Western Refining Beats on Q1 Earnings & Revs - Analyst Blog

Oil refiner and marketer, Western Refining Inc. WNR reported better-than-expected first-quarter 2014 results, before the opening bell yesterday. Increased throughput volumes aided the outcome.  

The company reported earnings per share (excluding special items) of 44 cents, surpassing the Zacks Consensus Estimate of 41 cents.

The bottom line, however, plummeted 53.2% from the year-ago quarter's adjusted per share profit of 94 cents. Significant fall in refining margins prompted the decline.

Quarterly net sales of $3.73 billion beat the Zacks Consensus Estimate of $2.43 billion. The top line also increased 71.0% from the year-ago quarter's figure of $2.18 billion.  

The better-than-expected results were reflected in the opening price of Western Refining yesterday. The company opened at $44.71 per share, reflecting a 2.7% hike from the closing price on May 5. The per share price, however, fell to $42.59 at the close of trading on Tuesday.  

Refining Segment: Analysis

Throughput: The total refining throughput averaged 137,486 barrels per day (Bbl/d), up from 122,373 Bbl/d in the year-ago quarter. Overall, throughput volumes at the El Paso refinery increased 11.4% year over year to 109,140 Bbl/d and the Gallup unit recorded throughput volumes of 28,346 Bbl/d, up 16.0% from the year-earlier level.

Refining Margins: Gross refining margin (excluding activities related to hedging) was down 53.3% year over year at $15.47 per barrel. Geographically, refining margin fell 54.4% to $15.78 per barrel at El Paso and was down 49.4% at $13.56 per barrel at Gallup.   

Operating Expenses: Direct operating expenses at El Paso during the quarter averaged $4.89 per barrel, down 19.8% year over year.

Direct operating expenses at Gallup decreased 16.2% year over year to $8.44 per barrel.

Direct operating expenses at Western Refining's units were $5.88 per barrel for the three months ended Mar 31, 2014, down from $7.43 in the corresponding period a year ago.

Capital Expenditure & Balance Sheet

El Paso, TX-headquartered Western Refining's total capital spending during the quarter was $50.6 million, lower than $65.6 million in the first quarter of 2013. As of Mar 31, 2014, Western Refining had cash and cash equivalents of $431.6 million and total debt of approximately $1,413.6 million, representing a debt-to-capitalization ratio of 34.7%.

Zacks Rank & Other Picks

Western Refining currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the oil refining and marketing industry like NGL Energy Partners LP NGL, Sprague Resources LP SRLP and Valero Energy Corporation VLO. All these stocks sport a Zacks Rank #2 (Buy).