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How Did Tesoro’s Refining Margin Trend in 3Q16?

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Dec. 4 2020, Updated 10:53 a.m. ET

Tesoro’s 3Q16 refining margin

Tesoro (TSO) noted a contraction in its GRM (gross refining margin) by $10.4 per barrel YoY (year-over-year) to $9.1 per barrel in 3Q16. Its operating costs rose $0.3 per barrel YoY to $5.1 per barrel in 3Q16. The contraction in TSO’s gross margin and the rise in its operating costs led to a contraction in its net refining margin.

TSO’s net refining margin contracted $10.6 per barrel YoY to $4 per barrel in 3Q16. Tesoro’s Refining segment’s EBITDA (earnings before interest, tax, depreciation, and amortization) fell from $1.0 billion in 3Q15 to $204 million in 3Q16.

In 3Q16, Tesoro’s refining index values, which are regional crack indicators in the areas in which TSO operates, slumped compared to 3Q15.

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The ANS (Alaskan North Slope) West Coast 3-2-1 crack spread and the WTI (West Texas Intermediate) Midcontinent 3-2-1 crack spread fell in 3Q16 compared to 3Q15. The West Coast 3-2-1 crack spread fell from $26.4 per barrel in 3Q15 to $17.1 per barrel in 3Q16. Similarly, the Midcontinent crack spread fell from $22 per barrel in 3Q15 to $14.5 per barrel in 3Q16.

Tesoro’s peers’ refining margins

TSO’s peers also noted year-over-year contractions in their refining margins in the quarter. Marathon Petroleum (MPC) recorded a contraction of $6.5 per barrel in its gross refining and marketing margin over 3Q15, to $10.8 per barrel in 3Q16. 

Valero Energy (VLO) also noted a contraction in its GRM (gross refining margin) to $9.1 per barrel in 3Q16, compared to $14.4 per barrel in 3Q15. Similarly, Phillips 66’s (PSX) worldwide refining margin contracted $6.7 per barrel over 3Q15 to $7.2 per barrel in 3Q16.

If you’re looking for broad-based exposure to energy sector stocks, you can consider the SPDR S&P Oil & Gas Exploration & Production ETF (XOP).

Continue to the next article for a look at Tesoro’s stock performance following its earnings.

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