Caltex Australia Plant Work to Limit Output in 2009

By Angela Macdonald-Smith

Aug. 22 (Bloomberg) -- Caltex Australia Ltd., the nation's biggest oil refiner, said ``major'' work at a plant accounting for almost half its capacity will limit 2009 output, after unplanned shutdowns cut production and profit in the first half.

Maintenance at the Lytton plant near Brisbane will prevent output of transport fuels reaching a target of 1 billion liters a month until 2010, Managing Director Des King said today. First-half profit excluding the effect of oil prices on the value of stockpiles fell 33 percent, beating the slump of as much as 40 percent forecast in June.

Unplanned closures at Caltex's two refineries contributed to a 13 percent drop in first-half output of gasoline, diesel and jet fuel and pared average operating rates. Caltex expects to complete a A$320 million ($281 million) diesel project at Lytton by the end of March, boosting capacity for the fuel by 40 percent and helping it toward its monthly production target.

``At least the maintenance at Lytton is planned, so they can store and refine and build inventories so you won't have the impact of having to import at short notice,'' said Stuart Baker, an energy analyst at Morgan Stanley in Melbourne. ``It shouldn't be a big impact, but it does delay the impact of bringing that new hydro-treater on'' line to expand production of cleaner fuel.

Caltex Australia, half-owned by Chevron Corp., gained 20 cents, or 1.7 percent, to A$11.95 in Sydney trading, beating a 1.2 percent advance in the Australian stock exchange's benchmark index.

Diesel Jumps

The maintenance at Lytton is work that occurs every four to five years, King said in a Web cast on first-half earnings, reported today in a statement to the Australian stock exchange. It will last ``several weeks'' and will reduce full-year output by ``much less than 5 percent,'' he said later in an interview.

``Production could well be a little bit lower next year overall,'' King said.

First-half production of transport fuels fell to 4.7 billion liters and full-year output may be below an earlier forecast of 10.4 billion to 10.6 billion liters, depending on the profitability of converting crude-oil into gasoline, King said.

``Should gasoline margins remain weak, we may emphasize gasoline imports at the expense of gasoline production,'' he said. ``We anticipate robust refiner margins overall, with diesel and jet fuel likely to remain strong, while we expect continued weakness in gasoline.''

Gas Shutdown

Caltex's diesel sales jumped 13 percent in the half, outpacing market growth of 8.3 percent, driven by demand from mining companies and the shutdown of an Apache Corp. natural gas plant in Western Australia which prompted buyers to seek alternative fuels. Australian diesel sales overtook gasoline sales for the first time in May.

Net income dropped 4 percent to A$354 million in the six months ended June 30, from A$368 million, a year earlier because of the shutdowns and a gain in the Australian dollar, Caltex said in the statement.

Operating profit excluding the effect of changes in oil prices on the value of stockpiles fell to A$196 million from A$294 million. In June the company forecast a drop in net income of as much as 18 percent and in operating profit of as much as 40 percent.

``The result was probably better than we had expected,'' Morgan Stanley's Baker said. ``There were strong contributions from downstream businesses, while there had been headwinds in the first half in the unexpected outages and some of those should abate in the second half.''

Shell, Exxon

Marketing activities accounted for more than three-quarters of operating profit, which would have been as much as A$260 million were it not for the unplanned shutdowns, King said.

The company wants to expand its retail outlets and win market share from rivals including the local units of Royal Dutch Shell Plc and Exxon Mobil Corp., he said.

While refining margins in the first half slid to $10.40 a barrel from $10.74, the gain in the Australian dollar cut margins in local currency terms by 16 percent.

Sales gained 34 percent to A$12.1 billion. Net debt rose to A$645 million at June 30, from A$582 million at Dec. 31. Caltex declared an interim dividend of 36 cents a share.

Caltex's refineries have a combined capacity of more than 35 million liters a day, according to its Web site. The Kurnell plant in Sydney's southeast is the largest in New South Wales state, based on daily capacity of more than 20 million liters. Lytton, in Queensland, can process about 17 million liters a day.

To contact the reporter on this story: Angela Macdonald-Smith in Sydney at amacdonaldsm@bloomberg.net