How Does PBF’s Leverage Compare to Its Peers’?



Peer comparison

Until now, we’ve discussed PBF Energy’s (PBF) stock performance, analyst ratings, and business segment dynamics. In this part, we’ll examine the leverage position of the company.

PBF’s net debt-to-adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) stood at 0.64x in 3Q15. This was higher than the average ratio of 0.4x of its peers Western Refining (WNR), HollyFrontier (HFC), and CVR Refining (CVRR). Net debt-to-adjusted EBITDA ratio shows a company’s leverage position as a multiple of its earnings.

In 3Q15, PBF’s total debt-to-capital ratio stood 42%, higher than the peer average of 25.1% of WNR, HFC, and CVRR. The debt-to-capital ratio shows a company’s leverage position and capital structure.

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PBF’s leverage: Net debt-to-adjusted EBITDA trend

PBF Energy’s net debt-to-adjusted EBITDA ratio fell from 1.1x in 3Q13 to 0.6x in 3Q15. Before analyzing the fall in the ratio, let’s understand the net debt trend.

PBF’s net debt, amid volatility, has remained at almost the same level in 3Q15 compared to 3Q13. This is on account of an equal rise in its total debt as well as in its cash and equivalents. Its total debt has risen steadily from $0.7 billion in 3Q13 to $1.3 billion in 3Q15. The rise in total debt was to fund capital expenditure, acquisitions, and the payment of dividends. Cash and equivalents, including marketable securities, rose from $57 million in 3Q13 to $707 million in 3Q15.

PBF’s adjusted EBITDA rose in 2015 on account of higher earnings in the company’s refining segment. However, a steeper rise in adjusted EBITDA compared to stable net debt from 3Q13 to 3Q15 led to a fall in PBF’s net debt-to-adjusted EBITDA multiple. Considering current acquisition and fundraising activities, it will be imperative to note how the leverage curve of the company shapes up in the next few quarters.


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