Fuels retailer Viva Energy delivered a jump in first-half earnings and tripled its dividend, with its Geelong refinery cashing in on strong refining conditions while warning margins had slowed in July and August amid weaker economic growth.
Underlying group earnings increased by 139 per cent to $612m, just under guidance handed down in July of $614m, with its Geelong refining margin nearly tripling to $US19 ($28) per barrel in the first half of 2022 from the same period a year earlier. Net profit rose 218 per cent to $355m.
Refining earnings soared 747 per cent to $371m while its retail, fuels and marketing earnings rose 14 per cent to $252m.
Viva will pay a dividend of 13.7c a share after deciding to accelerate payment of the refining dividend at 8.8c to reflect the division’s “exceptional earnings” in the first half, a huge jump on last year’s 4.1c payout.
The refining margin bounce was sparked by strong global demand for diesel, tightening supply, reduced China exports and Russian oil sanctions.
Retail fuel volumes were subdued, up just 1 per cent to 2.18 billion litres, due to the pandemic, floods, and high fuel prices. Commercial fuel fared better, with volumes up 7 per cent to 4.6 billion litres as the widespread return of air travel post lockdowns saw demand for jet fuel rise by 13 per cent during the six-month period.
Still, Viva chief executive Scott Wyatt flagged a setback with an unplanned outage of its refinery catalytic cracking unit – which has hit production and will reduce the August Geelong refining margin by around $US5 per barrel. The unit is expected to return to service by the end of August.
Refining margins have also softened in July and August amid slower economic growth with the gross refining margin falling to $US15.20 per barrel.
The Geelong refinery supplies half of Victoria’s fuel while Viva has a 1300-strong network of Shell and Liberty service stations around Australia.
It supplies fuel to 50 airports around Australia although demand for jet fuel suffered during the pandemic.
The company is also working on developing one of Australia’s LNG import plants at Geelong which had been due for a final investment decision before the end of 2022.
However, Viva said that timing now hinges on the outcome of the Environmental Effects Statement approval process.
Speculation has been building the federal government could consider underwriting gas import terminals on the east coast as they do with other critical infrastructure with both EnergyQuest and UBS suggesting Anthony Albanese may choose to intervene in the market to ease a supply crunch.
Viva has a deal with Woodside Energy for the gas producer to supply the east coast markets with LNG from Western Australia for the first time.
The memorandum of understanding would result in Woodside shipping LNG from WA to Viva Energy’s planned import terminal in Geelong.
The scheme with Woodside would allow LNG terminals to operate as virtual pipelines, with vessels able to move gas around Australia rather than building new pipeline infrastructure.
Viva’s main rival, Ampol, more than doubled its interim net profit on a replacement cost basis – which strips out the impact of oil prices on its stockpiles – to $471m from $187m with its dividend also surging to $1.20 a share from 52c.
Extracted in full form: Viva Energy triples dividend on oil refining bounce (theaustralian.com.au)
