Impact of complexity and refining yields on a refiner’s profitability
Refining yield shows the quantity and quality of various refined products. Higher-complexity refineries produce lighter refined products like gasoline. Complexity is a refinery’s configuration that determines the type of crude oil consumed and the quality of refined products produced.
Lighter refined products garner higher realizations than the heavier ones. With the higher production of lighter products, the revenues for refiners also increase. If heavier, sour crude oil is processed, it would result in lower input costs.
Better prices of refined products coupled with lower crude oil costs would result in improved operating margins for refiners that have greater complexity. This scenario means higher profits for these refiners.
MPC’s refining yields
Marathon Petroleum’s (MPC) Refining segment’s operations yielded 46.0% gasoline and 33.0% distillates in 3Q17. Gasoline is a lighter product that garners relatively higher realizations than other refined products. MPC’s gasoline production rose 4.0% over 3Q16 at 999 Mbpd (thousand barrels per day) in 3Q17, a favorable scenario.
In 3Q17, MPC’s distillate production rose 4.0% YoY to 673 Mbpd. Production of all other products increased in 3Q17 over 3Q16, except for asphalt, which accounts for 3.0% of total production. MPC’s asphalt production fell 4.0% YoY at 67 Mbpd in 3Q17 over 3Q16. MPC’s total production rose 5.0% YoY to ~2.1 MMbpd (million barrels per day).
Peers’ refining yields
MPC’s peer Valero Energy (VLO) produced 48.0% gasoline and 38.0% distillates in 3Q17. Andeavor’s (ANDV) gasoline production stood at 50.0% of its total refined production in 3Q17, which was higher than its peers.
Phillips 66 (PSX) yielded the lowest gasoline productions compared to peers MPC, VLO, and ANDV. Gasoline constituted 45.0% of the total refined products produced by PSX in 3Q17.