skills/full-company-analysis/references/modules/M086-refiners-analyst-playbook.md

<!-- Generated loss-aware reference mirror from God_Level_Public_Company_Financial_Analyst_Job_Guide_V6_99_ALL_SUB70_FIXED.docx. Canonical source remains the bundled DOCX. -->

<!-- Module: 086 | Title: Refiners Analyst Playbook -->

## PART XV - SECTOR PLAYBOOKS | MODULE 086

# Refiners Analyst Playbook

> Mission. Build a sector-specific research system for Refiners that converts operating data into financial outcomes, highlights the accounting areas most likely to distort comparability, and selects valuation methods that reflect the sector's economics.

## Economic engine and binding constraints

Model throughput, utilization, product yields, crack spreads, crude differentials, RINs/carbon costs, turnaround expense, working capital, and sustaining capex. Normalize through-cycle margins and recognize inventory accounting effects.

## Primary KPI stack

| KPI | Construction / analyst control |
| --- | --- |
| throughput | Physical volume processed, transported, refined, or handled through the asset during the period in standardized units. Validation: Tie physical/operating units to company disclosures or source-system data; reconcile beginning/ending populations where applicable and test scope, ownership, and period consistency. |
| utilization | Actual productive output or occupied capacity divided by practical available capacity after planned downtime, yield loss, and maintenance constraints. Validation: Recalculate from same-scope numerator and denominator; confirm period, units, cohort/geography, and issuer definition; reconcile material differences to filings or operating data. |
| crack spread | Market value of refined products produced from a barrel of crude minus crude feedstock cost, using a stated product slate such as 3-2-1. Validation: Recalculate independently from cited source data; verify definition, period, units, scope, signs, and any reconciliation to reported financial or operating totals. |
| capture rate | Realized refining margin divided by benchmark crack spread for the same region and period. Validation: Recalculate from same-scope numerator and denominator; confirm period, units, cohort/geography, and issuer definition; reconcile material differences to filings or operating data. |
| RIN cost | Net Renewable Identification Number compliance cost divided by refined gallons/barrels or reported as total expense net of internally generated credits. Validation: Recalculate price/cost from underlying dollars and physical units; test mix, rebates, FX, timing, and unit-definition effects; reconcile to reported revenue or expense. |
| turnaround expense | Maintenance turnaround cash/expense incurred during planned refinery outages, shown by facility and period and separated from normal maintenance. Validation: Recalculate independently from cited source data; verify definition, period, units, scope, signs, and any reconciliation to reported financial or operating totals. |
| inventory | Inventory days = average inventory / COGS x days in period |
| renewable diesel economics | Realized product price + credits/incentives - feedstock - conversion - logistics and variable costs per gallon/barrel. Validation: Recalculate independently from cited source data; verify definition, period, units, scope, signs, and any reconciliation to reported financial or operating totals. |



## Sector-specific accounting and comparability traps

- Lifo/fifo: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Inventory gains: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Hedges: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Turnaround accounting: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

- Environmental credits: reconcile issuer treatment with peer treatment and quantify the effect on reported growth, margin, cash flow, capital, or valuation before comparing outputs.

## Valuation frameworks

- Mid-cycle EV/EBITDA: enterprise value divided by through-cycle EBITDA after normalizing commodity prices, utilization, spreads, temporary outages, and one-time costs.

- FCF yield: normalized levered free cash flow divided by equity value; reconcile SBC, working capital, maintenance capex, taxes, and cycle before comparing companies.

- Replacement value: estimate the cost and time to recreate the asset network/capacity today, net of obsolescence and required upgrades, then compare with enterprise value.

## Sector diligence questions

- What is the most important leading indicator for Refiners, and how many months does it lead reported revenue or cash flow?

## Sector stress and falsification

- Stress throughput and utilization together in the direction most likely to break the equity story; flow the result through working capital, capex, liquidity, financing, dilution, and valuation.

- Explicitly test LIFO/FIFO. Determine whether it can make the reported sector comparison look better or worse without equivalent economic change.

## 99-point standalone execution extension

### Model architecture and forecast chain

Model throughput, utilization, crude differentials, crack spreads, product yields, RIN/renewable obligations, turnaround, and working capital.

### Leading-indicator dashboard

Track crack spreads, inventories, utilization, outages, crude differentials, product demand, refinery closures/additions, and regulatory credit prices.

### Primary-source map

SEC filings; EIA refinery utilization, inventories, crack-spread inputs and product demand; EPA renewable-fuel rules; regional product flows; turnaround disclosures.

### Accounting normalization test

Inventory accounting, turnaround capitalization, environmental obligations, and working-capital swings create large earnings/cash timing differences.

### Valuation implementation

Use mid-cycle earnings/FCF and asset replacement economics. Peak cracks should not be capitalized as permanent.

### Worked numerical mini-case

> Illustrative margin case.

Throughput is 200 kbpd and capture-adjusted refining margin is $12/bbl. Annual gross refining margin is roughly $876m before opex and turnarounds. A $3/bbl margin compression reduces annual gross margin about $219m.

Use regional crack spreads, capture rate, utilization and RIN/turnaround assumptions rather than spot headline cracks alone.

### Monitoring and falsification cadence

Breaks include structural demand decline, new low-cost capacity, feedstock disadvantage, environmental capex, or prolonged utilization weakness.

At every quarterly update, rebuild the driver bridge from operating units to revenue, margin, cash flow and valuation; compare leading indicators with the prior forecast; record definition changes; and precommit the threshold that would trigger a thesis reset rather than a cosmetic estimate change.

## Sector exit standard

The Refiners work is complete only when the analyst can explain the business in its native operating units, reproduce the KPI history, identify the binding growth constraint and marginal price setter, normalize sector-specific accounting, quantify a coherent adverse case, and translate the current market price into the operating expectations that must be met or exceeded.