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Summary

  • PBFX, a master limited partnership formed by PBF Energy to manage crude oil logistics assets, raised over $275.0 million in its IPO on Friday.
  • As essentially all of its revenues will be generated through PBF Energy, PBFX will face few competitors but may find it difficult to grow beyond PBF Energy.
  • We are positive on this company.

PBF Logistics LP (NYSE:PBFX), a master limited partnership formed by PBF Energy to manage crude oil logistics assets, raised over $275.0 million in its successful IPO on Friday.

The Parsippany, New Jersey-based firm offered 13.8 million shares at $23 per share.

PBFX filed on April 3, 2014.
Lead Underwriters: Barclays Capital Inc., UBS Investment Bank
Underwriters: Citigroup Global Markets Inc., Credit Suisse Securities (USA) LLC, Deutsche Bank Securities Inc., Morgan Stanley & Co. LLC, Wells Fargo Securities LLC

Company 'Logistics'
PBF Logistics is an MLP formed by PBF Energy to own, operate, develop and acquire crude oil pipelines, terminals, storage facilities and other logistical assets to support PBF Energy's refineries in Toledo, Ohio, Delaware City, Delaware, and Paulsboro, New Jersey.

The firm's initial assets include a light crude oil rail unloading terminal at the Delaware City refinery and a crude oil truck unloading terminal at the Toledo refinery; PBFX will seek to expand its assets through further acquisitions from PBF Energy and from third party sources, as well as through organic growth and construction.

The firm will generate revenue through fees charged for the movement and handling of crude oil, allowing PBFX to be at least one step removed from fluctuations in the price of oil.

After the IPO, substantially all of PBFX's revenue will be generated through long-term agreements with PBF Energy and its subsidiaries, which will have initial terms of seven years.

Valuation
PBFX offers the following figures in its S-1 balance sheet for the year ended 2013:

Revenue: $0.00
Net Loss: ($8,890,000.00)
Total Assets: $29,996,000.00
Total Liabilities: $499,000.00
Stockholders' Equity: $29,497,000.00

Diminished Competition
PBFX will face little competition, since essentially all of its revenues will be generated through PBF Energy. However, should its facilities have greater capacity than PBF Energy requires, PBFX may have to compete with other operators of similar assets for third-party business. The firm's success is deeply tied to that of PBF Energy, as its assets are specifically designed to serve PBF Energy's refineries.

Management Highlights
Thomas J. Nimbley has served as CEO of PBFX's general partner, which manages PBFX's operations, since 2013. Mr. Nimbley also serves as the CEO of PBF Energy Inc.

He previously served as a Principal for Nimbley Consultants LLC, as Senior Vice President and head of Refining for Phillips Petroleum Company, and as Senior Vice President and head of Refining for ConocoPhillips' domestic refining system.

Mr. Nimbley also worked in various positions with Tosco Corporation and its subsidiaries.

Conclusion For PBF Investors
We are positive on this company for 2014.

PBFX will more than likely be able to generate consistent revenues through its commercial agreements with PBF Energy, but there isn't much motivation for growth beyond PBF Energy's needs. The firm's initial assets are also very limited.

Though PBFX isn't directly exposed to changes in the oil market, it will rise and fall with PBF Energy's success or failure.

PBF Energy has performed well in recent months, and the firm's stated interest in acquiring a new California plant could lead to more business for PBFX.

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Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in PBFX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.