Oil refiner and marketer Western Refining Inc.’s (NYSE:WNR) second-quarter 2016 earnings per share (excluding special items) came in at 72 cents, surpassing the Zacks Consensus Estimate of 51 cents following strong retail fuel volume. The bottom line, however, decreased from the year-ago adjusted figure of $1.44 due to lower refining margins and higher operating expenses.
Quarterly net sales of $2,107.3 million beat the Zacks Consensus Estimate of $2,082 million. However, the top line decreased 25.5% from the year-ago quarter level.
Refining Segment: Analysis
Throughput: Total refining throughput averaged 159,778 barrels per day (Bbl/d) compared with 162,001 Bbl/d in the year-ago quarter. Throughput volumes at the El Paso refinery fell 1.3% year over year to 132,642 Bbl/d. The Gallup unit recorded throughput volumes of 27,136 Bbl/d, down 2.2% from the year-earlier level.
Refining Margins: Gross refining margin recorded a year-over-year decline from $19.62 to $13.55 per barrel. Geographically, refining margin plunged 29.3% to $14.14 per barrel at El Paso and decreased nearly 40.4% to $13.50 per barrel at Gallup.
Operating Expenses: Direct operating expenses at El Paso averaged $4.26 per barrel, 2.2% higher year over year. Moreover, direct operating expenses at Gallup increased about 6% year over year to $8.28 per barrel. Combined direct operating expenses at Western Refining’s units were $5.46 per barrel in the three months ended Jun 30, 2016. This is higher than $5.20 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 $77.7 million. This was much higher than $66.4 million in the second quarter of 2015. As of Jun 30, 2016, Western Refining had cash and cash equivalents of $198.3 million and total debt of approximately $2,068.7 million. This represents a debt-to-capitalization ratio of 49.8%.
Outlook
The company revealed that the third quarter had a reassuring start with demand for gasoline remaining favorable. We expect this to turn into good fortune unless any adversity crops up.
Zacks Rank and Other Key Picks
Western Refining currently carries a Zacks Rank #5 (Strong Sell). Some better-ranked players in the energy sector include Antero Resources Corporation (NYSE:AR) , Enbridge Inc. (NYSE:ENB) and Murphy USA Inc. (NYSE:MUSA) . Each of these stocks sports a Zacks Rank #1 (Strong Buy).
MURPHY USA INC (MUSA): Free Stock Analysis Report
WESTERN REFING (WNR): Free Stock Analysis Report
ENBRIDGE INC (ENB): Free Stock Analysis Report
ANTERO RESOURCE (AR): Free Stock Analysis Report
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