Ampol won’t need to tap the federal government subsidies for its Lytton refinery for the December quarter after the ageing plant posted its best quarterly result in more than four years on the back of the soaring petrol prices.
Ampol, led by chief executive Matthew Halliday, said on Tuesday the margin at its Brisbane oil refinery averaged $US11.24 per barrel in the December quarter, 40 per cent above the $US6.76 average margins in the September period and more than double the margins at the same time in 2020.
Lytton delivered earnings before interest and tax of $22m in the September quarter, despite softening oil prices in the period after a peak of about $US75 a barrel in July.
But oil prices surged again in the December quarter and Ampol said on Tuesday it expected Lytton to deliver a vastly improved quarterly profit, probably the highest in more than four years at the once-troubled refinery.
“The Lytton refinery is expected to deliver the highest RCOP EBIT quarterly result for more than four years, reflecting the substantial operating leverage to improved refiner margins,” Ampol said on Tuesday.
Lytton also delivered stronger output in the period, producing 1.59 million litres of fuel in the three months to the end of December, up from 1.57 million litres in the September quarter and more than 15 per cent above the levels in the December 2020 quarter.
Lytton delivered about 20 per cent of Ampol’s EBIT in the September quarter.
The stellar result means the refinery won’t be eligible to receive the federal government’s Fuel Security Service Payment for the second quarter in a row.
The variable subsidy was introduced from July 1 this year, taking over from a temporary 1c a litre subsidy put in place last year.
It was designed to ensure both Lytton and Viva’s Geelong refinery stay in business after Australia’s fuel security was threatened by a wave of oil refinery closures over the last decade, capped by ExxonMobil’s announcement a year ago that it would close its Altona refinery, and BP’s 2020 decision to cease production at Kwinana in Perth.
Both Altona and Lytton were under threat of closure until the subsidy scheme was locked in.
Strong margins and oil prices have so far managed to shield the federal government from significant claims under the scheme, with Viva saying in December it did not expect to claim the payment for the final quarter of its own financial year due to strong margins at Altona.
The subsidy increases when refineries’ margins are low and tapers off when profits are high, with the federal government having flagged a total cost over the next decade of up to $2.04bn under worst-case scenarios.
RBC Capital Markets analyst Gordon Ramsay said the Ampol announcement was in line with expectations for Lytton’s margins and output volumes.
“As city traffic volumes return towards more normal levels, we expect Ampol fuel sales volumes to increase. Retail fuel margins were also very strong in early December but have now moved back towards more normal period average levels,” he said.
Lytton produced 6.14 million litres of fuel in 2021, Mr Ramsey said, at an average margin of $7.45 a barrel. Ampol shares rose 2.4 per cent to $31.27 on Tuesday.
Extracted in full from: Soaring petrol prices help Lytton deliver solid returns for Ampol (theaustralian.com.au)