Delek US Holdings: Conditions Aren't As Bad As They Look
Tristan R. Brown
Tristan R. Brown
Wed, Sep. 14, 2:52 PM
- Delek US Holdings (DK -1.8%) and Alon USA Energy (ALJ -0.1%) are initiated with Buy ratings, with respective $23.50 and $10 price targets, at Citigroup, which says a potential merger of the two companies seems increasingly likely and could unlock value.
- DK already owns a 48% stake in ALJ and recently sold its retail assets to COPEC, raising sufficient funds to acquire the remaining 52% stake via cash, Citi says.
- Besides the synergies in procurement of crude and marketing of products, the firm says the clearest synergy is $71M that ALJ outlined in EBITDA that could be dropped into DK’s MLP, a value that alone represents 100% of ALJ’s market cap.
Wed, Aug. 31, 9:48 AM
- Israel's Delek Group (OTCPK:DGRLY, DK) is considering New York, London or Amsterdam for an IPO of its stake in the Tamar natural gas field valued at $3B-$4B, Bloomberg reports.
- Delek has held talks with HSBC and JPMorgan Chase on a plan to spin off its 31% stake in the offshore field into a special-purpose company and sell shares on one of the overseas bourses, according to the report.
- Delek has five years to sell its Tamar holdings as part of an agreement reached with the government last year to resolve monopoly concerns.
Mon, Aug. 29, 8:24 AM
- Delek US Holdings (NYSE:DK) agrees to sell its 348 MAPCO Express gasoline stations and convenience stores to Compania de Petroleos de Chile for $535M.
- DK says the deal provides additional financial flexibility, which can be used to support Delek Logistics Partners (NYSE:DKL) as it explores growth opportunities.
- COPEC owns Chile's largest convenience store network with more than 900 owned and affiliated sites.
- DK says it will continue to supply fuel to certain MAPCO retail locations under an 18-month supply agreement.
Tue, Aug. 16, 4:42 AM
- Billionaire investor Carl Icahn has called on the EPA to make changes to the market for renewable fuel credits or else risk "the mother of all short squeezes" that could bankrupt refiners.
- "The RIN market is the quintessential example of a 'rigged' market where large gas station chains, big oil companies and large speculators are assured to make windfall profits at the expense of small and midsized independent refineries which have been designated the 'obligated parties' to deliver RINs."
- Related tickers: VLO, NTI, CLMT, MPC, TSO, ALDW, CVI, WNR, PBF, DK, HFC, CVRR, NTI, ALJ, TSO, WNR, PSX, XOM, PBF
Fri, Aug. 12, 2:02 PM
Fri, Aug. 12, 9:22 AM
Thu, Aug. 11, 6:57 PM
- Major U.S. refiners are on track to pay record amounts this year for credits to comply with U.S. renewable fuel rules, a trend that is bound to continue to hurt profits for the group, Reuters reports.
- A group of 10 refinery owners including Marathon Petroleum (NYSE:MPC) and Valero Energy (NYSE:VLO) spent at least $1.1B buying RINs, according to a Reuters review of their filings, placing them on track to surpass the annual record of $1.3B spent by the same group in 2013.
- RINs averaged ~$0.78 each during Q2, ~25% above the same period a year ago, according to the analysis, due to more ambitious targets from U.S. regulators on the volumes of ethanol required to be blended with gasoline.
- Other relevant tickers include PBF, CVRR, HFC, TSO, PSX, WNR, DK.
Thu, Aug. 11, 5:36 PM
Thu, Aug. 11, 5:30 PM
- Delek US (NYSE:DK) +12.8% AH following a NY Post report that Carl Icahn-controlled refiner CVR Energy (NYSE:CVI) is planning to make an offer for the company; CVI +9.2% AH.
- The report also speculates that Icahn, who sits on DK’s board, is building a personal stake in the company.
- Refiners have been hurt this year by narrowing oil spreads plus the rising price of RINs; DK has lost 39% and CVI has shed 65% YTD.
Wed, Aug. 3, 11:24 PM
Tue, Aug. 2, 5:35 PM
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Mon, Jul. 25, 12:56 PM
- Some U.S. refiners, stuck with the highest inventories of gasoline for this time of year in a quarter of a century, have started blending winter grade gasoline a month earlier than usual to sell later in the year, Reuters reports.
- Looking to cut costs, refiners and blenders reportedly are making an early move to mix cheap butane - a cheaper blending component than most other ingredients - to convert the summer barrels into winter barrels.
- Mixing more winter gasoline now threatens to worsen the glut later, but that's a risk willingly taken by an industry left with few other choices, the report says.
- Independent U.S. refiners are expected to post another quarter of weak earnings en route to possibly the worst year since the shale boom began in 2011.
- Refiners are broadly lower today as crude oil prices drop: PSX -1.6%, VLO -0.7%, MPC -2.3%, TSO -1.6%, HFC -0.7%, WNR -0.3%, PBF -1.5%, DK -0.6%, ALJ -1.7%.
Wed, Jul. 13, 3:56 PM
- Phillips 66 (PSX -0.2%) is downgraded to Equal Weight from Overweight with an $86 price target, lowered from $93, at Barclays, which sees limited upside especially if refining margins rebound and offer greater valuation growth potential to its large-cap peers, including Tesoro (TSO -2.6%), Valero (VLO +0.4%) and Marathon Petroleum (MPC -1.6%).
- Barclays also downgrades Delek US Holdings (DK -4.7%) to Equal Weight from Overweight with a $15 price target, cut from $20, on valuation and continuously challenged margin capture at both DK refineries, neither of which show visibility toward material improvement.
- Meanwhile, the firm upgrades Alon USA (ALJ +0.1%) to Equal Weight from Underweight after the company has significantly underperformed since the end of 2012.
Tue, Jul. 12, 3:45 PM
- Alon USA Energy (ALJ +5.1%) is sharply higher after saying it has discussed a potential business combination with Delek U.S. Holdings (DK +3.8%) as part of a broader examination of strategic alternatives.
- ALJ says it has formed a special committee of independent board members to lead the review of strategic alternatives and has hired JPMorgan Chase as financial advisor.
- ALJ also says it has not established a timetable for completing its strategic review, and does not expect to issue further statements about the strategic process unless there is a material event.
Mon, Jul. 11, 12:44 PM
- Delek US Holdings (DK -1.1%) is downgraded to Neutral from Overweight with a $12 price target, reduced from $12, at J.P. Morgan, which says the company's valuation and leverage combination are less promising.
- The firm says DK's retail and logistics segments are well positioned for significant growth, particularly if the company acquires the rest of Alon USA Energy, but cites concerns related to DK's balance sheet in case the current macro environment persisted.
- As in its downgrade of PBF Energy, the firm lowers its Q2 estimates "as cracks softened in the final weeks of Q2 and capture rates now look even more negative than we thought Q/Q,” adding that it also has lowered full-year estimates since strip cracks continued to decline in June.
Thu, May 26, 6:36 PM
- Oil refiners such as Marathon Petroleum (NYSE:MPC), Delek US Holdings (NYSE:DK) and HollyFrontier (NYSE:HFC) are better positioned than the market suggests, Deutsche Bank analysts say.
- The firm thinks current refiner share price levels offer an attractive entry point or to add to positions for longer-term investors, with MPC, DK and HFC screening best with respective 19%, 13% and 8% upside; while from a free cash flow standpoint, only Valero Energy (NYSE:VLO), MPC and HFC find themselves in positive territory, offering respective 6.3%, 5% and 1%.
- For shorter-term investors, the firm sees PBF Energy (NYSE:PBF), HFC and DK with the highest downside risk, while MPC is a relative winner in both cases.
- Contrary to popular belief that higher crude prices are all else being equal a negative for refiners, Deutsche Bank believes a slow grind higher to $60-$65/bbl could be a sweet spot for refiners since the structural advantage of U.S. refiners vs. international refining is more pronounced.