Alon USA Energy, Inc. Reports Second Quarter 2016 Results

DALLAS, July 28, 2016 /PRNewswire/ — Alon USA Energy, Inc. (NYSE: ALJ) (“Alon”) today announced results for the second quarter of 2016. Net loss available to stockholders for the second quarter of 2016 was $(20.4) million, or $(0.29) per share, compared to net income available to stockholders of $36.4 million, or $0.52 per share, for the same period last year. Excluding special items, Alon recorded net loss available to stockholders of $(14.9) million, or $(0.21) per share, for the second quarter of 2016, compared to net income available to stockholders of $46.4 million, or $0.67 per share, for the same period last year.

Net loss available to stockholders for the first half of 2016 was $(55.9) million, or $(0.80) per share, compared to net income available to stockholders of $63.3 million, or $0.91 per share, for the same period last year. Excluding special items, Alon recorded net loss available to stockholders of $(44.2) million, or $(0.63) per share, for the first half of 2016, compared to net income available to stockholders of $68.0 million, or $0.98 per share, for the same period last year.

Paul Eisman, President and CEO, commented, “The refining environment in the second quarter of 2016 remained challenging as crack spreads were pressured by high product inventories. The average Gulf Coast 3-2-1 benchmark crack spread for the second quarter of 2016 was approximately $6.50 per barrel lower than the average for the same period last year. We continue to optimize our operations and control our costs in this difficult environment.

“As previously discussed, the Big Spring refinery’s second quarter results were negatively impacted by a power outage in late May. We estimate the lost opportunity cost and maintenance cost associated with the power outage negatively impacted Alon’s operating income by approximately $10 million. Big Spring’s refinery operating margin of $8.53 per barrel was negatively impacted by approximately $1.30 per barrel due to the unplanned downtime during the quarter. Despite the interruption to normal operations, the refinery achieved low operating costs of $3.59 per barrel. We expect to perform maintenance on the Big Spring refinery’s reformer in August. As a result, we expect total throughput at the Big Spring refinery to average approximately 69,000 barrels per day for the third quarter and 70,000 barrels per day for the full year of 2016.

“The Krotz Springs refinery’s results were negatively impacted by weakness in crack spreads, a larger premium in LLS crude relative to Brent crude and maintenance performed on the fluid catalytic cracking unit in the first half of April, which was previously discussed. We estimate the downtime associated with this maintenance work negatively impacted Krotz Springs’ refinery operating margin by approximately $0.86 per barrel and Alon’s operating income by approximately $5 million. Based on the projected margin environment, we expect total throughput at the Krotz Springs refinery to average approximately 63,000 barrels per day for the third quarter and 66,000 barrels per day for the full year of 2016.

“Our asphalt business performed very well in the second quarter with the onset of paving season. Relative to the second quarter of 2015, our asphalt sales volumes were up 43 percent, and our asphalt margin was up by 6 percent to $107 per ton. This business is benefiting from a stronger demand environment, as well as operational improvements implemented over recent quarters.

“Our retail results were negatively impacted by headwinds in the Permian Basin. However, we believe we are positioned well to benefit as the markets in which we operate improve and are expecting greater profitability in the second half of the year.

“The results of the AltAir renewable fuels project in California were negatively impacted by an increase in the price of feedstock costs (tallow) relative to the first quarter of 2016. A test run of soybean oil was successfully completed in late June, validating the feedstock flexibility of the unit.”

SECOND QUARTER 2016

Special items increased net loss by $5.5 million for the second quarter of 2016 primarily as a result of employee retention expense of $2.0 million, losses of $2.0 million associated with an asphalt inventory adjustment and unrealized losses of $3.8 million associated with commodity swaps, before income tax and non-controlling interest impacts of $2.4 million. Special items reduced net income by $9.9 million for the second quarter of 2015 primarily as a result of employee retention expense of $1.3 million, losses of $3.3 million related to an asphalt inventory adjustment and unrealized losses of $10.5 million associated with commodity swaps, before income tax and non-controlling interest impacts of $5.2 million.

The combined total refinery average throughput for the second quarter of 2016 was 133,413 barrels per day (“bpd”), consisting of 71,153 bpd at the Big Spring refinery and 62,260 bpd at the Krotz Springs refinery, compared to a combined total refinery average throughput of 152,092 bpd for the second quarter of 2015, consisting of 75,491 bpd at the Big Spring refinery and 76,601 bpd at the Krotz Springs refinery. The reduced throughput at our Big Spring refinery was the result of unplanned downtime during the second quarter of 2016 due to a power outage caused by inclement weather, which affected multiple units. During the second quarter of 2016, we performed maintenance on the fluid catalytic cracking unit at the Krotz Springs refinery, which reduced total throughput for the quarter.

Refinery operating margin at the Big Spring refinery was $8.53 per barrel for the second quarter of 2016 compared to $17.22 per barrel for the same period in 2015. This decrease in operating margin was primarily due to a lower Gulf Coast 3/2/1 crack spread, a narrowing of the WTI Cushing to WTI Midland spread, a reduced cost of crude benefit from the contango market in 2016 and the unplanned refinery downtime discussed above, partially offset by a widening of the WTI Cushing to WTS spread.

Refinery operating margin at the Krotz Springs refinery was $3.96 per barrel for the second quarter of 2016 compared to $7.95 per barrel for the same period in 2015. This decrease in operating margin was primarily due to a lower Gulf Coast 2/1/1 high sulfur diesel crack spread, a narrowing of both the WTI Cushing to WTI Midland and the LLS to WTI Cushing spreads, the premium in LLS compared to Brent, the refinery downtime discussed above and a reduced cost of crude benefit from the contango market in 2016.

The average Gulf Coast 3/2/1 crack spread was $13.16 per barrel for the second quarter of 2016 compared to $19.71 per barrel for the same period in 2015. The average Gulf Coast 2/1/1 high sulfur diesel crack spread was $7.92 per barrel for the second quarter of 2016 compared to $10.21 per barrel for the same period in 2015.

The average WTI Cushing to WTI Midland spread for the second quarter of 2016 was $0.17 per barrel compared to $0.60 per barrel for the same period in 2015. The average WTI Cushing to WTS spread for the second quarter of 2016 was $0.75 per barrel compared to $(0.21) per barrel for the same period in 2015. The average Brent to WTI Cushing spread for the second quarter of 2016 was $(0.18) per barrel compared to $3.66 per barrel for the same period in 2015. The average LLS to WTI Cushing spread for the second quarter of 2016 was $2.04 per barrel compared to $6.28 per barrel for the same period in 2015. The average Brent to LLS spread for the second quarter of 2016 was $(1.64) per barrel compared to $0.32 per barrel for the same period in 2015.

The contango environment in the second quarter of 2016 created an average cost of crude benefit of $1.49 per barrel compared to an average cost of crude benefit of $1.90 per barrel for the same period in 2015.

Asphalt margins for the second quarter of 2016 were $106.90 per ton compared to $100.92 per ton for the same period in 2015. On a cash basis (i.e., excluding inventory effects), asphalt margins in the second quarter of 2016 were $105.55 per ton compared to $99.51 per ton in the second quarter of 2015.

Retail fuel margins increased to 20.8 cents per gallon in the second quarter of 2016 from 20.3 cents per gallon in the second quarter of 2015. Retail fuel sales volume increased to 50.9 million gallons in the second quarter of 2016 from 49.5 million gallons in the second quarter of 2015. Merchandise margins decreased to 31.0% in the second quarter of 2016 from 31.8% in the second quarter of 2015. Merchandise sales decreased to $83.7 million in the second quarter of 2016 from $84.9 million in the second quarter of 2015.

YEAR-TO-DATE 2016

Special items increased net loss by $11.8 million for the first half of 2016 primarily as a result of employee retention expenses of $6.7 million, losses of $2.0 million related to an asphalt inventory adjustment, unrealized losses of $7.1 million associated with commodity swaps and $2.1 million associated with losses recognized on disposition of assets, before income tax and non-controlling interest impacts of $6.2 million. Special items reduced net income by $4.6 million for the first half of 2015 primarily as a result of employee retention expense of $1.3 million and losses of $14.0 million related to an asphalt inventory adjustment, partially offset by unrealized gains of $7.9 million associated with commodity swaps and $0.6 million associated with gains recognized on disposition of assets, before income tax and non-controlling interest impacts of $2.1 million.

The combined total refinery average throughput for the first half of 2016 was 136,206 bpd, consisting of 69,345 bpd at the Big Spring refinery and 66,861 bpd at the Krotz Springs refinery, compared to a combined total refinery average throughput of 148,679 bpd for the first half of 2015, consisting of 73,934 bpd at the Big Spring refinery and 74,745 bpd at the Krotz Springs refinery. The reduced throughput at our Big Spring refinery was the result of planned downtime to complete a reformer regeneration and catalyst replacement for our diesel hydrotreater unit in the beginning of the first quarter of 2016, as well as unplanned downtime during the second quarter of 2016 due to a power outage caused by inclement weather, which affected multiple units. The reduced throughput at the Krotz Springs refinery during the six months ended June 30, 2016 was the result of our election to reduce the crude rate to improve the refinery yield structure, as well as maintenance that was performed on the fluid catalytic cracking unit.

Refinery operating margin at the Big Spring refinery was $8.16 per barrel for the first half of 2016 compared to $15.56 per barrel for the same period in 2015. This decrease in operating margin was primarily due to a lower Gulf Coast 3/2/1 crack spread, a narrowing of both the WTI Cushing to WTI Midland and the WTI Cushing to WTS spreads and the refinery downtime discussed above, partially offset by the cost of crude benefit from the market moving further into contango in 2016.

Refinery operating margin at the Krotz Springs refinery was $2.69 per barrel for the first half of 2016 compared to $8.71 per barrel for the same period in 2015. This decrease in operating margin was primarily due to a lower Gulf Coast 2/1/1 high sulfur diesel crack spread, a narrowing of both the WTI Cushing to WTI Midland and the LLS to WTI Cushing spreads, the premium in LLS compared to Brent and the refinery downtime discussed above, partially offset by the cost of crude benefit from the market moving further into contango in 2016.

The average Gulf Coast 3/2/1 crack spread for the first half of 2016 was $12.20 per barrel compared to $18.73 per barrel for the same period in 2015. The average Gulf Coast 2/1/1 high sulfur diesel crack spread for the first half of 2016 was $7.33 per barrel compared to $11.79 per barrel for the same period in 2015.

The average WTI Cushing to WTI Midland spread for the first half of 2016 was $0.02 per barrel compared to $1.27 per barrel for the same period in 2015. The average WTI Cushing to WTS spread for the first half of 2016 was $0.32 per barrel compared to $0.76 per barrel for the same period in 2015. The average Brent to WTI Cushing spread for the first half of 2016 was $0.15 per barrel compared to $4.54 per barrel for the same period in 2015. The average LLS to WTI Cushing spread for the first half of 2016 was $1.82 per barrel compared to $4.48 per barrel for the same period in 2015. The average Brent to LLS spread for the first half of 2016 was $(1.26) per barrel compared to $0.57 per barrel for the same period in 2015.

The contango environment in the first half of 2016 created an average cost of crude benefit of $1.66 per barrel compared to an average cost of crude benefit of $1.28 per barrel for the same period in 2015.

Asphalt margins for the first half of 2016 were $97.96 per ton compared to $94.41 per ton for same period in 2015. On a cash basis (i.e., excluding inventory effects), asphalt margins in the first half of 2016 were $99.87 per ton compared to $105.77 per ton in the first half of 2015.

Retail fuel margins decreased to 20.4 cents per gallon in the first half of 2016 from 21.9 cents per gallon in the first half of 2015. Retail fuel sales volume increased to 100.9 million gallons in the first half of 2016 from 95.6 million gallons in the first half of 2015. Merchandise margins decreased to 31.3% in the first half of 2016 from 32.5% in the first half of 2015. Merchandise sales increased to $161.5 million in the first half of 2016 from $161.0 million in the first half of 2015.

Alon also announced today that its Board of Directors has declared the regular quarterly cash dividend of $0.15 per share. The dividend is payable on September 6, 2016 to stockholders of record at the close of business on August 19, 2016.

CONFERENCE CALL

Alon has scheduled a conference call, which will be broadcast live over the Internet on Friday, July 29, 2016, at 10:30 a.m. Eastern Time (9:30 a.m. Central Time), to discuss the second quarter 2016 financial results. To access the call, please dial 877-407-0672, or 412-902-0003 for international callers, and ask for the Alon USA Energy call at least 10 minutes prior to the start time. Investors may also listen to the conference live by logging on to the Alon investor relations website, http://ir.alonusa.com. A telephonic replay of the conference call will be available through August 12, 2016 and may be accessed by calling 877-660-6853, or 201-612-7415 for international callers, and using the passcode 13640012#. A webcast archive will also be available at http://ir.alonusa.com shortly after the call and will be accessible for approximately 90 days. For more information, please contact Donna Washburn at Dennard § Lascar Associates at 713-529-6600 or email dwashburn@dennardlascar.com.

Alon USA Energy, Inc., headquartered in Dallas, Texas, is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. Alon owns 100% of the general partner and 81.6% of the limited partner interests in Alon USA Partners, LP (NYSE: ALDW), which owns a crude oil refinery in Big Spring, Texas, with a crude oil throughput capacity of 73,000 barrels per day and an integrated wholesale marketing business. In addition, Alon directly owns a crude oil refinery in Krotz Springs, Louisiana, with a crude oil throughput capacity of 74,000 barrels per day. Alon also owns crude oil refineries in California, which have not processed crude oil since 2012. Alon is a leading marketer of asphalt, which it distributes primarily through asphalt terminals located predominately in the Southwestern and Western United States. Alon is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores which also market motor fuels in Central and West Texas and New Mexico.

Any statements in this press release that are not statements of historical fact are forward-looking statements. Forward-looking statements reflect our current expectations regarding future events, results or outcomes. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, our business and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in our expectations not being realized or otherwise materially affect our financial condition, results of operations and cash flows. Additional information regarding these and other risks is contained in our filings with the Securities and Exchange Commission.

This press release does not constitute an offer to sell or the solicitation of offers to buy any security and shall not constitute an offer, solicitation or sale of any security in any jurisdiction in which such offer, solicitation or sale would be unlawful.

 

 

 

 

 

 

 

SOURCE Alon USA Energy, Inc.

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