Australian fuel giant Viva Energy’s operating and shipping costs will be higher thanks to challenges linked to prolonged maintenance at its troubled flagship Victorian refiner.
The refinery, located in Geelong, is slowly resuming production after a crane dropped equipment during planned maintenance work that was supposed to be completed by the end of June. Repairs were expected to be completed by the end of September.
Viva supplies about a quarter of Australia’s liquid fossil fuels.
Viva supplies Shell-branded petrol stations across the country and in addition to owning and operating the Geelong refinery, it runs bulk fuels, aviation, bitumen, marine, chemicals, polymers and lubricants businesses at more than 20 terminals and 60 airports around Australia.
“In our view, the recovery of full Geelong refinery production is taking longer than what we and the market have anticipated, and therefore Viva continues to be affected by higher operating and shipping costs,” RBC Capital Markets analyst Gordon Ramsay said in a note to investors.
Viva expects to post a $20 million loss to its energy and infrastructure earnings before interest, tax, depreciation and amortisation because of problems plaguing its refinery in Victoria, unaudited financial results disclosed to the ASX on Monday revealed.
“We expect the Geelong refinery to achieve full production output capacity 4Q 2023 and post an earnings recovery,” Mr Ramsay said.
Despite the refiner not resuming full-tilt production, the refining margin fell 35 per cent to $US8.50 ($13.50) per barrel from $US13 per barrel in the prior corresponding period, thanks to oil prices increasing.
“Oil prices have since stabilised, which has in turn supported the recovery of retail fuel margins,” Viva said in a market filing on Monday.
Pump prices hit fresh average highs in Sydney, Melbourne and Adelaide in the past two weeks as Brent crude oil prices edge closer to $US100 a barrel.
Retail fuel margins were squeezed by rapidly rising oil prices over the quarter, but have since stabilised which has helped retail margins for both gasoline and diesel recover into October, Mr Ramsay said.
Fuel sales through the convenience network were slightly below RBC’s forecast, but in line with the second quarter of 2023.
Commercial and industrial fuel sale volumes rose 8.2 per cent year-on-year. Total group fuel sale volumes were in line with the second quarter of 2023, and have risen 4.7 per cent year-on-year, he added.
Viva shares declined 2.85 per cent to $2.73 on Monday.
Extracted in full from: Viva underperforms on Geelong refinery troubles (afr.com)