PBF Energy 2013 Annual Report Download - page 31

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our various supply and Inventory Intermediation Agreements. We terminated our supply agreement with Statoil
for our Paulsboro refinery effective March 31, 2013 and our MSCG Offtake Agreements for our Paulsboro and
Delaware City refineries effective July 1, 2013. Concurrent with the termination of our MSCG Offtake Agreements,
we entered into Inventory Intermediation Agreements with J. Aron at our Paulsboro and Delaware City refineries.
Pursuant to the Inventory Intermediation Agreements, J. Aron purchases and holds title to all of the intermediate
and finished products produced by the Delaware City and Paulsboro refineries and delivered into the tanks at the
refineries (or at other locations outside of the refineries as agreed upon by both parties). Furthermore, J. Aron
agrees to sell the intermediate and finished products back to us as they are discharged out of the refineries' tanks
(or other locations outside of the refineries as agreed upon by both parties). We market and sell the finished products
independently to third parties.
If we cannot adequately handle our crude oil and feedstock requirements without the benefit of the Statoil
arrangement at Paulsboro, or if we are required to obtain our crude oil supply at our other refineries without the
benefit of the existing supply arrangements or the applicable counterparty defaults in its obligations, our crude oil
pricing costs may increase as the number of days between when we pay for the crude oil and when the crude oil
is delivered to us increases. Termination of our Inventory Intermediation Agreements with J. Aron would require
us to finance our refined products inventory covered by the agreements at terms that may not be as favorable.
Additionally, we are obligated to repurchase from J. Aron all volumes of products located at the refineries’ storage
tanks (or at other locations outside of the refineries as agreed upon by both parties) upon termination of these
agreements, which may have a material adverse impact on our working capital and financial condition. Further, if
we are not able to market and sell our finished products to credit worthy customers, we may be subject to delays
in the collection of our accounts receivable and exposure to additional credit risk. Such increased exposure could
negatively impact our liquidity due to our increased working capital needs as a result of the increase in the amount
of crude oil inventory and accounts receivable we would have to carry on our balance sheet. Our long-term needs
for cash include those to support ongoing capital expenditures for equipment maintenance and upgrades during
turnarounds at our refineries and to complete our routine and normally scheduled maintenance, regulatory and
security expenditures.
In addition, from time to time, we are required to spend significant amounts for repairs when one or more
processing units experiences temporary shutdowns. We continue to utilize significant capital to upgrade equipment,
improve facilities, and reduce operational, safety and environmental risks. In connection with the Paulsboro
acquisition, we assumed certain significant environmental obligations, and may similarly do so in future
acquisitions. We will likely incur substantial compliance costs in connection with new or changing environmental,
health and safety regulations. See “Item 7. Management’s Discussion and Analysis of Financial Condition.” Our
liquidity will affect our ability to satisfy any of these needs or obligations.
We may not be able to obtain funding on acceptable terms or at all because of volatility and uncertainty in the
credit and capital markets. This may hinder or prevent us from meeting our future capital needs.
Global financial markets and economic conditions have been, and continue to be, disrupted and volatile due
to a variety of factors, including uncertainty in the financial services sector, low consumer confidence, continued
high unemployment, geopolitical issues and the current weak economic conditions. In addition, the fixed income
markets have experienced periods of extreme volatility that have negatively impacted market liquidity conditions.
As a result, the cost of raising money in the debt and equity capital markets has increased substantially at times
while the availability of funds from those markets diminished significantly. In particular, as a result of concerns
about the stability of financial markets generally and the solvency of lending counterparties specifically, the cost
of obtaining money from the credit markets may increase as many lenders and institutional investors increase
interest rates, enact tighter lending standards, refuse to refinance existing debt on similar terms or at all and reduce
or, in some cases, cease to provide funding to borrowers. Due to these factors, we cannot be certain that new debt
or equity financing will be available on acceptable terms. If funding is not available when needed, or is available
only on unfavorable terms, we may be unable to meet our obligations as they come due. Moreover, without adequate
funding, we may be unable to execute our growth strategy, complete future acquisitions, take advantage of other