There’s no good news coming from Western Refining (NYSE:WNR) today. The company reported second quarter earnings of $8.2 million (EPS of $0.12) versus $155 million and EPS of $2.29 for the same period a year ago. The culprit, of course, is lower refining margins. Analysts expected EPS of $0.28, so Western achieved a clear miss.

The company processed more than 222,000 b/d of crude in the 2008 secondquarter and earned $9.29/b in gross margin. In the same quarter a yearago, the company processed about 148,000 b/d of crude with a grossmargin of $21.85/b. You know the company is suffering when the earningspress release quotes the CEO saying, "We have also made great stridesin the areas of safety…."

If crude prices continue to fall, Western and other refiners mightbegin to recover. Apparently the market thinks so – Western’s stock isup about $0.35 in early trading today.

Williams Companies (NYSE:WMB) beat analysts’ EPS estimates of $0.69 forthe second quarter, tallying EPS of $0.73 on net income of $437million. However, backing out the effect of a mark-to-market non-cashgain of $31 million reduces EPS to $0.68, a penny below estimates.Williams did benefit from higher natural gas prices and increasedproduction, but operating expenses and other costs rose.

Williams upped its 2008 EPS guidance slightly, from $2.30-$2.80 to$2.35-$2.80. EPS guidance for 2009 also increased by a nickel. So fartoday the market is pushing the stock down by about $0.50/share.

Sempra Energy (NYSE:SRE) reported second quarter 2008 earnings of $244million (EPS of $0.98) on revenues of $2.5 billion. Analysts wereexpecting EPS of $0.91 on revenues of $2.56 billion. Sempra’s netincome from its utilities businesses rose 11%, due in large part to arate increase approved by the California PUC. The pipelines and storagebusiness improved by $7 year-over-year, due to the start-up of thewestern portion of the Rockies Express pipeline.

Sempra’s LNG terminal in Baja California became fully operational inMay, and is fully contracted for 20 years to process 1 billion cubicfeet/day of natural gas. Contracted LNG supplies from a new plant inIndonesia are scheduled to begin in the second quarter of 2009. In thesecond quarter of 2008, Sempra’s LNG operations lost $28 million, dueto higher income taxes and a larger mark-to-market loss on a marketingagreement. Provided the company management can sort out its derivativesplays, the LNG business should begin to generate profits for Semprapretty quickly. The stock is trading down about a dime in early tradingtoday.

Paul Ausick
August 7, 2008

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