(Citgo, 16.Aug.2021) — Citgo Petroleum Corporation reported its second quarter 2021 performance results, including net income of $3mn, EBITDA1 of $214mn and adjusted EBITDA2 of $208mn, marking the company’s first profitable quarter since the third quarter of 2019.
“Given the multiple challenges we have faced during 2020 and the first half of 2021, this return to profitability is particularly satisfying – especially given the slow margin recovery we are experiencing due to the lingering effects of the pandemic,” said Citgo President and CEO Carlos Jordá. “All of us at Citgo have continued to come together, carefully manage expenses and make some painful choices while remaining focused on safety and operational excellence.”
Also during the quarter, Citgo operations and much of the refining industry were affected by the nearly week-long Colonial Pipeline shutdown, which forced Citgo teams in Houston and Lake Charles to adjust operations in real time.
“The Colonial outage was of course unexpected, but the Citgo team responded with agility and professionalism,” said CEO Jorda. “We were gratified to receive positive feedback from our customers on our effective response to the shutdown.”
Despite reduced refining margins and the Colonial interruption, operations were strong at both the Lake Charles and Lemont refineries during the second quarter, with utilization rates of 87% and 97%, respectively. Reliability at the Corpus Christi refinery was negatively impacted by both operational and third-party outages affecting a number of units, which resulted in a utilization rate of 78% for the quarter. On the marketing side of the business, both the branded and unbranded product volumes and margins showed significant improvement in the second quarter.
“I am immensely proud of the hard work and sacrifice that helped make our return to profitability a reality,” said CEO Jordá, “With better margins, improved commercial and operational performance, and continued financial discipline, we believe that Citgo is well-positioned to benefit from a strengthening economy and demand for our products as we move into the second half of 2021.”
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1 EBITDA and Adjusted EBITDA are non-GAAP financial measures. Please see the reconciliation at the end of this press release for more information.
2 EBITDA and Adjusted EBITDA are non-GAAP financial measures. Please see the reconciliation at the end of this press release for more information.
Second Quarter Highlights:
Exports – Second quarter refined products exports averaged 132,000 barrels-per-day (bpd), up more than 30% from the first quarter. Export sales should see continued strength during the second half of the year as demand continues to recover.
Refinery Throughput – Total refinery throughput in the second quarter was 732,000 bpd, including 63,000 bpd of intermediate feedstocks. The overall crude utilization of 87% improved over the first quarter, despite the third-party outages affecting operations at the Corpus Christi refinery.
Notable Personnel Changes – On 23 June 2021, Ernesto José Hernández Bolívar and Luis Giusti Lugo were named to the Citgo Petroleum Corporation Board of Directors. Effective 1 June, Balvy Bhogal-Mitro was promoted to Vice President Strategic and Corporate Planning, reporting directly to Citgo President and CEO Carlos Jordá. Most recently, on 10 August, Mark Holstein was named Citgo General Counsel after serving as Interim General Counsel since December 2020.
Capital Spending/Other – The 2021 projection for capital, turnaround and catalyst spending was reduced to approximately $460mn from the previously announced $568mn after shifting the timing of the Corpus Christi turnaround from the fourth quarter of this year to the first quarter of 2022. With this revision, capital, turnaround and catalyst spending remains heavily weighted to the second half of this year. Based on improved results, effective 1 July, the company reinstated full employee salaries, which had been reduced by 10% in January 2021, and restored the employer contribution to the company’s 401(k) plan.
Industry Overview:
The second quarter of 2021 was one of improvement, both for the global economy and for the refiners who contribute products to keep that economy running. U.S. real GDP increased at an annualized rate of 6.5% in the second quarter. Increased vaccinations also allowed for much improvement in mobility. Both resulted in increased demand for refined products. Changes in key drivers for the U.S. refining industry during the second quarter include the following:
- U.S. oil demand increased to 19.78 MMBPD (million barrels-per-day) in the second quarter, up from 18.4 MMBPD in 1Q2021, with notable increases in mobility and economic activity. Demand growth is expected to continue.
- U.S. gasoline demand has continued to improve, with the second quarter averaging 5% below 2Q 2019. For the month of July, gasoline demand was just 1% shy of 2019 demand, reflecting pent-up, domestic summer travel. However, with the lingering threat of COVID variants, both U.S. and global gasoline demand is expected to finish the year 2-3% below year-end 2019 levels.
- U.S. distillate demand finished the quarter 1% above 2Q2019, consistent with the robust increase in GDP.
- U.S. jet fuel demand continues to increase at a slow and steady rate, with the second quarter now 29% under 2Q2019 in comparison to 1Q2021 being 35% under. For full year we expect Jet demand in the U.S. to average 20-25% under 2019. Consumer confidence in travel has been increasing both in the United States and globally; however, the spread of more transmissible COVID variants could have ongoing negative impacts on demand – particularly with respect to international travel – to the extent additional travel restrictions are imposed.
- U.S. refinery utilization averaged 88% for the second quarter and spiked above 91% in July to meet the summer gasoline demand. With expected continued improvements in product demand, utilization for the remainder of the year is expected to be about 3-5% below the historical seasonal range.
- U.S. refining margins improved quarter over quarter; however, higher domestic margins relative to those in international markets incentivized imports of excess supply from Europe that tempered the U.S. margin recovery. Nonetheless, we are cautiously optimistic that the second half of the year will be better than the first as the global recovery continues.
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