Western Refining CEO Discusses Q3 2010 Results – Earnings Call Transcript
Western Refining, Inc. (
)
Q3 2010 Earnings Conference Call
November 4, 2010 10:00 AM ET
Executives
Jeff Beyersdorfer – SVP, Treasurer, and Director, IR
Jeff Stevens – President and CEO
Gary Dalke – CFO
Analysts
Jeff Dietert – Simmons
Paul Sankey – Deutsche Bank
Jacques Rousseau – RBC Capital Markets
Kathryn O’Connor – Deutsche Bank
Chi Chow – Macquarie Capital Markets
Gary Stromberg – Barclays Capital
Evan Calio – Morgan Stanley
Steven Karpel – Credit Suisse
Presentation
Operator
Compare to:
Previous Statements by WNR
»
Western Refining, Inc. Q2 2010 Earnings Call Transcript
»
Western Refining, Inc. Q1 2010 Earnings Call Transcript
»
Western Refining, Inc. Q4 2009 Earnings Call Transcript
»
Western Refining Q3 2009 Earnings Call Transcript
Good morning and welcome to the 2010 Western Refining earnings conference call. After the speakers opening remarks, there will be a question and answer period. (Operator Instructions). As a reminder ladies and gentlemen, this conference call is being recorded and your participation implies consent to our recording of this call. If you do not agree with these terms, please disconnect at this time. Thank you.
I would now like to turn the call over to Mr. Jeff Beyersdorfer, treasurer and director of investor relations of Western Refining. Mr. Beyersdorfer, please go ahead sir.
Jeff Beyersdorfer
Thank you and good morning. I would like to thank you for taking the time to listen in today and for your continued interest in Western Refining. My name is Jeff Beyersdorfer; I’m the company’s treasurer and director of investor relations. Joining me for today’s call are Jeff Stevens, our President and CEO; Gary Dalke, our CFO; Mark Smith our President – Refining and Marketing; and other members of senior management team.
If you need a copy of the earnings release, you may obtain one from the investor relations section of our website at WNR.com. Before we proceed I would like to make the following safe harbor statement.
Today’s presentation will contain forward looking statements and I incorporate and refer you to the forward looking statement section of our earnings release and recent filings with the SEC. we assume no obligation to update or revise any forward looking statements to reflect new or changed events or circumstances. In addition to reporting financial results in accordance with generally accepted accounting principles or GAAP, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results which can be found in the press release which is posted in the IR section of our website.
I will now turn the call over to Jeff Stevens.
Jeff Stevens
Thanks Jeff. Welcome to everyone on the call. Today we will discuss our Q3 performance, the success we are seeing as a result of our strategic initiatives and how Western continues to proactively address the current market environment.
After my opening remarks about the quarter, Gary will review our earnings in more detail and provide operating guidance for Q4 2010. After Gary’s comments, we will open the call for your questions.
As stated in our press release, we reported another profitable quarter for Q3 2010. Net earnings of $11.4 million dollars or $.13 per diluted share excluding special items. This compares to a Q3 2009 net loss, excluding special items, of $8.7 million dollars or $.10 per diluted share.
The improvement reflects higher refinery margins and the continued gains we have generated from our cost saving initiatives. In Q3, industry refinery margins declined relative to Q2 2010 but continued to exceed 2009 levels. For example, the Gulf Coast 3 to 1 benchmark (inaudible) in Q3 was up by approximately $1.00 or 13% relative to Q3 2009. During the quarter our southwest refineries generated gross margin improvements that exceeded the benchmark gains without passive approving by 21%, in the four corners by 38% relative to Q3 2009.
I would also like to point out that both El Paso and Gallup have solid quarters from an operational perspective, as both refineries continue to run at full capacity. Strong throughputs combined with our cost reduction efforts enabled us to continue to operate our southwest refineries at very competitive per barrel cost. Gallup’s operating cost was $6.21 per barrel for the quarter; down from the $7.64 per barrel for the combined Gallup and Bloomfield refineries in Q3 2009. El Paso’s costs were $3.27 per barrel compared to $3.01 per barrel for Q3 2009.
As a remind though, last year El Paso refinery benefited from a property tax refund related to prior years. Excluding this refund, El Paso’s costs would have been $3.49 per barrel in Q3 2009.
Moving to our other businesses. Wholesale posted better results compared to the same quarter last year. As the demand for transportation fields continue to improve in the southwest. Operating income during the quarter was up by more than $1.5 million dollars or 40% compared to Q3 2009. The higher operating and income was primarily due to increased lubricant margins and continued fuel and lubricant volume growth.
Our retail business had its most profitable quarter since being acquired by Western, with operating income of $7.6 million dollars, which is up by 13% compared to Q3 2009. This outstanding performance is the result of improvements in fuel volumes and merchandise sales combined with continued strength in fuel margins. We are encouraged by the results of our wholesale and retail businesses and we expect these positive trends to continue.
Last year we announced the decision to suspend refinery operations at Yorktown. We are pleased to report that the safe and orderly shutdown of refining operations was completed on schedule in early September. As part of the shutdown process we generated $56 million dollars in cash from the partial liquidation of working capital at the facility.
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