ADoseOfData

Hit Them with Your Best Shot

Hit Them with Your Best Shot: WPZ reported a record third quarter, pulling in $1,189 million in Adjusted EBITDA, exceeding our model by $4 million, or 0.3%. The two segments driving the record earnings were NGL & Petchem and Atlantic-Gulf. Margins at Geismar have been especially volatile this year as several major crackers went offline for maintenance in Q3. Additionally, WPZ drew on ethylene in storage to capture some of the strongest spreads of the year. However, the company left a little in the tank by not completely drawing down inventories during the Q3 price spike. Management stated they’re waiting for stronger spreads in Q4. The observed ethylene margin for cracking ethane is now down 30% from its September high of more than $0.30/gal, but is still stronger than 1H2016. Time will tell if company can realize better margins in Q4 and if they were anticipating Geismar operations returning to normal. Leaving some storage inventory for Q4 smooths the drop after a knockout quarter. We expect olefins sales to be up in Q4 assuming that storage inventories were drawn. (Ticker: WPZ)

WPZ reported a record third quarter, pulling in $1,189 million in Adjusted EBITDA, exceeding our model by $4 million, or 0.3%. The two segments driving the record earnings were NGL & Petchem and Atlantic-Gulf. Margins at Geismar have been especially volatile this year as several major crackers went offline for maintenance in Q3. Additionally, WPZ drew on ethylene in storage to capture some of the strongest spreads of the year. However, the company left a little in the tank by not completely drawing down inventories during the Q3 price spike. Management stated they’re waiting for stronger spreads in Q4. The observed ethylene margin for cracking ethane is now down 30% from its September high of more than $0.30/gal, but is still stronger than 1H2016. Time will tell if company can realize better margins in Q4 and if they were anticipating Geismar operations returning to normal. Leaving some storage inventory for Q4 smooths the drop after a knockout quarter. We expect olefins sales to be up in Q4 assuming that storage inventories were drawn. (Ticker: WPZ)

About The Author Justin Carlson

I have over 10 years of experience in data analysis, research, and consulting across the energy sector. I currently serve as Vice President of Research and Managing Director at East Daley Capital, an energy assets research firm that is changing how investors look at midstream energy risk with an asset-driven information service that combines proprietary research with a trusted team of unbiased, experienced energy analysts. My insights and analysis bring greater transparency to the energy financial market by quantifying potential risks by asset and enabling investors to make more informed and accurate projections and investments. Prior to joining East Daley Capital, I was a senior manager at Platts, a division of McGraw Hill Financial, which acquired Bentek Energy, where I was a senior member of the leadership team.