Lower refining margins push Delek US, Alon USA to losses

Changes in the energy market, higher crude oil prices and lower refining margins pushed Delek US and Alon USA into the red for the first time in two years.

Changes in the energy market in the third quarter of 2013, combined with higher crude oil prices and lower refining margins for different fuels in the US pushed Delek US Holdings Inc. (NYSE:DK) and Alon USA Energy Inc. (NYSE:ALJ) into the red for the first time in two years.

Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tsuva, owns 33% of Delek US, after selling half its stake in the company at very high prices over the past year. Delek US posted a net loss of $1.7 million ($0.03 per share) for the third quarter, compared with a net profit of $94.5 million for the corresponding quarter of 2012. The net profit totaled $122 million in January-September, 41% less than in the corresponding period of last year.

Revenue edged up to $2.38 billion for the third quarter from $2.24 billion for the corresponding quarter.

Delek US's refining margin fell, due to the fall in the benchmark Gulf Coast 5-3-2 crack spread to an average of $12.30 per barrel during the third quarter from $29.96 during the corresponding quarter. In addition, higher crude oil prices affected the margin of the company's asphalt production.

Barclays Capital cut its target price for Delek US by 8% to $35 per share, compared with Friday's close of $23.96, giving a market cap of $1.41 billion.

Breakdowns hit Alon USA

Alon USA is controlled by Alon Israel Oil Company Ltd., owned by David Wiessman and Shraga Biran. Alon USA lost $28.7 million ($0.47 per share) for the third quarter, compared with a net profit of $43.2 million for the corresponding quarter. The net profit totaled $68 million in January-September, 10% less than in the corresponding period of last year.

Revenue fell to $1.89 billion for the third quarter from $2.36 billion for the corresponding quarter.

Alon USA's California refineries complex is offline as the company seeks permits for a rail terminal and refinery light crude modification project in order to obtain cheaper crude oil by train from the northern US. In the conference call, Alon USA president and CEO Paul Eisman warned that the company's California refineries might again go offline in 2015, depending on the receipt of permits for the planned facilities. The company had originally hoped to obtain the permits this year, but this may be delayed until the end of 2014.

In addition to lower refining margins, Alon USA was affected by an outage at its Big Spring, Texas, refinery, and by repairs at its Krotz Springs refinery in Louisiana. As a consequence, the company's refining sector posted an operating loss of $47.6 million for the third quarter, compared with an operating profit of $89 million for the corresponding quarter.

Alon USA's share price fell 7% on Friday to $10.24, giving a market cap of $639 million.

Published by Globes [online], Israel business news - www.globes-online.com - on November 11, 2013

© Copyright of Globes Publisher Itonut (1983) Ltd. 2013

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