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Analyzing HollyFrontier’s Refining Margin in 2018

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HollyFrontier’s refining margin

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.

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HollyFrontier’s refining margin by region

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.

HollyFrontier’s peers in 2018

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.

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