Viva Energy Sees EBITDA More Than Double to $770-780 Million in H1 2026 Amid Geopolitical Oil Market Turmoil

Geopolitical Tensions Propel Refining Margins to Record Highs

Viva Energy capitalized on a sharp tightening in global oil supply and refining capacity triggered by geopolitical events in the Middle East during H1 2026. The Geelong Refinery's margin, measured as the Geelong Refining Margin (GRM) in US dollars per barrel, soared to US$21.1/bbl in 1H26, up 156.4% from US$8.2/bbl in 1H25. This surge reflected a regional shortage of crude oil and refining capacity, creating a favorable pricing environment for Australian domestic refining.

The company highlighted that disruptions to Middle East oil flows constrained refined product availability regionally, benefiting Australian refiners. Management emphasized that domestic refining capacity has lessened reliance on international refineries and remains vital for fuel supply security. Viva Energy’s Energy & Infrastructure division, which includes Geelong Refinery, is expected to generate approximately $353 million in EBITDA (replacement cost) for 1H26. Regional refining margins are anticipated to stay above long-term averages for the remainder of FY26, although no Fuel Security Service Payment (FSSP) was received in 1H26 since the average Margin Marker surpassed the A$15.9/bbl threshold.

Geelong Refinery Alkylation Unit Fire Contained; Production Recovers to Over 90% Capacity

On 15 April 2026, a fire in the Alkylation unit at Viva Energy’s Geelong Refinery disrupted operations during a period of elevated margins. Despite this setback, production rebounded to over 90% of normal capacity following the June restart of the Regenerated Catalyst Circulation Unit (RCCU) and related units, demonstrating the company’s swift operational recovery within two months.

Despite the incident, the Energy & Infrastructure division processed 19.7 million barrels of crude in 1H26, up 4.5% from 18.8 million barrels in 1H25. The strong margin environment and near-full capacity recovery positioned the division well for the second half of FY26. Management underscored the critical importance of maintaining domestic refining capacity to ensure Australia’s energy security and supply resilience.

Commercial & Industrial Fuel Sales Rise Despite Aviation Demand Decline from Middle East Conflict

The Commercial & Industrial division reported fuel sales of 5,865 million litres in 1H26, a 1.0% increase from 5,804 million litres in 1H25, adding 60 million litres year-on-year. This growth occurred despite aviation fuel demand declines caused by Middle East conflict and a pull-forward of demand into Q1 2026. Favorable hedging and term supply contracts established before the conflict provided pricing protection and margin opportunities during market volatility.

However, these hedging benefits are expected to diminish in H2 FY26, potentially challenging C&I margin performance. Strength in the Resources sector and increased marine spot sales partially offset aviation fuel weakness, supporting volume growth. The division is projected to deliver about $305 million in EBITDA (replacement cost) for 1H26, with geopolitical disruptions presenting both challenges and opportunities.

Convenience & Mobility Segment Expands with New Distribution Centres and Store Conversions

Fuel sales in Viva Energy’s Convenience & Mobility division rose 2.4% to 2,625 million litres in 1H26 from 2,563 million litres in 1H25. Growth was driven by fuel availability, competitive pricing, and increased customer visits. Convenience sales (excluding tobacco) grew 1.3%, supported by expanded third-party delivery partnerships with Uber Eats and DoorDash, reflecting the company’s strategy to grow convenience sales beyond traditional in-store purchases.

New supply distribution centres have been established in Victoria and Queensland, with a New South Wales facility soon to be operational. Viva Energy remains on track to complete its rollout and exit the Coles private label supply agreement by FY26-end. The Convenience & Mobility division operates 983 stores under three banners: 635 Express, 251 OTR (On the Run), and 97 Liberty Convenience. The FlyBuys loyalty program was extended to the OTR network in Q2 2026, unifying loyalty across Shell-branded company-owned stores. Convenience & Mobility EBITDA (replacement cost) is expected to reach approximately $138 million for 1H26.

FY26 Store Development Focuses on OTR Growth and Unattended Self-Service Pilots

Viva Energy updated its network development plans to prioritize high-return projects amid current market conditions. The company plans to open 20 to 25 new OTR stores in FY26 and convert 10 to 15 Reddy Express stores to OTR and Liberty Convenience formats, consolidating its multi-banner strategy and leveraging OTR’s stronger brand presence.

A key strategic initiative is the rollout of unattended self-service store formats, with 25 to 30 existing stores expected to convert during FY26 following successful trials. This innovation addresses labor cost pressures and extends service hours, capturing incremental sales from after-hours and early-morning customers. Integration of OTR and Reddy Express networks continues, with FlyBuys loyalty extension creating a unified customer experience. These developments reflect Viva Energy’s confidence in convenience retail and commitment to modernizing store formats to boost profitability and customer satisfaction.

Convenience Sales Margin Affected by Inventory Write-Downs in Q2; Core Margins Remain Stable

Convenience gross margin (post waste and shrinkage) declined to 36.6% in Q2 2026 from 37.9% in Q2 2025, a 3.5 percentage point drop. However, approximately $6 million in inventory write-downs, mainly due to obsolescence and valuation adjustments, significantly impacted this figure. Adjusted for these items, Q2 2026 margins aligned closely with Q2 2025, indicating stable underlying operational performance.

For H1 2026, convenience gross margin was 37.7%, slightly down from 37.9% in H1 2025. Convenience sales revenue totaled $803 million in 1H26, a 3.8% decrease from $835 million in 1H25. The company did not specify drivers for this revenue decline, which may relate to banner mix, a 16.8% year-on-year drop in tobacco sales, or ongoing network integration and conversions. Despite these factors, the stable underlying margin suggests effective pricing power and cost management amid operational and restructuring activities.

Tobacco Sales Decline Reflects Market Shifts but Stabilize Quarter-on-Quarter

Tobacco sales in the Convenience & Mobility division fell 16.8% in 1H26 compared to the previous year, posing a significant headwind to convenience revenue. However, sales stabilized relative to the second half of 2025, indicating the decline reflects longer-term structural market changes rather than recent deterioration. Tobacco has faced declining consumption and regulatory pressures across Australian retail, and the quarter-on-quarter stabilization suggests the rate of decline may be easing.

This stabilization aligns with Viva Energy’s broader strategy to grow alternative revenue streams through delivery partnerships, expanded food and beverage offerings, and increased customer visits driven by competitive fuel pricing. The shift away from traditional, high-margin but declining tobacco sales toward higher-frequency, lower-margin convenience categories mirrors broader retail trends emphasizing fuel-led shopping occasions over destination convenience.

Net Debt Falls to $1.7 Billion on Strong Cash Flow and Capital Discipline

Viva Energy reported net debt of approximately $1.7 billion as of 30 June 2026, down $400 million from $2.1 billion at 31 December 2025. This reduction was primarily driven by strong cash conversion from elevated EBITDA and disciplined working capital management, rather than asset sales or capital raising. The $400 million net debt reduction over six months highlights the integrated energy business’s cash generation strength in a favorable margin environment.

The improved net debt position enhances financial flexibility amid ongoing capital investments in convenience store development and supply chain infrastructure. New distribution centres in Victoria and Queensland and plans to open 20-25 new OTR stores in FY26 represent significant capital deployment, yet the company continues to reduce debt. This balance between growth investment and debt reduction underscores the robust cash flow generated by elevated refining margins, providing strategic optionality and reducing exposure to future margin fluctuations or operational disruptions.

No Fuel Security Service Payment Received in 1H26 as Margins Exceed Threshold

Viva Energy did not receive a Fuel Security Service Payment (FSSP) in the first half of 2026 because the average Margin Marker exceeded the A$15.9/bbl threshold required to trigger payments. The FSSP is a government support mechanism to protect Australian domestic refining capacity during periods of sub-economic margins. The absence of payments reflects the historically elevated regional margins driven by geopolitical supply disruptions and refining capacity shortages.

This lack of FSSP payments during a period of high margins highlights the cyclical nature of this support. Management expects regional refining margins to remain above long-term averages through FY26, though likely moderating from exceptional 1H26 levels. The current margin environment, shaped by structural regional refining shortages, favors Australian refiners without government subsidies, contrasting with prior periods when FSSP payments were necessary.

CEO Highlights Integrated Supply Chain Strength Amid Geopolitical Challenges

Viva Energy’s CEO emphasized that H1 2026 was marked by significant geopolitical events causing major disruptions in global energy markets, testing supply chains. Despite challenges, the company collaborated closely with governments, customers, and suppliers to maintain production and supply, leveraging its integrated supply chain spanning crude supply, refining, commercial fuel distribution, and convenience retail.

The CEO noted that strong financial results reflected improved refining margins from regional oil supply and capacity shortages, alongside retail sales growth and commercial business strength. The commentary stressed that domestic refining has lessened dependence on international refineries and remains crucial for fuel supply security. This underscores the strategic importance of Viva Energy’s refining assets within energy security policy and suggests sustained margin strength and policy support for Australian refining beyond the current geopolitical cycle.