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A Look at Andeavor’s Refining Yields

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Impact of refining yields on a refiner’s profitability

Refining yield shows quantity and quality of various refined products produced. Higher complexity refineries produce more lighter refined products such as gasoline. Lighter refined products fetch higher realizations than the heavier ones. So more production of lighter products means higher revenues for refiners.

Also, if heavier sour crude oil is processed, it results in lower input cost. So better prices for refined products coupled with lower crude oil costs could result in improved operating margins for refiners with a higher complexity. That means higher earnings for refiners.

ANDV’s refining yields

Andeavor’s (ANDV) refining operations yielded 54% gasoline and 36% combined diesel fuel and jet fuel in the first quarter. Gasoline is a lighter product, fetching higher realizations than other refined products. Its gasoline production rose 27% over Q1 2017 at 568 Mbpd (thousand barrels per day) in Q1 2018, which is a favorable scenario.

ANDV’s diesel fuel production rose 36% year-over-year to 244 Mbpd in the first quarter. Similarly, jet fuel production rose 16% year-over-year to 132 Mbpd in the first quarter. However, production of other products decreased in the first quarter over Q1 2017. ANDV’s Others segment likely included heavy refined products, which accounted for 10% of its total production in the first quarter.

ANDV’s total production rose 20% year-over-year to 1047 Mbpd. Higher crude oil throughput led to the rise. ANDV’s integration of Western Refining assets has been the main reason for the rise in throughputs and yields in the first quarter over Q1 2017.

Peers’ refining yields

ANDV’s gasoline production of 54% is higher than peers Valero Energy (VLO), Phillips 66 (PSX), and Marathon Petroleum (MPC). VLO produced 47% gasoline and 37% distillates in the first quarter. PSX yielded 44% gasoline in the first quarter, the lowest among its peers. MPC’s refining operations yielded 47% gasoline and 31% distillates in the first quarter.

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