Analyzing HollyFrontier’s Refining Margin in 2018

HollyFrontier’s (HFC) refining segment is critical for its overall earnings. The refining segment’s adjusted EBITDA rose 127% to $1.7 billion in 2018. The rise was led by higher refining margins and partly offset by lower volumes.

HollyFrontier’s gross refining margin rose by $6.2 per barrel to $17.7 per barrel in 2018. The company’s operating costs rose by $0.3 per barrel during the same period. There was a $5.9 per barrel rise in the company’s net refining margin to $11.3 per barrel in 2018. The increase was driven by HollyFrontier’s higher gross refining margin. The increase was partly offset by the company’s higher operating cost per barrel in 2018.

HollyFrontier’s Midcon region’s (where the El Dorado and Tulsa refineries are located) net refining margin rose from $4.8 per barrel in 2017 to $8.9 per barrel in 2018. The situation was similar for the Southwest region, where the Navajo refinery is located. The net refining margin in the Southwest region rose from $7.2 per barrel in 2017 to $14.2 per barrel in 2018. Combined, the Midcon and Southwest regions accounted for 83% of HollyFrontier’s refining throughput in 2018.

The net refining margins rose in the Rocky Mountain region, where the Cheyenne and Woods Cross refineries are located.

Overall, the year-over-year rise in the refining margins across all three regions increased HollyFrontier’s consolidated net refining margin.

Valero Energy’s (VLO) gross refining margin rose from $9.1 per barrel in 2017 to $10.1 per barrel in 2018. Marathon Petroleum’s (MPC) gross refining and marketing margin rose from $12.6 per barrel in 2017 to $14.1 per barrel in 2018. Phillips 66’s (PSX) worldwide refining margin rose by $3.9 per barrel to $13.0 per barrel in 2018.