uploads///Revenues Q Refining

What Caused LYB’s Refining Segment’s Earnings to Turn Positive?

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May. 2 2018, Updated 9:31 a.m. ET

Refining segment’s revenue

LyondellBasell’s (LYB) Refining segment accounted for 23.1% of its total revenue in 4Q17 compared to 20.1% in 1Q18, indicating a YoY (year-over-year) rise of 4.1%.

The Refining segment reported revenue of $2.3 billion in 1Q18, a rise of 66.8% YoY. In 1Q17, the segment reported revenue of $1.4 billion.

The segment’s revenue rose primarily due to higher product prices. Crude oil has risen nearly $13 per barrel. As a result of these higher prices, the segment’s revenue rose 26%. On the other hand, crude oil output also increased, which resulted in the segment’s revenue rising 41%. Crude output for the quarter stood at 252,000 barrels per day, 59,000 barrels per day higher than in 1Q17.

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Segment’s EBITDA and margins

The Refining segment reported EBITDA (earnings before interest, tax, depreciation, and amortization) of $63 million in 1Q18, a rise of 310% YoY. In 1Q17, the segment’s EBITDA was -$30 million. The segment’s EBITDA rose primarily due to an increase in prices and higher productivity.

As a result, the segment’s margin expanded. It reported an EBITDA margin of 2.8% in 1Q18. In 1Q17, its EBITDA was negative.

Outlook

Whether the segment’s revenue continues its upward journey or not depends on crude oil prices. If they stay around the present level, then the segment’s revenue will likely rise. With higher production levels, the output of the number of barrels per day could also rise, which would again help the segment’s revenue to grow.

Investors can indirectly hold LyondellBasell stock by investing in the First Trust Materials AlphaDEX ETF (FXZ), which has 3.4% of its portfolio holdings in LyondellBasell. Other holdings of the fund include Eastman Chemical (EMN), Westlake Chemical (WLK), and Huntsman (HUN) with weights of 3.4%, 3.3%, and 2.7%, respectively, as of April 27, 2018.

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