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Wed, Oct. 21, 2:56 PM
- Citi analyst Faisel Khan downgrades some U.S. refiner stocks, believing that narrowing differentials resulting from recent pipeline expansions and production slowdowns in the U.S. will continue to weigh on refiner margins in the near future.
- The firm’s latest forecast calls for a Brent-WTI differential of only $4.50/bbl, much lower than the previous forecast of $8/bbl.
- Khan cuts ratings for HollyFrontier (HFC -0.4%), Western Refining (WNR -1.6%), CVR Refining (CVRR +0.3%), Alon USA Partners (ALDW +2.4%) and Northern Tier Energy (NTI -2.2%) to Neutral from Buy.
- But the firm maintains its Buy rating on Phillips 66 (PSX -0.5%), Marathon Petroleum (MPC -0.8%) and Valero Energy (VLO -0.6%), which Khan says have diversified their revenue streams into pipelines, gas processing or chemicals.
Tue, Sep. 29, 12:15 PM
- Oppenheimer’s Fadel Gheit thinks it may only a matter of time before oil and gas companies need to start cutting their dividends if oil prices stay low, as all oil and gas companies are currently funding their dividend through additional borrowing, which cannot be sustained indefinitely.
- Dividend to cash flow averages 36% for the majors, Gheit calculates, highest for Shell (NYSE:RDS.A) at 41% and lowest for BP at 31%; 23% for independent refiners, highest for Phillips 66 (NYSE:PSX) at >29%, and lowest for Valero (NYSE:VLO) at <16%; and 17% for the E&Ps, highest for Occidental Petroleum (NYSE:OXY) at >45%, followed by ConocoPhillips (NYSE:COP) at 35%.
- Net debt ratio averages 14% for the majors, lowest for Chevron (NYSE:CVX) at 11%; 17% for the independent refiners, highest for Tesoro (NYSE:TSO) at 30% and lowest for HollyFrontier (NYSE:HFC) at 5%; 30% for the large E&Ps, highest for Range Resources (NYSE:RRC) at 49% and lowest for OXY at 9%.
Mon, Sep. 28, 7:02 PM
- Wolfe Research's Paul Sankey says he is bracing for some ugly Q3 earnings reports among oil and gas producers and a soft environment well into 2016, arguing that with oil prices stuck ~$45/bbl for West Texas crude, "there is real bankruptcy risk for probably one-quarter of the U.S. oil industry.”
- The analyst advises clients to stick with quality companies that can weather a prolonged stretch of soft prices, which means larger independent producers such as EOG Resources (NYSE:EOG), Anadarko Petroleum (NYSE:APC) and Chevron (NYSE:CVX) among the majors.
- Sankey says “all will be fine in due course,” although the next 6-12 months could be “tough sledding” for their businesses.
- Sankey likes a number of refiners, who will benefit from cheap crude oil, including Valero Energy (NYSE:VLO), Marathon Oil (NYSE:MRO), Western Refining (NYSE:WNR) and HollyFrontier (NYSE:HFC).
Fri, Sep. 25, 2:10 PM
Thu, Sep. 3, 4:58 PM
- Delta Air Lines (NYSE:DAL) is running its Trainer, Pa., oil refinery at a near-record 110% of capacity, Reuters reports, in a sign of the surprisingly strong summer profits U.S. refineries are generating.
- The refinery reportedly has been running at a clip of ~204K bbl/day for the past month, resulting in higher yields of gasoline and distillates; the plant's nameplate capacity is 185K bbl/day.
- DAL is not alone, as HollyFrontier (NYSE:HFC) said a month ago that it ran its refineries in Tulsa, Okla., and El Dorado, Kan., at rates above 100% in Q2; in the entire Midwest region, refiners ran at 100.3% of capacity in the week to July 31, according to EIA data.
Mon, Aug. 24, 3:27 PM
- Chevron (CVX -5%) is upgraded to Neutral from Underperform with a $100 price target at BofA Merrill, which expects CVX’s net debt to stabilize with major projects beginning to contribute in 2017 and a drop in spending to maintenance levels.
- The firm says it has been concerned throughout the past year that CVX's cash burn would dilute equity value through peak spending at the same time that oil prices collapsed, but it no longer sees a risk, as CVX is discounting below strip prices but with a dividend.
- CVX requires sustained spending of $15B-$16B to hold production flat for an extended period,” BofA's Doug Leggate explains, adding that at $45-$50 oil, cash flow by 2017 would be closer to $29B so that the dividend is "more than covered" by cash flow in an ex-growth environment.
- ConocoPhillips (COP -6.2%) is the firm's top pick among the big oils after the stock has been hit hard, which the analyst thinks reflected unwarranted concerns regarding COP's dividend; at current strip prices, Leggate believes COP's upside is second only to Buy-rated Exxon Mobil (XOM -5.3%).
- However, the firm downgrades HollyFrontier (HFC -3.5%), Marathon Petroleum (MPC -7.2%) and Valero (VLO -4.7%) to Underperform and cuts Continental Resources (CLR -10.1%), Marathon Oil (MRO -8.4%), Noble Energy (NBL -5.4%) and Whiting Petroleum (WLL -8%) to Neutral.
Fri, Aug. 14, 12:47 PM
- The Obama administration will allow limited sales of crude oil to Mexico for the first time, Reuters reports, citing a senior administration official who says the U.S. Commerce Department is "acting favorably on a number of applications" to export U.S. crude in exchange for imported Mexican oil.
- The shipments, likely to be lighter, high-quality shale oil, would help Mexico's aging refineries produce more premium fuels, while U.S. refiners would continue to get Mexican heavy oil, a better match for them than the light oil coming from Texas and North Dakota.
- Although limited in scope, the move toward freeing up trade will please U.S. oil producers such as Pioneer Natural Resources (NYSE:PXD) and ConocoPhillips (NYSE:COP), which say the restrictions force them to sell oil at below global market rates, and may add momentum to efforts mostly to repeal what advocates see as a relic of the 1970s.
- Among relevant oil stocks: XOM, CVX, BP, RDS.A, RDS.B, OAS, NOG, CLR, WLL, EOX, SM, SFY, PVA, GST, SN, CRK, BBG, CWEI
- Relevant refining stocks: VLO, HFC, MPC, TSO, WNR, ALJ, PSX, PBF, DK, NTI, ALDW
- ETFs: XLE, XOP, XES, IEO, IEZ, PXE, NDP
Mon, Aug. 10, 12:45 PM
- Low crude oil prices may last "lower for longer" but refiners will stay "stronger for longer," as the group benefits from the lower prices when caused by oversupply and as Q3 results will prove "materially higher" for the group as a whole, Morgan Stanley's Eva Calio says.
- The analyst notes that many refiners reported Q2 results that came in ahead of expectations: Tesoro's (TSO +4.4%) earnings were 16% ahead of estimates, HollyFrontier's (HFC +2.9%) earnings beat expectations by 13%, and Valero (VLO +4.5%) exceeded earnings estimates by 10%.
- Calio expects TSO's capture rate to improve in Q3 and report higher sequential earnings even adjusting for an expected decline in cracks; meanwhile, HFC's management is committed to a $2.3B share repurchase over the next 2-3 years, and VLO remains on track for a second MLP drop before the end of the year.
Thu, Aug. 6, 2:59 PM
- Tesoro (TSO +3.3%) CEO Greg Goff says oil drilling in Utah's Uinta Basin has "dried up" because of low crude prices, and will affect availability of the waxy crude prevalent there after the refiner recently finished a $275M conversion project at its 57.5K bbl/day refinery in Salt Lake City to double waxy crude processing capacity to 22K bbl/day.
- Uinta trades at a discount to the WTI as it is more costly to produce and process; the discount narrowed as domestic crude prices plunged 58% Y/Y, prompting producers to pull back and focus on other more profitable oilfields.
- HollyFrontier (HFC +2.6%) also is set to start a similar conversion project at its Woods Cross refinery in Utah that will increase capacity to 45K bbl/day from 31K, with the ability to process up to 25K bbl/day of Uinta waxy crude.
- On today's earnings conference call, Goff declined to comment about talks reportedly held earlier this year to buy HFC, but said TSO fully intends to examine possible acquisitions from the midwest to the west coast, "pretty much staying out of the Gulf coast."
Thu, Aug. 6, 11:58 AM
- HollyFrontier (HFC +3.3%) enjoys a second straight day of gains after reporting a strong Q2 earnings beat, with Scotia Howard Weil upgrading shares to Sector Outperform from Sector Perform and raising its price target to $59 from $49 (Briefing.com).
- Weil notes the significant increase in share buybacks during Q2, leading it to believe HFC management is now ready to be more aggressive in using the balance sheet to return cash to shareholders.
- The firm says commentary during the Q2 conference call suggests HFC has an ambition to increase the value of the company by 50%, and it suspects a pathway toward this goal will be articulated at the Sept. 3 investor day.
- Also, Oppenheimer raises its target for the shares to $58 from $50 to reflect continued strong industry fundamentals and an improved company outlook.
Wed, Aug. 5, 6:19 PM
- HollyFrontier (NYSE:HFC) gained 5.5% in today's trade amid a mostly dismal showing for energy stocks, easily beating earnings and revenue estimates for the second straight quarter and showing it has moved forward from earlier this year when it made a failed attempt to acquire Citgo and rebuffed a takeover offer from Tesoro.
- HFC has since focused on its refineries in the Rocky Mountain region and in the southwestern U.S., which led to strong results in the past two quarters compared with lower than expected profit in the last two quarters of 2014.
- HFC says it expects to run its Rocky Mountain refineries at full capacity in the longer term, as its utilization rate in the region fell to 74.8% in Q2 from 84.7% in the year-ago quarter, but consolidated refinery gross margin rose to $17.42 per produced barrel from $14.54.
- Today's gains added to the 25% it already had gained YTD, but the rise could mean HFC has become too expensive to be an acquisition target.
Wed, Aug. 5, 7:40 AM
Wed, Aug. 5, 7:35 AM
HollyFrontier Corp is an independent petroleum refiner. It produces high-value light products such as gasoline, diesel fuel, jet fuel, specialty lubricant products, and specialty and modified asphalt. It operates in two segments; Refining and HEP.
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