Overall, the Ampol share price is down 19.71% in the last year, while the S&P/ASX 200 Index (ASX: XJO) is down 4.41% over the same period of time.
What’s affecting the Ampol share price?
This morning, Ampol released the Lytton refinery unaudited results for the fourth quarter of FY20. The Lytton refinery started operating in 1965 and is the country’s largest oil refinery. Its fate, however, has been called into question since the COVID-19 pandemic.
The good news for Ampol
In the fourth quarter, Lytton’s earnings before interest and tax (EBIT) showed a loss of $4 million, rounding out the full-year results for the refinery to a loss of $145 million.
The good news is this result exceeded analyst expectations by $20 million. Originally the consensus reflected a $165 million loss.
And not so good news…
The fact is that it’s still a substantial loss and, in Ampol CEO Matt Halliday’s own words, “unacceptable”.
As today’s update outlined, ongoing economic disruptions in 2021 have resulted in continued uncertainty.
The impacts on both international and domestic demand, in tandem with the strong Australian dollar, have tightened refining margins even further. Today’s update unveiled the refiner’s margins slipping to US$5.13 per barrel, compared to the US$9.08 per barrel refiner margin in the first half of 2020.
Meanwhile, the Lytton refinery continues to undergo its comprehensive review as Ampol works to determine the best course of action. The review is expected to be completed in the first half of 2021.
Lastly, Ampol disclosed that its net debt at the end of December 2020, excluding lease liabilities, was $434 million.
The future of Lytton
As previously mentioned, all options are on the table for the refinery. The Federal Government’s $2.5 billion fuel security package, proposed late last year, did not tickle the fancy of Mr Halliday, who told the Australian Financial Review:
We appreciate the intent of the proposed support package, but we need to be realistic about the extreme structural challenges that are facing the asset up at Lytton. We need to take control of our own destiny and focus on how we are going to deliver value for our shareholders.
If Ampol does decide to close the Lytton refinery, it would come after BP’s closing of the Kwinana refinery in Western Australia. Adding to the other 3 refineries that have shut down in Australia in the last 8 years.
Based on the Ampol share price at the time of writing, its market capitalisation is now $7.13 billion.
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Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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