Jeff Stevens, Western Refining's president and CEO, said, "We are pleased with our second-quarter results, which reflect improved refining margins and continued gains as a result of our cost-savings initiatives. Our Southwest refineries operated well and took advantage of the margin environment which showed improvement from [image-nocss] the first quarter of the year and the second quarter of 2009."
He added, "Our retail and wholesale businesses both delivered increased operating income due to continued fuel volume growth as market conditions improved in the Southwest."
The company reported that its cost-savings initiatives are generating results ahead of plan. Consolidating the operations of the two Four Corners refineries into the Gallup refinery has generated $13 million in year-to-date savings and remains on track to achieve the original estimate of $25 million in annualized cost reductions. In addition to the savings realized in the Four Corners consolidation, the company has realized $14 million in other cost reductions year-to-date and expects to exceed its original estimate of $25 million for 2010.
Western also announced that it is suspending refining operations at its Yorktown refinery due to the poor outlook for East Coast refining margins. Western will continue to operate the Yorktown products terminal and supply the region with finished products. The company is evaluating all strategic alternatives and if the situation improves would consider restarting refining operations. A safe and orderly shutdown of the processing units at the refinery will begin immediately and take approximately six weeks to be completed, it said.
"The decision to suspend refining operations at the Yorktown refinery was a difficult, but necessary decision driven by the ongoing challenging refining margin environment experienced on the East Coast, the continued low price differentials between light/heavy crudes and poor coking economics," Stevens said. "This was a market-driven decision and is not a reflection of the commitment of our Yorktown employees to run a safe and reliable operation. Western is committed to treating them fairly and with respect as we work through this transition."
As a result of this decision, the company will record a one-time cash charge totaling approximately $13 million during the second half of 2010.
"The recent operational changes, the reduced cost structure of the company, the position of our business units in the strengthening Southwest region, along with increasing demand for refined products, position the company well for the future," Stevens said.
Western Refining is an independent refining and marketing company headquartered in El Paso, Texas. It operates refineries in El Paso, Gallup, N.M., and Yorktown, Va. Western Refining's asset portfolio also includes refined products terminals in Albuquerque and Bloomfield, N.M., and Flagstaff, Ariz. retail gas 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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