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Where Is Andeavor Headed in 4Q17?

PART:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15
Part 5
Where Is Andeavor Headed in 4Q17? PART 5 OF 15

What Andeavor’s Cash Flow Analysis Reveals

Andeavor’s cash flow

In 9M17, Andeavor (ANDV) generated ~$1.2 billion in cash from operations. The company had cash outflows of ~$2.0 billion in the form of capital expenditures and acquisitions, as well as $223.0 million in the form of dividends in the first nine months of 2017.

The acquisition outflow was primarily related to the Western Refining acquisition and the North Dakota Gathering and Processing Assets acquisition.

What Andeavor’s Cash Flow Analysis Reveals

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Andeavor’s cash flow shortfall

Andeavor’s (ANDV) cumulative cash outflows totaled ~$2.2 billion in 9M17, considering the capex, acquisition, and dividend payments. This led to a shortfall of ~$1.0 billion, calculated as the difference between cash from operations and outflows due to its capex, acquisition, and dividend.

The shortfall was funded by drawing down on cash reserves. ANDV’s cash balance fell from $2.8 billion at the beginning of 9M17 to $0.5 billion at the end of 9M17. Andeavor also repaid some portion of its debt during this period.

Peers’ cash flow metrics

ANDV’s cash flow shortfall as a percentage of its cash flow from operations stood at 87.0%, the highest among its peers under discussion. However, the company posted a decline in its cash flow shortfall in 9M17 compared to 1H17, primarily due to improved 3Q17 performance.

Phillips 66 (PSX) had a lower shortfall of 36.0% in 9M17. Valero Energy (VLO) and Marathon Petroleum (MPC) saw cash flow surpluses of 42.0% and 28.0%, respectively, in 9M17.

For further details on refiners’ cash flow deficit or excess, you can refer to How Do Refiners’ Cash Flow Positions Look in 2017 So Far?

Andeavor’s cash flow analysis

Andeavor (ANDV) witnessed a recent cash flow shortfall, which was mainly due to its organic and inorganic growth activities that led to high cash outflows. Its cash inflows were impacted by the volatile refining environment. However, the growth activities could result in higher cash inflows going forward.

If the refining environment improves and Andeavor’s growth activities materialize as expected, Andeavor’s cash flows could increase, improving the company’s liquidity position. These growth activities include the Western Refining acquisition synergies flow, which we discussed in the previous article.

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