Refinery Earnings Preview
I've been telling you guy's that refining numbers are going to be coming in hot, well here are some preliminary results from one refinery...
This is a single facility, not a company. Numbers are preliminary and unaudited (I've also used round/whole numbers to avoid identification).
This is the worst performing refinery in this particular companies system, 75,000 bpd refinery operating in the mid-80% utilization over the 2nd Q.
First a quick look at Q1:
Planned Contribution margin of $6M
Total Gross Margin of $100M
Total OpEx of $35M
Actual Contribution Margin... $65M (that's a 10x of plan for anyone counting)
The street has raised guidance on 2nd Q refinery earnings across the board anywhere from 50-150% over the past 3 months.
Planned Contribution margin: $21M
Total Gross margin of $195M
Total OpEx of $45M
Actual Contribution Margin... $150M (+230% of Q1, and 700% of plan)
This isn't even the best they could have done. They left over $20M on the table due to lost opportunity costs. Utilization was +10% below target, and they had to spend an extra $10M in OpEx to maintain rates.
All this to say, even an averagely run facility is making record profits. A well oiled (pun intended) machine is going to blow the street estimates out of the water.
This also highlights the length refineries are going to in order to keep up rates (+25% in OpEx Q over Q). The problem is that there are some things money can't fix, and there will be unforeseen outages, a supply risk that could keep prices propped up longer.
Oh yeah, remember yesterday's post about crude dropping significantly and refinery crack spreads increasing (basically maintaining wholesale prices even as crude fell)? Well, yesterday Crude was up yesterday 2.5% while crack spreads maintained their margin (meaning as crude prices rose, so did wholesale prices).
Although a bad sign for your price at the pump, this is a very bullish sign for refinery profits.
As I mentioned yesterday, for the first time ever, it looks like refiners (or more appropriately refining capacity) is starting to dictate the price at the pump.
I own 3 refiners currently (not in my shared portfolio). I think they all do well this earnings season.
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