Market downturns often expose underlying weaknesses in companies that appear stable on the surface. Today, we dive into PBF Energy (PBF), a company facing significant financial headwinds after a refinery fire disrupted operations. With growing debt concerns and margin pressures, PBF presents a compelling short opportunity.

We’ll cover:

• Why PBF’s financial struggles make it a short candidate

• How to capitalize on the opportunity with an options trade

Stock Breakdown: PBF Energy (PBF)

Why PBF is a Short Play

A fire at the Martinez refinery near San Francisco has forced a shutdown for the rest of the quarter. This incident mirrors the Torrance refinery explosion, which led to prolonged operational setbacks. The timing is particularly damaging given additional supply disruptions and ongoing California wildfires, further straining refinery operations.

Financial Implications

The company has burned through $630 million in cash and was forced to adjust its revolver to $200 million for the quarter. PBF is now grappling with:

✔ Weaker first-quarter earnings due to the Martinez refinery outage

✔ Increased remediation costs from the fire

✔ Ongoing maintenance expenses at other refineries

✔ Rising debt concerns, as high-interest rates compound existing financial strains

PBF has historically struggled with heavy debt loads, and with yields up, the cost of borrowing remains elevated relative to their legacy debt. This adds long-term financial pressure that is unlikely to subside soon.

Trade Of The Week

How to Trade PBF

We see PBF’s challenges as a clear, short opportunity. Here’s how we’re playing it:

🟥 Short Position

Initiate a short position on PBF at $22.88 to capitalize on near-term downside risk.

🟩 Options Play: Long Put Spread

For traders looking to profit with defined risk, consider a put spread:

📉 Buy the July 18th $22 Put for $2.55

📈 Sell the July 18th $17 Put for $0.75

💰 Net Debit: $1.80 (as of Tuesday February 25th close, adjust accordingly)

This trade allows you to take advantage of PBF’s downside while limiting exposure.

In Conclusion…

PBF Energy is under severe financial pressure due to operational disruptions, rising debt, and weak margins. The combination of a refinery shutdown, cash flow struggles, and high-interest obligations makes PBF a compelling short trade.

For more in-depth trading strategies and market insights, upgrade to the paid version of our newsletter.

Sincerely,

The Resilient Trader