Refined fuel retailer Ampol (ASX.ALD) says the Middle East conflict created shortages in refined product that raised the second-quarter 2026 Lytton refiner margin by 260% on the previous corresponding period, or pcp, to USD 30.93 per barrel. Hedging also generated material value.

Why it matters: Ampol is guiding for first-half 2026 unaudited underlying EBITDA of $1.6 billion, up 147% on the pcp. This is materially ahead of our prior $1.1 billion forecast, much likely due to the hedging, though Ampol hasn’t yet quantified the benefit.

  • We consequently increase our 2026 EPS forecast by 77% to $5.04. Our 2026 divided per share forecast improves to $3.02, equivalent to an attractive fully franked 7.6% yield at the current share price. Such levels should not be expected to persist, however. Our 2027 EPS forecast is $2.28.
  • Ampol completed the acquisition of EG Australia on June 30, 2026, and elected to convert the scrip component of the consideration to fully cash. Shares on issue remain at 238 million, with the purchase funded out of strong first-half earnings our $3.4 billion estimate for net debt at end-June stands.

The bottom line: Our fair value estimate for no-moat Ampol increases 5% to $32 per share. Time value of money is complemented by the strong second-quarter performance. Ampol shares are up more than 40% since February and, in our view, are overvalued, in 2-star territory.

  • Appeal is growing fuel and convenience earnings in Australia and New Zealand backed by an integrated fuels supply chain. EVs will make inroads, but we expect refined fuel demand to persist well into the 2030s. Near term, we think the market credits Middle East gains persisting too long.
  • Our fair value assumes a five-year group EBITDA CAGR of 8% to $1.9 billion by 2030, including acquisition of EG. This assumes a midcycle Lytton refiner margin of USD 13.50 per barrel and improvement in nonrefining EBITDA margin to 5.8 cents per liter from 4.2 cents in 2025.

Ampol’s refiner margins soar on Middle East volatility

Ampol owns and operates a major refined petroleum product import terminal at Kurnell in Sydney and a refinery at Lytton in Brisbane. Annual refining capacity fell by half to 6.0 billion liters, about one-third of the company’s marketed volumes, when Kurnell closed in 2014. The refineries and finished product import terminals are integrated with pipelines, distribution, and marketing. The national service station network exceeds 1,800, including more than 600 operated Foodary convenience sites. There are also over 500 sites in New Zealand via subsidiary Z Energy.

Strong demand for transport fuels reflects favorable market attributes. Australia’s relatively sparse rail network and low population density favor trucks for the distribution of goods. Pandemics notwithstanding, volumes in the Australian liquid fuels market grow at close to growth rates in gross domestic product, with solid increases in diesel and jet fuel consumption offsetting a slow decline in petrol.

Ampol’s extensive network and comprehensive product offerings provide some competitive advantage. A very efficient supply chain makes Ampol an effective competitor. Still, we don’t see this as sufficient to justify a moat rating. The closure of Kurnell sees Ampol’s business rest largely on fuel distribution. In this space, it wrestles with expert competition in BP, Shell, and ExxonMobil. Potential long-term threats include substitution of diesel for alternative fuels such as liquid natural gas, or LNG, and electricity. In the case of LNG in particular, Ampol is likely to participate in any shift via its logistics network and filling stations.

Ampol maintains a market-leading 35% share of all transport fuels sold. Ampol substantially rests on its competitive supply chain now that Kurnell has been converted into an import terminal. Competitive pressures in the refining segment meant Ampol could not earn its cost of capital on Kurnell. The highly profitable and fast-growing marketing segment can enjoy increased investment that was previously wasted in the laggard.

Ampol successfully completed a NZD 2.0 billion bid for New Zealand peer Z Energy in first-half 2022.

Bulls say

  • Ampol is well-placed, with a leading market share in transport fuels. This position is backed by an extensive distribution network.
  • Australia’s demand for transport fuels grows at close to GDP rates.
  • Closing the highest-cost Kurnell refining operation materially improved return on invested capital.

Bears say

  • Ampol earnings are subject to influences outside of management control--currency, crude oil prices, and the Singapore refiner margin.
  • Increasing imports from significantly larger refineries could eat into Ampol’s transport fuels market share if distributed through independent operators.
  • Refining is a capital-intensive industry, and therefore volume and price must be maintained, as well as mechanical availability.

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