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Northern Tier Energy (NTI -2.5%) is downgraded to Hold from Buy at Cowen, which says NTI is...

Northern Tier Energy (NTI -2.5%) is downgraded to Hold from Buy at Cowen, which says NTI is nearing fair value with the benefits of its Bakken/Canadian crude slate already embedded in current valuation and given current peak cycle conditions. Concern over the rising cost of ethanol RINs could mount in 2014 upon increased ethanol blending requirements.
Comments (4)
  • What Cowen is saying might or might not be a good prognostication. I for one am getting weary of what seems like rapid fire upgrades and downgrades by analysts who seem to get it right or wrong with equal frequency.
    18 Mar 2013, 02:50 PM Reply Like
  • I am guessing the only good analysis of companies like NTI requires a significant fee. I have found the only use of PUBLIC analysis like Cowan is to profit when you know for a fact their basis is incorrect. if I recall NTI's CFO's comments on the impact of RIN in 2013 would be roughly 10% of DCF. I doubt Cowan or anybody else in the world can predict RIN cost outside of 12 months. History says the impact is neglible over the long term. I would be interested in the basis of their valuation analysis.

     

    Disclosure - I took my profit a couple of weeks ago and plan to buy back my shares times two over the next few weeks as the heard overreacts unless I determine that something significant such as outage or long term lower crack spreads.
    18 Mar 2013, 06:59 PM Reply Like
  • Atlas, i got out about the same time. I was planning on going in but not until the ref shuts down. Are you going in sooner to play the div or are you thinking the SP will increase during the retooling. (( I dont think the ethanol is so paramount as it will affect all refiners equally ?? )) The long term crack spread should not affect us for the rest of the year. Thanks
    18 Mar 2013, 10:05 PM Reply Like
  • Ken, Couldn't agree more with you. These guys change their fin opinions more readily than a snake sheds its skin! Dont pay much heed to these unless there is some fundamental which you missed out earlier. Atlas too seems right that RIN costs will taper down over time, particularly in case of NTI which has its own retail outlets where it can always provide the blend to evade penalties.

     

    You may wish to consider that NTI enjoys a significant double advantage -- one of its geography location where it can access multiple crudes within low cost transport -- two that its technology flexibility allows it to use these varied crudes. Some refiners may not be technically equipped to handle heavier or high-S crudes even where their geography might allow access to lower cost crudes. These two advantages I believe should allow NTI (and few selective others) to always have better margins than most refiners from both crack spreads and crude spreads.

     

    Word of caution though -- my feel over the long term is that the huge 19-22 $ spread between Brent - WTI which was visible during Sep-Dec 2012 is not going to be possible anymore, for multiple reasons. Therefore similar earnings and divs as recent may not be possible. But hey, even a div yield of 15% in a 2% interest rate economy is a huge payoff -- where ave div in S&P 100 is just over 3%!! Would love to hear your comments. Cheers!
    18 Mar 2013, 07:39 PM Reply Like
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