Australia | 11:00 AM
Ampol's September quarter result fell short of market expectations, but has the subsequent share price pullback opened up an opportunity for investors?
- Lytton refinery margins miss as costs bite
- Middle East war continues to offer tailwinds
- International trading offers potential upside
- Resilient performance from Convenience stores
- Scope for a special dividend in February 2027
By Danielle Ecuyer
Lytton refining margin disappoints
The release of a disappointing September quarter update has put downward pressure on the Ampol ((ALD)) share price this week. As at yesterday's closing share price of $39.67, the price has lost roughly -8% since Monday.
Prior to the announcement, the share price had risen 31%, also outperforming the broader energy sector.
Ampol’s Lytton refinery fell short of expectations as extended maintenance reduced production, while higher crude costs and a less favourable product mix weighed on margins.
RBC Capital highlighted the Lytton refinery margin of US$23.92/bbl missed both its own forecast of US$34/bbl and the consensus estimate of US$26.68/bbl.
However, judging from analysts' reviews post Monday's update, the outlook might be more encouraging than this week's share price punishment indicates.
UBS expects global fuel shortages to support refining margins into 2027, with market volatility also potentially benefiting Ampol’s international trading operations.
Bringing forward maintenance should position Lytton to operate at maximum capacity in 2027. UBS sees upside to market expectations, with its first-half 2027 refining margin forecast more than 15% above consensus.
Middle East energy disruptions and refining margins
Regarding the outlook, Brent crude rose 14.9% in September to US$100.2/bbl from August as hopes of a lasting US-Iran agreement faded.
The IEA has estimated global observed inventories were -507mb lower at the end of August compared to the start of the war, although reported crude exports through the Strait of Hormuz recovered to around 70%-90% of pre-conflict levels in late September.
Westpac does not envisage a lasting US-Iran agreement until at least mid-2027 and assumes there will not be a return to “full-scale” military action.
It is, however, anticipated there will be a continuation of Iranian attacks on ships and facilities as well as US blockades of Iranian exports. Westpac forecasts average Brent futures around US$101/bbl for 4Q2026.
The supply risk premium is expected to ease and the market to move into surplus in late 2027. Brent is forecast at around US$77/bbl in 4Q2027, declining to US$70/bbl in 2028, with expectations that Middle East production recovers completely.
For Ampol, the uncertainty around the duration of these disruptions adds another layer of complexity to the outlook for refining margins.
While management has guided to around -150ML less production of higher-value-added products such as petrol, diesel and jet fuel in the current quarter due to the added maintenance, the UBS analyst expects this to have only a slight impact on the Lytton refinery margin.
This broker’s 2H2026 forecast remains unchanged at US$25.1/bbl.
UBS highlights ongoing volatility in crude oil premiums and freight rates could result in a wider range of realised Lytton Refiner Margins (LRM) for Ampol.
When physical crude oil available for immediate delivery trades at a premium to Brent oil futures, the higher cost of securing and transporting crude can erode refining margins, even when regional crack spreads remain elevated.
This creates greater uncertainty around the actual margins Ampol can achieve, with the potential for refinery production cuts if processing crude becomes uneconomic.
In other words, elevated Singapore refining margins may not necessarily translate into stronger realised margins for Ampol, increasing the potential for earnings volatility.
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