Independent Refiner 4Q 2012 Earnings Summary | RefinerLink

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Independent Refiner 4Q 2012 Earnings Summary

By Steve Pagani

Mar 15, 2013

U.S. independent refiners finalized one of their best years ever ending the 4Q2012 with over $3 billion in net profit.


U.S. independent refinery earnings in the fourth quarter of 2012 were over $3 billion dollars.  Despite several turnarounds and lower product cracking margins the refiners continued to take advantage of discounted inland crude. 



The independent refiners continued their efforts to return boom profits to their base business and shareholders.  As the large integrated oil companies started leaving the U.S. refining industry, two U.S. independents, Marathon and Tesoro, stepped in to purchase assets at a discount. 


Nearly all the refiners continued to repurchase stock, pay down debt, or offer special dividends to their shareholders. 



Three refiners set themselves apart of the pack based on strong per barrel profit margin.  Western Refining beat everyone at $28/bbl net profit.  Their proximity to heavily discounted WTS and WTI crude enable above average net profit. Western Refining channeled this discount into their best year ever.


HollyFrontier and CVR both lead the rest of the pack with very strong per barrel earnings despite challenges with planned and unplanned maintenance. CVR even jumped into the double digit per barrel operating expense ($12/bbl), but cheap crude cures all.



Despite one of the lowest operating expenses per barrel Valero and Tesoro couldn’t over come lower per barrel gross margin creating one of the lowest per barrel net profit margins.  But Valero’s size was its strength as it earned over $1 billion in the quarter. As they move to more inland crudes in the Gulf Coast and Memphis their net profit should continue to increase.  Tesoro announced the closure of their Hawaii refinery, which should help increase their overall net profit per barrel. 


While Phillips 66 was on the lower end of the group in operating expense per barrel, their overall earnings stepped down in the quarter.  But their further expansion into inland crude sourcing at Bayway and in the Gulf Coast could help improve their per barrel net profit.  They announced they plan to receive over 400 rail cars in the 1Q2013.


Alon continues to work through their options for their Gulf Coast and California refineries as they don’t have easy access to discounted inland crudes.



Marathon closed 2012 with continued struggles on per barrel opex (amongst the highest in the group of independent refiners).  With the announcement of the acquisition of the new Galveston Bay Refinery (former Texas City from BP) and completion of the Detroit Heavy Crude project there should be hope that their ability to process increasing amounts of discounted inland crude will increase.



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