Colin Murray - IR Tom Nimbley - CEO Erik Young - CFO Jeffrey Dill - President, PBF Energy Western Region LLC.

Phil Gresh - J.P. Morgan Evan Calio - Morgan Stanley Brad Heffron - RBC Capital Markets Johannes Van Der Tuin - Credit Suisse Roger Read - Wells Fargo Neil Mehta - Goldman Sachs Jeff Dietert - Simmons & Company Blake Fernandez - Scotia Howard Weil Chi Chow - Tudor, Pickering, Holt & Co. Paul Cheng - Barclays Capital Faisel Khan - Citigroup.

Good day, everyone, and welcome to the PBF Energy Third Quarter 2016 Earnings Conference Call and Webcast. At this time, all participants have been placed in a listen-only mode. And the floor will be opened for your questions following management’s prepared remarks. [Operator Instructions] Please note today’s call maybe recorded.

I will be standing by you if you should need any assistance. It is now my pleasure to turn the floor over to Colin Murray, Investor Relations. Sir, you may begin..

Thank you, Erika. Good morning, and welcome to today’s call. With me today are Tom Nimbley, our CEO; Erik Young, our CFO; and several other members of our management team. A copy of today's earnings release, including supplemental financial and operating information is available on our Web site.

Before getting started, I'd like to direct your attention to the forward-looking statement disclaimer contained in today's press release.

In summary, it outlines that statements contained in the press release and on this call 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.

There are many factors that could cause actual results to differ from our expectations, including those we described in our filings with the SEC.

As also noted in our press release, we'll be using certain non-GAAP measures while describing PBF's operating performance and financial results, as we believe these metrics are useful, but they are non-GAAP measures and should be taken as such.

For reconciliations of non-GAAP measures to the appropriate GAAP figure please refer to the supplemental tables provided in today's press release. During the call, we will discuss adjusted fully converted earnings information and results excluding special items.

Our GAAP net income or GAAP EPS figures reflect the percentage interest in PBF Energy Company LLC owned by PBF Energy Inc. We think adjusted fully converted net income and EPS are meaningful metrics to you because they present 100% of the operations on an after-tax basis.

For the third quarter 2016, PBF Energy reported a net income of $56.4 million and net income attributable to PBF Energy, Inc. of approximately $42.1 million and earnings per share of $0.43.

As a result of rising hydrocarbon prices during the third quarter, we generated a non-cash lower cost to market or LCM, after-tax benefit of approximately $62.8 million, and our comments today will exclude this special item from the discussion of our results. I'll now turn the call over to Tom Nimbley..

Thanks, Colin. For the most part the third quarter was a disappointment. Frankly, overall we just did not execute well from an operational standpoint. We did not have a lot of help from the market with the majority of our benchmark cracks down $2 to $3 versus the second quarter.

On the product side, margins were compressed in most of our operating areas, influenced by the rising flat price environment and we saw added weakness in some regional gasoline, chemicals and asphalt margins. Outside of refining fundamentals, we had the added headwind of RINs, which is completely broken and punitive to our business.

I'll comment more on this later. Moving on to operations, Torrance ran well into September averaging over 150,000 barrels per day until we experienced an external power outage in mid-September, which resulted in a complete refinery shutdown. As you may have seen in recent media coverage, Torrance experienced a second power outage in October.

It is clearly not the norm to experience two power outages in such a short period of time, both of which were out of our control. Notwithstanding the recent issues with the external power supply, the earnings power of Torrance is evident.

Despite the shutdown, the refinery earned approximately $30 million in EBITDA in the quarter and we estimate that the power outages resulted in lost profit opportunities of approximately $60 million.

As we have outlined from our initial announcement on Torrance, our main focus is improving reliability and we obviously have something to prove in this area. Upgrading the power situation should go a good distance in this regard.

It is not lost on us that this is a critical issue and we are doing everything we can to take additional mitigation steps, while we implement a permanent solution. In Chalmette, the refinery ran in line with our expectations during the third quarter.

As a result of prevailing market conditions heading into the third quarter, we ran at reduced rates versus the second quarter, but our capture rate improved in a modestly better Gulf Coast margin environment relative to the prior quarter.

During the Colonial pipeline outage as gasoline was backing up on the Gulf Coast, we were able to maintain planned rates by exporting 30,000 barrels a day of gasoline in September.

We are continuing to increase our crude flexibility by running a broad variety of crude oils and we continue to push our products into the highest netback markets available.

Toledo already well in the quarter as demonstrated by their improved capture rates, which were largely driven by a better crude environment as the wildfire tightness eased and Syncrude differentials improved.

We did have some minor planned maintenance on our UDEX complex, and as such we're not able to capture the full benefit of the BTX markets in the quarter. East Coast profitability was disappointing. The light heavy differentials narrowed, which resulted in higher input costs.

Our East Coast benchmark crack was down almost $2.50 and product markets continued to feel the squeeze of high inventory levels and continued imports.

Despite being viewed as a positive product margins in PADD 1, the colonial pipeline outage occurred as we were ramping down for the turnaround on the FCC at Paulsboro and we were not able to fully participate in this brief spot market dislocation.

The Paulsboro turnaround is now complete and it was completed on time and on budget and the refinery has begun the startup process. This was a major turnaround and appears to have been well executed and we are looking forward to getting the plant up and running again.

From an operating cost perspective, on an absolute basis our costs were relatively in line with our expectations. And Torrance up until the outage the refinery was operating in line with our projections on a per barrel basis.

We are continuing to push the cost reductions at both Chalmette and Torrance, improve reliability frankly is the key to achieving these reductions. With that, will hand the call over to Erik, to cover some specific financial points for the quarter..

Thanks, Tom. Today we reported third quarter operating income excluding special items of approximately $26 million and an adjusted fully converted net loss of $16 million or $0.16 per share on a fully exchanged fully diluted basis.

Included in our results were net after-tax charges totaling approximately $4 million or $0.04 per share related to acquisition and other nonrecurring expenses. As Colin mentioned a moment ago, these figures exclude the non-cash LTM benefit and the relevant GAAP reconciliations can be found in the tables accompanying today's press release.

For the quarter, G&A expenses were $44 million, depreciation and amortization expense was $56 million, and interest expense was approximately $39 million. PBF's reported effective tax rate for the quarter was approximately 36%. For modeling purposes, you should continue to assume the normalized rate of 40%.

Our RINs purchases for the third quarter totaled $94 million bringing our year-to-date net rent expense to $252 million. we continue to make progress on offsetting the burden of RINs, but this is obviously a significant headwind.

Refining and corporate CapEx was approximately $120 million and we ended the quarter with liquidity of approximately $900 million. We remain focused on maintaining a flexible balance sheet and the September drop-down of the Torrance Valley pipeline added $175 million of cash.

In the third quarter, we saw a working capital benefit of approximately $175 million, which was driven primarily by Torrance, but lower than originally expected due to the rising price environment. We are pleased to announce that our Board has approved a quarterly dividend of $0.30 per share.

Also of note, today PBF Logistics announced a quarterly distribution increase to $0.44 per common unit. In terms of guidance for the fourth quarter throughput information was provided in today's press release. On the expensive side, we expect capital expenditures for the full-year of 2016 to be approximately $500 million to $525 million.

General and administrative and interest expenses are each expected to be $145 million to $165 million. We expect full-year depreciation to be approximately $220 million to $240 million and annual refining operating expenses should be in the $5.50 to $5.75 per barrel range for the system.

We're in the process of finalizing our 2017 operating and capital budgets and similar to prior years we expect to provide comprehensive guidance in January. Our 2017 capital spending will be centered on our planned first half turnarounds at Delaware and Torrance and a fall turnaround at Chalmette.

I will now turn the call back over to Tom, for his closing remarks..

Thank you, Erik. While so far 2016 has not been what we had hoped. There are some things to build on. First and foremost really we remain highly confident in our initial assessments of the earnings power of both Torrance and Chalmette, but that success does not come overnight. In Torrance, we were actually focused on reliability.

We have identified a solution to the power issues which should improve the reliability of the existing power supply by connecting the refinery directly to the heavy industrial grid that other local refineries are on. This will solve a number of the recent reliability issues at Torrance.

Following those activities, we remain committed to reducing operating expenses and have achieved some small reductions in the first quarter of ownership and we expect to further reduce expenses over the course of 2017.

Additionally, we haven't identified a number of process improvements to be made within the refinery at little to no cost that should enhance our margin capture capability.

In Chalmette, we are advancing the tank and reformer complex projects that we have mentioned previously, on which we are spending approximately $100 million and we expect a one to two-year payback on these projects. Both projects should be finished in the second half of next year and improve our capture rates.

In the third quarter, we increased our level of product exports and are continuing to debottleneck our logistics to further increase our capability. This should increase our presence in a new market for PBF and at the same time provide some relief from the crushing burden of RINs.

Exports are not something that PBF has done a lot of in the past and with the current market on RINs we feel that this is something PBF frankly needs and will expand upon.

In terms of the outlook for capital spending for the rest of the Company in 2017, we are deferring a number of discretionary projects across our system in favor of the projects in Chalmette. The returns for the project in Chalmette are compelling and the expenditures are justified even in this environment.

As I mentioned earlier, RINs are a significant headwinds to PBF's profitability and to the merchant refiners as a group. PBF is doing everything in our power to mitigate the burden of RINs through internal measures, such as increased exports and broadening our wholesale footprint.

However, we remain adamant in our opposition that the system is broken and has created winners and losers through a transfer of wealth. Make no mistake that the merchant refiners are the losers in this situation.

In the current price environment, PBF is facing $400 million to $500 million a year of additional cost, which is wealth being transferred to non-obligated parties who control the blending. We have been actively engaged with numerous parties in Washington and we believe that there is a broad understanding that the system is broken.

As can be seen from recent new stories, this situation has in part caused job losses and potentially worse in the independent refining sector. And the EPS -- EPA must act to fix it. Moving back to what we can control, we estimate that we’ve left approximately $275 million in lost profit opportunities this year through poor operational performance.

We're obviously not pleased with the way we are running or addressing these issues head on. We are focused on reliability at all of our refineries and attacking new markets in order to improve our system-wide margin capture.

As I mentioned, we remain confident in the earnings potential of Torrance and Chalmette and believe that these two assets will be our strongest performers in 2017. We will continue to prudently manage our balance sheet with a keen eye on operating expenses, working capital levels, and capital discipline.

We believe we will get back on track in 2017 and demonstrate why we feel we have some of the most crude advantage assets on the market and are one of the most highly leveraged to refining fundamentals.

Longer term, we believe the value of our system becomes even more competitive as a result of the international Maritime Organization's adoption of a 2020 deadline for lower sulfur bunker fuels that was announced yesterday. Operator, we’ve completed our opening remarks and would be pleased to take any questions..

[Operator Instructions] We will go first to the line of Phil Gresh with J.P. Morgan. Please go ahead..

Hey, good morning..

Good morning..

Good morning..

First I wanted to go back to the $275 million of lost profit number year-to-date, you said Torrance was $60 million in the third quarter.

Do you have a full number for the total Company in the third quarter alone? I assume there was a sizable amount on the East Coast as well?.

Yes, I do. Phil, if you give me a moment. The LPO for the third quarter I think was $109 million total company..

Got it.

And I assume the residual outside of Torrance is with the East Coast?.

No, there was some lost opportunities well in Chalmette. We got a smoke FCC downtime and we also have the coker come down for a couple of days. So we did have -- we had virtually no LPO in Toledo. So it's basically what we said in Torrance, and probably two thirds, one third East Coast Gulf Coast for the balance..

Okay, great. Thanks. And then, you’ve talked a lot in the past about the earnings power from Chalmette and of Torrance.

How -- as you think about this lost profit and just the bigger picture, I mean, how do you think about the earnings power of the Company moving forward as a whole, as opposed to Chalmette and Torrance?.

Well, I think we’ve -- actually we feel like the -- we’re going to get all these benefits from Torrance and Chalmette as we -- assuming and we will execute typically in Torrance on a reliability side. They’re very powerful machines.

We would expect relative to the last several years that Toledo is going to return to the mean as we’ve said before it's not going to be benefited as it was 3 or 4 years ago with distressed crude prices. So maybe we are down at $300 million EBITDA at Toledo. We think that we are going to be -- continue to have a very good operation in East Coast.

Obviously, RINs has to be dealt with and we are trying to deal with that both internally and externally.

But with our view on what the market is actually going to be and what the light heavy differentials are going to be, I think clearly our East Coast operation should be and likely will be advantaged versus certainly other refiners in the East Coast, in PADD 1, and frankly in the Atlantic basin.

And as we move forward, I ended my comments discussing the IMO that is a rather significant statement that was made yesterday. That is going to have ramifications, if you did pick it up on it. Effectively that's going into effect in 2020. So that's not a lot of time. So I think we will actually start seeing some impact of that in short order..

Okay. Thanks, Tom..

And we will go next to the line of Evan Calio with Morgan Stanley. Please go ahead..

Hi, good morning, guys..

Good morning..

Hi, Evan..

Hey, Tom, I know you acquired shares this summer showing your conference in PBF's ability to integrate and execute the margin improvements at both Chalmette and Torrance.

May be on Torrance specifically, what is the power solution that you referenced and what specifically should happen in 4Q over the next several quarters that will move you towards your or towards your targeted guidance? Just trying to understand the reasonable timeline that you think you're on to achieve the -- that EBITDA run rate guidance for Torrance?.

Yes, very good questions. On the power side, let me just backup for a moment. Certainly the first power failure that occurred and again both of these in Southern California Edison related events, but frankly that doesn't really matters, but we pay the consequence, so we have to get the fix.

One was a fog related and I don't quite understand how that can -- it cannot happen again, they just had some problems with insulators. And the second one, I believe, as they admitted or indicated in a press conference, human error. So first thing they have to figure out how to not have those things happen, so that we get impacted.

That being said, the fix is basically to hookup Torrance directly to the 220,000 volt grid, which we are currently not on today. They provide things to substations -- through substations, which gives us a higher vulnerability. Our team is working with Southern California Edison.

It's very clear here that there's everybody -- is in everybody's best interest to get this solved. The city of Torrance and the Mayer wants to solve, the South Coast Air Quality Management District want to solve, the Community want to solve, Southern California Edison and PBF do.

So we are working, we don't have a definitive schedule yet because frankly Jeff still met the President of Western region met with his counterpart to Southern California Edison, in fact, yesterday or the day before and they committed to give us a schedule and details on the project itself pretty shortly.

But we do know we have something that is going to be -- will fix the problem. And as I said, we're also going -- not stopping here, we got to do interim fixes and so today to make sure we don't have a repeat. We had a Board meeting earlier this week. We took the Board out to Torrance, let them see the plant. I remain very confident in Torrance.

It has to run, but if you accept that the power of this machine is incredible. It runs 16 degree API crude.

It's got a cat feed hydro feed, which basically improve the quality to cat feed that is runs over hundred thousand barrels a day and that’s why it's a gasoline machine, but we're making progress on operating costs and I made a reference to -- will give you more data as we go forward.

The running refinery as a merchant refiner, the team out there is identifying a number of low cost, commercial opportunities that Exxon Mobil did not participate in because they were running an integrated model, I guess.

But we think it's going to add some additional benefits to the refinery, so we're very confident in $360 million and we're confident in short-term, reaching that objective..

You know you mentioned in the opening comments that you consulted a number of projects being executed within the Company.

Have you moved people internally around to accelerate the realization of those projects? You mentioned specifically Torrance that may pull that forward in the next couple of quarters or what have you done internally different that would get you on track here?.

Well, the big thing we’ve done is, we’ve focused to discretionary capital spend for the Company, if you will, on Chalmette. And that we've already started to build up a project organization, but most of that is being done under project management by Chalmette with contractors executing it candidly.

it's not a rocket science to build the crude tank and the retrofit of the reformer and the light-ends plant that we are talking about. Should be a $70 million project with $70 million of EBITDA is something that we’re just bringing back to life.

So, the real issue there is executing it in the field, I will tell you that we’re already in the field, we've opened up the vessels in Chalmette, we’ve done the internal inspection. So we don't think there's any surprises from what they look like inside after they have been mothballed. They were mothballed properly.

And we're actually in the field starting to do the piling work and work for the crude tank. So from the capital side, I think we’re in good shape in terms of executing the projects. At Torrance it's not right now discretionary capital projects that we're really looking at. It's simple outside the fence or inside the fence. I will give you an example.

Exxon Mobil was double handling or double treating material that chewed up some capacity inside the plant.

Our people have figured out now that they can basically make a additionally cut off of one unit and sell it into the distillate market, freeing up capacity in a downstream unit which will allow us to increase effectively overall distillate yield in the refinery.

A lot of words there, but basically we are going to be able to make 50,000 barrels a day more distillate out of that plant. Obviously we will only do that if the market is there, but those are the type of things that we're really finding and finding in probably a higher rate than what we expected when we model that..

Right. Let me ask the second question on as it relates to RINs in your opening comments, this is clearly an industry divide on the your point of obligation issue, there is potential EPA substantial -- there is a potential I guess for the EPA to change an enforcement point later in November.

I know you’re at the forefront of discussion, how would you gauge the legislative awareness or maybe assess any probability of a self or a EPA induced change this year?.

Okay. Well, I think there is an awareness and I think regrettably let me put it this way, being somewhat sarcastic I would gladly pay more taxes if it would result in smaller government. The reality is, there is an awareness as to whether or not that results in anything, who knows.

There is clearly a lot of attention being given to two fronts on this as you're well aware. One is moment of point of obligation. That is really going to be driven by the White House and handicap in this, candidly I don’t think it's going to get done before the election because very little gets done before the election.

So then the evidence or the other key point goes to the November 30 day.

They could announce the -- a change at the point of obligation, but my view is that that'll be singularly focused on whether or not they go ahead, the EPA being there and recognize that there has not been sufficient penetration of E15, E 85 to allow the number that they had in the initial obligation to stand without penetrating the blend wall and if they do what they did last year and recognize that then we'll get some relief.

That at least give us temporary relief until we get this thing fixed. I do believe it will be fixed over time. There is a high degree of understanding that this thing doesn't make any damn sense..

Great. Thanks, guys..

We will go next to the line of Brad Heffron from RBC Capital. Please go ahead..

Good morning, everyone..

Good morning..

Just talking about Torrance a little further, obviously you have the power issues there.

I was curious if you could talk about if there's anything else that appear since you’ve taken over the plant that needs to be fixed, that was out of line with what you are thinking and also, Tom, I think last quarter you talked about how there was a little bit of a cultural issue there.

Can you talk about how that is progressing as well?.

Yes. Thank you. We really haven't found anything else that was -- would be a surprise in terms of we said Exxon spend a lot of money fixing this plant up.

The power issue standalone, they obviously had some issues and they were working on, but outside of that power issue, we’ve got some maintenance work turnarounds that we’re going to have to do that just around the normal schedule that you would see in a refinery.

But the rest of the equipment appears to be very good shape and we really don't have any surprises in that regard. So we’re really gets down to running it and I will -- simple example, we’ve gotten caught a little bit, Exxon had a system of how they spared some of their rotating equipment pumps, etcetera. We’re changing that.

We want to make sure that we got spare pumps available. If a pump goes down, we could put the other one on, made -- not have to have the lost throughput.

The cultural issue, as I said, we took the Board out there and we had some meetings and we had a dinner with the management teams of both logistics company and the refinery and I will tell you I was very pleased. The energy level is very high of the people both that we’ve hired into bringing, who aren't with Exxon Mobil.

But probably more importantly the people who are there and we’re working for Exxon Mobil, who have kind of seem alike. They basically have said okay. This is going to be run differently. This is an important asset to PBF.

This is going to be run as a merger refinery and importantly we can't look over our shoulders to Houston, Texas, or Dallas Texas to get our directions. The expectation is that the management of the Western region will get these results delivered and they seem to be embracing.

So I did feel like that was the whole issue and candidly it's still an issue with Chalmette, and they’re doing well too. But it's kind of breaking away from the fact that you're part of a huge integrated oil company just by nature has to be run differently for being part of a merchant refiner..

okay. Understood. That’s good to hear. And then in the prepared comments, Tom you talked about how you’re diverting some of the discretionary spending next year to Chalmette.

I’m curious what projects you’re deferring, are we talking about like the hydro plant or anything else, any color you could give?.

Right now we are not showing the hydrotreater plant being built with -- it never was being built with PBF money. Although we were trying to get some leasing done. We are entertaining other options including third-party options to do the hydrogen plant.

Right now we haven't really got that completely button-down, but the intent is, we’re going to try to get that done but not to use our money to do that.

As is in the case, virtually every refinery that’s probably $20 million, $30 million of discretionary small, Ed Westlake calls them self-help projects or maybe you guys do and that that's real, that to have this kind of thing we're doing in Chalmette. Those are being held.

They’re being just put on hold, frankly because we want to concentrate on Chalmette and while we are very confident in where we stand with those, I would said with Torrance and Chalmette and the earnings power.

We have these headwinds at RINs and we are going to be conservative and make sure we’re protecting the balance sheet job one and hunker down and we'll see what happens on November 30 and beyond and be in a position that we can go either way..

Okay. Thanks a lot..

Our next question comes from Ed Westlake with Credit Suisse. Please go ahead..

Hi. Its Johannes here. Thank you for taking my call. A few questions to start off with, I guess the core question about competition, there's a lot of talk or an increasing amount of talk about product coming through Buckeye and into the East Coast.

Is that something that you all have thought about on a strategic level and how you would negotiate if there is less space for you to push product into Pennsylvania?.

Yes, we follow the conversations of competitive oil company on this subject for a number of years. In fact at every conference that we go to are usually get asked questions as to that particular oil companies desire to do that. We don't think it's an issue to be honest.

I mean think about this, the ebb to move product out of PADD 2 to PADD 1 is open less than half of the year for sure. So to do that you're effectively rewarding a pipeline company by paying them some money to get a lower netback. I really don't think it's a huge that.

If the barrels clear out of PADD 2, we have a refinery in PADD 2, we could benefit from that. We have -- we are pursuing other opportunities, actually our commercial people to move product Upstate New York through what SXL now? So we’ve got lots of way to do it and that's not really an issue for us..

Okay. And then you all have a lot of cash in terms of runway to keep doing some of these projects. I know your CapEx you talked about concentrating much of it at Chalmette, focusing on those self-help projects. It was a weak quarter. Fourth quarter, first quarter for the year are generally fairly weak.

There is some downtime that’s coming around in terms of plant turnarounds.

What sort of cash balance are you looking to maintain over that period of time and what sort of levers will you pull to make sure that you maintain it?.

I think on the cash side of things, Johannes, we're still relatively consistent in our message that we should be operating with, call it $300 million to $500 million of cash, we do have a higher balance than that. In fact, today we have a little north of a $1 billion of total liquidity between ABL availability and cash.

So I think to Tom's point, the plan is to hunker down make it through what we think it’s kind of a downturn in the cycle right now and come out on the other side we do feel like we’ve got some other levers around maneuvering on the working capital side of things, we mentioned that last quarter.

We did get some cash in from the Torrance working capital side of things. Although candidly there's more of that to come and I think we can reduce some inventories out on the West Coast to assist in that effort.

And then, to Tom's point on the CapEx side of things, reducing some of the discretionary projects, while focusing on the highest return options..

Okay. I have a couple more follow-up questions, but I will wait for my turn. Thank you..

Thank you. We will go next to the line of Paul Sankey with Wolfe Research..

Hi guys. Just one question that kind of feels almost nosy is just, what was the issue with the electricity at Torrance? I just wanted the specifics of the outage. It seems odd that you would have external power supply issues twice..

There were two issues, Paul. As I said, one is I understand it was blamed on fog, it was basically there was insulators in their system that were out in their grid, if you will, and they had basically a short, if you will, that they blamed on the weather which created the first issue.

The second one, which was -- we responded better to the second issue, but there's two basic feeders that come into the refinery, electrical feeders, high-voltage power.

Over the weekend I guess they were taking one of them out of service to do preventive maintenance and in somehow as I understand it -- in as doing that preventive maintenance, the person who was doing it or a person who was doing it left a loose wire, a loose connection and when the -- after the Columbus Day holiday the load increased and basically tripped out that entire -- the feeder that was operating while the other one was down.

So human error ….

Who is the they? Is that just like the local utility?.

Yes, Southern California Edison is the local ….

Just wondering. At a high -- altogether high level, Tom, I’m looking at your what is it, 700,000 odd barrels a day of refining capacity and wondering where you see yourselves going long-term.

It feels like you’re certainly into a phase of consolidation here, right, with the way that you’re changing your CapEx and it feels like at least a year of getting the operations back further to the operations.

It really seems -- I mean, you sound pretty downbeat about the way you operated in Q3, but it really feels like it was Torrance that was the problem, right?.

Yes, it was clearly the -- the biggest problem. We did have -- really this year, I was disappointed. As you know earlier this year we had the loss of Delaware City weather -- during a typical weather situation, but that frankly should have been avoided. So we left money on the, particularly ….

Again, I mean, the Torrance thing is like, someone leaves a screwdriver in the electricity supply.

There is not much you can do about that, right?.

Well, I kind of take a different view to be honest. At the end of the day, it's all on us. I got it.

Southern California Edison has to, if they don't perform we’re going to be in trouble, but we have to get them work with that, work with everybody to make sure that somebody doesn't leave a hard hat or a screwdriver in that grounds something, but you're right. Look, I said we had $60 million LPO in Torrance.

Now that’s probably a little inflated, because the way we calculate the LPO is the lowest throughput time for whatever the daily market -- the margin is, the crack and crack goes up when somebody like Torrance goes down. But it shows the earnings power of the machine. So we will get this thing under control.

I'm not downbeat on Torrance at all or Chalmette or even the whole company. I'm actually very optimistic, but very frustrated by the fact that we haven't performed in the manner that we expect our folks to be able to perform this year..

Sure. And then the longer-term question was, I guess, the outlook for the next year may be beyond us that you just focus on these assets that you've got..

Primarily we will focus on the assets. We will focus on the balance sheet, but I will say that we will look at everything. Our longer term strategy is not changed at all.

We will look for opportunities to buy assets if they're available at the right price and particularly assets that would actually give us a additional diversification or a natural hedge position, if you will. What I mean by natural hedge is, if you are going to be in PADD 3 and you’re going to be in PADD 5, we already have multiple assets in PADD 1.

We were little worried about what PADD 2 would look like in terms of the bid/ask, but longer term we would like to have more assets in PADD 5 and PADD 3. Again, that’s a diversification in the hedge play..

Thank you..

Thank you. We will go next to the line of Roger Read with Wells Fargo. Please go ahead..

Yes, thanks. Good morning..

Good morning..

Probably you’re going to rehash some of the things that have already been hit here, but I guess, Erik, maybe a question for you on the cash side. What -- you were net cash positive in the quarter it looks like to us, once you adjust for the acquisition and whatever cash flow was coming in. You mentioned some of the working capital improvements.

What should we think about in terms of additional sort of working capital offsets or other ways to adjust on the cash flow side?.

You're absolutely correct for Q3. We did in addition to the $175 million that we received through the drop-down. Those were cash proceeds that went to the parent company. We did incrementally generated an additional cost roughly $40 million, $50 million of cash, so that’s a real positive.

I think as we go forward, we continue to have obviously cash interest, we’ve got dividends, we have ultimately as we’re profitable we are going to be paying taxes. But from the working capital side of things, we still think on the West Coast there's opportunity to continue to reduce inventory.

These two operational blips here over the past few weeks have not helped us there. But it's going to take a little bit longer, but I think the team on the West Coast is focused on reducing operating inventory levels there. And as we go, those are the biggest levers that we have in terms of inventory.

We’ve a decent sized system today across the five refineries and naturally one thing that we ultimately need to really focus on..

Are you willing to quantify the inventory opportunity at all?.

I think on the front end, we said we could generate over $200 million of positive working capital from the West Coast and I think including what we've done to date is about 150, so I'd like to think there's at least another $50 million out there and we are going to hold them to a high standard.

So we will shoot for higher than that, but let's plan on $50 million..

Okay. Thanks. And then, Tom, for you, A lot of questions about whether with the lack of crude differentials if things have permanently turned for the PADD 1 area. I think you’ve got one of the better units there.

But can you give us an idea of where you think things go our over the next, say, 12 to 18 months assuming we don't get any sort of a light differential back into the market? How we should think about what the margin opportunity is for an East Coast unit..

Yes, I would respond in kind of three ways. One is I do think we talked before, very familiar with most of the assets in PADD 1 and worked at many of them including Bayway. Bayway is a horse. It's in the harbor.

It’s a solid refinery, but we are right up there with our facilities with Bayway, an advantage in my opinion versus anybody along up of East Coast come by chance or the other facilities in the Pennsylvania New York area and that’s simply a function of the complexity of the machines that we have in the crude optionality that we have.

The second piece is, it's interesting now obviously light crude domestically is not economic, i.e., Bakken by rail. We do - we also running notionally 30,000 barrels a day to pull heavy crude and into Delaware, but other than that nobody is making any moves to move Bakken by rail or very little.

So the light crude situation is really a function of -- right now I guess you could probably bring in [indiscernible] or crudes from West Africa and they have -- if they come down on their OSPs and they’re kind of getting economic, but ebbs and flows. There is some higher levels of crude exports. The West African crudes have responded to that.

So over the long haul, I don't -- we don’t really get too worried about that from and I do think you’re more vulnerable if you run, you’re constrained to a 100% light sweet crude operation and again I mentioned a couple of times already this change in the spec -- sulfur spec on marine bunker fuel.

I mean, you go from 3.5% software 2.5%, that an 85% reduction in sulfur. If you're making fuel all today and not coking or making asphalt you better have a plan to figure out how to deal with that.

And that is going to make it I think that's going to increase the demands that we have all the time, because we only have one refinery to runs light sweet crude and that refinery does not make fuel. It cracks its bottoms and turns it into gasoline and jet. So we’re kind of insulated from that and we'll see how that develops..

Thank you..

Thank you. We will take our next question from the line of Neil Mehta from Goldman Sachs. Please go ahead..

Good morning, guys..

Good morning, Neil..

Can you talk about M&A strategy, certainly with the two assets that have been acquired, big part of the story now is going to be bringing them into the portfolio and maximizing the value, but to the extent that there are other assets on the market, does PBF believe that it has the financial flexibility and also the time to focus on an additional asset in addition to the two that you were working on right now?.

I think we have to be very careful -- again the priority is to protect the balance sheet. We ended the quarter with probably more liquidity than we expected. Erik has talked to that.

I think if we get and we will get the reliability of Torrance improve, that the earnings power of Torrance and Chalmette will benefit us and hopefully will benefit us in shorter order. But we are going to protect ourselves against the shock on RINs and we’re going to not be in a position where we’re over levered.

However, it is our intent clearly to figure out a way to continue to grow the Company in a manner that I mentioned, I think when Paul was asking, we do -- we will remain very disciplined. We are not going to pay up for assets.

There are some assets that have been on the market and there has been numbers thrown around that we are not going to pay those numbers.

There are other assets that we will look at when a -- when assets come onto market that if fits the model, and the model is basically something that we see upside in the facility, whether it be because of -- it was part of a bad joint venture or a non-core asset that somebody wanted left or has synergistic capabilities with our existing assets that we already have in the location.

Those are the type of things we’re going to pursue but we're not going to sacrifice or threaten the balance sheet in pursuit of those facilities..

Right..

I think Neil as well you know we’ve really scaled up here through the 60% growth in total throughput capacity over the past year. So we’ve got the teams working through a lot of different initiatives and ultimately if there is a, what we would deem to be a good and accretive transaction, we feel fairly confident in terms of access to capital.

It should also just be noted we have utilized PBF Logistics specifically with the Torrance acquisition. This $175 million drop-down is not insignificant when you think about the net purchase price for the Torrance refinery. So again, focus is on integration and balance sheet, but ultimately long-term focus is to grow..

That's great.

And then the follow-up is on Torrance and what you think about for normalized levels of operating expenses, recognizing that part of that is going to be just how well the asset runs, but do you see it as $8 a barrel or potentially even lower than that?.

We remain -- our target rate is to get to $6.75 a barrel. We are looking at the competition in that area. The absolute key, what were we ….

$8.68 in the quarter..

$8.68 in the quarter, but when you have no throughput through the refinery for two or three weeks, you tend to have less denominator and therefore your unit costs go up and that’s the fact. So you’re exactly right.

I think first step to get it from 8 -- more than $8.50 down to $7.50 is to run the place and not have your fixed costs eat you up when you’re not running the barrels.

We’ve also, frankly I think we're probably not what were we versus the business plan so far, down $10 million to $12 million?.

$12 million..

$12 million so far.

We are putting our business plans together for 2017 and it is our expectation that each refinery will come in with operating cost savings, but particularly we’re looking to see exactly what the Chalmette folks and Torrance folks are going to come in with and we think we will right on our target to reasonable period of time, capture the $50 million that we set was a target for us at Torrance.

That goes to where our target remain, $6.75..

That's great, guys. Thank you very much..

Thank you. We will go next to the line of Jeff Dietert from Simmons. Please go ahead..

Good morning..

Good morning..

Good morning..

Thanks for the upgrade -- update on the opportunity cost at the Torrance power outage in 3Q. Could you compare and contrast just how similar or different the October power outage is.

Are we going to see a similar opportunity lost in October?.

No, it will be lower than that. We haven't quantified it yet. Obviously, and the reason I say its lower is one of the things -- the question again was asked about the culture. And one of the things that we were pleased with is and when we had the second power outage, the whole refinery went down, but they had learned an awful lot from the first one.

And their response -- the people of Torrance's response to that was very, very good. I mean, they figured out how to get heat into the plant and have the major -- the utility systems came back extremely quickly, that was different than the first time around.

And with the utilities coming back quickly, getting heat into the system we were able to bring the units up. It still took five or six days to get everything lined out. We had the cokers up in a couple of days. We had the cat up right after that. So, I don't have that LPO number, but I don't expect it to be anywhere near the $60 million number..

Got you. And you talked about connecting to the heavy power grid.

Could you talk a little bit more about what's involved there? Maybe regulatory requirements right away, physical construction, timeline, any additional comments on …?.

I could, but I might make mistake, so I’m going to turn that question over to the President of the Western Union, Jeff Dill, who has really been involved in this whole area and leading the effort for us..

Thanks, Tom. Good morning. Look, this is a process that Southern California Edison will really drive. And as Tom mentioned earlier, not only are we looking at making a direct connection from the refinery to a 220 KV system, which is about a two-mile connection and that project is underway and we are working that with Southern California Edison.

Both our technical teams are meeting and reviewing a number of interim measures that we want to see implemented on the current system that comes through the substation, Tom described earlier, so that we can improve the reliability starting right now with Edison while we execute that longer project, because it will take time.

It will require review through the various regulatory agencies that govern Southern California Edison. But we’ve conveyed to them and their President has conveyed to me that they are committed to executing that as fast as they possibly can..

Great.

And is there a potential cogeneration opportunity there? Is that something you are considering, as well?.

We think this connection to the 220 system is actually a better solution than a co-gen and it's certainly a solution that can be implemented faster than trying to permit and build a co-gen in Southern California..

Thank you..

Thank you. We will go next to the line of -- I’m sorry, Blake Fernandez with Howard Weil. Please go ahead..

Hey, guys, good morning. I think you pretty well covered the M&A topic and the focus on the balance sheet.

I presume -- just want to confirm, but I presume issuing equity at these levels is not the desired path?.

No, absolutely correct..

Okay. Secondly, just looking, I haven't had a chance to run the guidance for 4Q through my model, but it looks like some of the throughputs are down a bit.

Can you just confirm -- does that contemplate just pure maintenance that you’ve or does that contemplate any kind of an economic run cuts throughout the system?.

Well, the only area that we’re contemplating economic run cuts, so there is -- it’s basically base maintenance that has had some impact in the fourth quarter. Right now the forecast for the PADD 2 margins for the fourth quarter are not very good, given the inventory overhang that exists in PADD 2.

That’s the one area of the country that we’re looking at and we are likely not going to run Toledo at a $150,000 barrels a day through the whole fourth quarter, because we don’t think we’re going to have the margins there. That's the area that you will probably see some reduction because of economics..

Got it. Okay. And the last thing just, Tom, I know you elaborated a little bit on exports and the fact that you sent off about 30,000 barrels a day of gasoline.

I’m just trying to make sure for, one, I assume that comes from the Gulf Coast and when you say you’re exploring some additional opportunities, can you talk about just regionally is that all Gulf Coast and what kind of capacity do you think you can get up to?.

We will take them sequentially. You are correct. The number I referenced in the comments was all Gulf Coast out of Chalmette. That is a focus area, specific to Chalmette to try to increase the exports, we actually get better reasonably good or even better netbacks versus the pipe.

And at the same time, we get that obviously an arrow in a quiver in the RINs war. So priority, we expect that to go -- continue to improve, that is somewhat a function of the logistics projects that we talked about, particularly to crude tank. It’s a little convoluted, but Torrance -- I’m sorry, Chalmette has pretty difficult logistics.

The docks are completely constipated and sometimes you have a significant demurrage on crude ships, because there's not enough [indiscernible] in the refinery to unload the crude in one shot, therefore we go ahead and we build a new crude tank.

We allowed that to happen, that frees up dock space, that allows us to put gasoline or distillate ships on the dock and then it increase the exports. So we’re going to be focusing on that. It will take the construction of this tank and other things that we're doing to try to debottleneck that -- in that area, but that’s clear focus.

But at the same time, it's not the only focus. We are actually -- as we get into Torrance, there is potentially opportunities to export products, clean products down to Mexico.

We haven't done anything on that, but we're early in the game there and as you’re well aware we’re focusing on primarily just getting the reliability to plan out, but we think there is potentially opportunity there. We haven't really exhausted or even penetrated whether or not there is some bulk opportunities that exist on the East Coast.

We've been limited almost precluded I'd say, from doing any exports on the East Coast, again because of logistics problems, lack of water depth in Delaware, tankage constraints in Paulsboro, but the new Plains facilities, they give us an opportunity to enter that market even in the East Coast. So primary focus Chalmette, but well beyond Chalmette..

All right. Thanks a bunch..

And we will go next to the -- Chi Chow with Tudor, Pickering, & Holt..

Great, thanks. Good morning, everyone..

Good morning..

Good morning..

So, I guess, just one more question on Chalmette. Tom, you mentioned that you’re looking at changing commercial opportunities versus the way Exxon operated there.

Can you give us some details on that? I’m just wondering if change in the class of trade may also help out your RIN situation?.

Good question. Well, first of all, let me back up on the commercial opportunity, one of the main focus areas, and by the way it's in both Chalmette and Torrance. It's on the input side of the barrel. We have -- I think we're probably up to eight to nine crudes that have been approved, that were not approved as Exxon crudes in Chalmette.

These are other medium heavy sours to improve the operating envelope and we’re doing the same thing in Torrance, and we’re doing at a reasonably rapid pace. The question on wholesale is.

or channel trade, if you will, that’s a very good question, because there is -- we have a group that is working pretty diligently and has been for a period of time that is trying to basically to make some inroads into markets like in Baltimore and maybe a connection, if you will, have Chalmette and the East Coast refineries meet in the middle.

We do view that as a vehicle that would again like the exports [technical difficulty] make us money in a base case, but it give us additional blending opportunities perhaps on RINs and we're even looking at doing some minor exports of products out of Toledo..

Okay.

Can you quantify what that might mean on reducing your RIN costs? Anything you can you provide on that end?.

Chi, I could not right now. I think that the team is actually working on bringing in as part of the 2017 business plan effort that we’ve got in addition to each refinery coming in, there is going to be a wholesale business plan, a commercial review including wholesale.

We will probably have a better handle on that when we go through that activity, the latter part or the middle of November..

Okay, great. Thanks for that.

And then second question, do you’ve any thoughts on the potential OPEC cut and what that might do on crude pricing and maybe specifically on some of the heavier grades?.

I will give you my opinion, it is only an opinion and there is thousands and thousands and thousands of opinions.

I think that OPEC is obviously the Saudis, by the way we’re out in Saudi Arabia, fourth of the executives were in Dhahran two weeks ago and met with the CEO of Saudi Aramco and we didn’t get any tremendous intelligence on this issue, but we did discuss it. Obviously, the Saudis appear to have shifted back towards underpin the market in some manner.

How effective that’s going to be, we will see. My own personal opinion is, there is a big change from the past. And that is that shale oil technology is real and it's there and as they cut some areas, first response you’re likely going to get and drilling rig counts going up every week.

Sooner or later the rigs will go back on and domestic production will come up, the Canadians are going to continue to produce. So overall, I'm somewhat -- I think there is a chance that oil goes $50, $70 a barrel and may overshoot in each direction as things unfurl. But the reality is that 20 years ago and 10 years ago, we were talking about pink oil.

That’s off the board. There is a lot of oil out there. There a lot of reserves out there and the technology is there to produce it. And Iraq has got a lot of reserves, so I don't really see this as -- it's going to drive enormously flat price up and differentials narrowing, but I could be completely wrong.

I don’t have more -- a whole lot more intelligence on that than you guys do..

Okay. Well, we value your opinion, Tom. So appreciate that..

Thank you. We will go next to the line of Paul Cheng with Barclays Capital. Please go ahead..

Hey, guys. Good morning..

Good morning..

Good morning..

Tom, just curious, may not be a totally fair question. Torrance and Chalmette, you’re still ramping up the operation and so far the EBITDA contribution clearly is below what you think you could, but until that we’ve been able to prove the actual earning and profitability or cash flow generating capabilities of those two facilities.

Is there a concern that if we start dropping off that from those facilities into the MLP and then you accentuate that and make them have to deal with a constant outflow of cash.

That will make the facility or that the C Corp to be more vulnerable to downturn, sort of like what happened to the East Coast operation after you dropped all those rail into the MLP now that you’ve that commitment you can't get out?.

No, I don’t have that concern for Chalmette and Torrance. I mean, obviously, the comparison to the East Coast is valid in terms of we had a lifeline with the distressed crude environment that existed both in Canada and Bakken, and we took advantage of it and we got a lot of money from the MLP from dropping-down those assets.

But just as importantly we were able to take advantage of that stranded core situation and that has changed. So we're not fully utilizing the rail unloading assets at all in Delaware. That being said, it's not the same case in Chalmette and particularly Torrance.

When we dropped down in Torrance, we drop-down half of the SJV system, if you will, and just you look at that as if you were a third-party refiner and didn't have your own pipeline system, you will be using somebody else's pipeline system, Plains of somebody else, and you'd be paying for that operating cost certainly to get your crude sourced into the refinery.

So the key for us is with facilities that we've been dropping down are more pure logistics distribution facilities, not other things that are integral to the refinery in many ways. So I think, Paul, it's just the machines can do it. They have to run.

I’m assuming the market is going to be there and its going to be reasonable a light heavy disk, as these things eat heavy crude. So I'm not worried about that..

I think Paul, we also read there is a big initiative with our logistics business to grow through third-party acquisitions. So, the team here has been challenged to continue down that path. We’ve got a pretty robust M&A pipeline. We've obviously closed one deal this year, but I think you'll see us continue to go down kind of a measured drop path.

We don’t think we’ve been aggressive on anything. It is -- your point is very valid and I think the one that resonates internally. We think we've been fairly responsible thus far and you should continue to think that we’re going to do that going forward..

Okay. And Tom, for the Torrance that connecting to the heavy grip [ph] or heavy industrial region, that hook up.

How long will it take? What's your best estimate?.

I couldn’t even give you the estimate right now. We’ve had different numbers drawn around. I will ask Jeff, if he wants to opine on it.

But as I said, in the meeting that he had recently with the President and several Vice Presidents of the outside utility, they committed to come back in relatively short order with what the project timeline might be or at least give us some indications on that.

Jeff, do you have anything else you would add?.

Paul, I will echo that, the last meeting I’ve had with Edison, they committed to get me a project schedule in short order and I really don't want to give any kind of forecast until I see what they think their process is going to lend itself. But again we're looking at a number of other measures to take a while that longer-term project is executed..

When they say short order, I mean you’re dealing with those people, I suppose that frequently enough that are we talking about weeks or are we talking about months?.

We're talking about things that are already being put in place now. I mean, they’ve changed work practices, they’ve changed maintenance routine on the insulators that are to cause the first outage.

So we're talking about things all that actually have already been implemented and we will continue to look for things to improve on their grid over the next weeks and months to improve the current reliability while we execute that longer-term strategy..

Okay. Thank you..

Thank you. We will go next to the line of Doug Leggate from Bank of America. Please go ahead..

Hey, guys. It's [indiscernible] on for Doug. I understand that a lot of things have been asked, so just one for me. Just wondering if you could elaborate on the initiatives that you have in place to offset the RIN obligation, in particular, I’m interested in the opportunity for exports at Chalmette..

Yes, as I said the Chalmette exports is the -- probably the biggest focus area for us in terms of increasing the amount of exports that we do in the Company. We are going to look at some other areas that I mentioned, if it's viable, it’s early stage in Torrance due to export out of Torrance.

Obviously there is Mexico and other countries are having to bring in products, because they’re having some trouble with maintaining or the crude runs in their refineries etcetera.

So we will look at that, we will look at East Coast, we will look at Toledo, but the primary emphasis is in Chalmette and that as I said it is completely dependent upon debottlenecking, if you will, the constrained logistics that we have in that refinery mainly around the docks.

We just have too high dock occupancy and that is somewhat driven by the fact that we don’t have enough tankage, typically the area that we are talking about is crude tankage to allow crude ships, which can pump off very fast to pump off, because they wind up filling the available crude tankage and they have to sit there while the inventory gets drawn down.

So this new tank that we’re putting in is going to solve that problem. Crude ships will come in, pump off and get out leaving the space available to bring in other ships, particularly clean product ships that will allow us to continue to export.

Now our competition, which we are dealing with in the Gulf Coast has been very successful and taking market share from the rest of the world and pressing the refining advantage that the United States is had and I believe continues to have. We intend to do the same thing..

All right. Thanks, guys..

Thank you. We will take our final question from the line of Faisel Khan from Citigroup. Please go ahead..

Thanks. Good morning..

Good morning..

Not to beat a dead horse, but I just want to go back to the connection to the 220 kilowatt line, you guys have talked about.

So, how far is that line from the Torrance refinery, because that could take a -- depending on how far it is, it could take a while to get that sort of permanent solution in place?.

Yes. Faisel, its Jeff Dill. Its two miles and it would go straight down an existing right-of-way..

It would be an underground line?.

That would certainly be our preference..

Okay, okay. Got it. And then, I just want to make sure I understood that the outage that took place because of the arc that -- the arc you were describing in the substation, was that a result of drawing a lot of power at peak demand time or was it, you said -- I think you said human error, but I just want to make sure I got that correct..

Right. So there were two outages and let me draw a better distinction for you. So the first outage involved in arc between insulators and the arc occurred because the insulators had not been cleaned when a -- somewhat unusual fall heavy fog rolled into the South Bay area. If those insulators have been cleaned, the arcing would not have happened.

And so that's that a work practice that Edison is taking a new look at and making sure that does not reoccur.

The second outage was as Tom explained, they were doing work in the substation that these refinery over a weekend, they made a temporary wiring configuration as I understand it, and when peak load returned after a Columbus Day holiday weekend, their temporary wiring configuration could not hold the increased load and as a result that was a much larger widespread outage more than just the refinery.

That wiring obviously has been corrected and the work they were doing on the substation related to that has been stopped until they can complete it and execute it without having a situation that endangers the reliability of the grid..

Okay..

Faisel, I don’t know -- Faisel, just to speak the obvious. We are going to get this permanent solution or that what we believe is the real retrofit or effects as soon as possible. But neither of these events should have happened. It was basically poor practices on the part of unfortunately the utility.

Not cleaning an insulator and obviously a problem in the PM that they were doing on it. So we're working hard with Edison, because these things can happen..

Is there history of this sort of issue with Edison and Torrance? I mean, I thought Exxon sued Edison because they couldn’t get the reliability of power into the ….

They did. And that never got anywhere, but at the same time Exxon Mobil was working with Edison and there was a rather significant improvement in the number of electrical issues that happened as they were going down the path of doing what we're doing. i.e., this can happen.

Lets figure out how to make sure that we prevent these things and then I don’t know if it happenstance, but we take over and then there is two external failures that really shouldn't have happened and it's our job to work with them to make sure they do everything they can to prevent it from happening and then we put ourselves in a more protective position by this other longer term -- not longer-term, but a permanent solution to the problem..

Okay. I got you. And just on the low sulfur marine regs, so -- my understanding is that the regs are designed for when the ships come into port when they are idle.

Do think there is going to be a real big demand change in the low sulfur fuel just on -- on just the idling and coming into the port alone, or am I thinking about that the wrong way?.

No, I think at least as we understand it. It’s a global change..

Okay. Okay..

So the global change again just to put in context the spec -- sulfur spec today is 3.5% sulfur. You go down to 0.5, you’re going to have to kick out a lot of heavy resid that can't be blended to that. So where does that go? It can't be burned in ships and that's what 90% of the demand for this material is basically bunker fuel on ships.

So you’re going to have to take your heavier resid certainly out and even your lighter resids. I think the sulfur content of the bottoms, the residuum is Brent crude oil is 1.3%. You would have to blend that down to 0.5, you’re going to need a heck of a lot of ultralow sulfur diesel to be able to do that.

So , unless there is a shift to LNG or they put scrubbers on the ships to remedy this problem, which is somewhat expensive and its probably couldn’t even be done in a short order, because right now this is in 2020. The solution is probably a rather significant increase in demand for ultralow sulfur diesel to go into bunker fuel.

I heard numbers as high as 300,000 barrels a day. At the same time, constant demand and you kick out that level of resid, which basically should sloppy up the resid market. And if you have a coker or you can get it into the asphalt business you might see a better economics on the coker feed that you’re buying. So this is a big deal..

Okay, okay. And last question, I’m sorry, I asked this question more directly on M&A.

So could you do a transaction like Torrance or Chalmette today without issuing any equity?.

No..

No..

Okay..

Faisel, I think we'd have to do a structured transaction to -- in order to complete some type of acquisition..

Okay. Understood..

Some of that would, I think you should assume more than likely we would try to use PBF Logistics to assist in completing a transaction just as we’ve ….

Okay..

… done with Torrance..

Got it. Understood. Thanks for the time, guys. I appreciate it..

At this time, I would like to turn the conference back over to Mr. Tom Nimbley, for closing remarks. Please go ahead..

Thank you very much for your attention. Hopefully in the next call we have -- we will have better results to report to you. Everybody have a good day..

We would like to thank everybody for their participation on today’s conference call. Please feel free to disconnect your line at any time..