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EL PASO, Texas -- Western Refining, Inc. yesterday reported a net loss – excluding special items, of $51.1 million for its fourth quarter of 2009. That compares to net earnings of $33.6 million, exclusive of special items, reported for the fourth quarter of 2008, according to BusinessWire.
On a GAAP (generally accepted accounting principles) basis, the company reported a fourth quarter 2009 net loss of $97.5 million, compared to the fourth quarter of 2008 net loss of $12.8 million. Western attributed the quarter-over-quarter decline to the impact of a continued weak economy, reduced demand for transportation fuels, and narrowing differentials between light and heavy crude oil prices, all of which resulted in lower refining margins.
The current economic environment hasn't been kind to any refiners. As previously reported by CSNews Online, Alon USA posted a net loss of $65.4 million in its fourth quarter, Sunoco -- although still in the black -- reported a 77 percent decline in fourth quarter profits, and Chevron, the nation's fifth largest refiner, earlier this year said it would restructure its refinery operations, cut jobs and exit some markets.
For the year ended December 31, 2009, Western Refining reported a net loss, excluding special items, of $44.5 million. This compares to full-year 2008 net income, excluding special items, of $110.6 million. The company reported on a GAAP basis a net loss of $350.6 million for the full-year 2009, compared to net earnings of $64.2 million for the previous year.
Cash flow from operations was $140.8 million for the year. As of December 31, 2009, total debt was $1,116.7 million, which included $50 million outstanding under the company's revolving credit facility.
Jeff Stevens, Western's President and CEO, said, "To help manage through what was a very challenging year for all refiners, Western made some difficult, but necessary, decisions that improved our operational efficiency and enhanced our financial flexibility. We are confident that the actions we took and our continued focus on ensuring safe and efficient operations will help position us for stronger and sustainable results as the market recovers."
During 2009, the company pursued several initiatives to enhance and streamline operations, strengthen its balance sheet, and improve liquidity:
• The El Paso refinery began operations of a newly-constructed gasoline hydrotreater unit giving the plant the ability to increase lower-cost sour crude oil throughput. Additionally, the new unit gives Western the ability to increase production of Phoenix grade gasoline from approximately 12,000 barrels per day to 20,000 barrels per day. Historically, Phoenix has been one of the more attractive markets in terms of both product demand and gross margin.
• The company consolidated its two Four Corners refineries into its Gallup, New Mexico, refinery. This consolidation will eliminate certain operating costs totaling approximately $25 million per year beginning in the first quarter of 2010, while maintaining the capability to process similar volumes of crude oil that have been historically processed at both Bloomfield and Gallup refineries combined. Western is continuing to operate the Bloomfield refinery products terminal and will supply the Four Corners with refined products by utilizing a new pipeline connection and exchange supply agreements. The company will also maintain its marketing assets, and, through an exchange agreement, will supply barrels to the Bloomfield facility in exchange for barrels produced at the El Paso refinery.
• The company identified and implemented approximately $25 million in additional cost savings initiatives. These include the reduction of contractor services at the company's refineries, changes in its Wholesale operations to respond to market conditions, closure of underperforming retail outlets, and reductions in executive compensation and other employee related costs. These initiatives began in late 2009 and will be fully realized beginning in 2010.
• Western successfully completed several transactions to enhance its balance sheet, extend maturities, and increase its financial flexibility. In June, Western issued $600 million in Senior Secured Notes, comprised of $325 million of 11.25 percent notes which mature in 2017 and $275 million of Floating Rate Notes which mature in 2014. Additionally, the company issued $215.5 million of 5.75 percent Senior Convertible Notes which mature in 2014 and 20,000,000 shares of common stock at $9 per share. In November, Western secured an amendment from its lender group revising certain covenants to further increase its financial flexibility.
"We are pleased to have seen a gradual improvement in refining margins during the fourth quarter and this improvement has continued into the first quarter of 2010," said Stevens. "Our southwest refining margins remained stronger than overall US benchmarks during the quarter. We expect to see continued modest improvements in margins as we move into the driving season."
Western has refineries in El Paso, Tex., Gallup, N.M., and Yorktown, Va. Western's asset portfolio also includes three refined products terminals, four asphalt terminals, 150 retail service stations and convenience stores in Arizona, Colorado, and New Mexico, a fleet of crude oil and finished product truck transports, and wholesale petroleum products operations in Arizona, California, Colorado, Nevada, New Mexico, Texas, and Utah.
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