This is my first article on CVR Refining, LP (CVRR) and I will discuss the upcoming quarterly earnings and distribution, as well as more about the company being way ahead in the changing market place. The interest here for dividend or distribution chasers is the high distribution. Investors who are looking for a buy-and-hold investment because of the nice quarterly distribution should consider this stock. I like this investment because the company made a solid profit in the first quarter, and over the second quarter the fundamentals have not changed. CVR Refining has processed crude into products and has a very good distribution process that is making money.
The first-quarter 2013 dividend was $1.58 per unit. If the dividend remains the same at the current unit price it would yield nearly 23% ($1.58/$27.13 open unit price as of July 24, 2013). Even if the distributions run near or above $1.25 for second-quarter 2013, the distribution yield would be over 18% annually.
On Aug. 1, 2013, CVR Refining will host the Q2 2013 earnings conference call. The company will release the results prior to the market open, with the conference call to follow at 12:00 pm ET. During the conference call it will announce the second-quarter distribution. Company operations during the second quarter have been steady, with the cost of crude going up over $100 per barrel and the prices of refined products also going up. The crack spread has not seen a major change this quarter, and we expect a profitable quarter for the company and a significant return in distributions for investors.
CVR Refining went public with a January 2013 IPO. It is headquartered in Sugarland, Texas, and is an independent downstream energy limited partnership formed by CVR Energy, Inc., to own, operate and grow its refining and related logistics businesses. CVR Refining's petroleum business includes a 115,000 barrel per day complex full coking, medium-sour crude oil refinery operated by Coffeyville Resources Refining & Marketing in Coffeyville, Kan.
Coffeyville Resources Crude Transportation operates a 50,000-barrel-per-day, crude oil gathering and trucking system located in Bartlesville and Wynnewood, Okla., and Plainville and Winfield, Kan. Situated approximately 100 miles from Cushing, Okla., which is one of the largest crude oil trading and storage hubs in the United States, the refinery is served by numerous pipelines, including pipelines from the U.S. Gulf Coast and Canada. The gathering business purchases crude from independent crude oil producers in Kansas, Missouri, Oklahoma, Nebraska, and Texas.
The Wynnewood Refining Company, LLC is a 70,000 barrel per day medium complexity crude oil refinery operated by Wynnewood Refining Company in Wynnewood, Okla. It has approximately 350 miles of pipelines, more than 125 crude oil transports, a network of strategically located crude oil gathering tank farms, and more than six million barrels of owned and leased crude oil storage capacity. The Wynnewood refinery provides a meaningful increase in the scale and diversity of our refining operations. The Wynnewood refinery produces gasoline, diesel fuel, military jet fuel, solvents, and asphalt.
Petroleum products produced at the Wynnewood refinery are purchased by Coffeyville Resources Refining & Marketing. Coffeyville Resources Refining & Marketing then sells and distributes the products. Like the Coffeyville refinery, the Wynnewood refinery's crude oil requirement is partially sourced by the crude gathering operations and is located in close proximity to Cushing. There is an advantage to both refineries being close by as they are able to use the same distribution network, which returns a greater profit for the company. The two refineries complement each other in the production of their products. These two characteristics are not often found and save the company money, as well as return the savings in the bottom-line profits.
The CVR Energy (CVI) -- CVRR's parent company -- portfolio of companies employs approximately 1,100 employees and generated $8.6 billion in net sales revenue in 2012. CVR Refining reported a net income of $333.7 million, or $1.63 per diluted unit, for the first quarter of 2013. Refining margin adjusted for FIFO impact per crude oil throughput barrel, a non-GAAP financial measure, was $26.44 in the first quarter. First-quarter 2013 throughput of crude oil and all other feedstock and blend stocks totaled 204,590 barrels per day. Tracking the peaks and valleys of the price of the unit, over the last two quarters the cycle of unit price has increased to over $34.00 just prior to the ex-distribution date, and then the price retreated to the $27-$28 range.
Goldman Sachs announced it would begin covering CVR Refining L.P. on June 10, 2013. Analyst Arjun N. Murti commented that "CVR Refining is a variable-distribution refining MLP similar in structure to Alon USA Partners (ALDW) and Northern Tier Energy (NTI). The company is a pure-play on Cushing-area refining given its Coffeyville, Kan., and Wynnewood, Okla., plants, and, as a result, is highly leveraged to our bullish MidCon refining call. Relative to Buy-rated C-Corp refiners and refining MLPs, CVRR shows less upside, however, which is why we initiate with a Neutral rating." Later the same day Goldman Sachs downgraded the company to a sell.
Our position is to buy and hold CVRR in order to take advantage of the nearly 20% annual return on investment. Allow the price to cycle through the quarter, but if you are looking for solid quarter distributions, CVRR is a good company to put your money in.
Disclaimer: All information in this article came from the companies' websites, press releases, and media reporting. We always recommend investors conduct their own risk analysis to determine if this or any investment is right for their portfolio.