DALLAS -- Alon USA Energy Inc. has reported that net income for the three months ended Sept. 30, 2005, increased to $24.4 million compared to net income of $6.1 million for the three months ended Sept. 30, 2004, an increase of $18.3 million. Third-quarter earnings per share were 57 cents compared to 17 cents for the comparable quarter last year.
Net income for the three months ended Sept. 30, 2005, included $5 million of after-tax gain recognized on disposition of assets relating to the contribution of certain pipeline and terminal assets to Holly Energy [image-nocss] Partners LP in the first quarter of this year. The amount of after-tax gain recognized was $4.2 million greater than planned due to the acceleration of a portion of the deferred gain relating to the HEP transaction. Net income for the three months ended Sept. 30, 2005, excluding the effects of the accelerated deferred gain would have been $20.2 million, or 47 cents earnings per share, in line with Alon's previously announced third-quarter earnings per share estimates.
Net income for the nine months ended Sept. 30, 2005, was $74.3 million, or $1.98 earnings per share, compared to net income of $22.9 million, or 65 cents earnings per share for the nine months ended Sept. 30, 2004, an increase of $51.4 million. Excluding the accelerated $4.2 million of after-tax gain recognized in the third quarter, net income for the nine months ended Sept. 30, 2005 would have been $70.1 million, or $1.86 earnings per share.
The increases in net income for the three and nine months periods ended Sept. 30, 2005, over the comparable periods in 2004 were primarily attributable to continued strong industry refining margins and favorable differentials between WTI and WTS crude oil (WTI/WTS). For third-quarter 2005, Gulf Coast 3-2-1 crack spreads increased to an average of $17.13 per barrel compared to an average of $6.71 for third-quarter 2004, primarily due to production interruptions in the Gulf Coast region in connection with hurricanes Katrina and Rita. WTI/WTS crude oil differentials for third-quarter 2005 increased to an average of $4.09 per barrel compared to an average of $3.87 barrel for third-quarter 2004.
The positive impact of favorable refining margins and WTI/WTS crude oil differentials in third-quarter 2005 was partially offset by the company's acceleration of a reformer catalyst regeneration that was previously scheduled for January 2006. As a result of downtime associated with the regeneration, refinery throughput for third-quarter 2005 decreased by approximately 5,400 barrels per day (bpd) as compared to second-quarter 2005. Despite this reduction in throughput, overall refinery production of 66,747 bpd in third-quarter 2005 was 13.5%, or 7,944 bpd, higher than third-quarter 2004 production due to the expansion of the Big Spring refinery's crude oil throughput capacity in first-quarter 2005.
Jeff Morris, Alon's president and CEO, said In the third quarter, we were unexpectedly required to accelerate a reformer catalyst regeneration as previously disclosed on Sept. 22, 2005. Now that this regeneration has been completed and the appropriate upgrades are being designed, we expect to avoid the regeneration previously scheduled in January of 2006 and to combine our next regeneration with our scheduled low sulfur fuel upgrade planned for April 2006. Operations are back to normal and we have returned to the consistent performance to which we have become accustomed.
He added, Turning to the fourth quarter, we ran well in October, decreased our inventories and improved our cash position. We expect our cash balance to be further enhanced in the fourth quarter as we convert approximately 300,000 barrels of unfinished product to finished gasoline and diesel. Sweet/sour spreads in October increased over third quarter levels and refining margins remained strong even as Gulf Coast refineries came back on line. Thus, we believe we are on schedule to reduce inventories and increase our cash balances back to planned levels by year end.
Alon USA Energy, Dallas, is a refiner-marketer operating mainly in the Southwest and South Central United States. The company owns and operates a sour crude oil refinery in Big Spring, Texas, which has a crude oil throughput capacity of 70,000 bpd. Alon USA markets gasoline and diesel products under the FINA brand name. It also operates convenience stores in West Texas and New Mexico under the 7-Eleven and FINA brand names and supplies motor fuels to these stores from its Big Spring refinery.Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.