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How LyondellBasell’s Refining Segment Fared in 4Q17

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LYB’s Refining segment revenues

LyondellBasell’s (LYB) Refining segment accounted for 23.1% of LYB’s total revenues in 4Q17 compared with 20.1% in 4Q16, indicating a YoY (year-over-year) rise of 3.0 percentage points. The Refining segment reported revenues of $2.1 billion in 4Q17, an increase of 35.3% YoY. In 4Q16, the segment reported revenues of $1.6 billion. This was the segment’s highest quarterly revenue since 1Q15.

The segment’s revenue growth was primarily driven by increased throughput. In 4Q17, the refining segment produced 17,000 more barrels per day as compared to 4Q16. Also, the higher oil prices pushed the segment’s revenue up.

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Operating income and margins

The Refining segment reported an operating income of $59 million in 4Q17, an increase of 47.5% on a year-over-year basis. In 4Q16, the segment reported an operating income of $40 million. The price increase has helped to improve the spread of the Maya 2-1-1 by $1.32 per barrel. As a result, the segment’s operating income margin also improved. The refining segment reported an operating income margin of 2.8% as compared to 2.6% in 4Q16, an increase of 20 basis points on a year-over-year basis.

Outlook

The Refining segment is expected to continue its growth, supported by higher throughput and higher oil prices. However, unplanned maintenance and changes in the global oil prices could have an adverse impact on the segment. We won’t review the company’s Technology segment in this series, as its revenue in 4Q17 were only $125 million.

Investors can indirectly hold LyondellBasell stock by investing in the First Trust Materials AlphaDEX Fund (FXZ), which has ~3.3% of its portfolio holdings in LyondellBasell. Other holdings of the fund include Eastman Chemical (EMN), Cabot (CBT), and Westlake Chemical (WLK), which had weights of 3.6%, 3.4%, and 3.3%, respectively, as of February 5, 2018.

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