Why the Viva Energy (ASX:VEA) share price is in focus

The Viva Energy Group Ltd (ASX: VEA) share price is one to watch after the energy group’s first quarter update this morning.

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The Viva Energy Group Ltd (ASX: VEA) share price is in focus again after climbing 1.1% higher yesterday. Investors will be watching after the Aussie energy group’s latest quarterly update prior to the market open.

Why is the Viva Energy share price in focus?

Viva Energy CEO and managing director, Scott Wyatt, said:

Viva Energy is making strong progress on our business recovery program with encouraging results in all parts of our business during the quarter.

The Viva Energy share price will be one to watch as investors see if they share the same opinion. Industry fuel volumes remain down with coronavirus-induced lockdowns and border closures weighing on demand.

Viva Energy’s quarterly petrol production reflected the challenging conditions. Alliance sales volumes “progressively improved” throughout the first quarter despite rising oil prices. Premium petrol sales are up 11% on the same period last year and now comprise 32% of total petrol sales.

Petrol sales remained flat at 780 million litres (ML) while diesel segment sales climbed 4% from Q1 2020 to 1,678 ML. The aviation sector continues to struggle with jet sales down 62% on the prior corresponding period (pcp) to 311 ML. Similarly, lower cruise ship numbers impacted its marine volumes in “Other” which fell 39% on pcp to 261 ML.

One area that makes the Viva Energy share price worth watching was its Geelong refining margin. The Aussie energy group saw its refining margin surge 119% to US$5.9 per barrel, up from US$2.7 in Q1 2020. Viva Energy said the refining environment remains “challenging” as it works with the Federal Government on the long-term fuel security package.

Viva Energy expects to receive $19.6 million from the Government’s Temporary Refinery Production Payment program for Q1 2021. However, all non-essential refinery capital expenditure has been deferred to the second half of the year.

Foolish takeaway

The Viva Energy share price is worth watching in early trade after the group’s first-quarter trading update. Premium sales led the way for the Aussie company while several challenges remain for key business segments.

Shares in the energy group are down 3.7% this year and are underperforming the S&P/ASX 200 Index (ASX: XJO) on a year to date basis.

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Motley Fool contributor Ken Hall 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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