Oil refiner and marketer, Western Refining Inc. (WNR) reported second-quarter 2014 earnings per share (excluding special items) of $1.29, which failed to meet the Zacks Consensus Estimate of $1.32. A fall in refining margins led to the miss.
However, the bottom line showed an improvement from the year-ago quarter level of $1.25 per share on the back of higher throughput volumes and lower operating expenses.
Quarterly net sales of about $4.35 billion beat the Zacks Consensus Estimate of $3 billion and also increased 79% from the year-ago quarter figure of $2.43 billion.
Refining Segment: Analysis
Throughput: The total refining throughput averaged 165,641 barrels per day (Bbl/d), up from 161,985 Bbl/d in the year-ago quarter. Overall, throughput volumes at the El Paso refinery increased 2.7% year over year to 139,241 Bbl/d while the Gallup unit recorded throughput volumes of 26,400 Bbl/d, marginally higher than the year-earlier level of 26,349 Bbl/d.
Refining Margins: Gross refining margin was down 8.8% year over year to $23.42 per barrel. Geographically, refining margin was up 7.7% to $20.95 per barrel at El Paso but was down 36.8% to $15.34 per barrel at Gallup.
Operating Expenses: Direct operating expenses at El Paso averaged $3.86 per barrel in the quarter, up about 17% year over year. Direct operating expenses at Gallup decreased 13.3% year over year to $9.03 per barrel.
Direct operating expenses at Western Refining’s units were $4.93 per barrel for the three months ended Jun 30, 2014, down from $4.98 in the corresponding period a year ago.
Capital Expenditure & Balance Sheet
El Paso, TX-headquartered Western Refining’s total capital spending during the quarter was approximately $40 million, higher than $36.2 million in the second quarter of 2013. As of Jun 30, 2014, the company had cash and cash equivalents of $531.8 million and total debt of approximately $1,200.2 million, representing a debt-to-capitalization ratio of 28.7%.
Zacks Rank & Other Picks
Western Refining currently carries a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, one can consider better-ranked players from the broader energy sector like Patterson-UTI Energy Inc. (PTEN), Cameron International Corporation (CAM) and Weatherford International plc (WFT). All these stocks sport a Zacks Rank #1 (Strong Buy).
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