Petrotrin Pain Profits down but Petrotrin earnings up 132%

Petrotrin chief financial officer Ronald Huff confirmed via email on Friday that the Oppenheimer data released to bondholders on July 16 is accurate.

Omar Zeolla, senior analyst responsible for Petrotrin at Oppenheimer wrote to bondholders.: “I believe Petrotrin’s results for the quarter ended June reflect the expected improving trend in financial performance as its refining capacity came back online and oil prices and refining margins improved. While results for the first nine months of the 2015 fiscal year ending June 2015 are still being affected by the weak performance of the first quarter of the fiscal year, the last two quarters have shown a return to financial performance similar to previous years.”

Zeolla added that earnings before income tax, depreciation and amortisation (EBITDA) margins are back to the 11-12 per cent range and free cash flow has been positive for the last two quarters.

Petrotrin’s nine-months ending on June 30 showed positive results, especially when calculating the results for the quarter ending June 2015, Oppenheimer said.

“The nine month figures show a positive EBITDA of US$24 million by my calculations. EBITDA was negative $75 million through the six months through the end of the first calendar quarter of this year. This was a result of the inventory write-down in the quarter ending December 31, 2014 (the first quarter of the 2015 fiscal year).”

Results through that first quarter had also been weak due to lower oil prices and the interruption in refinery operations which reduced refinery capacity utilisation to 25 per cent in fiscal 2014. “The improved results in the last two quarters reflect improved utilisation rate in refining – this was the major problem affecting results in the last year – now up to 70 per cent in the last two months. Refining margins have improved since early this year, Oppenheimer found.

“Margins reached five-year highs recently, positively contributing to results; throughput and product mix have also improved and fuel production increased. The company is benefiting from strong refining margins in the region, especially in some areas of the US West Coast as a result of strong demand and limited supply of refined products,” Zeolla said.

Refinery only 40 per cent supplied

Oppenheimer told bondholders Petrotrin’s upstream production is also expected to increase after September, improving the company’s own supply of oil for its refining operations. Petrotrin projects 25 per cent growth in oil and gas production by 2019 from current levels.

Increasing oil production improves the company’s integration and should increase the own supply of oil from the current approximate 40 per cent of total needs.

Over US$175M lost

antt.22Backing out the quarterly results for Q3 FY2015 from the nine-month cumulative US$168 million net loss by the company, “the June quarter seems the strongest quarter so far for this fiscal year,” Zeolla said. “I estimate EBITDA of US$100 million for the quarter after a negative $125 million in the quarter ending December 2014; this figure included a US$175 million inventory write-down as a result of declining oil prices,” Zeolla said.

Free cash flow also improved to a total of US$124 million for Q3 FY2015 as quarterly revenues rose to US$882 million for the last quarter and EBITDA margins improved. “Free cash flow is expected to be – at worst – neutral for this fiscal year after capital expenditure (capex) was budgeted in the US$300 million range but will likely be below that number. Capex through the first nine months of FY2015 was US$130 million, so it is running lower than expected,” he said.

Preliminary financials show cash balances declined to US$133 million from US$277 million at the end of fiscal year 2014 (September 30, 2014) but mostly due to repayment of debt (total debt declined from US$2.2 billion at the end of FY2014 to US$1.9 billion).

Cash balances declined close to the US$100 million minimum level the company is comfortable with but the company expects to close a US$500 million committed bank revolver by the end of this month, which should be used to repay short term debt and leave about US$300 million available to fund working capital and investments, helping maintain cash balances at least at current levels, Oppenheimer said. Petrotrin’s short-term debt declined to US$725 million at the end of June from US$945 million at the end of FY2014 (September 30, 2014).


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