The year-over-year improvement reflects higher refining margins and the continued gains generated from the company's 2010 cost savings initiatives. Western's Southwest refineries generated strong gross margins per barrel during the quarter with the El Paso, Texas, refinery improving 21% and the Four Corners refinery improving 38% relative to [image-nocss] the third quarter of 2009.
Western's Retail business had a record quarter, posting operating income of $7.6 million, an increase of 13% as compared to the prior-year quarter, driven by increases in fuel and merchandise volumes. In addition, the company's wholesale business performed well due to increased lubricants margins and improving demand for both fuels and lubricants.
Jeff Stevens, Western's CEO, said, "We are very pleased to report another profitable quarter. Our refineries ran well, and we believe refining margins at our Southwest refineries continued to be some of the strongest in the U.S. We are optimistic about the fourth quarter due to the strength in diesel margins which offset the weaker gasoline margins that we typically see this time of year. Overall, both gasoline and diesel margins are significantly stronger than the fourth quarter of 2009."
During the third quarter, Western announced the safe and successful completion of the shutdown of its Yorktown refining operations and generated $56 million in cash from the partial liquidation of working capital. The company also incurred costs of $4 million during the quarter related to the shutdown. Western continues to operate the products terminal and is supplying finished products to its local customers. Western is currently negotiating with a number of interested parties regarding strategic alternatives for Yorktown, including third-party storage and terminalling or the sale of the terminal assets.
Western continued to benefit from the successful implementation of the Four Corners refinery consolidation and other cost reductions announced in 2009. These initiatives had an initial target of $50 million in annualized savings starting in 2010.
"Our focus on the cost savings initiatives continues to show results," added Stevens. "We are on track to exceed our target of $50 million in annualized cost savings and we continue to take the necessary steps to actively manage our business in a prudent and fiscally responsible manner."
Western Refining is an independent refining and marketing company headquartered in El Paso. It operates refineries in El Paso, and Gallup, N.M. Western Refining's asset portfolio also includes refined products terminals in Albuquerque and Bloomfield, N.M., and Yorktown, Va., retailgas 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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