The quarter-over-quarter decline was driven by the impact of a continued weak economy, reduced demand for transportation fuels and narrowing differentials between light and heavy crude oil prices, all of which resulted in lower refining margins.
For the year ended [image-nocss] Dec. 31, 2009, the company reported a net loss, excluding special items, of $44.5 million, or a loss of 56 cents per diluted share. This compares to full-year 2008 net income, excluding special items, of $110.6 million, or $1.62 per diluted share.
Jeff Stevens, Western's president and CEO, said, "To help manage through what was a very challenging year for all refiners, Western made some difficult, but necessary, decisions that improved our operational efficiency and enhanced our financial flexibility. We are confident that the actions we took and our continued focus on ensuring safe and efficient operations will help position us for stronger and sustainable results as the market recovers."
During 2009, the company pursued several refining initiatives to enhance and streamline operations, strengthen its balance sheet, and improve liquidity: The El Paso, Texas, refinery began operations of a newly constructed gasoline hydrotreater unit giving the plant the ability to increase lower-cost sour crude oil throughput. Additionally, the new unit gives Western the ability to increase production of Phoenix-grade gasoline from approximately 12,000 barrels per day to 20,000 bpd. Historically, Phoenix has been one of the more attractive markets in terms of both product demand and gross margin.
The company consolidated its two Four Corners refineries into its Gallup, N.M., refinery. This consolidation will eliminate certain operating costs totaling approximately $25 million per year beginning in first-quarter 2010, while maintaining the capability to process similar volumes of crude oil that have been historically processed at both Bloomfield and Gallup refineries combined. Western is continuing to operate the Bloomfield refinery products terminal and will supply the Four Corners with refined products by using a new pipeline connection and exchange supply agreements.
The company will also maintain its marketing assets, and, through an exchange agreement, will supply barrels to the Bloomfield facility in exchange for barrels produced at the El Paso refinery.
The company identified and implemented approximately $25 million in additional cost savings initiatives. These include the reduction of contractor services at the company's refineries, changes in its wholesale operations to respond to market conditions, closure of underperforming retail outlets and reductions in executive compensation and other employee related costs. These initiatives began in late 2009 and will be fully realized beginning in 2010.
Commenting on current market conditions, Stevens said, "We are pleased to have seen a gradual improvement in refining margins during the fourth quarter and this improvement has continued into the first quarter of 2010. Our southwest refining margins remained stronger than overall U.S. benchmarks during the quarter. We expect to see continued modest improvements in margins as we move into the driving season."
Western Refining is an independent refining and marketing company headquartered in El Paso. It has refineries in El Paso, Gallup, and also in Yorktown, Va. Western's asset portfolio also includes refined products terminals in Albuquerque and Bloomfield, as well as Flagstaff, Ariz., 150 retail 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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