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, 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
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%).
Fri, Jan. 22, 5:40 PM
Dec. 16, 2015, 12:13 PM
- Congress has agreed to lift the 40-year-old ban on crude oil exports, but refiners are holding up well as the group wins a tax break on the cost of transporting oil as part of the deal.
- The tax provision meant to blunt potential damage to domestic refiners of allowing unfettered crude exports would allow non-integrated refiners to count 75% of their oil transportation costs toward an existing manufacturing tax deduction.
- Refiners are "positioned to succeed regardless,” says Carl Larry, head of oil and gas for Frost & Sullivan. “They can still make products cheaper than anywhere in the world... Regardless of whether the U.S. exports crude, they’ll be ahead of the game.”
- Wells Fargo contends that lifting the ban will have only a minimal impact in the short term, and notes that Phillips 66 (PSX +1.6%) has indicated lifting the move would have no material impact at least for one year; Valero Energy (VLO +1.2%) is better positioned than most because it already relies on a larger percentage of foreign oil for its feedstock to make gasoline and other petroleum products, says Simmons analyst Jeff Dietert.
- Also: TSO +2.5%, MPC +0.9%, HFC +2.4%, PBF +1.6%, WNR +4.9%, NTI +1.6%, ALJ +1%, CLMT -2.2%.
- Earlier: Solar stocks soar as Congress proposes extending solar/wind tax credits
Nov. 30, 2015, 3:28 PM
- Biofuel names react favorably and refiners negatively to just-released EPA biofuel targets that come in above those proposed by the agency in May.
- Fuel suppliers will be required to mix 16.93B gallons of corn-based ethanol and other renewable fuels into gasoline this year and 18.11B gallons next year, according to the newest EPA targets.
- The final 2016 standard for advanced biofuel is nearly 1B gallons, or 35% higher than actual 2014 volumes.
- Biofuel names include: PEIX +17.7%, REGI +8.1%, AMRS +7%, GEVO +4.9%, SZYM +2.5%, GPRE +6.2%, REX +3.2%, ADM flat.
- Refiners are pulling back: VLO -0.9%, TSO -1.5%, HFC -2.6%, MPC -0.3%, PSX -0.9%, WNR -0.7%, CLMT -2.6%.
Sep. 25, 2015, 2:10 PM
Aug. 24, 2015, 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.
Aug. 6, 2015, 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."
Aug. 6, 2015, 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.
Jul. 30, 2015, 11:16 AM
- HollyFrontier (HFC +4.4%) is higher following a Reuters report that Tesoro (TSO -2.5%) approached the company about a potential buyout but talks were not successful.
- The companies held discussions in this year's Q1 but were scuttled after HFC's board balked at TSO's proposed offer, which is not known, and other terms, according to the report.
- TSO is said to remain interested in a deal for HFC, which would provide access to the Rocky Mountain region, where refiners have seen margins rise as they have access to crude that can be difficult to transport to traditional refining centers on the Gulf coast.
Jul. 8, 2015, 3:49 PM
- The U.S. E&P industry is "between a rock and a hard place" entering earnings season, Deutsche Bank says, expecting continued headwinds for the group; while momentum has been building for moderate acceleration in activity levels in H2, macro concerns from China to Greece have weighed on crude prices and introduced an “additional layer of uncertainty.”
- Among the major integrated oils, the firm prefers EOG Resources (EOG -2.5%) and Anadarko Petroleum (APC -2.8%) into Q2 results but cuts its stock price target for Marathon Petroleum (MPC -2.6%) in half to $62.
- U.S. refiners, on the other hand, continue to defy fears of a collapse in margins, with demand strength and robust gasoline cracks again driving upside to earnings estimates; the firm sees 7% upside on average to current Q2 estimates for the group, with particular strength from Tesoro (TSO -1.2%), Valero (VLO -0.9%) and HollyFrontier (HFC -1.4%).
May 29, 2015, 11:15 AM
- Ethanol companies rise while refiners are off session highs after the EPA announces its renewables fuels mandate.
- The EPA proposes requiring 15.93B gallons of total renewable fuel in 2014, 16.3B gallons in 2015, and 17.4B gallons in 2016, but the proposal for the total renewable fuel requirement falls short of levels Congress mandated, which were 20.5B gallons in 2015 and 22.5B gallons in 2016.
- Also, the EPA cuts 2016 corn-ethanol quota to 14B gallons; U.S. law required 15B gallons of ethanol for 2016.
- Ethanol exposed companies are mostly higher: ADM +0.7%, GPRE +4.2%, PEIX +4.1%, REX +1%, DAR +2%, CZZ -2.2%.
- Among refiners: HFC +0.3%, TSO +1.3%, VLO +0.8%, WNR +1.9%, PBF -1%.
- Biofuel related stocks: GEVO -8.3%, SZYM -2.7%, CDTI -1%, REGI -0.7%.
May 7, 2015, 11:49 AM
- HollyFrontier (HFC +3.7%) is upgraded to Outperform from Sector Perform with a $49 price target, raised from $40, at RBC, which cites improving operation execution, a new drop strategy and a large new buyback program.
- The firm likes HFC's new drop strategy in which it will build out new refining projects and then drop a portion to Holly Energy Partners (NYSE:HEP) to cover the costs; the new drop strategy of using its MLP to fund new refining capital projects will prove to be accretive going forward, RBC says.
- The firm says it no longer sees HFC as strictly a name that trades around the WTI-Brent spread, and now sees a true investment case to be made.
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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