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Thursday, Feb. 28, 2008
Western Refining Reports Fourth Quarter and Record Full Year 2007 Financial Results
EL PASO, Texas — Western Refining, Inc. (NYSE:WNR) today reported net earnings of $238.6 million or $3.53 per diluted share for the full year of 2007, versus net earnings of $204.8 million or $3.11 per diluted share for 2006. This is the second consecutive year that Western has reported record earnings. The increased earnings were primarily the result of higher refinery gross margins and increased refinery throughput.
The Company reported a net loss of $25.5 million, or $0.38 per diluted share, for the quarter ended December 31, 2007. For the same period in 2006, the Company had net income of $50.9 million, or $0.76 per diluted share. Performance in the quarter was adversely impacted by rising crude oil prices throughout the quarter. This increase in feedstock costs, coupled with softness in finished product prices, particularly gasoline and lower valued products such as asphalt, resulted in lower refining margins. Higher operating expenses also impacted earnings in the quarter.
“We are very pleased to have achieved a new record high in annual earnings for Western, despite the significant volatility in crude oil and finished product prices that impacted the industry throughout the year. During 2007, our El Paso refinery continued to have strong operating performance with total throughput increasing for the fifth consecutive year to its current level of approximately 134,000 barrels per day,” said Paul Foster, Western’s President and Chief Executive Officer.
“We have taken a number of actions to improve the Yorktown and Gallup refineries so that the safety and reliability at those facilities are more consistent with our El Paso refinery. We have also implemented numerous operational changes at the former Giant refineries that will lead to improved performance.”
Actions taken to improve performance at these facilities include:
— Improved Coker operations at Yorktown to 21,000 barrels per day, an increase of about 17% over historical operations. Improving the utilization of the coker will allow for additional processing of heavier crudes;
— Renegotiated and/or terminated higher-cost feedstock agreements. For example, in early 2007, Giant entered into a fixed price ethanol supply agreement for all three of its refineries. This contract was recently terminated and we estimate, based upon ethanol spot market prices in the fourth quarter, that we will reduce ethanol costs by approximately $7.0 million per year at these facilities;
— Hired new refinery managers for both Yorktown and Gallup; and
— Transferred maintenance and engineering personnel to Yorktown and Gallup from the El Paso facility.
Foster continued, “As a result of the performance improvement initiatives implemented throughout the second half of the year, the Yorktown refinery is currently operating at approximately 70,000 barrels per day, an increase in capacity of approximately 8,000 barrels per day or about 13% from historical operations. In addition, operations at the Four Corners refineries demonstrated combined crude oil throughput capacity in excess of 40,000 barrels per day in the fourth quarter.”
In 2008, Western will continue to focus on operational enhancements and financial improvements. In particular, Western plans to:
— Complete the DuPont SAR project at the El Paso refinery in the first quarter. Processing of acid gas has begun, and Western will begin raising sour crude runs from approximately 10% to 20% of crude throughput at the refinery in the near future;
— Complete the low sulfur gasoline project at the Yorktown refinery in the first quarter. This project is expected to result in several financial benefits including: (1) reduced freight costs, as Western markets additional low sulfur gasoline in local markets and over the refinery rack; (2) increased opportunity to purchase discounted high sulfur gasoline and upgrade to low sulfur gasoline due to the unit’s significant size; and (3) the ability to process additional lower cost crude oil;
— Continue the low sulfur gasoline project at the El Paso refinery. Completion of this project is anticipated in the second quarter of 2009, at which time Western will have the ability to raise sour crude runs up to 50% of crude oil throughput at the refinery;
— Continue working on a number of initiatives at all four refineries, targeted at reducing processing costs and improving energy efficiency; and
— Implement reductions in corporate overhead that will result in annual savings of approximately $15 million compared to the 2007 combined level.
Commenting on current market conditions, Foster said, “While refining margins remained seasonably weak throughout the month of January, we saw improvements in February, and are expecting to see even further improvement in the month of March as we move into the driving season.”
“The integration of the Giant assets is proceeding as planned. In the second half of 2007, we spent a significant amount of time and money at the refineries improving their safety and reliability. We believe that we have made wise investments in the future of these assets and that we are well positioned to begin reaping the benefits of our work at these facilities. Additionally, the integration of the wholesale and retail units with the overall operations of Western is proceeding nicely.”
Conference Call Information
A conference call is scheduled for February 28, 2008, at 11:00 a.m. ET to discuss Western’s financial results. The call can be accessed at Western’s website, http://www.wnr.com. The call can also be heard by dialing (888) 713-4199, passcode: 57803474. The audio replay will be available through March 13, 2008, and can be accessed by dialing (888) 286-8010, passcode: 94359580.
A copy of this press release, together with the reconciliations of certain non-GAAP financial measures contained herein, can be accessed on the investor relations menu on Western’s website, http://www.wnr.com. -
FYI – Western Refining Report 4Q07 results. THe Yorktown coker is @ 21 MBD a 17% increase over historical, Contract Ethanol canceled all 3 Western refineries & new ones will decrease cost $7 MM/year. Refinery charge improvements & increase @ Yorktown & El Paso lead additional sour crude processing by 2009.
Regards
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