HollyFrontier: Rising Regulatory Costs Diminish An Otherwise Compelling Long Thesis
Tristan R. Brown • 23 Comments
Tristan R. Brown • 23 Comments
HollyFrontier's Best Days Might Be Over But It Still Merits A Look
Tristan R. Brown
Tristan R. Brown
HollyFrontier Is A Pure Play In The Mid-Continent
Intangible Valuation • 15 Comments
Intangible Valuation • 15 Comments
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, Jun. 29, 3:58 PM
- Tesoro (TSO +1.9%) is upgraded to Buy from Neutral with a $100 price target, lifted from $96, at Goldman Sachs, citing a more constructive outlook for the California refining market, underappreciated value in non-refining assets, and limited risk from higher RINs and a lower Brent-WTI spread.
- Goldman thinks the California refining market will remain well-balanced, despite Torrance returning to service, driven by growing regional demand and the currently low inventories, and that investors have not been giving TSO fair value for its non-refining businesses.
- At the same time, the firm downgrades PBF Energy (PBF +1.2%) to Neutral from Buy with a $26 price target, cut from $37, expecting the company to be “disproportionately negatively impacted” by expectations of higher RINs prices.
- Along with TSO, Goldman rates Valero (VLO +0.1%) and Marathon Petroleum (MPC +4%) as Buys among refiners, while maintaining Sell ratings on Phillips 66 (PSX +1.2%), HollyFrontier (HFC +0.1%), CVR Energy (CVI -0.4%) and CVR Refining (CVRR -1%).
Wed, Jun. 8, 6:39 PM
- Gasoline profit margins have fallen to their narrowest seasonal levels since 2010, dropping by $5/bbl in slightly more than two weeks, as high imports have kept U.S. inventories elevated even as gasoline demand rises.
- The decline was not stemmed by yesterday’s EIA projection that summer gasoline demand will rise to a record 9.5M bbl/day, as gasoline imports into the U.S. east coast, which primarily come from refineries in eastern Canada and Europe, have kept U.S. inventories at the highest levels in at least 20 years.
- "We’re seeing the economics change to the point that many refiners along the coast are looking at maximizing jet fuel and diesel at the expense of gasoline," analyst Andy Lipow tells Bloomberg.
- The falling margins are hurting refiners, with Bloomberg's North America Refining & Marketing index down 28% Y/Y; in today's trade, WNR -3.1%, HFC -2.7%, CVRR -2.2%, VLO -2.2%, TSO -2%, NTI -0.8%, ALJ -0.8%.
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.
Wed, May 11, 4:50 PM
Wed, May 4, 3:43 PM
- HollyFrontier (HFC -9.2%) sinks nearly 10% after posting a solid Q1 earnings beat, but Wells Fargo points out that the company, like its peers so far in Q1, came in with weaker than expected refining margins despite higher than expected throughputs.
- Wells says Q1 consolidated refinery production of 416K boe/day topped its forecast for 405K boe/day but declined vs. 421K boe/day in Q4 2015 and 431K a year ago, while refining margin of $7.58/boe was lower than the firm's forecast of $8.92/boe and lower than $9.92/boe in Q4 and $16.69/boe a year ago.
- HFC says Q1 earnings reflect seasonally weak industry refining margins, which were 40% below year-ago levels, but gasoline margins continue to strengthen - up 40%-70% Y/Y - and the company expect gasoline margins to strengthen further thanks to strong data in vehicle miles traveled.
- Now read Holly Frontier: Deutsche sees 66% upside
Wed, May 4, 6:32 AM
Tue, May 3, 5:30 PM
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Fri, Apr. 8, 2:58 AM
- After hosting HollyFrontier's (NYSE:HFC) new CEO George Damiris for two days, Deutsche remains uber-bullish.
- "While the narrowing of the Brent-WTI spread and relative attractiveness of medium/heavy sour differentials has driven an understandable market preference for complex, Gulf Coast refiners, we expect that the market is likely under appreciating some of the underlying geographic advantage of HFC’s portfolio.
- "With a three-legged investment case driven by advantaged crude, peer-leading gasoline yield and the tailwind of an underappreciated business improvement program (+$265m of incremental EBITDA in 2016), we remain constructive HFC."
- Firm rates HFC a Buy with $57 price target (implied upside 66%) based on a sum-of-parts valuation.
Fri, Apr. 1, 10:59 AM
- Holly Energy Partners (HEP -2.1%) agrees to acquire crude oil tankage located at HollyFrontier's (HFC -3.8%) Tulsa refinery from an affiliate of Plains All American Pipeline (PAA -2.1%) for $39.5M.
- In connection with the deal, HEP and HFC say they expect to enter into a 10-year throughput agreement containing minimum quarterly volume commitments from HFC.
- HEP expects the acquisition will generate minimum annual revenue of $6.1M in the first year and will be immediately accretive.
- Now read A high-dividend stock with 45 straight dividend hikes, insider buying and rising estimates
Wed, Mar. 23, 12:34 PM
- HollyFrontier (HFC -6.5%) is downgraded to Sell from Neutral with a $34 price target, down from $37, at Goldman Sachs, citing crude spreads, valuation and consensus earnings risk.
- Goldman expects HFC's capital return to decelerate from 2013-15 cumulative levels of $2.7B to 2016-18 levels of $1.8B, well below the $3.9B scenario the company showed at its 2015 analyst day; the firm also cuts its 2016 EPS estimate to $2.44 from $2.64 and below Wall Street consensus of $3.14.
- The firm sees more upside to its Buy-rated names Valero Energy (VLO -0.7%), Marathon Petroleum (MPC -2.3%) and PBF Energy (PBF -3.3%).
Thu, Mar. 3, 12:23 PM
- There are better ways to play the ongoing oil apocalypse other than Exxon Mobil (XOM -1.2%), Deutsche Bank analyst Ryan Todd, pointing to a slow recovery in free cash flow, limited relative leverage to a recovery at this point in the cycle, and trading at a 60% premium to peers.
- One of the questions facing XOM remains the sustainability and attractiveness of its business model in a low-to-moderate crude price environment - i.e., can the combination of cost reductions and capital reallocation support sustainable reserve replacement, dividend/free cash flow growth and improving returns: "If the budget outlook is any indication, we're not there yet," Todd says.
- The analyst prefers Pioneer Natural Resources (PXD -1.4%), Valero Energy (VLO +2.3%), Marathon Petroleum (MPC +5.2%) and HollyFrontier (HFC +4.5%); he rates XOM as a Hold with an $85 price target.
- Earlier: Exxon Mobil plans 25% capex cut to $23B (Mar. 2)
Wed, Feb. 24, 6:32 AM
Tue, Feb. 23, 5:30 PM
Wed, Feb. 17, 5:22 PM
Fri, Jan. 22, 5:40 PM
HollyFrontier Corp. is an independent petroleum refiner and marketer which produces high-value light products such as gasoline, diesel fuel, jet fuel and other specialty products. The company operates its business through two segments: Refining & Holly Energy Partners. The The Refining segment... More
Sector: Basic Materials
Industry: Oil & Gas Refining & Marketing
Country: United States
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