Energia
Andeavor Reports First Quarter 2018 Results
- Andeavor (NYSE: ANDV) today reported first quarter earnings of $164 million, or $1.07 per diluted share, compared to $50 million, or $0.42 per diluted share a year ago. Consolidated net earnings were $237 million for the first quarter 2018 compared to $87 million for the same period last year. EBITDA for the first quarter 2018 was $680 million compared to $432 million last year.
First quarter 2018 results included the following pre-tax items: $19 million of acquisition and integration costs primarily related to the Western Refining acquisition and approximately $100 million net benefit primarily related to a reduction in the RINs obligation from prior years. First quarter 2017 results included $16 million of acquisition costs.
"We continue to make excellent progress executing the growth plans we communicated at our December Investor and Analyst Day. We have raised our 2020 Andeavor Logistics' growth target to $965 million of net earnings and EBITDA by $150 million to over $1.6 billion as a result of our recently announced acquisitions and strategic projects in the Permian Basin," said Greg Goff, Chairman and CEO. "Our integrated business model allowed us to deliver strong results despite lower than normal crack spreads on the West Coast early in the first quarter. Looking ahead, crude oil differentials and refining crack spreads have improved significantly, and we see continued growth in demand and the refining margin environment across our entire business, which should benefit the second quarter and full year."
(a) Referred to in the body of this press release as "earnings."
Marketing segment operating income was $128 million and segment EBITDA was $152 million in the first quarter 2018. This compares to segment operating income of $133 million and segment EBITDA of $146 million last year. Overall fuel margins for the first quarter 2018 were 9.1 cents per gallon compared to 9.6 cents per gallon last year, and Retail and Branded fuel margins were 16.2 cents per gallon compared to 17.4 cents per gallon in 2017. Marketing margins were lower as a result of the lag in street prices increasing relative to the rapidly rising spot market prices during the quarter.
For the first quarter, merchandise margin increased to $50 million from $3 million in 2017 primarily due to the Western Refining acquisition and the conversion of MSO sites (multi-site operators) to company owned sites, which allow for the capture of non-fuel margin. Andeavor continued to grow its network of retail and branded stations, increasing by 787 stations, or 31% year-over-year, to 3,300. This was primarily driven by the Western acquisition, the acquisition of retail stations completed in Northern California in July 2017, and the continued execution of the Company's organic growth plan, including rebranding and expansion into Mexico. Andeavor has 57 branded stations and 25 unbranded stations in Mexico as of April 30, 2018.
Logistics segment operating income increased to $188 million in the first quarter 2018 from $150 million a year ago and segment EBITDA increased to $271 million from $212 million last year. The increase in segment operating income and segment EBITDA was primarily driven by contributions from the Western Refining Logistics acquisition and the 2017 drop down as well as organic growth.
Refining segment operating income was $205 million for the first quarter 2018 compared to $34 million in 2017. Segment EBITDA was $387 million compared to $181 million in 2017. Refining margin was $1.0 billion, or $10.85 per barrel, for the first quarter 2018. This compares to a refining margin of $701 million, or $9.44 per barrel, in the first quarter 2017. Refining Inland regional results included a net, pre-tax benefit of approximately $100 million primarily related to a reduction in the RINs obligation for the 2016 and 2017 compliance periods for some of the Company's Inland refineries. Refining utilization was 90% for the first quarter 2018 compared to 92% for 2017 due to the Company's planned turnarounds at the Los Angeles and Martinez refineries during the quarter. These turnarounds were executed successfully and the refineries are back to normal operations.
Corporate and unallocated costs for the first quarter 2018 were $151 million and included $19 million of acquisition and integration costs primarily related to the Western Refining acquisition. Net interest expense was $102 million in the first quarter 2018. The effective tax rate for the first quarter was 20%.
Andeavor ended the quarter with $433 million in cash and cash equivalents, down from $543 million at the end of 2017. Andeavor currently has approximately $2.2 billion of availability under its revolving credit facility. Total debt, net of unamortized issuance costs, was $8.7 billion at the end of the first quarter. Excluding Andeavor Logistics, total debt was $4.6 billion.
Capital spending for the first quarter 2018 was $420 million, consisting of $337 million for Andeavor and $83 million for Andeavor Logistics. Turnaround expenditures for the first quarter were $203 million.
Andeavor repurchased 2.6 million shares for approximately $256 million in the first quarter. The Company paid cash dividends of $92 million in the first quarter. Additionally, Andeavor today announced that the board of directors has declared a quarterly cash dividend of $0.59 per share payable on June 15, 2018 to all holders of record as of May 31, 2018.
On April 30, 2018, Andeavor and Marathon Petroleum Corp. (NYSE: MPC) ("Marathon") announced they have entered into a definitive merger agreement under which Marathon will acquire all of Andeavor's outstanding shares. This transaction is expected to create a premier U.S. refining, marketing and midstream company, building a platform that is well-positioned for long-term growth and shareholder value creation. This transaction is expected to close in the second half of 2018 and is subject to customary closing conditions, including approval by the shareholders of both companies and the receipt of regulatory approval.
Andeavor continued to deliver on its commitment of an expected $350 to $425 million in annual run-rate synergies by June 2019. Through the first quarter 2018, Andeavor has achieved approximately $250 million in annual run-rate synergies, including $120 million in corporate efficiencies and the $130 million in value chain optimization, marketing, operational and other improvements.
On April 24, 2018, Andeavor announced participation in two new joint ventures that support the transportation of crude oil from the Permian Basin to Corpus Christi, Texas with connection to the South Texas Gateway Terminal, a marine terminal under development. Gray Oak Pipeline, LLC is expected to be placed in service by the end of the fourth quarter 2019, while the South Texas Gateway Terminal is expected to begin operations by the end of 2019.
The combined system will position Andeavor to supply crude oil from its Delaware Basin gathering and storage systems, which further strengthens Andeavor's platform and enhances its commercial capability in the region, allowing Andeavor and its customers to access multiple markets on the U.S. Gulf Coast as well as other markets through the South Texas Gateway Terminal.
Andeavor announced today that it expects to offer assets totaling $1.6 to $1.7 billion to Andeavor Logistics. The assets are comprised of Permian and refining logistics assets, the Conan Crude Oil Gathering System, and the Los Angeles Refinery Interconnect Pipeline.
Accomplishing the drop down in 2018 is expected to allow for more efficient operational management of the assets, increase growth visibility, enable Andeavor Logistics to benefit from the Company's Permian growth plans and maintain reporting transparency as changes in lease accounting standards become effective in 2019.
Andeavor intends to close on the acquisition of West Coast asphalt terminals of Delek US Holdings, Inc. (NYSE: DK) in the second quarter 2018. Andeavor expects to grow its asphalt business to serve more customers, provide superior customer service and expand the product offering. The Company expects to improve the business and increase sales by approximately 20% over the next three years.
In lieu of its previously scheduled conference call, Andeavor provided a pre-recorded webcast hosted by Greg Goff and Steven Sterin regarding first quarter 2018 results and other business matters. Interested parties may listen to the webcast by logging on to
http://www.andeavor.com .
Andeavor is a premier, highly integrated marketing, logistics and refining company. Andeavor's retail-marketing system includes approximately 3,300 stations marketed under multiple well-known fuel brands, including ARCO , SUPERAMERICA , Shell , Exxon , Mobil , Tesoro , USA Gasoline and Giant . It also has ownership in Andeavor Logistics LP (NYSE: ANDX) and its non-economic general partner. Andeavor operates 10 refineries with a combined capacity of approximately 1.2 million barrels per day in the mid-continent and western United States.
Contact:
Investors:
Brad Troutman, Investor Relations, (210) 626-4568
Media:
Andeavor Media Relations, media@andeavor.com, (210) 626-7702
Our management uses certain "non-GAAP" performance measures to analyze operating segment performance and "non-GAAP" financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:
We present these measures because we believe they may help investors, analysts, lenders and ratings agencies analyze our results of operations and liquidity in conjunction with our U.S. GAAP results, including but not limited to:
Management also uses these measures to assess internal performance. Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. See "Non-GAAP Reconciliations" below for reconciliations between non-GAAP measures and their most directly comparable U.S. GAAP measures.
On June 1, 2017, we closed the Western Refining Acquisition. Our results include the operations from Western Refining for the three months ended March 31, 2018 and thus the prior period may not be comparable. With the Western Refining Acquisition, our Marketing segment reflects our expanded marketing business that consists of expanded wholesale marketing operations and retail stores marketed under multiple well-known fuel brands. Our Logistics segment includes the results of Andeavor Logistics, excluding its wholesale business, and acquired logistics assets. Our Refining segment reports the results of our refining system that consists of ten refineries.
(a) Represents market value of 127,889,386 common units held by Andeavor at both March 31, 2018 and December 31, 2017. The market values were $44.81 and $46.19 per unit based on the closing unit price at March 31, 2018 and December 31, 2017, respectively.
(b) Represents distributions received from Andeavor Logistics during the three months ended March 31, 2018 and 2017 on common units and general partner units held by Andeavor.
(c) Management uses fuel margin and fuel margin per gallon to compare fuel results and merchandise margin and merchandise margin percentage to compare retail results to other companies in the industry. There are a variety of ways to calculate fuel margin, fuel margin per gallon, merchandise margin and merchandise margin percentage. Different companies may calculate these measures in different ways. Refer to "Non-GAAP Measures" and "Non-GAAP Reconciliations" for further information regarding these non-GAAP measures. Fuel margin and fuel margin per gallon include the effect of intersegment purchases from the Refining segment.
(d) Included in our Refining segment's cost of materials and other were Logistics segment revenues for services provided to our Refining segment of $309 million and $203 million for the three months ended March 31, 2018 and 2017, respectively. These amounts are eliminated upon consolidation.
(e) The Logistics segment had 26.7 Mbpd and 21.1 Mbpd of gross natural gas liquids ("NGL") sales under percent of proceeds ("POP") and keep-whole arrangements for the three months ended March 31, 2018 and 2017,respectively, of which the Logistics segment retained 11.8 Mbpd and 7.4 Mbpd, respectively. The difference between gross sales barrels and barrels retained is reflected in NGL expense resulting from the gross presentation required for the POP arrangements associated with the North Dakota Gathering and Processing Assets.
(f) Included in NGL expense for the three months ended March 31, 2017 were approximately $2 million of crude costs related to crude oil volumes obtained in connection with the North Dakota Gathering and Processing Assets acquisition. The corresponding revenues were recognized in pass-thru and other revenue. As such, the calculation of the average margin on NGL sales per barrel for the three months ended March 31, 2017 excludes this amount.
(g) Our Logistics segment operating expenses and general and administrative expenses include amounts billed by Andeavor for services provided to Andeavor Logistics under various operational contracts. Amounts billed by Andeavor included in operating expenses totaled $51 million and $39 million for the three months ended March 31, 2018 and 2017, respectively. The net amounts billed include reimbursements of $7 million and $2 million for the three months ended March 31, 2018 and 2017, respectively. Amounts billed by Andeavor included in general and administrative expenses totaled $20 million for both the three months ended March 31, 2018 and 2017. All of these amounts are eliminated upon consolidation. Those expenses with third-parties related to the transportation of crude oil and refined products related to Andeavor's sale of those refined products during the ordinary course of business are reclassified to cost of materials and other in our statements of consolidated operations upon consolidation.
(h) Our Logistics segment uses average margin per barrel, average revenue per MMBtu and average revenue per barrel to evaluate performance and compare profitability to other companies in the industry. Refer to "Non-GAAP Measures" and "Non-GAAP Reconciliations" for further information regarding these non-GAAP measures.
There are a variety of ways to calculate these measures; other companies may calculate these in a different way.
(i) Volumes represent barrels sold under Logistics' keep-whole arrangements, net barrels retained under its POP arrangements and other associated products.
(j) Refined product sales include intersegment sales to our Marketing segment of $5.2 billion and $3.7 billion for the three months ended March 31, 2018 and 2017, respectively.
(k) Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including refining margin, refining margin per throughput barrel and manufacturing costs before depreciation and amortization expenses per throughput barrel. Refer to "Non-GAAP Measures" and "Non-GAAP Reconciliations" for further information regarding these non-GAAP measures.
(l) Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. Total refined product sales include sales of manufactured and purchased refined products. Refined product sales include all sales through our Marketing segment as well as in bulk markets and exports through our Refining segment.
(m) Amounts may not recalculate due to rounding of dollar and volume information.
(n) Shown net of unamortized issuance costs.
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