(Reuters) - U.S. refiner Phillips 66 posted a better-than-feared quarterly profit on Tuesday, as higher income from its pipelines and terminals business offset the impact of higher Canadian crude prices on refining.
The company is the second refiner after rival Valero Energy to post bullish numbers at a time when investors and analysts had largely expected poor performance from refiners due to higher prices of Canadian oil
Higher Canadian crude prices bruised refining margins of Phillips 66, which fell 56 percent from the fourth quarter.
Adding to its woes were planned turnarounds and unplanned outages that impacted five refineries. On an adjusted basis, the company’s refining business lost $219 million in the quarter, compared with an income of $110 million a year ago.
“We ran lights out in the fourth quarter but I think we’ve run kind of rugged in the first quarter,” Chief Executive Greg Garland said on a conference call with analysts.
The company had an uncharacteristic six percent of unplanned downtime in the quarter, when they would normally target about two percent, he added.
Canada’s largest crude-producing province Alberta mandated temporary oil production cuts effective January to boost prices of Canadian crude and ease congestion on pipelines that caused a crude glut and steep discounts on Canadian crude.
Integrated producers with domestic refinery like Suncor Energy, Husky Energy Inc and Imperial Oil Ltd that have benefited from refining cheaper oil have opposed Alberta’s move.
“Phillips 66 lost money in three of the four refining regions, which is not normal for the company. The company has an otherwise strong track record of operations in refining and we expect the company will make a comeback in the second quarter,” Credit Suisse analyst Manav Gupta said in a note.
On an adjusted basis, Phillips 66’s profit fell to $187 million, or 40 cents per share, in the first quarter ended March 31, from $512 million or $1.04 per share a year earlier.
Analysts, on average, were expecting the Houston, Texas-based refiner to post a profit of 34 cents per share, according to IBES data from Refinitiv.
The company’s refineries ran at a utilization rate of 84 percent in the quarter against 89 percent in the year-ago quarter.
Shares of Phillips 66 were down marginally at $94.83 at midday, after the call.
Reporting by Nishara Karuvalli Pathikkal; Editing by Shailesh Kuber