Good News Gets Scarce in the Energy Business (WNR, WMB, SRE)

By Douglas A. McIntyre Updated Apr 27, 10:28PM EDT · Published Aug 7, 9:46AM EDT

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Oil_gas_pipeline_pic 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

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.