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