Andeavor's 3Q17 Stock Performance Beat the S&P 500

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Part 13
Andeavor's 3Q17 Stock Performance Beat the S&P 500 PART 13 OF 14

What Andeavor’s 3Q17 Refining Index Reveals

Andeavor index

In 3Q17, Andeavor’s refining index values—which are regional crack indicators in the areas where ANDV operates—have improved compared to 2Q17.

The index values in California and the Pacific Northwest rose to $16.6 per barrel and $15.7 per barrel in 3Q17, respectively, from $14.8 per barrel and $11.5 per barrel, respectively, in 2Q17. Plus, ANDV’s Midcontinent index value surged sharply to $19.9 per barrel in 3Q17 from $15.3 per barrel in 2Q17. On a consolidated basis, ANDV’s index rose by $3.2 per barrel over 2Q17 to $17.7 per barrel in 3Q17, which points toward a possible rise in Andeavor’s refining margins in 3Q17 compared to 2Q17.

What Andeavor&#8217;s 3Q17 Refining Index Reveals

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Rise in Andeavor’s index year-over-year

Similarly, year-over-year, index values in all three regions have risen. Andeavor’s consolidated index rose by $5.5 per barrel over 3Q16 to $17.7 per barrel in 3Q17, pointing toward a likely increase in ANDV’s refining margin in 3Q17 over 3Q16.

Peers’ likely margins in 3Q17

Like Andeavor, Marathon Petroleum (MPC) also publishes refining margin indicators. In 3Q17, per MPC, the blended LLS crack and the LLS-WTI spread have expanded in 3Q17 over 2Q17. However, the sweet-sour differential has narrowed. This situation points toward a possible increase in MPC’s refining earnings in 3Q17 over 2Q17.

However, MPC’s RINs (renewable identification numbers) expense rose in the quarter, which implies that the growth in refining earnings due to the wider cracks will be partially negated by an increase in the RINs burden in 3Q17 over 2Q17.

Also, Valero Energy’s (VLO) four operating regions have seen rises in average regional cracks in 3Q17 compared to 2Q17, which points toward a likely rise in VLO’s refining margins in 3Q17 over 2Q17.


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