Welcome to the PBF Logistics Second 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 open for your questions following Management's prepared remarks. Please note, this call may be recorded. [Operator Instructions]. It is now my pleasure to turn the floor over to Colin Murray, Investor Relations. Sir, you may begin.

Thank you, Erica. Good morning and welcome to PBF Logistics' second quarter earnings conference call. With me today are Tom Nimbley, our CEO, Erik Young, our CFO and several other members of the Partnerships' senior management team. If you would like a copy of our earnings release, it is available on our website. Before we begin, I would like to direct your attention to the forward-looking statement disclaimer contained in today's press release. In summary, it outlines that, statements in the press release and on this conference call that state the Partnership'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've described in our filings with the SEC. Now, I will turn the call over to Tom Nimbley.

Thank you, Colin. Good morning, everyone, and thank you for joining us on today's call. As Erik will cover in more detail shortly, we are pleased with our second quarter financial results. Our assets operated well and throughput rates can be found in our earnings release. We are pleased to announce an increase to the Partnership's quarterly distribution to $0.43 per unit per quarter. This represents a compound annual growth rate of approximately 20% since our IPO and a 43% increase to our minimum quarterly distribution. The successful execution of our disciplined growth strategy is a building block for PBF Logistics' continued expansion and drive support for increased distributions. In April, we completed our previously announced acquisition of the East Coast Terminals from Plains All American. With the acquisition complete, we have added third-party revenue to PBF Logistics, and we have commenced the work required to connect the terminal and storage assets located in New Jersey to our Paulsboro refinery. Once complete, we should be in early 2017, the new connections will allow us to leverage our relationships with PBF Energy and increase the revenue generated by the East Coast Terminals by approximately 50%. The East Coast Terminals deal was PBF Logistics’ first third-party acquisition, and we continue to purse similar opportunities to diversify the Partnership's revenue and leverage synergies with our sponsor. In conjunction with the East Coast Terminal’s acquisition, we successfully raised approximately $53 million through an underwritten offering of 2,875,000 common units. There was strong appetite in the market and we demonstrated that PBF Logistics can access the capital markets and organically fund its strategic growth. With that, I would like to turn the call over to Eric.

Thank you, Tom. This morning, we reported second quarter net income to the Partnership of $16.3 million or $0.41 per common limited partner unit. Cash generated by operating activities of $17 million and EBITDA of approximately $26 million. We had $20 million of cash available for distribution, which represents a quarterly coverage ratio of approximately 1.17 times. Revenue for the quarter was $40.7 million, which includes $2.7 million of third-party revenues from our East Coast Terminals. Total costs and expenses were $16.8 million including operating and maintenance expenses, G&A and depreciation and amortization. It is important to note that this figure includes approximately $2.4 million of transaction expenses related to the East Coast Terminals acquisition and $1.1 million of unit based compensation expense related to a senior executive retirement. Interest expense and financing cost were approximately $7.6 million in total. We are pleased to report that we ended the quarter with approximately $315 million in liquidity including $50 million of cash and access to approximately $265 million under our revolving credit facility. During the quarter, we were able to successfully increase the size of our revolving credit facility to $360 million. As a result, our net debt to EBITDA ratio was approximately 3.7 times on an annualized basis. I would like to follow-up on Tom's commentary regarding our recent acquisition. We financed the transaction through a successful equity offering to the public and borrowings under our revolving credit facility. As Tom mentioned, we have begun the capital investments to connect the terminals to the Paulsboro refinery and we expected this organic growth project should enable the East Coast Terminals to generate approximately $9 million of net income and in excess of $15 million of EBITDA from third-party and PBF Energy business. We continue to focus on the strength of our balance sheet and positioning the partnership for future growth whether through drop-downs from the sponsor or third-party acquisitions. We feel that PBF Logistics is well positioned to capitalize on opportunities as they arise. Operator, we've concluded our opening remarks. And now, we'll open the call for questions.

[Operator Instructions]. Your first question is from Justin Jenkins with Raymond James. Please go ahead.

Thanks. I guess I'll start with maybe a more strategic one. So, I know in the past you guys have talked about running maybe a dual path between drop-downs and third-party M&As from a growth perspective. We're certainly in a period of maybe more difficult refining fundamentals than we'd all like to see. So, I guess I'm curious if that plays into how you view drop-downs and then I'd love to hear your thoughts on the current state of midstream M&A?

I'd just make a comment. I think we're going to look at each opportunity individually if we find a third-party opportunity, we directionally look to third-party opportunities like the Plains acquisition that brings third-party revenue, but also the possibility of synergistic EBITDA contribution with the Parent company, if we can find something in that order, and we would certainly pursue it. And at the same time I'll ask -- Eric will comment more. We have a very healthy backlog of drop-down assets and the acquisitions that the Parent has made in both Chalmette, and now Torrance with that acquisition complete has added to that backlog not only in terms of number, but importantly a diversification of the assets that we would be potentially putting into the MLP.

So Justin we have, as we have said before and now we can kind of solidify the number, but we feel very good about the $280 million of EBITDA that sits at PBF Energy that is logistics related, that over the next three to five years, we think ultimately will be dropped into the MLP. That excludes any type of third-party transaction. So, as we move forward from here, we would say we've got assets that today are predominantly on the East Coast and the Midwest. We do have brand new assets in Chalmette in Torrance that we've acquired at the parent company in conjunction with the two refinery acquisitions. And as the MLP continues to grow, we think that asset and geographic diversification is key. So, in the event that we don't have line of sight on a specific third-party transaction, we continue to help people along to understand that ultimately we will then drop assets down. We have a pretty dedicated program internally of putting financial statements in and around these assets together and ultimately, the drop-down timing is all something that we can control. It's obviously subject to the availability of the capital markets, but we also feel very confident in our ability to access the capital markets. We showed that in a much more strenuous time in the MLP space earlier this year with our successful $53 million equity raise.

Thanks a lot for that. And I appreciate the update on the East Coast Terminals here. But maybe, if you could give us a sense on what the contribution was specifically in the quarter beyond just the revenue number from a third-party perspective, and if you think that's a bit ratable going forward here as we get into the incremental uplift in 2017 that you talked about with the Paulsboro connection?

Yes. So, we still feel very confident with the original numbers that we laid out earlier in the year that put these particular suite of terminals will generate approximately $10 million of EBITDA for calendar year 2016, obviously a portion of that is under somebody else's watch. As we sit here going through the remainder of the year, we're still very comfortable with that particular guidance. And then ultimately, once we get the connections finished, we think further $15 million that was referenced in the prepared comments, that's going to be a 2017 figure.

Perfect. Great color, guys. Thanks for the time.

We'll go next to Bhavesh Lodaya from Credit Suisse. Please go ahead, your line is open.

Good morning Tom.

Good morning.

Good morning.

So impressive growth in volumes in the products pipeline in 2Q. Could you maybe share what drove those and what's the outlook?

I think overall if you just think about, that is a primary distribution point for the Delaware City refinery. So, ultimately, in Q1, the operating performance of the refinery was subpar and as a result we had lower volumes through that particular asset. Ultimately, it comes down to where does the refinery get its highest net back through various modes of transportation. We still feel very confident that the 50,000 barrel a day MVC [ph] that the MLP receives is something that ultimately is going to stay constant. There are going to be times where we're under that number and then you are going to have bonds where, for the refining company, if they are receiving a higher net back on that particular pipeline versus alternative modes of transportation, you will see higher volumes, which is what we saw during the second quarter.

Thanks. And then, just in drop-downs again like, you mentioned $280 number, is there any updated thoughts around what multiples you are looking at for these transactions going ahead?

I think today if we sit here and look at where the PBF Logistics yield is on the equity and look at the state of the debt markets, we still feel very comfortable with, ultimately it's all a very simple mathematical equation and anywhere from kind of 8 to 10 times appears to be where obviously peers have dropped assets and where comparable transaction multiples have traded. So, ultimately as we look at where we trade on the screen, that number appears to work, that range of numbers appears to work depending on what the split of debt and equity is in your modeling assumptions using even a long-term debt rate.

Fair enough, and maybe a final one from me. So with the closing of the East Coast acquisition, how should we think about say the operating and maintenance line and the G&A line items going ahead?

Ultimately, if you take the original guidance that we provided on the operating expense through kind of the calendar 2016 year, and then ultimately we were still comfortable with assuming the second half of the year kind of a $5 million run rate for those particular assets on an EBITDA basis. The $2.7 million of revenue associated with what we saw during the ownership from the time of acquisition that should be a relatively consistent figure as we go from now through the end of the year. Then we will see that step function change up, once we have the pipeline connected.

And the G&A of around $3 million to $3.5 million, that should be a good run rate going ahead, right?

Yes. Our original guidance for the $10 million a year in EBITDA is a good one for the full year, so obviously half of that for the second half.

Okay. Thank you.

We'll go next to Ryan Levine from Citi. Please go ahead.

Good morning.

Good morning.

Does PBF subjective to reduce the RIN exposure by $100 million figure that was stated earlier over the next two years translate into any potential incremental midstream opportunities for PBFX or for PBF?

It certainly could. I mean obviously, the way we could reduce our exposure in a positive manner to RINs absent just some fix on the statute itself or reduction in RINs prices is to tap the export markets, which is a clear objective and move more product and blended ourselves over RACs, so we have an opportunity potentially in Toledo with putting -- our grassroots RAC in to blend barrels not on third-parties but ourselves to get the RIN to the extent that we could find additional terminals that we return into proprietary terminals that had the same access to that class of trade, i.e., blended moving into the market as a finished product, we'll pursue all of those things. It's going to take you know a rather broad approach in order to be able to accomplish that objective that I mentioned on the previous call to get those prices, those costs down by $100 million over the next few years, but certainly that will be part of the strategy.

Would most of that spending be organic, or would you also look to acquire in-house RIN blending, ethanol blending capability?

Would be combination, it all depends on the circumstances and what's available and what comes up, we would pursue both. We're obviously moving ethanol strategically. Now, we're going to bring it in by rail and we're going to see if we can penetrate a market, some of the East Coast market, but there are number of things that we continue to pursue. We look at every business opportunity that comes forward. We're cognizant of the balance sheet, but you know I would say that, it depends on what the right deal is.

Just one last follow-up on that. In terms of the export opportunity at Toledo, is there any type of volume number that you are eyeballing at this point, or is it still too early?

I may have misspoke then, it's not an export opportunity really at Toledo. That's all moved by pipe. It's a land-locked market pretty much. We have in the past actually looked at doing something with Toledo stocks to be able to move by water down to the Gulf Coast, but the economics on that did not pay out. The two areas that we're going to focus on initially, on terms of increase in exports markets, major emphasis in Chalmette and that will be addressed by, partly by the crew tank that we are building in Chalmette, will debottleneck the logistics facilities significantly, and at the same time candidly. One of the things that we're trying to see if we can benefit from, the plains acquisition and the East Coast Terminals, is we are logistically challenged in the East Coast in PBF, i.e., Delaware City has limited draft capability and high dock occupancy, Paulsboro had better deepwater but limited tankage, therefore we're looking at the Plains acquisition tankage and terminals to see if there is a way that we could actually use those additional facilities to bright spot [ph] i.e., load a gasoline ship and move it to the South America et cetera, or diesel, also low sulfur diesel ships and move it to Europe where there is typically, when [indiscernible].

Ryan, the Toledo opportunity that Tom referenced was on the RAC side of things we today do now own our own RAC in Toledo, so ultimately is there an organic project in and around the refinery or are there third-party acquisition opportunities that exist in the product distribution markets in and around our Toledo production.

Our next question comes from Shneur Gershuni from UBS Securities. Please go ahead.

Just wanted to follow-up on the earlier strategic questions just with respect to drop-downs. Empathetically speaking, it may not be hypothetical, but you know in an environment where refining earnings could come in just because of the charging environment which would hypothetically lead to an increase in the multiple at the PBF level. Does that have an impact in how you think about what the drop-down multiple should be? Does it sort of push you towards wanting to target a higher drop-down multiple, or do you expect that you can continue to be supportive on the drop-down in pricing?

For all of the drop-down acquisitions that we've done and you should assume for everything that we're going to do going forward, we ultimately utilize our conflicts committee, everything is done on an arms-length basis and acquisition multiples from the MLPs perspectives are going to be driven by a couple of different factors. Number one, where the equity is trading, number two, access to capital markets, but probably most importantly, what the terms of a contract would look like with the sponsor. So, given today our assets that have a very short-term contract it's probably safe to assume you would gather lower multiple if they are similar to the assets that are in the MLP today that we already have in terms of tanks and other logistics assets. Going forward, we have pipelines, we have other tanks, we have other storage facilities, RIN [ph] facilities. These are all assets that are very critical to the day to day operations of the refinery. And ultimately, we've shown that the parent company or sponsor signs up to longer term contracts, minimum volume commitments depending on the length of those contracts, that's another factor that plays into the multiples. Regardless of what happens at the parent company from a trading multiple standpoint, it doesn't appear that refining is going to trade anywhere close to where the MLPs trade, so that financial arbitrage still exist. Again it goes back to capital markets, the quality of the asset, the length of the contract and ultimately where the refining of excuse me the MLP equity yield is.

So, maybe just sort of stabilizing remarks. So basically, you still envision scenarios where it's accretive to both entities, and going to be more a function of what are the price of the assets in the current market today and your access to capital markets at the MLP. So, is that a fair way to characterize it?

Absolutely. I think, remember PBF owns just shy of 50% of the PBF Logistics. Everything is consolidated on the PBF balance sheet. So there is a constant balance in maintain a conservative balance sheet, so there is never going to be a scenario where one company is going to be advantaged or disadvantaged versus the other. There has to be a transaction that is beneficial to both companies. But today, given where we've seen the market and as we look forward here, there still appears to be a wide open market to do drop-down transactions. It really is going to come down to -- is the equity capital markets open for whether it's PBF logistics or other drop-down vehicles. And ultimately, what do the contract terms look like. Those two things are really going to drive ultimately a pure acquisition multiple.

Thank you very much. Have a great weekend.

Okay. If there are no other questions, then thank you very much for your attendance and your time today. Have a great day and a great weekend.

Thank you.

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