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Western Refining Misses on Q3 Earnings, Rev

Zacks Equity Research

Oil refiner and marketer, Western Refining Inc. (WNR), reported weak third-quarter 2013 results, owing to significant decrease in refining margins, partially offset by reduced operating expenses and higher throughput.

The company reported earnings per share (excluding special items) of 33 cents, lagging the Zacks Consensus Estimate of 49 cents. The figure also decreased 66.7% from the year-ago quarter's adjusted profit of 99 cents.

Quarterly net sales of $2.45 billion failed to beat the Zacks Consensus Estimate of $2.53 billion. The results also reflected a nominal decrease of 0.1% from the year-ago quarter.

Refining Segment: Analysis

Throughput: The total refining throughput averaged 159,622 barrels per day (Bbl/d), up from 144,198 Bbl/d in the year-ago quarter. Overall, throughput volumes at the El Paso refinery increased 7.4% year over year to 133,558 Bbl/d, while the Gallup unit recorded throughput volumes of 26,064 Bbl/d, up 31.4% from the year-earlier level.      

Refining Margins: Gross refining margin (excluding activities related to hedging) was down 59.9% year over year to $11.60 per barrel. In terms of different regions, refining margin was down 59.3% to $11.56 per barrel at El Paso and down 63.9% to $10.63 per barrel at Gallup.

Operating Expenses: Direct operating expenses at El Paso during the quarter averaged $4.35 per barrel, down 16.5% year over year.

Direct operating expenses at Gallup were down 18.8% from the year-ago period to $8.91 per barrel.

Direct operating expenses at Western Refining’s units were $5.64 per barrel for the three months ended Sep 30, 2013, down from $6.47 per barrel in the year-ago period.

Capital Expenditure & Balance Sheet

El Paso, Texas-headquartered Western Refining’s total capital spending during the quarter was $45.9 million, lower than $71.3 million in the third quarter of 2012. As of Sep 30, 2013, Western Refining had cash and cash equivalents of $371.1 million and total debt of approximately $554.5 million, representing a debt-to-capitalization ratio of 37.7%.

Dividend & Share Repurchase

On Oct 15, 2013, Western Refining announced fourth quarter dividend of 22 cents per share, representing a 22.2% sequential hike. The dividend is payable on Nov 14, 2013, to shareholders of record as of Oct 30, 2013.

Western Refining has repurchased roughly 11.4 million shares from the start of the share repurchase program, till Oct 25, 2013, for an average $29.38 per share.


For the fourth quarter of 2013, the total refinery throughput is anticipated to be approximately 130,000 - 134,000 Bbl/d at the El Paso refinery and 24,000 - 26,000 Bbl/d at the Gallup refinery. Western Refining maintains its expected capital spending for 2013 at $206 million.   

Zacks Rating

Western Refining currently retains a Zacks Rank #4 (Sell), implying that it is expected to underperform the broader U.S. equity market over the next 1 to 3 months.

However, one can look at better performing energy firms like Matador Resources Company (MTDR), Northern Oil and Gas Inc. (NOG) and VOC Energy Trust (VOC) that offer value. All the stocks sport a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on WNR
Read the Full Research Report on MTDR
Read the Full Research Report on VOC
Read the Full Research Report on NOG

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