VEA - Viva Energy Group

[System]

Viva Energy is one of Australia's leading integrated downstream petroleum companies.

Over the past three years, Viva Energy has supplied over 14 billion litres of petroleum products annually, representing approximately a quarter of Australia's fuel needs.

Viva Energy generated Pro Forma Underlying EBITDA (RC) of $634.3 million in FY2017A, and operates across three business segments:

• Retail, Fuels and Marketing;
• Refining; and
• Supply, Corporate and Overheads.

In addition, Viva Energy owns:

38% of Viva Energy REIT, an ASX-listed company and property trust that owns service station property assets that it predominantly leases to Viva Energy. Viva Energy REIT had a market capitalisation of approximately $1.5 billion as at close of 19 June 2018; and

50% of Liberty Oil, an independent fuel retailer and wholesale distributor in Australia, with a strong presence in regional markets, country-wide.

It is anticipated that VEA will list on the ASX during July 2018.

https://www.vivaenergy.com.au

 

[greggles]

Viva Energy bouncing back this morning on news that it has extended its alliance with Coles Express to 2029. Under the new arrangements Viva Energy are to take responsibility for retail fuel pricing and marketing while Coles Express remains responsible for operating the convenience stores.

Although Viva Energy are to make a one off payment of $137 million to Coles Express as a result of the changed commercial terms, the outlay is to be funded by existing debt facilities.

VEA has reaffirmed it 1H2019 prospectus forecast of underlying EBITDA (RC) for Retail of $321.9 million, and expects the 2H2019 Retail Underlying EBITDA (RC) result to be in line with 1H2019, resulting in a full year earnings uplift of 5.7% above the expected FY2018 Retail Underlying EBITDA (RC) result of $608.8 million (unaudited).

VEA up 12.73% to $2.17 so far today.

 

[Trav.]

Nice BO and gap filled.

ATH @ $2.58

Holding

 

[barney]

Holding

…… and other appropriate smilies

 

[bux2000]

Hi There,
Wonder if someone may be able to explain. After looking at risk and reward options in the current market I bought some VEA today at $1.20. I did not however look at recent announcements. They have announced a buy back. Simple question is this a good or bad thing for the price in the future.
Thanks
bux

 

[peter2]

@bux Thanks for the question but this type of question is better placed in the VEA (stock specific) thread. I'll ask @joeblow to move it and my reply to that thread later on.

Assessing the risk reward of every investment is a judgment decision we all must make. I'm inclined to agree with your decision to buy at this time. However that doesn't mean the price of VEA can't go lower. Currently the Saudi's have reduced the price of their oil to very low levels and this has caused the prices of all oil associated companies to fall hard.

I did not however look at recent announcements.

An informed investor makes better decisions. You should have checked the recent announcements because VEA have decided to postpone their buyback due to the uncertainty caused by the current coronavirus crisis.

Buybacks are generally good for the share price because this activity reduces the number of shares on issue. The size of the buyback is important. VEA got their cash from selling assets in their restructure. These assets belong to the shareholders and they're entitled to most of the money if the company isn't going to use it.

Buybacks are lazy way of benefiting shareholders. It indicates that the Board don't know what to do with the money.

 

[bux2000]

Definition of hindsight
: perception of the nature of an event after it has happened In hindsight, it's clear there were alternatives.

Hi Peter
Thank you for taking the time to reply and Thank you Joe for shifting it to a more suitable place

bux

 

[mikmac]

DYOR but I personally think now is not a great time to invest in them as I see further downside to their SP, based on a few factors. I haven't had a deep look specifically at their operations but generally speaking:

Refining margins - throughout the world they are currently in the negatives due to the pandemic with a significant reduction in demand. The Geelong refinery had a gross refining margin of $3.4USD a bbl in Jan and $2.4USD in Feb, compared with a GRM of $6.6 and $7.4 in 2019 and 2018 respectively. Jet was one of the more profitable finished products for a refinery in the Asia Pacific region. Now with demand almost reduced to nothing overnight and likely to see the borders closed for 6+ months, I would not expect to see the crack spread on Jet to improve for some time, and see significant erosion in the GRM in this alone. Gasoline margins were already pretty low due to a regional oversupply, little demand now also. Diesel may hold up somewhat due to the agriculture and logistics sectors been mostly unaffected.

Ongoing oil war reducing crude oil prices - while low crude oil prices are generally a good thing for a refinery longer term, a volatile crude price isn't. Crude is bought 2-3 months out from actual processing. My understanding on this side of it is a bit blurry however.

Major turnaround (shutdown) - Scheduled execution towards Q3 this year at Geelong Refinery. As I understand it, the catalytic cracker and associated units at the refinery are entering into a maintenance period for 6-8 weeks. A catalytic cracker is a high margin unit - upgrading low value, longer chain hydrocarbons into more valuable products. Further reduction in crude run rate in general would be expected while these units are undergoing maintenance.

Retail demand/service stations - People aren't traveling, aren't at work so no demand for petroleum products. Pretty self-explanatory this one.

My few

 

[So_Cynical]

Hi There,
Wonder if someone may be able to explain. After looking at risk and reward options in the current market I bought some VEA today at $1.20.

Floated at 2.50 two years ago so you're in for less than half that price and close to the 52 week low, demand is weak but that won't last forever.

 

[Dona Ferentes]

This isn't a hearty endorsement of future upside?

"Although demand will recover in time, some refineries around the world will no doubt close as a result of the more permanent demand impacts and challenging economic outlooks in their respective markets, the question for us is whether Australian refineries should again fall victim to this rationalisation”

Scott Wyatt, CEO, Viva Energy Australia

 

[Dona Ferentes]

Viva up 5% today; a trading update stated it was looking at underlying earnings of $390 million to $410 million June 30 half-up 48% from the same half in 2020 and 34% from the first half of 2019.

Much of the improvement can be put down to the start of the multi-million dollar support package from the federal government started earlier this year, Viva and Ampol (nee Caltex Australia) are the major beneficiaries of this spend by Canberra. Viva said it received $40.6 million of the Federal Government’s Temporary Refining Production payment in the half.

The Fuel Security Service Payment announced as part of the Federal Government’s long-term Fuel Security Package was expected to start on July 1 and run to at least June 30, 2027 (unless extended by option). It will replace the temporary payment.

Viva said the improvement followed strong sales growth in its non-aviation (jet fuel) businesses, supportive margins (ie higher prices), and an improved refining performance since returning to full production late last year.

 

[Dona Ferentes]

Viva Energy will halt purchases of Russian crude oil following the invasion of Ukraine but only after its next two shipments, which it said are needed to avoid potential fuel shortages.

The petrol and diesel supplier said it has explored options to sell the two cargoes of Russian crude that are due to arrive in Australia over the next two months for processing at its Geelong refinery, but had found “no credible purchasers”.

Without the two cargoes, which have been purchased from international oil companies rather than from Russian producers, “the company faces gaps in its refining program and potential fuel shortages”, it said.

.... a 'developing story', as they say ?

 

[InsvestoBoy]

Viva Energy will halt purchases of Russian crude oil following the invasion of Ukraine but only after its next two shipments, which it said are needed to avoid potential fuel shortages.

The petrol and diesel supplier said it has explored options to sell the two cargoes of Russian crude that are due to arrive in Australia over the next two months for processing at its Geelong refinery, but had found “no credible purchasers”.

Without the two cargoes, which have been purchased from international oil companies rather than from Russian producers, “the company faces gaps in its refining program and potential fuel shortages”, it said.

.... a 'developing story', as they say ?

Seems like big news.

I wish our Federal Government utter disregard for Strategic Petroleum Reserve obligations would be an election issue but it seems like the electorate cares less than the Government.

 

[Dona Ferentes]

Viva Energy (ASX: VEA) is one of Australia’s leading energy companies and supplies approximately a quarter of the country’s liquid fuel requirements. It is the exclusive supplier of high-quality Shell fuels and lubricants in Australia through an extensive network of more than 1,340 service stations across the country.

Viva Energy owns and operates the strategically located Geelong Refinery in Victoria, and operates bulk fuels, aviation, bitumen, marine, chemicals and lubricants businesses supported by more than 20 terminals and over 50 airports and airfields across the country.

..... just trying to figure out who owns the former Shell oil refinery site on the Parramatta River, which is tipped to fetch more than $500 million when it comes up for sale....

.... what was Shell’s Clyde Refinery, the 25.6 hectare holding took 10 years to rehabilitate and is being sold with approval for a 13-lot subdivision by interests associated with ASX-listed Viva Energy,

 

[Country Lad]

Viva Energy owns and operates the strategically located Geelong Refinery in Victoria, and operates bulk fuels, aviation, bitumen, marine, chemicals and lubricants businesses supported by more than 20 terminals and over 50 airports and airfields across the country.

..... just trying to figure out who owns the former Shell oil refinery site on the Parramatta River, which is tipped to fetch more than $500 million when it comes up for sale....

@Dona Ferentes the note 14 in the last VEA annual report answers your question.

14 . These properties were sold (or in case of Part Clyde Terminal agreed to be sold upon the plan of subdivision being registered) to VE Property Pty Ltd (VEP) in 2017 and 2018. Accordingly, with the exception of Clyde Terminal, these sites are now owned by VEP. Pursuant to the agreement with VEP, Viva Energy retains responsibility for remediation

It is that part of the property that Viva will not use as their terminal facilities. Mind you, VE property is a private company with no profile so good luck with finding who they are. Maybe worth going back to the VEA 2017 and 2018 annual reports. VEP purchase from VEA. Are the VE initials coincidences?

VEA still strong after saying in the recent refining update to end April that:

For the four months ended 30 April 2022, the Company’s unaudited EBITDA (RC) is approximately $308M. This is an increase of 65% on the prior year’s corresponding four-month period ended 30 April 2021, reflecting the current increase in refining margins together with a continued strong performance in our Retail and Commercial marketing businesses.

Happy to hold for the longer term.

 

[Dona Ferentes]

Update:
Strong global demand for refined products, especially diesel, coupled with tightening supply as a result of refinery closures, reduced exports from China and the broader impact of sanctions on the purchase of Russian oil, continued to drive stronger global refining margins through 2Q2022. The Geelong Refinery delivered a strong operational performance, producing at near full capacity in 1H2022. Actual Geelong Refining Margin achieved in 2Q2022 was US$30.8/BBL, which is a significant increase on the GRM of US$8.3/BBL reported for the quarter ended 31 March 2022 .

..... can't see this going the other way, for a while.

Unaudited Underlying Group EBITDA (RC5) for 1H2022 is expected to be approximately $614M, an increase of 140% on the same period last year. This improvement is predominantly driven by a stronger refining performance and continued recovery in commercial segments which were most impacted by the pandemic, with Retail performance negatively impacted due to the effect of rising product costs on retail margins.

......but there are cost pressures.

 

[Dona Ferentes]

Viva Energy to acquire Coles Express and create largest fuel and convenience network under single operator

This transaction will create the largest single branded Australian fuel and convenience network under a single retail operator, with 710 sites nationally, providing the platform for Viva Energy to accelerate plans to further grow its retail network and the fuel and convenience business. By bringing together the two businesses now, rather than at the natural end of the Alliance in 2029, Viva Energy can more efficiently optimise the network and is in a better position to make the investments necessary to keep evolving the convenience offer at a point where sales are recovering and consumers are increasingly seeking greater convenience offers.

Together with its investment in the regionally focused Liberty Convenience network of 92 sites, the Company has a high quality national network of fuel and convenience stores located in metro, regional and on main transport routes, providing an advantaged position to serve the on-road and local suburban convenience markets.

 

[Sean K]

Not sure why this has crept onto my watchlist, and why I haven't bought it...

 

[Smurf1976]

Viva Energy to acquire Coles Express and create largest fuel and convenience network under single operator

And now acquiring On The Run as well.

OTR being a major service station chain in SA. I haven't seen figures but they'd account for a pretty large % of all fuel sold in Adelaide I expect, there's a lot of them.

 

[Dona Ferentes]

And now acquiring On The Run as well. ..OTR being a major service station chain in SA. I haven't seen figures but they'd account for a pretty large % of all fuel sold in Adelaide I expect, there's a lot of them.

The OTR Group comprises the OTR Convenience Retail network of 205 company-owned and -controlled leasehold stores operating under the OTR brand, comprising 174 integrated fuel and convenience stores and 31 stand-alone stores.

The network also includes

• 92 stores which incorporate quick service restaurants (QSRs) operated by OTR. The business has leasehold rights to a growth pipeline of 90 sites, largely outside of South Australia, which will be developed into new OTR stores over the next few years;
• Smokemart and Giftbox (SMGB) provides tobacco and cigarette wholesale arrangements to OTR and other retail third-party networks. Its retail network consists of 257 company owned and controlled leasehold stores across Australia, together with an online retail website;
• the Mogas Regional and Reliable Petroleum wholesale fuel and lubricant businesses which service customers in regional South Australia

...
Moving towards convenience... Viva will bring together the OTR, Coles Express and Viva Energy Retail businesses to establish a nationwide convenience network with more than 1,000 stores.

Viva claimed the purchase would:

“Immediately increase the earnings contribution from Convenience from ~30% to ~50% of the Convenience & Mobility business, reducing dependency on income from traditional fuels and increasing exposure to the fast-growing convenience sector.

“Extend the proven OTR convenience offer and technology platforms to Coles Express stores that can support the format, taking the OTR brand nationally and growing convenience sales. OTR’s convenience sales per store are, on average, more than double what is achieved through the Coles Express network presenting considerable growth upside.

“Achieve significant scale and synergies in procurement, marketing and functional support. OTR substantially reduces the time and cost of setting up infrastructure to replace the transitional services arrangements provided by Coles Group, by transitioning directly to proven and existing back-office infrastructure.”