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A Look at Andeavor’s Refining Yields in 4Q17

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Impact of complexity and refining yields on profitability

A refining yield shows the quantity and quality of various refined products produced. Higher complexity refineries produce lighter refined products such as gasoline. Complexity is a refinery’s configuration, which determines the type of crude oil consumed and the quality of refined products produced.

Lighter refined products have higher realizations than the heavier ones. So producing lighter products means higher revenues for refiners. If heavier products are produced, sour crude oil is processed, which could result in lower input costs. Better prices for refined products coupled with lower crude oil costs could result in improved operating margins for refiners that have a higher complexity. That could mean higher profits for those refiners.

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ANDV’s refining yields

Andeavor’s (ANDV) refining operations yielded 53% gasoline and 38% combined diesel fuel and jet fuel in 4Q17. Gasoline is a lighter product with higher realizations than other refined products. ANDV’s gasoline production rose 32% over 4Q16 at 605 Mbpd (thousand barrels per day) in 4Q17, which is a favorable scenario.

ANDV’s diesel fuel production rose 36% YoY (year-over-year) to 284 Mbpd in 4Q17. Jet fuel production rose 12% YoY to 139 Mbpd in 4Q17. Production of other products, however, decreased in 4Q17 over 4Q16. ANDV’s others segment probably includes heavy refined products, which accounted for 9% of its total production in 4Q17. ANDV’s total production rose 26% YoY to 1133 Mbpd. Higher crude oil throughput led to the rise. ANDV’s integration of Western Refining assets was the main reason for the rise in throughputs and yields in 4Q17 over 4Q16.

Peers’ refining yields

ANDV’s peer Valero Energy (VLO) produced 48% gasoline and 38% distillates in 4Q17. Phillips 66 (PSX) yielded less gasoline compared to ANDV and VLO. Gasoline constituted 45% of PSX’s total refined products produced in 4Q17.

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