Delek US Holdings, Inc. reported 4Q14 net income of US$37.5 million, or US$0.64 per diluted share, versus a net loss of US$(4.7) million, or US$(0.08)per basic share, in the quarter ended 31 December 2013.
Operating income for 4Q14 benefited from US$60.9 million of net hedging gains, of which US$42.6 million were realised. Those gains partially offset US$72.9 million of higher cost related to inventory adjustments resulting from a decline in crude oil and product prices during the quarter. Excluding the impact of inventory adjustments and net unrealised hedging gains, 4Q14 after-tax earnings would have been higher by US$37.7 million.
On a year-on-year basis, 4Q14 results improved in all three segments led primarily by refining. The refining segment benefited from a combination of a wider discount between Midland WTI and Cushing WTI, more stable local market netbacks relative to Gulf Coast light product price trends, and a lower crude oil price environment that improved margins on residual products, particularly asphalt. These factors more than offset a lower 5-3-2 Gulf Coast crack spread.
For the full year 2014, Delek US reported net income of US$198.6 million, or US$3.35per diluted share, compared to net income of US$117.7 million, or US$1.96 per diluted share in 2013.
“We performed well in the fourth quarter across all three operating segments,” said Uzi Yemin, Chairman, President and Chief Executive Officer of Delek US. “Our access to local markets for our refined products, a diversified crude slate and lower cost crude that benefited asphalt margins, combined with increased throughput, improved our refining performance year-on-year. This improvement occurred in the face of more challenging market conditions for refining as measured by a decline in the 5-3-2 crack spread. Our logistics segment benefited from a strong west Texas wholesale margin, while a higher fuel margin increased results in our retail segment compared to 4Q13.
“In 2014, we invested US$257 million in capital expenditures across our operations, which included the turnaround and improvement in crude flexibility at our El Dorado refinery, as well as the ongoing expansion project at our Tyler refinery. Additionally, we returned a significant amount of cash to our shareholders in the form of US$59 million in dividends and US$75 million of stock repurchases. As we enter 2015, we are on schedule to complete our Tyler refinery turnaround and expansion project by mid-March, which will bring us to the end of a large capital spending programme. We anticipate, based on Delek Logistics’ expected growth, it should have the ability to reach the high splits on the incentive distribution rights during the second half of 2015, which should increase the cash flow to the general partner. We remain focused on creating long-term value for our shareholders by growing our business, while returning cash to our shareholders through dividends and our new US$125 million 2015 share repurchase programme.”
Tyler refinery update
In preparation for its scheduled turnaround, the Tyler refinery shut down operating units on 23 January 2015. This turnaround is expected to be completed by mid March along with the replacement of the fluid catalytic cracking reactor and work related to expansion of the crude nameplate capacity by 15 000 bpd to 75 000 bpd. This expansion project is expected to cost approximately US$70.0 million, of which approximately US$49.9 million was spent during 2014. This will increase total crude nameplate capacity in the refining system to 155 000 bpd.
Based on current market conditions, and assuming 10 000 to 15 000 bpd of incremental crude throughput, this expansion is expected to generate annual EBITDA of approximately US$40 million to US$65 million. In addition, improved yields from the new fluid catalytic cracking reactor is expected to increase EBITDA by approximately US$10 million on an annual basis.
Adapted from press release by Rosalie Starling
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