Western Refining Beats Street on Refining Margins

Western Refining Inc reported a better-than-expected adjusted quarterly profit on Thursday as lower crude oil prices helped improve refining margins.

Growing output from the Permian Basin in Texas and New Mexico, where Western's refineries are located, has combined with inadequate pipeline infrastructure to create a glut and suppress crude prices in the region, boosting the company's refining margins.

Western profits on the difference between the cheap crude it buys from the Permian and the refined products it sells at prices linked to the crude benchmark at Cushing, Oklahoma.

The gap between the price for West Texas Intermediate crude at Midland in the Permian and the U.S. benchmark price at the pipeline hub in Cushing <WTC-WTM> averaged $3.13 per barrel in the fourth quarter, higher than $2.46 a year ago.

Western said gross margins rose to $22.13 per barrel in the fourth quarter ended Dec. 31, from $7.99 a year earlier.

The company reported a profit of $130.9 million, or $1.33 per share, in the quarter, compared with a loss of $7.3 million, or 9 cents per share.

Excluding items, Western earned $1.19 per share, above the average analyst estimate of 98 cents, according to Thomson Reuters I/B/E/S.

Net sales were flat at $3.02 billion, slightly below analysts' average estimate of $3.08 billion.

Western also recorded a $78.6 million charge in the quarter related to the value of its inventory, mirroring the $244 million charge recorded by peer HollyFrontier Corp on Wednesday.

Western Refining's shares closed at $43.64 on the New York Stock Exchange on Wednesday. The stock has risen about 13 percent in the past 12 months. (Reporting by Narottam Medhora