UPDATE 1-Western Refining profit beats estimates on higher output

Thu Feb 27, 2014 7:05am EST

* 4th-quarter adj profit $0.60/shr vs est $0.56

* Revenue rises 34 percent to $3.02 bln

* 4th-quarter crude costs up

Feb 27 (Reuters) - Western Refining Inc reported a better-than-expected profit for the fourth quarter, helped by higher production from its refineries, even as the cost of the crude oil it processes rose.

The Texas-based company, which operates two refineries close to the U.S. Gulf Coast, said production rose nearly 3 percent to 154,908 barrels per day.

Excluding one-time items, including a pretax hedging loss of $100.6 million, the company earned 60 cents per share.

Net sales rose about 34 percent to $3.02 billion.

Analysts on average had expected Western Refining to earn 56 cents on revenue of $2.37 billion, according to Thomson Reuters I/B/E/S.

Western Refining said cost of products sold soared 60 percent to $2.73 billion in the quarter, with margins per barrel crashing 76 percent.

Western Refining operates the El Paso refinery in Texas and Gallup refinery in New Mexico, with combined capacity of about 151,000 barrels per day, according to its website.

Refiners make more money when the price difference between various types of crude oil is wide. When the gap narrows in the price between West Texas Intermediate crude oil and Gulf Coast benchmark Light Louisiana Sweet crude , as it did in the fourth quarter, margins are squeezed.

Western Refining said it expected price difference between various crude oil to widen in the first quarter and new pipelines would bring cheap crude from shale fields in North America.

To boost margins, Western Refining bought in November a controlling stake in Northern Tier Energy for its flagship refinery, which is closer to North Dakota's Bakken oil field than most U.S. refineries.

The company reported a net loss of $7.3 million, or 9 cents per share, in the quarter ended Dec. 31, compared with a net income of $207.6 million, or $1.92 per share, a year earlier.

Western Refining's shares, which have risen 15 percent in the past year, closed at $39.17 on the New York Stock Exchange on Wednesday.

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