Delek US Holdings Inc., a diversified energy company with assets in the petroleum refining, logistics and retail industries, has announced financial results for the third quarter 2013.
For the three months ended Sept. 30, 2013, Delek US reported a net loss of -$1.7 million, or -$0.03 per basic share, versus net income of $94.5 million, or $1.57 per diluted share in the third quarter 2012.
Lower earnings were primarily due to the refining segment, as a combination of factors in the third quarter 2013 created less favorable market conditions compared to the prior-year-period.
A decline in the 5-3-2 Gulf Coast crack spread, an increase in crude oil prices and backwardation of the crude oil futures market all contributed to a decline in refining margins on a year-over-year basis. In addition, market dynamics were negatively affected by RINs in July and August, reducing gasoline netbacks in areas served by the El Dorado refinery.
This year-over-year decline in the refining segment performance was partially offset by improved retail and logistics segment results compared to the third quarter 2012.
During the third quarter 2013, net income was also negatively affected by approximately $4 million after-tax, or $0.07 per share primarily due to inventory mark-to-market adjustments and a combination of other costs related to acquisitions, a higher tax rate and costs associated with financing related activities.
As of Sept. 30, 2013, Delek US had a cash balance of $428.2 million and total debt of $369.0 million, resulting in net cash of $59.2 million. This compares to a net cash position of $155.9 million at June 30, 2013 with this change being primarily driven by cash used in investing activities. As of Sept. 30, 2013, Delek US’ subsidiary, Delek Logistics Partners LP had a cash balance of approximately $6.7 million and $161.0 million of debt, which is included in the consolidated amounts on Delek US’ balance sheet. The increase in debt at Delek Logistics from June 30, 2013, is primarily related to the purchase of logistics assets for $94.8 million from a subsidiary of Delek US on July 26, 2013.
In addition, Delek US’ Board of Directors declared a regular quarterly cash dividend of $0.15 per share. This cash dividend is payable on Dec. 17, 2013 to shareholders of record on Nov. 26, 2013.
“While the refining environment was challenging in the third quarter, our refining segment did increase throughput levels compared to the prior year period. In addition our logistics segment performed well and we continued to unlock value with the first drop down to Delek Logistics in July. The retail segment also showed solid year-over-year improvement during the quarter,” said Uzi Yemin, Chairman, president and CEO of Delek US. “As we have entered the fourth quarter, market conditions have improved through October. Crude oil prices have declined to below $100 per barrel and the discount between WTI Midland and WTI Cushing has widened. Our refineries are well positioned to benefit from pipeline access to Midland sourced crude, which accounts for approximately 87,000 barrels per day out of our 140,000 barrels per day crude capacity. In addition, we have experienced an improvement in wholesale margins in our refining system. Finally, our balance sheet remains strong and provides flexibility to continue investing in our businesses and growing through acquisitions, while continuing to return value to our shareholders.”
Retail segment contribution margin was $16.6 million in the third quarter 2013, which compares to $11.0 million in the third quarter 2012. Higher fuel margins more than offset lower merchandise margins increasing results on a year-over-year basis. Fuel margin increased to 20.5 cents per gallon in the third quarter 2013 compared to 13.9 cents per gallon in the prior-year-period. During the third quarter 2013 wholesale fuel prices declined as retail fuel prices were more stable, increasing fuel margins on a year-over-year basis. Merchandise margin was 27.6% in the third quarter 2013, compared to 28.6% in the prior-year-period. Operating expenses were $33.2 million in the third quarter 2013 compared to $33.9 million in the third quarter 2012.
At the conclusion of the third quarter 2013, the retail segment operated 362 locations, versus 372 locations at the end of the third quarter 2012. Six new large-format stores have opened during the first nine months of 2013 including one during the third quarter. An additional four to six large-format stores are expected to be opened during the fourth quarter of 2013.