Oil refiner and marketer
Western Refining Inc. (
came out with in-line first quarter profits, as refinery throughput
matched expectations. The company reported earnings per share
(excluding special items) of 81 cents, same as the Zacks Consensus
The El Paso, Texas-headquartered downstream operator improved
considerably from the first quarter 2011 profit of 27 cents per
share, amid gross margin improvement in both its refineries.
Net sales of $2.3 billion were up 27.2% from the year-ago level
and also outpaced the Zacks Consensus Estimate by 4.8%.
Refining Segment: Analysis
Total refining throughput averaged 144,831 barrels per day (Bbl/d),
compared with 121,549 Bbl/d in the year-ago quarter. Overall,
throughput volumes in the El Paso refinery increased 24.6% year
over year to 120,394 Bbl/d, while that in the Gallup unit remained
almost flat at 24,437 Bbl/d.
Gross refining margin (excluding unrealized losses on hedging) rose
18.7% year-over-year to $20.34 per barrel. In terms of different
regions, refining margin was up approximately 13.9% in El Paso to
$21.30 per barrel and up 9.3% in Gallup to $21.54 per barrel. The
higher profitability could be attributed to the company's use of
the less expensive West Texas crude oil as refinery
Direct operating expenses in El Paso during the quarter averaged
$4.57 per barrel, down 22.7% year over year, while costs in Gallup
increased 27.8% from the year-ago period to $8.56 per barrel.
Overall, direct operating expenses at the company's units were
$5.70 per barrel for the three months ended March 31, 2012, down
from $7.42 per barrel in the year-ago period. The cost reduction
can be attributed to improved throughputs, together with lower
natural gas catalyst and chemical expenses.
Capital Expenditure & Balance Sheet
Western's total capital spending during the quarter was $22.2
million, up from $10.8 million in the first quarter of 2011. As of
March 31, 2012, Western had cash and cash equivalents of $221.0
million and total debt of approximately $777.0 million,
representing a debt-to-capitalization ratio of 50.4%.
For the second quarter of 2012, total refinery throughput is
anticipated to be approximately 128,000 - 133,000 Bbl/d at the El
Paso refinery and 24,000 - 26,000 Bbl/d at the Gallup refinery. The
company expects capital spending for 2012 to be approximately
Recommendation & Rating
We have a long-term Neutral recommendation on Western Refining,
which competes in the 'Oil Refining and Marketing' industry with
other established firms like
Valero Energy Corp. (
Tesoro Corp. (
For the short-term, though (1-3 months), Western Refining
currently retains a Zacks #2 Rank (Buy rating).
TESORO CORP (TSO): Free Stock Analysis Report
VALERO ENERGY (VLO): Free Stock Analysis Report
WESTERN REFING (WNR): Free Stock Analysis
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