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Andeavor’s Regional Crack Spread Trends in 4Q17

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Previously in this series, we discussed Andeavor’s (ANDV) refining margin in 3Q17 in comparison to 3Q16 and ANDV’s refining index trend in 4Q17. We saw that in 4Q17, index values are showing weakness quarter-over-quarter but are displaying improvement year-over-year (or YoY).

Let’s look at the regional crack spread trends for the current quarter.

Andeavor’s regional crack spreads

The regional crack spreads, where Andeavor’s (ANDV) refineries operate, are indicators of ANDV’s expected margin in 4Q17. The major area-wise indicators are the Midcontinent WTI (West Texas Intermediate) 3-2-1 crack spread, the Pacific Northwest ANS (Alaska North Slope) 5-3-1-1 crack spread, the West Coast ANS 3-2-1 crack spread, and the Gulf Coast WTI 3-2-1 crack spreads.

Regional cracks in 4Q17

On a year-over-year basis, all four crack spreads rose in 4Q17. The Midcontinent region had the highest rise in the crack spread of 93.0% YoY to $21.20 per barrel in 3Q17.

This increase was followed by the Gulf Coast and the Pacific Northwest, which rose 48.0% YoY and 25% YoY, respectively, to $18.70 per barrel and $17.30 per barrel in 4Q17. The West Coast saw the lowest rise of 20.0% YoY to $15.80 per barrel in 4Q17.

However, quarter-over-quarter, three of the four regions saw falling crack spreads in 4Q17. The West Coast saw the highest fall of 27.0% quarter-over-quarter, followed by the Pacific Northwest (39.0% quarter-over-quarter) and the Gulf Coast (28.0% quarter-over-quarter). However, the Midcontinent witnessed a 5.0% increase quarter-over-quarter.

Overall, crack spreads point toward a lower refining margin for Andeavor in 4Q17 quarter-over-quarter. However, year-over-year, these margins could increase.

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