Oil Refiner HollyFrontier Comes Up Short

Oil refinery
Oil refinery

HollyFrontier Corp. (NYSE: HFC) reported fourth-quarter and full-year 2012 results before markets opened this morning.

The oil refiner posted quarterly EPS of $1.92 on revenues of $5.15 billion. In the same period a year ago, HollyFrontier reported EPS of $1.06 on revenues of $4.97 billion. Fourth-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $2.26 and $4.93 billion in revenue.

For the full year, EPS totaled $8.38, slightly off the consensus estimate of $8.57, and revenues totaled $20.09 billion, versus an estimate of $19.32 billion.

The company noted that fourth-quarter EPS was lowered by $0.11 due to after-tax charges related to environmental accruals and a "partial write-off of a previously capitalized project."

The company's CEO said:

For the fourth quarter, strength in inland to coastal crude oil differentials continued to contribute to attractive refined product margins, particularly considering the effects of lower seasonal demand that have historically yielded tighter margins. Looking to 2013, we believe that the structural crude advantages currently driving our operating margins will positively impact our operating income, allowing us to continue to pay both regular and special dividends.

HollyFrontier benefited from an average gross margin of $22.25 a barrel at its Rocky Mountain refineries and margins of $22.65 a barrel and $28.71 a barrel at its Midwest and Southwest refineries, respectively. Every one of those numbers is at least $4 a barrel higher than the same quarter a year ago. The company's consolidated gross margin rose from $15.32 a barrel in the fourth quarter of 2011 to $17.71 a barrel in 2012.

How could HollyFrontier miss its numbers? The company admits that lower crude oil charges in the quarter were the result of "a combination of unplanned downtime and turnaround activity extending longer than planned." Costs are rising also, from an average of $5.22 a barrel in the fourth quarter a year ago to $6.29 a barrel in 2012, but that is partly a function of the downtime.

Shares are down about 2% in premarket trading this morning, at $54.50 in a 52-week range of $28.05 to $57.07. Thomson Reuters had a consensus analyst price target of $56.50 before today's results were announced.

Filed under: 24/7 Wall St. Wire, Earnings, Oil & Gas Tagged: HFC