By Sourasis Bose and Nicole Jao
(Reuters) -Oil refiner Phillips 66 (NYSE:) reported a first-quarter profit loss on Friday as seasonal maintenance and a renewable fuel conversion project at its Rodeo, California, refinery weighed on earnings.
Phillips’ market capture, a measure of refining profits compared to industrial benchmarks, fell from 93% to 69% in the quarter, even as crude utilization was 92% above last year.
The company said realized margins in the first quarter fell about 47% to $10.91 per barrel from a year earlier, led by a nearly 50% decline in Gulf Coast margins.
Seasonal maintenance activities, mainly at the downstream catalytic units on the Gulf Coast, limited the refinery’s ability to make higher value products, Phillips 66 CEO Mark Lashier said during the company’s earnings call on Friday.
“We are still maximizing the throughput of our crude oil, but by design that crude oil has been turned into intermediates rather than clean products because of the recovery work we had along the way,” he said.
The refiner’s shares fell nearly 3% on Friday.
On the West Coast, the renewable energy conversion project at the Rodeo refinery suffered a $180 million loss during the quarter, which also weighed on quarterly results.
The market had expected a noisy refining result on the West Coast given the start of Rodeo, but margins were also weaker than forecast in other regions, TD Cowen analyst Jason Gabelman said in a note.
The Rodeo Renewable Energy Complex produces 30,000 barrels of renewable fuels per day. According to the earnings report, the plant is on track to produce about 50,000 barrels of renewable fuels per day by the end of the second quarter.
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Activist investor Elliott, who unveiled a $1 billion stake in Phillips last year, has pushed the company to address underperformance in refining and accelerate cost cuts.
Refiners’ margins have been slashed from the peaks reached after Russia’s invasion of Ukraine in 2022, amid a surge in global refining capacity that has led to a drop in fuel prices.
Rival Valero beat profit expectations on Thursday despite routine maintenance work at its refineries.
Phillips 66 said it has launched a sale process of its retail marketing businesses in Germany and Austria as part of its plan to divest non-core assets worth about $3 billion.
The Houston-based company reported adjusted earnings of $1.90 per share for the three months ended March 31, compared with analyst estimates of $2.17 per share, according to LSEG data.
