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Western Refining (WNR) Q1 Earnings Beat Estimates, Rise Y/Y

Zacks Equity Research

Oil refiner and marketer Western Refining, Inc. WNR reported first-quarter 2017 results, wherein earnings of 19 cents surpassed the Zacks Consensus Estimate of 14 cents. Moreover, the bottom line improved from the year-ago adjusted earnings of 13 cents per share.

The better-than-expected results are mainly attributed to higher gross refining margins and increased sales.  

Quarterly net sales of $2,329 million increased by 60% from the year-ago quarter sales of $1,456 million.

 

Refining Segment: Analysis

Throughput: Total refining throughput averaged 264,683 barrels per day (Bbl/d) compared with 265,977 Bbl/d in the year-ago quarter. The marginal decrease is attributable to lower throughput volumes at the El Paso refinery, which was partially offset by higher volumes at St Paul Park Refinery and Gallup unit.

Throughput volumes at the El Paso refinery declined 8.7% year over year to 130,554 Bbl/d. The Gallup unit recorded throughput volumes of 28,743 Bbl/d, up 29% from the year-ago level. St. Paul Park Refinery unit generated throughput volumes of 105,386 Bbl/d, up 4.7% from the year-ago period.          

Refining Margins: Gross refining margin recorded year-over-year growth of 23% to $9.92 per barrel from $8.06. Geographically, refining margin rose 28.4% to $9.53 per barrel and 29% to $11.99 per barrel at El Paso and Gallup respectively. However, the refining margin declined 9% to $7.36 per barrel at St. Paul Park Refinery. This decline was due to lower realized prices for asphalt and higher logistics fees payable to Western Refining Logistics WNRL.

Operating Expenses: Direct operating expenses at El Paso averaged $4.32 per barrel, up 23.7% year over year. However, direct operating expenses at Gallup decreased about 21.8% year over year to $7.86 per barrel. Further, direct operating expenses at St Paul Park Refinery decreased by 13.4% year over year to $4.17 per barrel. Combined direct operating expenses at Western Refining units were $4.95 per barrel in the reported quarter compared with $4.62 per barrel in the year-ago period. 

Capital Expenditure & Balance Sheet

El Paso, TX-based Western Refining’s total capital spending during the quarter was $46.2 million compared with $79 million in first-quarter 2016, down 41.4%. As of Mar 31, 2017, Western Refining had cash and cash equivalents of $160 million and total debt of approximately $1,903.2 million. This represents a debt-to-capitalization ratio of 45.7%.

Dividend

Western Refining paid a dividend of 38 cents per share of common stock in first-quarter 2017.

Western Refining, Inc. Price, Consensus and EPS Surprise

Western Refining, Inc. Price, Consensus and EPS Surprise | Western Refining, Inc. Quote

First-Quarter Price Performance

In the first quarter, Western Refining’s shares lost 7%, outperforming the Zacks categorized Oil and Gas Refining & Marketing industry’s decline of 10.8%.

Outlook

Western Refining’s capital expenditure budget for 2017 is $266 million with $146 million set aside for discretionary spending for logistics projects and El Paso expansion.

Total refining throughput for El Paso is expected in the range of 140–144 thousand barrels per day (mbpd) for second-quarter 2017. Expected refinery throughput for Gallup and St Paul Park is 26–28 mbpd and 84–88 mbpd for second-quarter 2017.

Zacks Rank and Key Picks

Western Refining currently carries a Zacks Rank #3 (Hold).

Some better-ranked players in the broader energy space include Bellatrix Exploration Ltd BXE and McDermott International, Inc. MDR. Both the companies sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Bellatrix reported positive earnings surprise of 58.54% in the trailing four quarters.

McDermott posted positive average earnings surprise of 387.5% in the preceding four quarters.

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McDermott International, Inc. (MDR): Free Stock Analysis Report
 
Western Refining, Inc. (WNR): Free Stock Analysis Report
 
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Western Refining Logistics, LP (WNRL): Free Stock Analysis Report
 
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