Oil refiner and marketer Western Refining Inc.’s WNR third-quarter 2016 earnings per share (excluding special items) of 46 cents surpassed the Zacks Consensus Estimate of 44 cents on lower operating expenses. The bottom line, however, decreased from the year-ago adjusted figure of $1.69 per share due to lower refining margins.
Quarterly net sales of $2,065 million missed the Zacks Consensus Estimate of $2,652 million. Also, the top line deteriorated 19.6% from the year-ago quarter level.
Refining Segment: Analysis
Throughput: Total refining throughput averaged 255,222 barrels per day (Bbl/d) compared with 255,170 Bbl/d in the year-ago quarter. Throughput volumes at the El Paso refinery rose 2.5% year over year to 142,432 Bbl/d. The Gallup unit recorded throughput volumes of 28,245 Bbl/d, up 10.1% from the year-earlier level.
Refining Margins: Gross refining margin recorded a year-over-year decline to $12.02 per barrel from $20.65. Geographically, refining margin plunged 36.2% to $11.80 per barrel at El Paso and decreased nearly 39.3% to $14.01 per barrel at Gallup.
Operating Expenses: Direct operating expenses at El Paso averaged $3.71 per barrel, up 2.8% year over year. Direct operating expenses at Gallup decreased about 11% year over year to $8.10 per barrel. Combined direct operating expenses at Western Refining’s units were $4.93 per barrel in the three months ended Sep 30, 2016 as against $5.04 per barrel in the year-ago period.
Capital Expenditure & Balance Sheet
WESTERN REFING Price, Consensus and EPS Surprise
El Paso, TX-based Western Refining’s total capital spending during the quarter was $78.3 million. This was higher than $76.4 million in the third quarter of 2015. As of Sep 30, 2016, Western Refining had cash and cash equivalents of $266.1 million and total debt of approximately $2,110.2 million. This represents a debt-to-capitalization ratio of 48.2%.
Outlook
The company expressed its optimism about the fourth quarter as it has started witnessing an increase in crude oil throughout by 4,000 barrels per day at St. Paul Park. We expect this to boost the company’s future profitability.
Zacks Rank and Other Key Picks
Western Refining currently carries a Zacks Rank #3 (Hold).
Some better-ranked players from the broader energy sector include North Atlantic Drilling Limited NADL, Ultra Petroleum Corp. UPLMQ and Baker Hughes Incorporated BHI. All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
In the last four quarters, North Atlantic Drilling posted an average positive earnings surprise of 148.4%.
Ultra Petroleum, on the other hand, posted an average positive earnings surprise of 65.91% in the last four quarters.
In the last four quarters, Baker Hughes posted an average positive earnings surprise of 65.12%.
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