abarrelfull wrote on 13 Nov 2013 09:22
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Western Refining, Inc. (NYSE:WNR) today reported a net loss of $4.8 million, or $0.05 per diluted share, for the third quarter of 2009. The Company’s net income was $109.2 million, or $1.60 per diluted share, for the same period in 2008.
The year-over-year decline in net income was primarily due to lower refined product margins driven by weakness in finished product prices relative to crude and feedstock costs. In addition, heavy and sour crude differentials remained tight which negatively impacted margins at the Yorktown refinery and, to a lesser extent, at the El Paso refinery. Yorktown also experienced lower coking margins.
In the quarter, Western generated cash flow from operations of approximately $28.0 million, and year-to-date has generated cash flow from operations of $148.6 million. The Company had no cash borrowings outstanding under its revolving credit facility as of September 30, 2009.
Paul Foster, Western’s Chief Executive Officer, said, “Refining margins were depressed during the third quarter, historically a strong quarter for refiners, primarily due to the prolonged economic slowdown. Overall, margins declined substantially in the latter part of the quarter. However, we are pleased that fuel volumes and margins remained stable in our wholesale operations and that our retail unit had a strong quarter despite the challenging marketplace.”
After a thorough evaluation of its Four Corners assets, Western has decided to consolidate the operations of its two Four Corners refineries into one at the Gallup refinery. This consolidation will eliminate certain operating costs of approximately $25 million per year beginning in the first quarter of 2010 while maintaining the capability to process the same volumes of crude that have been recently processed at both Bloomfield and Gallup combined.
Western will continue to operate the Bloomfield products terminal and will supply the Four Corners with refined products by utilizing new pipeline connection and exchange supply agreements. The Company will also maintain its marketing assets, and through the long-term exchange agreement, will supply barrels to Bloomfield in exchange for barrels produced at the El Paso refinery. The Company is evaluating alternative uses for the Bloomfield refinery including the possibility of biofuels production.
As a result of the refinery consolidation, Western expects to take pre-tax charges against earnings in the fourth quarter of approximately $55-$65 million, the majority of which will be non-cash. These charges are primarily related to asset impairment and idling costs.
“The decision to idle the Bloomfield refinery was a difficult, but necessary decision to ensure that Western remains well positioned for the future, despite the weak industry dynamics. Western appreciates the dedication of our employees and is committed to treating them fairly and with respect as we work through this transition,” Foster continued.
In addition to the refinery consolidation, the Company has also identified a number of additional cost savings initiatives that will generate approximately $25 million in annualized savings. The majority of these actions are in the early stages of implementation and will be fully realized beginning in the first quarter of 2010.
In conclusion, Foster stated, “The market is certainly challenging, but we are continuing to take decisive actions to ensure we are running our operations in a reliable and cost effective manner which we believe will allow us to be profitable over the long run in a variety of market conditions.”
