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Did Andeavor’s Refining Margins Expand in 1Q18?

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May. 9 2018, Published 7:15 a.m. ET

Andeavor’s refining margin in 1Q18

Andeavor (ANDV) posted its earnings on May 7. The company surpassed its earnings estimates for the quarter. Read, Andeavor’s 1Q18 Earnings Beat Estimates for more information. In this series, we’ll look at refining margins in more detail.

Andeavor (ANDV) saw a rise in gross refining margin by $1.4 per barrel YoY (or year-over-year) to $10.9 per barrel in 1Q18. Its operating costs fell by $0.1 per barrel YoY to $5.6 per barrel in 1Q18. The rise in gross margin coupled with a fall in operating cost led to a surge in net refining margin.

ANDV’s net refining margin increased by $1.5 per barrel YoY to $5.3 per barrel in 1Q18. Andeavor’s EBITDA (earnings before interest, tax, depreciation, and amortization) from the refining segment rose from $181 million in 1Q17 to $387 million in 1Q18.

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ANDV’s refining margin rose in its Inland (North Dakota, Utah, Minnesota, New Mexico, and Texas) region, partly offset by the falls in the Pacific Northwest (Washington and Alaska) and California (Martinez and Los Angeles) regions. Its refining margin in California contracted from $10.5 per barrel in 1Q17 to $9.6 per barrel in 1Q18. Also, the Pacific Northwest margins fell from $7.7 per barrel in 1Q17 to $7.0 per barrel in 1Q18. However, the Inland refining margins rose from $7.9 per barrel in 1Q17 to $14.0 per barrel in 1Q18.

Also, in 1Q18, Andeavor’s refinery throughput rose from 825 Mbpd (thousand barrels per day) in 1Q17 to 1,037 Mbpd in 1Q18, reflecting the impact of the Western Refining integration, which also led to higher yields of refined products.

Peers’ refining margins

ANDV’s peers have noted a mixed trend in their refining margin in the quarter. Valero Energy (VLO) observed a rise in its gross refining margin from $8.1 per barrel in 1Q17 to $8.4 per barrel in 1Q18. Also, Phillips 66’s (PSX) worldwide refining margin rose by $0.7 per barrel, or 9% YoY, to $9.3 per barrel in 1Q18. However, Marathon Petroleum’s (MPC) gross refining and marketing margin fell by $1.1 per barrel over 1Q17 to $10.6 per barrel in 1Q18.

Move on to the next part to see how Andeavor stock performed on its earnings release day.

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