Murphy USA posts unusual Q1 loss

Murphy USA reported a first quarter loss of $3 million in a filing with the Securities and Exchange Commission on Tuesday. The El Dorado-based retail fuel and convenience store chain did not disclose a P&L statement with its news, but did provide financial details.

On an adjusted basis, Murphy USA reported $30.3 million in adjusted EBITDA (earnings before interest, taxes, depreciation and amortization).

The company said “record-high gasoline inventories, subdued retail demand, and discounted pipeline space values” were mostly to blame for the poor first quarter performance. However, company leaders said they expected conditions to change later this year.

“The first quarter is typically a period of lower earnings for the company, but a variety of market conditions along with regulatory and political events have converged that will result in short-term underperformance versus historical Q1 results,” said President and CEO Andrew Clyde.

“In our 20 year history, we have weathered a wide variety of challenging market conditions, which eventually experience mean reversion and we expect that this year will be no different. While we don’t expect discussions around guidance on a quarterly basis going forward, we are prudently level-setting expectations to maintain transparency with investors and affirm our commitment to long-term value creation for shareholders,” Clyde added.

Additional commentary about market conditions included:

• First quarter retail fuel volumes and margins were both soft.
• Results from the company’s Product Supply and Wholesale activities performed below expectations due to unfavorable market conditions beyond elements of normal seasonality.
• Lower Renewable Identification Number (“RIN”) prices, which were negatively impacted due to heightened regulatory and political uncertainty, in the first quarter led to total fuel margins below average.

“However, in recent weeks, the market’s self-correcting mechanisms have caused conditions to improve as excess winter-grade inventory levels have fallen ahead of the transition to summer-grade gasoline along with higher net product exports. Additionally, the market has re-priced RINs higher – and more in line with historical spot-to-rack relationships – as the risk of sudden regulatory change has moderated after the Environmental Protection Agency comment period ended following its decision to deny petitions to change the Renewable Fuel Standard Point of Obligation in addition to the elimination of any speculation about a delay or reopening of the 2017 mandates. As a result, the net contribution from Product Supply and Wholesale inclusive of RINs is returning to more normal levels,” the company reported.

While claiming market fundamentals were returning to normal, Murphy USA said it would adjust its full-year guidance on earnings.

Net income was revised downward from $140-$190 million for the full year to $90-$160 million.