Oil refiner and marketer Western Refining Inc. WNR reported strong second-quarter 2015 earnings on the back of higher refining margin from the Gallup refinery. However, increased operating expenses and lower throughput volume acted as partial dampeners.
The company’s earnings per share (excluding special items) came in at $1.44, which surpassed the Zacks Consensus Estimate of $1.32 and increased substantially from the year-ago adjusted figure of $1.29.
However, quarterly net sales of $2,828.9 million were 35% lower than the year-ago quarter level. The top line widely missed the Zacks Consensus Estimate of $3,675 million.
Refining Segment: Analysis
Throughput: Total refining throughput averaged 162,001 barrels per day (Bbl/d), down from 165,641 Bbl/d in the year-ago quarter. Overall, throughput volumes at the El Paso refinery decreased about 3.5% year over year to 134,315 Bbl/d, but the Gallup unit recorded throughput volumes of 27,686 Bbl/d, up almost 5% from the year-earlier level.
Refining Margins: Gross refining margin recorded a year-over-year decline, from $23.42 to $19.71 per barrel. Geographically, refining margin decreased 4.5% to $20.01 per barrel at El Paso but increased 48% to $22.64 per barrel at Gallup.
Operating Expenses: Direct operating expenses at El Paso averaged $4.17 per barrel, 8% higher year over year. However, direct operating expenses at Gallup fell 13.5% year over year to $7.81 per barrel. Combined direct operating expenses at Western Refining’s units were $5.25 per barrel for the three months ended Jun 30, 2015, reflecting an increase from $4.93 in the year-ago period.
Capital Expenditure & Balance Sheet
Headquartered in El Paso, TX, Western Refining’s total capital spending during the quarter was $66.4 million, much higher than $40 million in the second quarter of 2014. As of Jun 30, 2015, Western Refining had cash and cash equivalents of $543.9 million and total debt of approximately $1,597.6 million, representing a debt-to-capitalization ratio of 34.8%.
Dividend & Share Repurchases
So far in 2015, the company has given back roughly $118 million to its shareholders through dividend and share repurchase.
Zacks Rank & Other Stock Picks
Western Refining currently carries a Zacks Rank #3 (Hold).
Some better-ranked players in the energy sector are Seadrill Partners LLC SDLP, Valero Energy Partners LP VLP and CVR Refining, LP CVRR. All these stocks sport a Zacks Rank #1 (Strong Buy).
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