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WRAPUP 1-Strong margins boost profits at smaller refiners
November 4, 2010 / 12:13 PM / 7 years ago

WRAPUP 1-Strong margins boost profits at smaller refiners

* Profits at Holly, Western Refining, Frontier beat

* Western Refining sees high margins in Q4 too

* Delek posts wider loss as expenses offset better margins

By Adveith Nair

BANGALORE, Nov 4 (Reuters) - Three smaller U.S. refiners, Holly Corp HOC.N, Frontier Oil FTO.N and Western Refining WNR.N benefited from wider refining margins and joined their bigger peers in posting strong quarterly results and signaling a solid finish to the year.

Profits have risen at oil companies as U.S. crude prices rose 13 percent from a year earlier, while natural gas rose more than 30 percent in the quarter. A recovering economy has also increased demand for fuel, leading to improvement in refining margins.

Refining margins are the difference between the cost of crude oil and wholesale price of petroleum products like gasoline.

Quarterly profit at Dallas-based Holly, the biggest among the refiners that reported on Thursday, more than doubled, sailing past estimates. Refining margins were up 26 percent. [ID:nASA00ZG7] “Continued strong diesel cracks at each of our refineries combined with robust gasoline cracks at our Woods Cross refinery and attractive lube margins at our Tulsa refinery helped fuel significant improved year over year third quarter performance,” Holly CEO Matthew Clifton said.

Crack spread is the profit margin between the price of crude oil and petroleum products extracted from it.

Improved crack spreads also shored up results at Houston-based Frontier Oil, valued at $1.41 billion. The company reported a higher-than-expected profit after a year-ago loss. [ID:nASA00ZHI]

“The third quarter provided another opportunity for profitable refining with improved crude differentials and healthy product margins,” Chief Executive Mike Jennings said.

Refined product margins improved in the third quarter, as domestic year-over-year demand improvement continued, Frontier said. The company’s average gasoline crack spread was up over 30 percent, while average distillate crack spread rose over 75 percent.

El Paso, Texas-based Western Refining reported an adjusted profit of 13 cents a share, comfortably beating estimates on strong margins at its Southwest refineries, and it was bullish on margins going forward. [ID:nASA00ZE2]

“We are optimistic about the fourth quarter due to the strength in diesel margins which offset the weaker gasoline margins that we typically see this time of year,” Chief Executive Jeff Stevens said.

The company, valued at $603 million, added gasoline and diesel margins for the fourth quarter were stronger than last year, echoing comments made by Valero Energy (VLO.N), the largest independent U.S. refiner. [ID:nN26131844]

Over the past week, Marathon Oil (MRO.N) and smaller peer CVR Energy (CVI.N) have also reported strong quarterly profits. [ID:nN02162160] [ID:nSGE6A10IG]

Earlier on Thursday, Delek US Holdings (DK.N), the smallest refiner of the lot, also reported a 44 percent increase in refining margins. However, the company, valued at $398 million, reported a wider loss as throughput fell and operating expenses rose. [ID:nASA00ZCV] (Reporting by Adveith Nair in Bangalore; Editing by Jarshad Kakkrakandy)

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