Delek US Holdings, Inc. has announced financial results for its second quarter ended 30 June 2016. Delek US reported a second quarter net loss of US$(7.0) million, or US$(0.11) per basic share, versus net income of US$48.3 million, or US$0.79 per diluted share, for the quarter ended 30 June 2015. On an adjusted basis, Delek US reported a net loss of US$(5.1) million, or US$(0.08) per basic share for the quarter ended 30 June 2016, compared to net income of US$37.8 million, or US$0.62 per diluted share on an adjusted basis in the prior year period. Reconciliations of GAAP earnings to adjusted earnings are included in the financial tables attached to this release.
On a year-over-year basis, results in the second quarter of 2016 benefited from improved performance in retail and logistics, as well as lower operating and overhead expenses. The decline in expenses was primarily due to improved reliability and a combination of lower variable costs, outside services, employee expenses and maintenance, partially driven by cost reduction programmes implemented throughout the company. These benefits were more than offset by a 47% decline in the WTI Gulf Coast 5-3-2 crack spread, and a narrowing of the Midland WTI crude oil discount to Cushing WTI.
In May 2015, Delek US acquired 48% of the outstanding stock of Alon USA. The loss from the equity investment in Alon USA of US$(10.4) million and associated interest costs of US$3.8 million related to the financing of this investment lowered results by approximately US$0.15 per basic share after tax in the second quarter of 2016. Excluding the effect of this investment, Delek US' underlying assets would have earned US$0.04 per share on a reported basis and US$0.07 per share on an adjusted basis. For purposes of after-tax calculations, a marginal income tax rate of 35% was used related to the effect from the investment in Alon USA.
Uzi Yemin, Chairman, President and Chief Executive Officer of Delek US stated, "During the second quarter, our initiatives to improve the factors under our control began to provide results. Programmes to reduce costs were factors in lower operating expenses and G&A expenses on a year-over-year basis. We also achieved an operating expense per barrel of US$3.41 in our refining system in the second quarter of 2016. In addition our capture rates based on adjusted refining margin improved at both refineries on a sequential basis compared to first quarter of 2016. Finally, both the logistics and retail segment contribution margins improved on a year-over-year basis as well."
Yemin concluded, "We ended the quarter with US$377.1 million of cash, which is an improvement from our 31 March 2016 cash balance of US$350.0 million. By reducing costs, managing our capital spending programmes and benefiting from cash inflows from tax refunds we lowered our net debt position on a sequential basis by approximately US$48.0 million. Efforts are underway to unlock the value of our retail segment and we remain focused on creating long term value for our shareholders as we continue to explore strategic opportunities."
Adapted from press release by Rosalie Starling
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