Murphy reports Q1 earnings from RINs, Hereford ethanol plant

By Susanne Retka Schill | May 07, 2014

Ethanol still figures in Murphy USA Inc.’s business, as it reported positive earnings from its plant in Texas and from the sale of renewable identification numbers (RINs) in its first quarter financial report, released May 5. Overall, the marketer of retail motor fuel products and convenience merchandise reported net income of $9.6 million on revenues of $4.2 billion in Q1 compared to $22 million net income on revenues of $4.4 billion in the same period a year ago.

The lower results in continuing operations for the current quarter were primarily driven by lower retail fuel margins partially offset by improved results from the Hereford, Texas, ethanol plant and higher merchandise gross margin dollars in the current period, the company reported.

In December 2013, the company closed on the sale of its wholly-owned subsidiary, Hankinson Renewable Energy LLC, which owned and operated the 145 MMgy ethanol plant in southeastern North Dakota. “As a result of this sale, the historical operating results of Hankinson and the gain on the sale were reclassified to discontinued operations for all periods presented,” the statement accompanying the financial report stated. “Discontinued operations generated income of $0.8 million, net of tax of $0.4 million, for the recently completed quarter due to final adjustments to working capital with the buyer. Operating profits of the Hankinson plant for the first quarter of 2013 were $1.5 million, net of tax.”

The company's remaining 110 MMgy ethanol plant in Hereford, Texas, was profitable for the first quarter of 2014 generating $1.2 million in net income compared to a net loss of $2.9 million in Q1 2013. The improved results at Hereford in the current quarter were the result of higher crush spreads.

In the financial discussion on retail fuel handing, the company described its results from the trading of renewable identification numbers (RINs), the mechanism used for reporting compliance with the renewable fuels standard. “Also impacting operating income for the three months ended March 31, 2014, was income generated by the sale of RINs of $17.6 million compared to $13.3 million in the 2013 period.  During the current period, 38 million RINs were sold at an average selling price of $0.47 per RIN.  We use our product supply and wholesale positions to ensure ratable low-cost supply for our retail business and to capture higher total contributions including recognizing a higher level of RINs through blending.”

The company reported total retail fuel volumes of 910.1 million gallons in Q1 2014 compared to 880.1 million gallons in Q1 2013. Murphy USA has 1,220 retail locations in operation, opening 11 in Q1. Another 13 sites are under construction, plus the company expects to add an additional 49 sites by the end of the year.

To read the full report, click here.