CVR Refining (CVRR +0.00%) reported its third-quarter earnings on Thursday. While the company did miss Wall Street's expectations due to some planned and unplanned downtime at its Coffeyville refinery, it still posted solid results that resulted in reducing net debt while paying a very generous distribution to its unitholders. Here's a quick snapshot of what happened this quarter.
By the numbers
| Quarterly Results (figures in millions except per share numbers) | Q3 2015 | Q2 2015 | Q3 2014 |
| Revenue | $1,361 | $1,547.5 | $2,215.2 |
| Adjusted EBITDA | $229.6 | $194.3 | $129.9 |
| Net income attributable to shareholders | $138.9 | $227.8 | $21.8 |
| EPS (diluted) | $0.94 | $1.54 | $0.15 |
Source: CVR Refining earnings release.
Catching up on the business this quarter
- The company's Coffeyville refinery was put into turnaround mode at the end of the third quarter, and a portion of its refining capacity was shut down. Thanks to favorable conditions prior to the turnaround, though, the company was able to beat its original expectations of 190,000 barrels per day of production and was able to produce 200,000 barrels per day between the two refineries.
- Higher crude throughputs at both refineries brought down per barrel operating expenses at both facilities. Excluding expenses related to planned turnarounds, combined per barrel expenses were $5.27 per barrel of crude oil throughput in the third quarter of 2015 as compared to $6.48 in the third quarter of 2014.
- The company completed the construction of a tank storage facility in Cushing, Oklahoma. According to CEO Jack Lipinski, these tanks provide a unique profit opportunity when the oil market is in contango, like it is today. A contango market is where the the future price of oil is higher than the current price. So, companies will look to get a future contract for that oil, store it, and then sell it later at the higher prices. Companies with storage can charge storage fees that can be lucrative during this market condition.
- CVR Refining's parent company, CVR Energy (CVI 3.97%), announced during the quarter that it would take an equity participation stake in a crude oil gathering system in the SCOOP and STACK shale formations in Oklahoma. This pipeline project will likely be used in conjunction with CVR Refining's existing gathering assets to deliver crude from this region to its refineries.
- Net debt -- debt minus cash on hand -- decreased to just $79 million. The company has been reducing its net debt position since 2012.
- Management and the board announced a quarterly distribution of $1.01 per share. Keep in mind, though, that CVR refining is a variable rate MLP, and therefore the distribution can change from quarter to quarter.
Outlook
With parts of the Coffeyville facility under turnaround maintenance until mid-November, management expects total throughputs to be lower in the coming quarter. Also, crack spreads have been a little erratic, so it's hard to pin down what the quarter will look like. According to Lipinski:
We've seen a bit of a wild ride over the last couple of months in terms of crack spreads. In the group, we saw crack spreads in the latter part of July average between $19 and $21 per barrel. They reached highs of almost $35 a barrel in mid-August, and then they fell sharply to approximately $15 a barrel in mid-September. Going into October, in the group, we saw cracks peak just under $26. Today, they're about $16. We would expect a relatively weak fourth quarter ... [W]e expect the total rate for the fourth quarter will range between 155,000 and 165,000 barrels a day for the combined throughput at both refineries.
10-second takeaway
Despite a small operational hiccup in the quarter, CVR Refining was able to beat operational expectations, as the market for refiners has been very favorable over the past several quarters. It may not be able to experience that same level in the coming quarter thanks to planned downtime, but with no clear indications that oil prices are headed any higher in 2016, the good times could keep rolling at CVR Refining.
