PBF’s segmental analysis
PBF Energy (PBF) noted a fall in its gross refining margin by $3.60 per barrel to $8.80 per barrel in 4Q15 as compared to 4Q14. PBF’s operating costs also fell by $0.7 per barrel to $4.60 per barrel in 4Q15 on a YoY (year-over-year) basis. The company’s net refining margin fell by $2.90 per barrel to $4.20 per barrel in 4Q15 on a YoY basis.
However, in 4Q15, PBF Energy’s (PBF) throughput rose from 38 million barrels in 4Q14 to 58 million barrels in 4Q15, as it included two months of operations of the recently acquired Chalmette refinery. PBF’s Logistics segment reported a rise in operating income from $16 million in 4Q14 to $24 million in 4Q15.
PBF’s peers Valero Energy Corporation (VLO) and Tesoro Corporation (TSO) witnessed declines in gross refining margins in 4Q15 as compared to 4Q14. VLO and TSO saw their refining margins narrow by $0.3 and $3 per barrel to $10.90 and $12.80 per barrel, respectively, in 4Q15 as compared to 4Q14. However, Phillips 66 (PSX) noted a marginal rise of $0.1 per barrel to $9.40 per barrel in 4Q15 as compared to 4Q14. For exposure to refining sector stocks, investors can consider the Vanguard Energy ETF (VDE), which has ~10% exposure to the sector.
PBF Energy’s 1Q16 refining margin outlook
In 1Q16, PBF Energy (PBF) is likely to witness lower earnings from its Refining segment compared to 1Q15. This is due to the fact that product cracks have narrowed. The US Gulf Coast WTI (West Texas Intermediate) 3:2:1 crack spread fell from $19 per barrel in 1Q15 to $10 per barrel in 1Q16.
Further, in 1Q16, the refining margin indicators of major oil refining companies showed weakness when compared to 1Q15. For example, Marathon Petroleum Corporation’s (MPC) margin indicators, the blended LLS (Light Louisiana Sweet) 6-3-2-1 crack spread, the sweet-sour differential, and the LLS-WTI spread, fell in 1Q16 as compared to 1Q15.