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What Andeavor’s Refining Index for 1Q18 Suggests

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Andeavor’s refining margin trend

Before analyzing Andeavor’s (ANDV) refining index for 1Q18, let’s look at its refining margin performance in 4Q17.

Andeavor (ANDV) saw a decline in its gross refining margin of $1.80 per barrel YoY (year-over-year) to $7.60 per barrel in 4Q17. Its operating costs fell $0.10 per barrel YoY to $5.30 per barrel in 4Q17. The fall in gross margin, partially offset by a fall in operating costs, led to a decrease in net refining margins. ANDV’s net refining margin decreased $1.70 per barrel YoY to $2.30 per barrel in 4Q17.

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Peers’ refining margins

The refining margins for ANDV’s peers rose in 4Q17 over 4Q16. Valero Energy’s (VLO) margin rose $0.93 per barrel over 4Q16 to $8.80 per barrel in 4Q17. Marathon Petroleum’s (MPC) gross refining and marketing margin rose $1.80 per barrel over 4Q16 to $13.10 per barrel in 4Q17. Phillips 66’s (PSX) worldwide refining margin rose $2.50 per barrel, or 39% YoY, to $9 per barrel in 4Q17.

Andeavor’s refining index

In 1Q18, Andeavor’s refining index values, which are regional crack indicators in the areas where ANDV operates, have risen YoY in two of the three areas.

Index values YoY have had a mixed trend. The index value in California has declined $1.20 per barrel YoY to $11 per barrel in 1Q18. However, the index values for the Pacific Northwest and Midcontinent have risen $1.40 per barrel YoY and $2.90 per barrel YoY, respectively, to $11.30 per barrel and $16 per barrel, respectively, in 1Q18. Andeavor’s consolidated index rose marginally by $0.80 per barrel over 1Q17 to $13 per barrel in 1Q18, pointing to a likely increase in its refining margin in 1Q18 over 1Q17.

In the next part, we’ll look at ANDV’s stock performance before its earnings release.

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