Holly Reports Bigger-Than-Expected First Quarter Loss

Holly Corp. (HOC) swung to a first-quarter loss that was bigger than analysts expected due to poor refining margins as it continued to integrated two Tulsa, Okla., plants acquired last year.

The U.S. refining industry has been squeezed by tough economic conditions over the past year as oil prices more than doubled while demand for refined products, which fell sharply during the recession, remains weak. As a niche refiner, Holly has been somewhat sheltered by deteriorating conditions and could see margins improve ahead of the peers that are located in more competitive regions.

"Although we are disappointed with the loss for this quarter, we are cautiously optimistic about the remainder of 2010 as the margin environment has shown significant improvement heading into the summer," said Holly Chairman and Chief Executive Matthew Clifton.

The company posted a first-quarter loss of $28.1 million, or 53 cents, a share on revenues of $1.87 billion, down from a profit of $21.9 million, or 44 cents a share, on $650.8 million in revenues. Analysts had expected a loss of 47 cents a share on revenue of $1.69 billion.

"General weak demand for gasoline and distillate products combined with increased crude costs led to the 2010 first quarter loss," said Clifton. "However, overall refinery margins compared somewhat favorably to the 2009 fourth quarter due to improvements late in the first quarter."

Gross refinery margins were 43% lower at $5.56 a barrel during the quarter. Production prose 151% to 217,000 a barrel due to the recently acquired Tulsa facilities and higher throughput at its other refineries.

The company's total crude-processing capacity is 256,000 barrels a day at three refining facilities located in Artesia, New Mexico, Woods Cross, Utah, and Tulsa.

The New Mexico refinery's net operating margin per barrel was a loss of 8 cents, down from a profit of $6.28 during the first quarter of 2009.

Meanwhile, the Tulsa refinery generated a net operating margin loss of $2.58 a barrel. Last June Holly acquired an 85,000-barrel-a-day refinery in Tulsa with 3.2 million barrels of storage assets from Sunoco Inc. (SUN) and then bought a 75,000-barrel-a-day plant nearby from Sinclair Oil Corp. in December. It has been in the process of integrating the two plants.

Shares fell 3.5% to $24.64.

While he expected the stock to fall on the disappointing earnings report, RBC Capital Markets managing director Jacques Rousseau remains "confident that the company will be able to integrate the 2 refineries it purchased last year in Tulsa, and turn a profit in the coming quarters."

Naureen S. Malik, Dow Jones Newswires; 212-416-4210; naureen.malik@dowjones.com

Holly (NYSE:HOC)
Graphique Historique de l'Action
De Juin 2024 à Juil 2024