Western Refining, Inc. (NYSE:WNR) today reported first quarter 2017
net income attributable to Western of $11.6 million, or $0.10
per diluted share, as compared to net income attributable to
Western of $30.5 million, or $0.33 per diluted share for the
first quarter of 2016. Net income attributable to Western,
excluding special items, was $20.8 million, or $0.19 per
diluted share. This compares to first quarter 2016 net income,
excluding special items, of $11.6 million, or $0.13 per
diluted share. Adjusted EBITDA for the first quarter 2017 was
$122.4 million compared to $98.3 million last year. Special
items include $11.3 million related to merger and reorganization
costs. A reconciliation of reported earnings and description
of special items can be found in the accompanying financial tables.
Jeff Stevens, Western's Chief Executive Officer,
said, "Our integrated business model allowed us to deliver good
first quarter results in spite of significant crack spread
volatility during the quarter. Crack spreads increased in
March after a difficult February. Crude oil differentials,
particularly the Midland/Cushing and Bakken differentials, narrowed
as compared to the first quarter of 2016."
During the first quarter of 2017, total refining
throughput was approximately 265,000 barrels per day with the St.
Paul Park refinery recording quarterly crude oil throughput of
approximately 105,000 barrels per day, a record high.
Refinery utilization was at 95% for the quarter. The El Paso
refinery underwent an annual reformer regeneration. At
Gallup, planned maintenance work originally scheduled for the first
quarter was deferred to April 2017. Refining gross margin per
barrel of total throughput, excluding lower of cost or market
adjustments, was $9.92 per barrel as compared to $8.06 per barrel
for the first quarter 2016. At St. Paul Park, gross margin
was negatively impacted by asphalt pricing and logistics fees
payable to Western Refining Logistics, LP (NYSE:WNRL) as compared
to first quarter 2016. Capture rates for the quarter were largely
impacted by narrowing crude oil differentials, volatile West Coast
fuel margins, asphalt margins and planned maintenance at El
Paso.
Total refining operating expense was $4.95 per
barrel during the first quarter 2017, compared to $4.62 per barrel
during the first quarter 2016. The increase was primarily due
to lower throughput at the El Paso refinery offset, in part, by
higher throughputs at Gallup and St. Paul Park.
Total retail fuel volumes were up
quarter-to-quarter based on continued growth in the Southwest and
fuel margins were relatively strong for this time of year. In
March, SuperAmerica acquired 22 additional retail locations from a
franchisee in Minnesota. This transaction increases
profitability and brings the total number of company-operated
SuperAmerica stores to 192.
During the first quarter 2017, capital spending
was $41 million for Western and $5 million for WNRL.
Western paid a dividend of $0.38 per share of
common stock in the first quarter 2017. In April, Western's
Board of Directors also approved a $0.38 per share dividend for the
second quarter. Including the second quarter dividend,
Western will have returned approximately $83 million to
shareholders through dividends in 2017.
Cash and cash equivalents at March 31, 2017, was
$160 million as compared to $269 million at December 31,
2016. The reduction was primarily due to an increase in
working capital used for operations.
Operating guidance for the second quarter 2017
can be found in the attached tables.
Looking forward, Stevens said, "At St. Paul
Park, we are executing a turnaround on the #1 crude unit, the HF
alkylation unit and #2 reformer and plan to start up the solvent
deasphalter in May. This will complete our capital spending
at St. Paul Park to increase the crude slate flexibility and
improve gasoline and diesel yields. At Gallup, we are
undertaking our annual diesel hydrotreater catalyst
replacement. In October, we will execute a turnaround to
increase the El Paso crude unit capacity by 3,500 barrels per
day. That will bring the total El Paso capacity to
approximately 140,000 barrels per day."
Stevens continued, "In the Delaware Basin, we
continue to see growth in crude oil production which provides
additional optionality for our crude oil slate at El Paso and to
sell to third parties. We also continue to expand our
logistics capabilities by constructing additional gathering
pipelines connected to new production. The on-going
commitment to our integrated business model continues to position
the Company for future success."
Non-GAAP Financial Measures
In a number of places in the press release and
related tables, we have excluded certain income and expense items
from GAAP measures. The excluded items are generally non-cash in
nature such as unrealized net gains and losses from commodity
hedging activities and changes in the lower of cost or market
inventory reserve; however, other items that have a cash impact,
such as gains or losses on disposal of assets and merger and
reorganization costs are also excluded. We believe it is useful for
investors and financial analysts to understand our financial
performance excluding such items so that they can see the operating
trends underlying our business. Readers of this press release
should not consider these non-GAAP measures in isolation from, or
as a substitute for, the financial information that we report in
accordance with GAAP.
About Western RefiningWestern
Refining, Inc. is an independent refining and marketing company
headquartered in El Paso, Texas. The Company operates refineries in
El Paso, Gallup, New Mexico and St. Paul Park, Minnesota. The
Company’s retail operations includes retail service stations and
convenience stores in Arizona, Colorado, Minnesota, New Mexico,
Texas, and Wisconsin, operating primarily through the Giant,
Howdy’s, and SuperAmerica brands.
Western Refining, Inc. also owns the general
partner and approximately 53% of the limited partnership interest
of Western Refining Logistics, LP (NYSE:WNRL).
More information about Western Refining is
available at www.wnr.com.
Cautionary Statement on Forward-Looking
StatementsThis press release contains forward-looking
statements which are protected by the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. The
forward-looking statements reflect Western’s current expectations
regarding future events, results or outcomes. The forward-looking
statements contained herein include statements about: second
quarter 2017 operating guidance; the turnaround at St. Paul Park
and the impact they will have on Western's crude slate flexibility
and in gasoline and diesel yields; the turnaround at Gallup and El
Paso and the expected impact on the capacity of the El Paso
refinery; the additional optionality for the crude oil slate at El
Paso; the expansion of Western's logistics capabilities; and
Western's positioning for future success. These statements
are subject to the general risks inherent in Western’s business.
These expectations may or may not be realized. Some of these
expectations may be based upon assumptions or judgments that prove
to be incorrect. In addition, Western’s business and operations
involve numerous risks and uncertainties, many of which are beyond
its control, which could result in Western’s expectations not being
realized, or otherwise materially affect Western’s financial
condition, results of operations and cash flows. Additional
information relating to the uncertainties affecting Western's
business is contained in its filings with the Securities and
Exchange Commission to which you are referred. The forward-looking
statements are only as of the date made. Except as required by law,
Western does not undertake any obligation to (and expressly
disclaims any obligation to) update any forward-looking statements
to reflect events or circumstances after the date such statements
were made, or to reflect the occurrence of unanticipated
events.
Consolidated Financial Data
We report our operating results in three reportable segments:
refining, WNRL and retail, based on manufacturing and marketing
processes, the nature of our products and services and each
segment's respective customer base.
- Our refining segment owns and operates three refineries that
process crude oil and other feedstocks primarily into gasoline,
diesel fuel, jet fuel and asphalt. We market refined products to a
diverse customer base including wholesale distributors and retail
chains. The refining segment also sells refined products in the
Mid-Atlantic region and Mexico.
- WNRL owns and operates terminal, storage, transportation and
wholesale assets in the Southwest and terminal and transportation
assets in the Upper Great Plains region. WNRL's Southwest wholesale
assets consist of a fleet of crude oil, asphalt and refined product
truck transports and wholesale petroleum product operations. WNRL's
primary customer is our refining segment. WNRL purchases its
wholesale product supply from the refining segment and third-party
suppliers.
- Our retail segment operates retail convenience stores and
unmanned commercial fleet fueling ("cardlock") locations located in
the Southwest ("Southwest Retail") and Upper Great Plains
("SuperAmerica") regions. The retail convenience stores sell
gasoline, diesel fuel and convenience store merchandise.
The following tables set forth our unaudited
summary historical financial and operating data for the periods
indicated below:
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands, except per share
data) |
Statements of
Operations Data |
|
|
|
Net sales (1) |
$ |
2,328,532 |
|
|
$ |
1,455,504 |
|
Operating costs and
expenses: |
|
|
|
Cost of
products sold (exclusive of depreciation and amortization) (1) |
1,914,008 |
|
|
1,047,361 |
|
Direct
operating expenses (exclusive of depreciation and
amortization) |
231,801 |
|
|
223,585 |
|
Selling,
general and administrative expenses |
58,641 |
|
|
53,285 |
|
Merger
and reorganization costs |
11,297 |
|
|
408 |
|
Gain on
disposal of assets, net |
(459 |
) |
|
(130 |
) |
Maintenance turnaround expense |
3,314 |
|
|
125 |
|
Depreciation and amortization |
56,804 |
|
|
52,651 |
|
Total
operating costs and expenses |
2,275,406 |
|
|
1,377,285 |
|
Operating
income |
53,126 |
|
|
78,219 |
|
Other income
(expense): |
|
|
|
Interest
income |
108 |
|
|
164 |
|
Interest
and debt expense |
(33,735 |
) |
|
(26,681 |
) |
Other,
net |
6,941 |
|
|
6,512 |
|
Income
before income taxes |
26,440 |
|
|
58,214 |
|
Provision for income
taxes |
(5,444 |
) |
|
(18,629 |
) |
Net
income |
20,996 |
|
|
39,585 |
|
Less net income
attributable to non-controlling interests (2) |
9,428 |
|
|
9,047 |
|
Net
income attributable to Western Refining, Inc. |
$ |
11,568 |
|
|
$ |
30,538 |
|
|
|
|
|
Basic earnings per
share |
$ |
0.10 |
|
|
$ |
0.34 |
|
Diluted earnings per
share |
0.10 |
|
|
0.33 |
|
|
|
|
|
Dividends declared per
common share |
0.38 |
|
|
0.38 |
|
|
|
|
|
Weighted average basic
shares outstanding |
108,669 |
|
|
92,078 |
|
Weighted average
dilutive shares outstanding (3) |
109,155 |
|
|
92,144 |
|
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands) |
Economic
Hedging Activities Recognized Within Cost of Products
Sold |
|
|
|
Realized
hedging gain, net |
$ |
39,787 |
|
|
$ |
17,803 |
|
Unrealized hedging loss, net |
(4,452 |
) |
|
(12,483 |
) |
Total
hedging gain, net |
$ |
35,335 |
|
|
$ |
5,320 |
|
|
|
|
|
Cash Flow
Data |
|
|
|
Net cash
provided by (used in): |
|
|
|
Operating
activities |
$ |
(18,317 |
) |
|
$ |
2,301 |
|
Investing
activities |
(45,728 |
) |
|
(46,487 |
) |
Financing
activities |
(44,509 |
) |
|
(135,215 |
) |
Capital
expenditures |
$ |
46,258 |
|
|
$ |
79,029 |
|
Cash
distributions received by Western from: |
|
|
|
NTI |
$ |
— |
|
|
$ |
13,537 |
|
WNRL |
16,154 |
|
|
13,392 |
|
Other
Data |
|
|
|
Adjusted
EBITDA (4) |
$ |
122,418 |
|
|
$ |
98,290 |
|
Balance Sheet
Data (at end of period) |
|
|
|
Cash and
cash equivalents |
$ |
160,027 |
|
|
$ |
593,101 |
|
Restricted cash |
— |
|
|
36,783 |
|
Working
capital |
707,813 |
|
|
1,066,651 |
|
Total
assets |
5,486,637 |
|
|
5,753,762 |
|
Total
debt and lease financing obligation |
1,969,079 |
|
|
1,711,282 |
|
Total
equity |
2,259,919 |
|
|
2,850,800 |
|
(1) Excludes $904.8 million and $741.1 million
of intercompany sales and $904.8 million and
$741.1 million of intercompany cost of products sold for three
months ended March 31, 2017 and 2016, respectively.
(2) Net income attributable to non-controlling interests
from WNRL for the three months ended March 31, 2017 and 2016,
was $9.4 million and $4.7 million, respectively. Net
income attributable to non-controlling interests from NTI for the
three months ended March 31, 2016 was $4.3 million with no
comparable activity during the three months ended March 31,
2017.
(3) Our computation of diluted earnings per share includes
unvested restricted shares units and phantom stock. If determined
to be dilutive to period earnings, these securities are included in
the denominator of our diluted earnings per share calculation. For
purposes of the diluted earnings per share calculation, we assumed
issuance of 0.5 million and 0.1 million restricted share
units and phantom stock for the three months ended March 31,
2017 and 2016, respectively.
(4) Adjusted EBITDA represents earnings before interest
and debt expense, provision for income taxes, depreciation,
amortization, maintenance turnaround expense and certain other
non-cash income and expense items. However, Adjusted EBITDA is not
a recognized measurement under U.S. generally accepted accounting
principles ("GAAP"). Our management believes that the presentation
of Adjusted EBITDA is useful to investors because it is frequently
used by securities analysts, investors and other interested parties
in the evaluation of companies in our industry. In addition, our
management believes that Adjusted EBITDA is useful in evaluating
our operating performance compared to that of other companies in
our industry because the calculation of Adjusted EBITDA generally
eliminates the effects of financings, income taxes, the accounting
effects of significant turnaround activities (that many of our
competitors capitalize and thereby exclude from their measures of
EBITDA) and certain non-cash charges that are items that may vary
for different companies for reasons unrelated to overall operating
performance.
Adjusted EBITDA has limitations as an analytical tool, and you
should not consider it in isolation, or as a substitute for
analysis of our results as reported under GAAP. Some of these
limitations are:
- Adjusted EBITDA does not reflect our cash expenditures or
future requirements for significant turnaround activities, capital
expenditures or contractual commitments;
- Adjusted EBITDA does not reflect the interest expense or the
cash requirements necessary to service interest or principal
payments on our debt;
- Adjusted EBITDA does not reflect changes in, or cash
requirements for, our working capital needs; and
- Adjusted EBITDA, as we calculate it, may differ from the
Adjusted EBITDA calculations of other companies in our industry,
thereby limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be
considered a measure of discretionary cash available to us to
invest in the growth of our business. We compensate for these
limitations by relying primarily on our GAAP results and using
Adjusted EBITDA only supplementally.
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands) |
Net income attributable
to Western Refining, Inc. |
$ |
11,568 |
|
|
$ |
30,538 |
|
Net
income attributable to non-controlling interests |
9,428 |
|
|
9,047 |
|
Interest
and debt expense |
33,735 |
|
|
26,681 |
|
Provision
for income taxes |
5,444 |
|
|
18,629 |
|
Gain on
disposal of assets, net |
(459 |
) |
|
(130 |
) |
Depreciation and amortization |
56,804 |
|
|
52,651 |
|
Maintenance turnaround expense |
3,314 |
|
|
125 |
|
Net
change in lower of cost or market inventory reserve |
(1,868 |
) |
|
(51,734 |
) |
Unrealized loss on commodity hedging transactions |
4,452 |
|
|
12,483 |
|
Adjusted EBITDA |
$ |
122,418 |
|
|
$ |
98,290 |
|
|
|
|
|
Adjusted EBITDA: |
|
|
|
Western
(1) |
$ |
86,593 |
|
|
$ |
69,925 |
|
WNRL |
35,825 |
|
|
28,365 |
|
Consolidated Adjusted
EBITDA |
$ |
122,418 |
|
|
$ |
98,290 |
|
|
Three Months Ended |
|
March 31, |
|
2017 |
|
Western (1) |
|
WNRL |
|
(Unaudited) |
|
(In thousands) |
Net income (loss)
attributable to Western Refining, Inc. |
$ |
1,110 |
|
|
$ |
10,458 |
|
Net
income attributable to non-controlling interests |
— |
|
|
9,428 |
|
Interest
and debt expense |
27,127 |
|
|
6,608 |
|
Provision
for income taxes |
5,554 |
|
|
(110 |
) |
Gain on
disposal of assets, net |
(168 |
) |
|
(291 |
) |
Depreciation and amortization |
47,072 |
|
|
9,732 |
|
Maintenance turnaround expense |
3,314 |
|
|
— |
|
Net
change in lower of cost or market inventory reserve |
(1,868 |
) |
|
— |
|
Unrealized loss on commodity hedging transactions |
4,452 |
|
|
— |
|
Adjusted EBITDA |
$ |
86,593 |
|
|
$ |
35,825 |
|
|
Three Months Ended |
|
March 31, |
|
2016 |
|
Western (1) |
|
WNRL |
|
(Unaudited) |
|
(In thousands) |
Net income attributable
to Western Refining, Inc. |
$ |
21,234 |
|
|
$ |
9,304 |
|
Net
income attributable to non-controlling interests |
4,344 |
|
|
4,703 |
|
Interest
and debt expense |
19,629 |
|
|
7,052 |
|
Provision
for income taxes |
18,368 |
|
|
261 |
|
Gain on
disposal of assets, net |
(31 |
) |
|
(99 |
) |
Depreciation and amortization |
45,507 |
|
|
7,144 |
|
Maintenance turnaround expense |
125 |
|
|
— |
|
Net
change in lower of cost or market inventory reserve |
(51,734 |
) |
|
— |
|
Unrealized loss on commodity hedging transactions |
12,483 |
|
|
— |
|
Adjusted EBITDA |
$ |
69,925 |
|
|
$ |
28,365 |
|
(1) Our presentation of Adjusted EBITDA for Western
excludes the results of WNRL for all periods presented.
Consolidating Financial Data
The following tables set forth our consolidating historical
financial data for the periods presented below.
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands) |
Operating
Income |
|
|
|
Refining |
$ |
61,665 |
|
|
$ |
84,374 |
|
WNRL |
26,362 |
|
|
13,188 |
|
Retail |
3,848 |
|
|
3,865 |
|
Other |
(38,749 |
) |
|
(23,208 |
) |
Operating
income |
$ |
53,126 |
|
|
$ |
78,219 |
|
Depreciation
and Amortization |
|
|
|
Refining |
$ |
40,187 |
|
|
$ |
36,500 |
|
WNRL |
9,732 |
|
|
9,338 |
|
Retail |
6,076 |
|
|
5,680 |
|
Other |
809 |
|
|
1,133 |
|
Depreciation and amortization expense |
$ |
56,804 |
|
|
$ |
52,651 |
|
Capital
Expenditures |
|
|
|
Refining |
$ |
37,115 |
|
|
$ |
67,957 |
|
WNRL |
5,470 |
|
|
8,356 |
|
Retail |
3,262 |
|
|
2,074 |
|
Other |
411 |
|
|
642 |
|
Capital
expenditures |
$ |
46,258 |
|
|
$ |
79,029 |
|
Balance Sheet
Data (at end of period) |
|
|
|
Cash and cash equivalents |
|
|
|
Western,
excluding WNRL |
$ |
136,729 |
|
|
$ |
564,448 |
|
WNRL |
23,298 |
|
|
28,653 |
|
Cash and
cash equivalents |
$ |
160,027 |
|
|
$ |
593,101 |
|
Total debt |
|
|
|
Western,
excluding WNRL |
$ |
1,589,701 |
|
|
$ |
1,235,282 |
|
WNRL |
313,524 |
|
|
422,810 |
|
Total
debt |
$ |
1,903,225 |
|
|
$ |
1,658,092 |
|
Total working capital |
|
|
|
Western,
excluding WNRL |
$ |
730,384 |
|
|
$ |
1,052,503 |
|
WNRL |
(22,571 |
) |
|
14,148 |
|
Total
working capital |
$ |
707,813 |
|
|
$ |
1,066,651 |
|
Refining Segment
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(In thousands, except bpd and per barrel
data) |
Statement of
Operations Data (Unaudited): |
|
|
|
Net sales (including
intersegment sales) (1) |
$ |
2,085,638 |
|
|
$ |
1,276,968 |
|
Operating costs and
expenses: |
|
|
|
Cost of
products sold (exclusive of depreciation and amortization) (2) |
1,846,771 |
|
|
1,028,250 |
|
Direct
operating expenses (exclusive of depreciation and
amortization) |
117,992 |
|
|
111,857 |
|
Selling,
general and administrative expenses |
15,871 |
|
|
15,867 |
|
Gain on
disposal of assets, net |
(162 |
) |
|
(5 |
) |
Maintenance turnaround expense |
3,314 |
|
|
125 |
|
Depreciation and amortization |
40,187 |
|
|
36,500 |
|
Total
operating costs and expenses |
2,023,973 |
|
|
1,192,594 |
|
Operating
income |
$ |
61,665 |
|
|
$ |
84,374 |
|
Key Operating
Statistics |
|
|
|
Total sales volume
(bpd) (1) (3) |
335,826 |
|
|
290,035 |
|
Total refinery
production (bpd) |
262,883 |
|
|
263,960 |
|
Total refinery
throughput (bpd) (4) |
264,683 |
|
|
265,977 |
|
Per barrel of refinery
throughput: |
|
|
|
Refinery
gross margin (2) (5) (6) |
$ |
9.99 |
|
|
$ |
10.19 |
|
Refinery
gross margin, excluding LCM adjustment (2) (5) (6) |
9.92 |
|
|
8.06 |
|
Direct
operating expenses (7) |
4.95 |
|
|
4.62 |
|
Mid-Atlantic sales
volume (bbls) |
2,177 |
|
|
1,731 |
|
Mid-Atlantic margin per
barrel |
$ |
0.39 |
|
|
$ |
1.14 |
|
The following tables set forth our summary refining throughput
and production data for the periods and refineries presented:
El Paso Refinery
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
Key Operating
Statistics |
|
|
|
Refinery product yields
(bpd): |
|
|
|
Gasoline |
67,482 |
|
|
75,239 |
|
Diesel
and jet fuel |
52,106 |
|
|
58,284 |
|
Residuum |
1,868 |
|
|
3,218 |
|
Other |
7,697 |
|
|
4,619 |
|
Total
refinery production (bpd) |
129,153 |
|
|
141,360 |
|
Refinery throughput
(bpd): |
|
|
|
Sweet
crude oil |
103,727 |
|
|
104,887 |
|
Sour
crude oil |
19,042 |
|
|
28,499 |
|
Other
feedstocks and blendstocks |
7,785 |
|
|
9,670 |
|
Total
refinery throughput (bpd) (4) |
130,554 |
|
|
143,056 |
|
Total sales volume
(bpd) (3) |
148,012 |
|
|
141,762 |
|
Per barrel of refinery
throughput: |
|
|
|
Refinery
gross margin (2) (5) |
$ |
9.53 |
|
|
$ |
7.42 |
|
Direct
operating expenses (7) |
4.32 |
|
|
3.49 |
|
Gallup Refinery
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
Key Operating
Statistics |
|
|
|
Refinery product yields
(bpd): |
|
|
|
Gasoline |
18,027 |
|
|
14,772 |
|
Diesel
and jet fuel |
9,369 |
|
|
5,856 |
|
Other |
868 |
|
|
1,179 |
|
Total
refinery production (bpd) |
28,264 |
|
|
21,807 |
|
Refinery throughput
(bpd): |
|
|
|
Sweet
crude oil |
25,309 |
|
|
19,066 |
|
Other
feedstocks and blendstocks |
3,434 |
|
|
3,246 |
|
Total
refinery throughput (bpd) (4) |
28,743 |
|
|
22,312 |
|
Total sales volume
(bpd) (3) |
32,501 |
|
|
30,614 |
|
Per barrel of refinery
throughput: |
|
|
|
Refinery
gross margin (2) (5) |
$ |
11.99 |
|
|
$ |
9.30 |
|
Direct
operating expenses (7) |
7.86 |
|
|
10.06 |
|
St. Paul Park Refinery
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
Key Operating
Statistics |
|
|
|
Refinery product yields
(bpd): |
|
|
|
Gasoline |
51,538 |
|
|
49,707 |
|
Distillate |
36,177 |
|
|
33,639 |
|
Residuum |
10,936 |
|
|
11,662 |
|
Other |
6,813 |
|
|
5,785 |
|
Total
refinery production (bpd) |
105,464 |
|
|
100,793 |
|
Refinery throughput
(bpd): |
|
|
|
Light
crude oil |
53,308 |
|
|
58,349 |
|
Synthetic
crude oil |
21,303 |
|
|
11,726 |
|
Heavy
crude oil |
25,991 |
|
|
26,274 |
|
Other
feedstocks |
4,784 |
|
|
4,260 |
|
Total
refinery throughput (bpd) (4) |
105,386 |
|
|
100,609 |
|
Total sales volume
(bpd) (3) |
105,074 |
|
|
99,094 |
|
Per barrel of
throughput: |
|
|
|
Refinery
gross margin (2) (5) (6) |
$ |
7.36 |
|
|
$ |
8.09 |
|
Direct
operating expenses (7) |
4.17 |
|
|
4.82 |
|
(1) Refining net sales for the three months ended
March 31, 2017 and 2016 include $245.4 million and
$59.7 million, respectively, representing a period average of
53,422 bpd and 20,066 bpd, respectively, in crude oil sales to
third-parties. The increase in crude oil sales is primarily due to
sales activities in the Mid-Atlantic region, which was included
under a supply and marketing agreement which expired on December
31, 2016.
(2) Cost of products sold for the combined refining
segment includes the net realized and net non-cash unrealized
hedging activity shown in the table below. The hedging gains and
losses are included in the combined gross profit and refinery gross
margin but are not included in those measures for our individual
refineries. The hedging gains and losses for the combined refining
segment include a realized hedging gain of $7.4 million and an
unrealized hedging loss of $2.7 million from our Mid-Atlantic
operations during the three months ended March 31, 2017, which
are not included in the combined gross profit and refinery gross
margin or those measures for our individual refineries.
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands) |
Realized hedging gain,
net |
$ |
39,787 |
|
|
$ |
17,803 |
|
Unrealized hedging
loss, net |
(4,452 |
) |
|
(12,483 |
) |
Total
hedging gain, net |
$ |
35,335 |
|
|
$ |
5,320 |
|
(3) Sales volume includes sales of refined products
sourced primarily from our refinery production as well as refined
products purchased from third parties. We purchase additional
refined products from third parties to supplement supply to our
customers. These products are similar to the products that we
currently manufacture and represented 8.2% and 5.7% of our total
consolidated sales volumes for the three months ended
March 31, 2017 and 2016, respectively. The majority of the
purchased refined products are distributed through our refined
product sales activities in the Mid-Atlantic region.
(4) Total refinery throughput includes crude oil, other
feedstocks and blendstocks.
(5) Refinery gross margin is a per barrel measurement
calculated by dividing the difference between net sales and cost of
products sold by our refineries’ total throughput volumes for the
respective periods presented. Net realized and net non-cash
unrealized economic hedging gains and losses included in the
combined refining segment gross margin are not allocated to the
individual refineries. Cost of products sold does not include any
depreciation or amortization. Refinery gross margin is a non-GAAP
performance measure that we believe is important to investors in
evaluating our refinery performance as a general indication of the
amount above our cost of products that we are able to sell refined
products. Each of the components used in this calculation (net
sales and cost of products sold) can be reconciled directly to our
statement of operations. Our calculation of refinery gross margin
may differ from similar calculations of other companies in our
industry, thereby limiting its usefulness as a comparative
measure.
Our calculation of refinery gross margin excludes the sales and
costs related to our Mid-Atlantic business that we report within
the refining segment. The following table reconciles the sales and
cost of sales used to calculate refinery gross margin with the
total sales and cost of sales reported in the refining statement of
operations data above:
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands) |
Refinery net sales
(including intersegment sales) |
$ |
1,941,577 |
|
|
$ |
1,191,566 |
|
Mid-Atlantic sales |
144,061 |
|
|
85,402 |
|
Net sales
(including intersegment sales) |
$ |
2,085,638 |
|
|
$ |
1,276,968 |
|
|
|
|
|
Refinery cost of
products sold (exclusive of depreciation and amortization) |
$ |
1,703,556 |
|
|
$ |
944,824 |
|
Mid-Atlantic cost of
products sold |
143,215 |
|
|
83,426 |
|
Cost of
products sold (exclusive of depreciation and amortization) |
$ |
1,846,771 |
|
|
$ |
1,028,250 |
|
The following table reconciles combined gross profit for our
refineries to combined gross margin for our refineries for the
periods presented:
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands, except per barrel
data) |
Refinery net sales
(including intersegment sales) |
$ |
1,941,577 |
|
|
$ |
1,191,566 |
|
Refinery cost of
products sold (exclusive of depreciation and amortization) |
1,703,556 |
|
|
944,824 |
|
Depreciation and
amortization |
40,187 |
|
|
36,500 |
|
Gross
profit |
197,834 |
|
|
210,242 |
|
Plus depreciation and
amortization |
40,187 |
|
|
36,500 |
|
Refinery
gross margin |
$ |
238,021 |
|
|
$ |
246,742 |
|
Refinery gross margin
per throughput barrel |
$ |
9.99 |
|
|
$ |
10.19 |
|
Gross profit per
throughput barrel |
$ |
8.30 |
|
|
$ |
8.69 |
|
(6) Cost of products sold for the combined refining
segment includes changes in the lower of cost or market inventory
reserve shown in the table below. The changes in this reserve are
included in the combined refinery gross margin but are not included
in those measures for the individual refineries. The following
table calculates the combined refinery gross margin per throughput
barrel excluding changes in the lower of cost or market inventory
reserve that we believe is useful in evaluating our refinery
performance exclusive of the impact of fluctuations in inventory
values:
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands, except per barrel
data) |
Refinery gross
margin |
$ |
238,021 |
|
|
$ |
246,742 |
|
Net change in lower of
cost or market inventory reserve |
(1,613 |
) |
|
(51,670 |
) |
Refinery gross margin,
excluding LCM adjustment |
$ |
236,408 |
|
|
$ |
195,072 |
|
Refinery
gross margin, excluding LCM adjustment, per refinery throughput
barrel |
$ |
9.92 |
|
|
$ |
8.06 |
|
(7) Refinery direct operating expenses per throughput
barrel is calculated by dividing direct operating expenses by total
throughput volumes for the respective periods presented. Direct
operating expenses do not include any depreciation or
amortization.
WNRL
WNRL's financial and operational data presented includes the
historical results of the assets acquired from Western in the St.
Paul Park Logistics Transaction. This transaction was a transfer of
assets between entities under common control. We have
retrospectively adjusted historical financial and operational data
of WNRL, for all periods presented, to reflect the purchase and
consolidation of the St. Paul Park Logistics Assets into WNRL.
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands) |
Statement of
Operations Data: |
|
|
|
Net sales |
$ |
604,692 |
|
|
$ |
468,039 |
|
Operating costs and
expenses: |
|
|
|
Cost of
products sold |
517,299 |
|
|
395,590 |
|
Direct
operating expenses |
44,847 |
|
|
44,658 |
|
Selling,
general and administrative expenses |
6,743 |
|
|
5,364 |
|
Gain on
disposal of assets, net |
(291 |
) |
|
(99 |
) |
Depreciation and amortization |
9,732 |
|
|
9,338 |
|
Total
operating costs and expenses |
578,330 |
|
|
454,851 |
|
Operating
income |
$ |
26,362 |
|
|
$ |
13,188 |
|
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands, except key operating
statistics) |
Key Operating
Statistics |
|
|
|
Pipeline and gathering
(bpd): |
|
|
|
Mainline
movements: |
|
|
|
Permian/Delaware Basin system |
53,136 |
|
|
49,486 |
|
Four
Corners system (1) |
47,480 |
|
|
52,467 |
|
TexNew
Mex system |
4,402 |
|
|
12,544 |
|
Gathering
(truck offloading): |
|
|
|
Permian/Delaware Basin system |
14,605 |
|
|
20,533 |
|
Four
Corners system |
6,617 |
|
|
12,761 |
|
Terminalling,
transportation and storage (bpd): |
|
|
|
Shipments
into and out of storage (includes asphalt) |
584,476 |
|
|
388,258 |
|
Wholesale: |
|
|
|
Fuel
gallons sold (in thousands) |
302,050 |
|
|
314,943 |
|
Fuel
gallons sold to retail (included in fuel gallons sold above) (in
thousands) |
79,113 |
|
|
79,841 |
|
Fuel
margin per gallon (2) |
$ |
0.042 |
|
|
$ |
0.028 |
|
Lubricant
gallons sold (in thousands) |
1,321 |
|
|
2,201 |
|
Lubricant
margin per gallon (3) |
$ |
1.08 |
|
|
$ |
0.69 |
|
Asphalt
trucking volume (bpd) |
5,205 |
|
|
— |
|
Crude oil
trucking volume (bpd) |
48,894 |
|
|
35,111 |
|
Average
crude oil revenue per barrel |
$ |
2.26 |
|
|
$ |
2.24 |
|
(1) Some barrels of crude oil in route to our Gallup
refinery and Permian/Delaware Basin are transported on more than
one mainline. Mainline movements for the Four Corners and Delaware
Basin systems include each barrel transported on each mainline.
(2) Fuel margin per gallon is a measurement calculated by
dividing the difference between fuel sales, net of transportation
charges, and cost of fuel sales for our wholesale business by the
number of gallons sold. Fuel margin per gallon is a measure
frequently used in the petroleum products wholesale industry to
measure operating results related to fuel sales.
(3) Lubricant margin per gallon is a measurement
calculated by dividing the difference between lubricant sales, net
of transportation charges, and lubricant cost of products sold by
the number of gallons sold. Lubricant margin is a measure
frequently used in the petroleum products wholesale industry to
measure operating results related to lubricant sales.
Retail Segment
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands, except per gallon
data) |
Statement of
Operations Data |
|
|
|
Net sales (including
intersegment sales) |
$ |
542,961 |
|
|
$ |
451,627 |
|
Operating costs and
expenses: |
|
|
|
Cost of
products sold (exclusive of depreciation and amortization) |
454,697 |
|
|
364,651 |
|
Direct
operating expenses (exclusive of depreciation and
amortization) |
68,962 |
|
|
67,070 |
|
Selling,
general and administrative expenses |
9,384 |
|
|
10,387 |
|
Gain on
disposal of assets, net |
(6 |
) |
|
(26 |
) |
Depreciation and amortization |
6,076 |
|
|
5,680 |
|
Total
operating costs and expenses |
539,113 |
|
|
447,762 |
|
Operating
income |
$ |
3,848 |
|
|
$ |
3,865 |
|
Key Operating
Statistics |
|
|
|
Southwest Retail: |
|
|
|
Retail
fuel gallons sold |
96,882 |
|
|
91,469 |
|
Average
retail fuel sales price per gallon, net of excise taxes |
$ |
1.90 |
|
|
$ |
1.43 |
|
Average
retail fuel cost per gallon, net of excise taxes |
1.73 |
|
|
1.28 |
|
Retail
fuel margin per gallon (1) |
0.17 |
|
|
0.15 |
|
Merchandise sales |
76,111 |
|
|
75,967 |
|
Merchandise margin (2) |
30.3 |
% |
|
29.5 |
% |
Operating
retail outlets at period end |
259 |
|
|
258 |
|
Cardlock
fuel gallons sold |
15,784 |
|
|
15,253 |
|
Cardlock
fuel margin per gallon |
$ |
0.143 |
|
|
$ |
0.128 |
|
Operating
cardlocks at period end |
52 |
|
|
52 |
|
SuperAmerica: |
|
|
|
Retail
fuel gallons sold |
70,245 |
|
|
73,090 |
|
Retail
fuel margin per gallon (1) |
$ |
0.23 |
|
|
$ |
0.24 |
|
Merchandise sales |
80,325 |
|
|
84,193 |
|
Merchandise margin (2) |
26.2 |
% |
|
26.1 |
% |
Company-operated retail outlets at period end |
192 |
|
|
169 |
|
Franchised retail outlets at period end |
94 |
|
|
114 |
|
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands, except per gallon
data) |
Net
Sales |
|
|
|
Retail
fuel sales, net of excise taxes |
$ |
343,414 |
|
|
$ |
261,523 |
|
Merchandise sales |
156,436 |
|
|
160,160 |
|
Cardlock
sales |
30,388 |
|
|
20,733 |
|
Other
sales |
12,723 |
|
|
9,211 |
|
Net
sales |
$ |
542,961 |
|
|
$ |
451,627 |
|
Cost of
Products Sold |
|
|
|
Retail
fuel cost of products sold, net of excise taxes |
$ |
310,551 |
|
|
$ |
230,707 |
|
Merchandise cost of products sold |
112,319 |
|
|
115,776 |
|
Cardlock
cost of products sold |
28,062 |
|
|
18,701 |
|
Other
cost of products sold |
3,765 |
|
|
(533 |
) |
Cost of
products sold |
$ |
454,697 |
|
|
$ |
364,651 |
|
Retail fuel margin per
gallon (1) |
$ |
0.20 |
|
|
$ |
0.19 |
|
(1) Retail fuel margin per gallon is a measurement
calculated by dividing the difference between retail fuel sales and
cost of retail fuel sales for our retail segment by the number of
gallons sold. Retail fuel margin per gallon is a measure frequently
used in the convenience store industry to measure operating results
related to retail fuel sales.
(2) Merchandise margin is a measurement calculated by
dividing the difference between merchandise sales and merchandise
cost of products sold by merchandise sales. Merchandise margin is a
measure frequently used in the convenience store industry to
measure operating results related to merchandise sales.
Reconciliation of Special Items
We present certain additional financial measures below that are
non-GAAP measures within the meaning of Regulation G under the
Securities Exchange Act of 1934.
We present these non-GAAP measures to provide investors with
additional information to analyze our performance from period to
period. We believe it is useful for investors to understand our
financial performance excluding these special items so that
investors can see the operating trends underlying our business.
Investors should not consider these non-GAAP measures in isolation
from, or as a substitute for, the financial information that we
report in accordance with GAAP. These non-GAAP measures reflect
subjective determinations by management and may differ from
similarly titled non-GAAP measures presented by other
companies.
|
Three Months Ended |
|
March 31, |
|
2017 |
|
2016 |
|
(Unaudited) |
|
(In thousands, except per share
data) |
Reported diluted
earnings per share |
$ |
0.10 |
|
|
$ |
0.33 |
|
Income before income
taxes |
$ |
26,440 |
|
|
$ |
58,214 |
|
Special items: |
|
|
|
Unrealized loss on commodity hedging transactions |
4,452 |
|
|
12,483 |
|
Merger
and reorganization costs |
11,297 |
|
|
— |
|
Gain on
disposal of assets, net |
(459 |
) |
|
(130 |
) |
Net
change in lower of cost or market inventory reserve |
(1,868 |
) |
|
(51,734 |
) |
Earnings
before income taxes excluding special items |
39,862 |
|
|
18,833 |
|
Recomputed income taxes
excluding special items (1) |
(9,783 |
) |
|
(7,065 |
) |
Net
income excluding special items |
30,079 |
|
|
11,768 |
|
Net income attributable
to non-controlling interests |
9,290 |
|
|
186 |
|
Net
income attributable to Western excluding special items |
$ |
20,789 |
|
|
$ |
11,582 |
|
Diluted
earnings per share excluding special items |
$ |
0.19 |
|
|
$ |
0.13 |
|
(1) We recompute income taxes after deducting special
items and earnings attributable to non-controlling interests.
Second Quarter 2017 Guidance
Operations |
El Paso |
|
Gallup |
|
St. Paul Park |
Total Throughput
(mbpd) |
140,000 - 144,000 |
|
26,000
- 28,000 |
|
84,000
- 88,000 |
Direct Operating
Expenses ($/Bbl) |
$3.80
- $4.00 |
|
$8.25
- $8.50 |
|
$5.35
- $5.60 |
Maintenance turnaround
expense ($ millions) |
— |
|
— |
|
$30 -
$32 |
|
Western |
|
WNRL |
|
Total |
Other |
(In millions) |
Selling, general and
administrative expenses |
$ |
53 |
|
|
$ |
7 |
|
|
$ |
60 |
|
Depreciation and
amortization |
50 |
|
|
10 |
|
|
60 |
|
Interest and debt
expense |
30 |
|
|
7 |
|
|
37 |
|
Full Year 2017 Capital
Expenditures: |
|
|
|
|
|
Maintenance/Regulatory |
$ |
120 |
|
|
$ |
16 |
|
|
$ |
136 |
|
Discretionary |
146 |
|
|
27 |
|
|
173 |
|
Full Year
2017 Total Capital Expenditures |
$ |
266 |
|
|
$ |
43 |
|
|
$ |
309 |
|
Investor and Analyst Contact:
Jeffrey S. Beyersdorfer
(602) 286-1530
Michelle Clemente
(602) 286-1533
Media Contact:
Gary W. Hanson
(602) 286-1777
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