Ampol refinery surges into black without subsidies

Ampol’s oil refining operations surged back into the black in the September quarter without any support from the subsidy package put in place by the federal government, with some experts now predicting an unexpectedly strong winter ahead for margins across the sector.

The company’s Lytton refinery in Brisbane posted earnings before interest and tax of $22 million in the July-September period, compared to the heavy loss of $82 million in the same quarter a year ago in the depths of the COVID-19 lockdowns.

The turnaround brought earnings for Ampol’s fuels and infrastructure business back into profit for the quarter and fuelled a 75 per cent surge in total benchmark EBIT to $102 million. Group benchmark net profit jumped 71 per cent to $41 million.

Ampol said the average margin at the refinery was $US6.76 a barrel in the September quarter, a significant improvement of the $US5.90/bbl of the June half.

FACTS Global Energy is anticipating “a good winter ahead” for refinery margins across the sector.

“Until very recently, refiners were suffering from a severe case of the COVID blues,” FGE said.

“But finally, many months of pain have produced gain. Margins have improved and the outlook is good, at least through the winter ahead.”

The forecast signals that the government subsidies, which only kick in when margins are weak, may not be paid out as much as expected over the next several months at least. However, rival Viva Energy, depended on the subsidy for its refinery at Geelong to scrape into break-even territory in the quarter, Viva reported on Monday.

Still, Ampol said lockdowns in key markets in NSW, Victoria and New Zealand still impacted fuel and shop sales, evident in a 62 per cent slump in EBIT in the convenience retail division to $33 million.

“The third quarter was a challenging period for many businesses and Ampol was no exception,” said chief executive Matt Halliday.

He said recent announcements from the NSW and Victorian governments were “encouraging” but sounded a note of caution about the impact of higher oil and fuel prices on margins.

“While we do expect volumes to begin to recover as consumer mobility increases, crude and refined product prices have continued to trend higher in recent weeks,” Mr Halliday said.

“This will benefit Lytton’s profitability but will temper retail margins in the short term. Additionally, the reopening of domestic and international borders will be positive for jet demand.”

Shares in Ampol were down 5¢ to $31.21 shortly before the close.

Mr Halliday said Ampol was “optimistic” about the start of 2022 with improved momentum but added it would take time to assess the strength of the recovery.

Ampol’s fuels and infrastructure business outside refining posted stable earnings as growth in the international business offset the impact of domestic COVID-19 lockdowns.

Government subsidies under an interim refining rescue package were the only thing that helped prevent a loss at the Lytton refinery in the June half, but the revised subsidy measure put in place on July 1 only kicks in when margins are low to prevent losses.

Extracted from AFR

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