1,060) (388) Distributable cash flow$ 45,700 $ 48,178 30
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The following table presents a reconciliation of EBITDA, EBITDA attributable to
PBFX and Adjusted EBITDA to net income, which is the most directly comparable
GAAP financial measure of operating performance on a historical basis, for the
periods indicated.
Three Months Ended
March 31,
2022 2021
(In thousands)
Net income $ 36,259 $ 37,211
Interest expense, net 9,713 10,287
Amortization of loan fees and debt premium 418 429
Accretion on discounted liabilities 5
6
Change in contingent consideration 238
655
Depreciation and amortization 9,484
9,405
EBITDA 56,117
57,993
Less: Earnings attributable to the CPI earn-out 255
70
EBITDA attributable to PBFX 55,862
57,923
Non-cash unit-based compensation expense 654
989
East Coast Terminals environmental remediation costs 65 84 Adjusted EBITDA$ 56,581 $ 58,996
Three Months Ended
Summary Our net income for the three months endedMarch 31, 2022 decreased by approximately$1.0 million to$36.3 million from$37.2 million for the three months endedMarch 31, 2021 . The decrease in net income was primarily due to the following: •an increase in operating and maintenance expenses of approximately$4.4 million , or 17.4%, as a result of higher utilities costs due to increased energy rates and usage, higher additive costs and higher outside services and other fees coinciding with increased throughput at certain of our assets;
offset by the following:
•an increase in total revenue of approximately$1.9 million , or 2.2%, primarily attributable to inflation rate adjustments implemented in accordance with certain of our commercial agreements (the "Inflation Rate Increase"), higher revenues at ourEast Coast storage facility related to increased affiliate activity, as well as the implementation of an MVC under a third-party customer contract, higher pass-through utilities costs, and increased throughput at certain of our assets, offset by the commencement of a new commercial agreement with a reduced MVC at our Delaware City rail facility;
•a decrease in general and administrative expenses of approximately
•a decrease in other expenses of approximately$0.6 million , or 5.5%, primarily related to a decrease in interest expense as a result of lower borrowings under our Revolving Credit Facility; and
•a decrease in change in contingent consideration of approximately
Depreciation and amortization was relatively consistent during the comparative periods with no significant fluctuation activity.
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EBITDA attributable to PBFX for the three months ended March 31, 2022 decreased
by approximately $2.1 million to $55.9 million from $57.9 million for the three
months ended March 31, 2021 due to the factors noted above, excluding the impact
of depreciation and amortization, interest expense, net, amortization of loan
fees and debt premium, accretion on discounted liabilities, change in contingent
consideration and earnings attributable to the CPI earn-out.
Adjusted EBITDA for the three months ended March 31, 2022 decreased by
approximately $2.4 million to $56.6 million from $59.0 million for the three
months ended March 31, 2021 due to the factors noted above, excluding the impact
of unit-based compensation and certain environmental remediation costs.
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--------------------------------------------------------------------------------Segment Information
Our operations are comprised of operating segments, which are strategic business units that offer different services in various geographical locations. We review operations in two reportable segments: (i) Transportation and Terminaling and (ii) Storage. Decisions concerning the allocation of resources and assessment of operating performance are made based on this segmentation. Management measures the operating performance of each of our reportable segments based on the segment operating income. Segment operating income is defined as net revenue less operating expenses, depreciation and amortization and change in contingent consideration. General and administrative expenses and interest expenses not included in the Transportation and Terminaling and Storage segments are included in Corporate. Segment reporting is further discussed in Note 11 "Segment Information" of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Financial Statements."
Transportation and Terminaling Segment
The following table and discussion provide an explanation of our results of
operations of the Transportation and Terminaling segment for the three months
ended
Three Months Ended
March 31,
2022 2021
(in thousands, except for total throughput and lease tank capacity)
Revenue:
Affiliate $ 63,484 $ 65,592
Third-party 6,764 5,885
Total revenue 70,248 71,477
Costs and expenses:
Operating and maintenance expenses 20,739 17,633
Depreciation and amortization 7,430 7,235
Total costs and expenses 28,169 24,868
Transportation and Terminaling Segment Operating Income Key Operating Information Transportation and Terminaling Segment Terminals Total throughput (bpd)(1) 236,692 219,870
Lease tank capacity (average lease capacity barrels per month)(2)
2,441,528 2,490,334
Pipelines
Total throughput (bpd)(1) 171,344 153,463
Lease tank capacity (average lease capacity barrels per month)(2)
1,201,276 1,033,760
(1) Calculated as the sum of the average throughput per day for each asset group
for the period presented.
(2) Lease capacity is based on tanks in service and average lease capacity
available during the period.
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Three Months Ended
Our Transportation and Terminaling operating income for the three months endedMarch 31, 2022 decreased by approximately$4.5 million to$42.1 million from$46.6 million for the three months endedMarch 31, 2021 . The decrease in operating income was primarily due to the following: •an increase in operating and maintenance expenses of approximately$3.1 million , or 17.6%, as a result of higher utilities costs due to increased energy rates and usage, higher additive costs and higher outside services and other fees coinciding with increased throughput at certain of our assets; •a decrease in total revenue of approximately$1.2 million , or 1.7%, primarily attributable to the commencement of a new commercial agreement with a reduced MVC at our Delaware City rail facility, offset by the Inflation Rate Increase, higher pass-through utilities costs and increased throughput at certain of our assets; and
•an increase in depreciation and amortization of approximately
Storage Segment
The following table and discussion provide an explanation of our results of operations of the Storage segment for the three months endedMarch 31, 2022 and 2021: Three Months Ended March 31, 2022 2021 (in thousands, except for storage capacity reserved and total throughput) Revenue: Affiliate$ 12,501 $ 10,341 Third-party 6,694 5,687 Total revenue 19,195 16,028 Costs and expenses: Operating and maintenance expenses 8,676 7,415 Depreciation and amortization 2,054 2,170 Change in contingent consideration 238 655 Total costs and expenses 10,968 10,240 Storage Segment Operating Income
Key Operating Information
Storage Segment
Storage capacity reserved (average shell capacity barrels per
month)(1) 7,901,226 7,605,161
Total throughput (bpd)(2) 9,619 7,873
(1) Storage capacity is based on tanks in service and average shell capacity
available during the period.
(2) Calculated as the sum of the average throughput per day for each asset group
for the period presented.
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Three Months Ended
Our Storage operating income for the three months endedMarch 31, 2022 increased by approximately$2.4 million to$8.2 million from$5.8 million for the three months endedMarch 31, 2021 . The increase in operating income was primarily due to the following: •an increase in total revenue of approximately$3.2 million , or 19.8%, primarily attributable to the Inflation Rate Increase and higher revenues at ourEast Coast storage facility related to increased affiliate activity, as well as the implementation of an MVC under a third-party customer contract;
•a decrease in change in contingent consideration of approximately
•a decrease in depreciation and amortization of approximately
offset by the following:
•an increase in operating and maintenance expenses of approximately
Liquidity and Capital Resources
We expect our ongoing sources of liquidity to include cash generated from operations (including proceeds from our commercial agreements withPBF Holding ), borrowings under our Revolving Credit Facility and issuances of additional debt and equity securities as appropriate given market conditions. We believe our balances of cash, cash equivalents, cash generated from operations, borrowings under the Revolving Credit Facility and potential issuances of debt and equity securities will be sufficient to satisfy cash requirements over the next twelve months and beyond. Our largest customer is our affiliate,PBF Holding , a subsidiary of our parent sponsor.PBF Energy has initiated several steps as part of a strategic plan to navigate current volatile markets and preserve or enhance its liquidity, including asset sales, new debt issuances, temporarily idling various units at certain refineries to optimize production, reductions in capital and operating expenditures, suspension of its dividend and exploring other potential opportunistic financing activities. We believe such actions will allowPBF Energy to continue to honor its commercial agreements with us.
We have paid, and intend to continue to pay, at least the minimum quarterly
distribution of
As of
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During the three months ended March 31, 2022 , we made cash distribution payments
as follows (in thousands, except per unit data):
Related Earnings Period: Q4 2021
Distribution date March 10, 2022
Record date February 24, 2022
Per unit $ 0.30
To public common unitholders $ 9,793
To PBF LLC $ 8,986
Total distribution $ 18,779
Credit Facilities
The Revolving Credit Facility is available to fund working capital,
acquisitions, distributions and capital expenditures and for other general
partnership purposes. We have the ability to increase the maximum amount of the
Revolving Credit Facility by an aggregate amount of up to $250.0 million , to a
total facility size of $750.0 million , subject to receiving increased
commitments from the lenders or other financial institutions and satisfaction of
certain conditions. Obligations under the Revolving Credit Facility are
guaranteed by our restricted subsidiaries and secured by a first priority lien
on our assets and those of our restricted subsidiaries. The maturity date of the
Revolving Credit Facility is July 30, 2023 and may be extended for one year on
up to two occasions, subject to certain customary terms and conditions. We are
in compliance with the covenants under the Revolving Credit Facility as of
March 31, 2022 .
During the three months ended
Our 6.875% Senior Notes due 2023 (the "2023 Notes") have an aggregate principal amount of$525.0 million with interest payable semi-annually onMay 15 andNovember 15 . The 2023 Notes mature onMay 15, 2023 . The 2023 Notes contain customary terms, events of default and covenants for an issuer of non-investment grade debt securities. These covenants include limitations or restrictions on us and our restricted subsidiaries' ability to, among other things, make distributions. These covenants are subject to a number of important limitations and exceptions. As ofMarch 31, 2022 , we are in compliance with all covenants under the 2023 Notes. Cash Flows
The following table sets forth our cash flows for the periods indicated:
Three Months Ended March 31,
2022 2021
(In thousands)
Net cash provided by operating activities $ 67,322 $ 54,822
Net cash used in investing activities (1,433) (1,254)
Net cash used in financing activities (46,464)
(45,886)
Net change in cash and cash equivalents$ 19,425 $ 7,682 36
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Cash Flows from Operating Activities
Net cash provided by operating activities increased by approximately$12.5 million to$67.3 million for the three months endedMarch 31, 2022 compared to$54.8 million for the three months endedMarch 31, 2021 . The increase in net cash provided by operating activities was primarily the result of an increase in the net changes in operating assets and liabilities of approximately$14.1 million primarily driven by the timing of collection of accounts receivables and liability payments, offset by a net decrease in non-cash charges relating to depreciation and amortization, amortization of loan fees and debt premium, accretion on discounted liabilities, unit-based compensation and change in contingent consideration of approximately$0.7 million and a decrease in net income of approximately$1.0 million .
Cash Flows from Investing Activities
Net cash used in investing activities increased by approximately$0.2 million to$1.4 million for the three months endedMarch 31, 2022 compared to$1.3 million for the three months endedMarch 31, 2021 . The increase in net cash used in investing activities was due to an increase in capital expenditures of approximately$0.2 million resulting from the timing of capital projects.
Cash Flows from Financing Activities
Net cash used in financing activities increased by approximately$0.6 million to$46.5 million for the three months endedMarch 31, 2022 compared to$45.9 million for the three months endedMarch 31, 2021 . Net cash used in financing activities for the three months endedMarch 31, 2022 consisted of net repayments of$25.0 million under our Revolving Credit Facility, distributions to unitholders of$18.8 million and a$2.7 million payment of contingent consideration. Net cash used in financing activities for the three months endedMarch 31, 2021 consisted of distributions to unitholders of$18.7 million , net repayments of$15.0 million under our Revolving Credit Facility and a$12.2 million payment of contingent consideration.
Capital Expenditures
Our capital requirements have consisted of, and are expected to continue to
consist of: expansion, maintenance and regulatory capital expenditures.
Expansion capital expenditures are expenditures incurred for acquisitions or
capital improvements that we expect will increase our operating income or
operating capacity over the long term. Examples of expansion capital
expenditures include the acquisition of assets, the construction, development or
acquisition of equipment at our facilities or projects that provide additional
throughput or storage capacity to the extent such capital expenditures are
expected to expand our operating capacity or increase our operating income.
Maintenance capital expenditures are expenditures (including expenditures for
the addition or improvement to, or the replacement of, our capital assets, and
for the acquisition of existing, or the construction or development of new,
capital assets) made to maintain our long-term operating income or operating
capacity. Examples of maintenance capital expenditures are expenditures for the
refurbishment and replacement of our transportation, terminaling, storage and
processing assets and to maintain equipment reliability, integrity and safety.
Regulatory capital expenditures are expenditures made to attain or maintain
compliance with regulatory standards (including in response to the potential
impacts of climate change). Examples of regulatory capital expenditures are
expenditures incurred to address environmental laws or regulations.
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Capital expenditures for the three months ended March 31, 2022 and 2021 were as
follows:
Three Months Ended March 31,
2022 2021
(In thousands)
Expansion $ 184 $ 555
Maintenance 1,060 388
Regulatory 189 311
Total capital expenditures $ 1,433 $ 1,254
We currently expect to spend approximately $18.0 million to $23.0 million for
the remainder of 2022 for capital expenditures. Of the total expected remaining
capital expenditures, approximately $10.0 million to $14.0 million relate to
maintenance capital expenditures. We anticipate the forecasted maintenance
capital expenditures will be funded primarily with cash from operations and
through borrowings under the Revolving Credit Facility as needed. We currently
have not included any potential future acquisitions in our forecasted capital
expenditures for the remainder of 2022. We may rely on external sources
including incremental borrowings under the Revolving Credit Facility and
issuances of equity and debt securities to fund any significant future
expansion.
Material Cash Requirements
With the exception of activity under the Revolving Credit Facility, there have been no significant changes in our material cash requirements (including known contractual and other obligations) since those reported in our 2021 Form 10-K. Refer to Note 6 "Debt" of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information regarding our debt obligations.
Other
We have not entered into any transactions, agreements or other contractual
arrangements that would result in off-balance sheet liabilities, other than
outstanding letters of credit in the amount of
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--------------------------------------------------------------------------------Environmental and Other Matters
Environmental Regulations
Our operations are subject to extensive and frequently changing federal, state and local laws, regulations and ordinances relating to the protection of the environment. Among other things, these laws and regulations govern the emission or discharge of pollutants into or onto the land, air and water, the handling and disposal of solid and hazardous wastes and the remediation of contamination. As with the industry generally, compliance with existing and anticipated environmental laws and regulations increases our overall cost of business, including our capital costs to develop, maintain, operate and upgrade equipment and facilities. While these laws and regulations affect our maintenance and regulatory capital expenditures and net income, we believe they do not necessarily affect our competitive position, as the operations of our competitors are similarly affected. We believe our facilities are in substantial compliance with applicable environmental laws and regulations. However, these laws and regulations, as well as the interpretation of such laws and regulations, are subject to changes by regulatory authorities, and continued and future compliance with such laws and regulations may require us to incur significant expenditures. Additionally, violation of environmental laws, regulations and permits can result in the imposition of significant administrative, civil and criminal penalties, injunctions limiting our operations, investigatory or remedial liabilities or construction bans or delays in the development of additional facilities or equipment. Furthermore, a release of hydrocarbons or hazardous substances into the environment could, to the extent the event is not insured, subject us to substantial expenses, including costs to comply with applicable laws and regulations and to resolve claims by third parties for personal injury or property damage or by theU.S. federal government or state governments for natural resources damages. These impacts could directly and indirectly affect our business and have an adverse impact on our financial position, results of operations and liquidity. We cannot currently determine the amounts of such future impacts.
Environmental Liabilities
Contaminations resulting from spills of crude oil or petroleum products are not unusual within the petroleum terminaling or transportation industries, and, historically, spills at truck and rail racks and terminals have resulted in contamination of the environment, including soils and groundwater.
Pursuant to the contribution agreements entered into in connection with the IPO and the Acquisitions from PBF,PBF Energy has agreed to indemnify us for certain known and unknown environmental liabilities that are based on conditions in existence at our Predecessor's properties and associated with the ownership or operation of the Contributed Assets and arising from the conditions that existed prior to the closings of the IPO and the Acquisitions from PBF. In addition, we have agreed to indemnifyPBF Energy for (i) certain events and conditions associated with the ownership or operation of our assets that occur, as applicable, after the closing of each Acquisition from PBF (including the IPO) and (ii) environmental liabilities related to our assets if the environmental liability is the result of the negligence, willful misconduct or criminal conduct of us or our employees, including those seconded to us. As a result, we may incur environmental expenses in the future, which may be substantial. As ofMarch 31, 2022 , we have recorded a total liability related to environmental remediation costs of$1.9 million related to existing environmental liabilities. Refer to Note 9 "Commitments and Contingencies" of the Notes to Condensed Consolidated Financial Statements included in "Item 1. Financial Statements" for additional information. 39 --------------------------------------------------------------------------------
Supplemental Guarantor Financial Information
The following consolidated subsidiaries serve as guarantors of the obligations under the 2023 Notes:
•Delaware City Logistics Company LLC;
•Delaware Pipeline Company LLC;
•Delaware City Terminaling Company LLC;
•Toledo Terminaling Company LLC;
•PBF Logistics Products Terminals LLC;
•PBFX Operating Company LLC;
•Torrance Valley Pipeline Company LLC;
•Paulsboro Natural Gas Pipeline Company LLC;
•Toledo Rail Logistics Company LLC;
•Chalmette Logistics Company LLC;
•Paulsboro Terminaling Company LLC;
•DCR Storage and Loading Company LLC;
•CPI Operations LLC; and
•PBFX Ace Holdings LLC.
These guarantees are full and unconditional and joint and several.
In addition,PBF LLC provides a limited guarantee of collection of the principal amount of the 2023 Notes but is not otherwise subject to restrictions included in the indenture. Refer toPBF LLC's condensed consolidated financial statements, which are included in the combined Quarterly Report on Form 10-Q for the period endedMarch 31, 2022 filed byPBF LLC andPBF Energy . The Co-Issuer has no independent assets or operations, and we do not have any subsidiaries designated as "Non-Guarantor Subsidiaries." As such, the consolidated results of the Issuer and Guarantor Subsidiaries are reflected in our Condensed Consolidated Financial Statements included in "Item 1. Financial Statements."
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