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Analyst Blog

On Feb, 27, 2014, oil refiner and marketer, Western Refining Inc. (WNR - Analyst Report), reported better-than-expected fourth-quarter 2013 results, before the opening bell. Increased throughput volumes aided the outcome.

The company reported earnings per share (excluding special items) of 60 cents, surpassing the Zacks Consensus Estimate by a penny.

The figure, however, decreased 58.6% from the year-ago quarter's adjusted per share profit of $1.45. Significant fall in refining margins led to the decline.

Quarterly net sales of $3.02 billion beat the Zacks Consensus Estimate of $2.58 billion. The top line also increased 34.4% from the year-ago quarter’s figure of $2.25 billion.  

The better-than-expected results were reflected in the opening price of Western Refining on Thursday. The company opened at $40.13 per share, reflecting a 2.5% hike from the closing price on the previous day. The per share price, however, fell to $37.47 at the close of trading on Thursday.  

For the year ended Dec 31, 2013, Western Refining reported income (excluding one-time items) of $3.12 per share, lower than the year-ago adjusted profit of $5.14 per share. Revenues were recorded at $10.1 billion against the year-ago number of $9.5 billion.  

Refining Segment: Analysis

Throughput: The total refining throughput averaged 157,252 barrels per day (Bbl/d), up from 152,280 Bbl/d in the year-ago quarter. Overall, throughput volumes at the El Paso refinery increased 2.3% year over year to 133,723 Bbl/d, while the Gallup unit recorded throughput volumes of 23,529 Bbl/d, up 9.5% from the year-earlier level.

Refining Margins: Gross refining margin (excluding activities related to hedging) was down 54.9% year over year to $13.87 per barrel. Geographically, refining margin fell 55.0% to $13.85 per barrel at El Paso and was down 52.3% to $14.43 per barrel at Gallup.   

Operating Expenses: Direct operating expenses at El Paso during the quarter averaged $3.97 per barrel, down 8.9% year over year.

Direct operating expenses at Gallup dipped 1.7% year over year to $11.24 per barrel.

Direct operating expenses at Western Refining’s units were $5.14 per barrel for the three months ended Dec 31, 2013, down from $5.93 in the year-ago period.

Capital Expenditure & Balance Sheet

El Paso, Texas-headquartered Western Refining’s total capital spending during the quarter was $57.9 million, lower than $71.4 million in the fourth quarter of 2012. As of Dec 31, 2013, Western Refining had cash and cash equivalents of $468.1 million and total debt of approximately $1,411.5 million, representing a debt-to-capitalization ratio of 35.5%.

Share Repurchase

During 2013, Western Refining bought back 8.1 million stocks. The shares, worth $253.0 million, were bought at an average price of $31.27 per share.

Zacks Rating

Western Refining currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.

Meanwhile, one can consider better-ranked players in the oil refining and marketing sector like Global Partners LP (GLP - Snapshot Report), Ferrellgas Partners LP (FGP - Analyst Report) and Marathon Petroleum Corporation (MPC - Analyst Report). Global Partners sports a Zacks Rank #1 (Strong Buy) while Ferrellgas Partners and Marathon Petroleum carry a Zacks Rank #2 (Buy).

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