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Jul. 27, 2015, 11:59 AM
- Macquarie sees plenty of long-term value in the oil refining market despite concerns over the outlook for U.S. crude oil production growth, and initiates coverage with five new Outperform ratings for Valero (VLO -1.5%), Tesoro (TSO -1%), HollyFrontier (HFC -1.4%), PBF Energy (PBF -1.8%) and Delek U.S. Holdings (DK -1.4%).
- While oil demand remains above 1M bbl/day, Macquarie notes that refining capacity continues to be tight, oil finding and development costs have fallen to $25/bbl which has lowered crude production break-even levels, and capital discipline in the space has increased which opens the doors for special dividends and share buybacks.
Jul. 23, 2015, 6:44 PM
- Even as the E&P and oilfield services sectors have slumped again, stocks of refiners such as Valero Energy (NYSE:VLO), Tesoro (NYSE:TSO), Marathon Petroleum (NYSE:MPC) and Western Refining (NYSE:WNR) have jumped 25% or more YTD.
- West coast refiners are big winners right now: Earlier this month, according to Credit Suisse, regional refining margins hit almost $60/bbl, - higher than the oil price itself.
- But Heard On The Street's Liam Denning suspects a top is near, with valuation a factor; VLO, for example, now trades at ~9.6x earnings, above its 15-year average of ~8.5x, which would be closer to just 8x without the wild swings in 2009-10 in the aftermath of the financial crisis.
- The other worry is that the glut of crude oil is morphing into a glut of refined products, such as diesel; U.S. commercial inventories of crude peaked in April and have since dropped by 29.5M barrels, but stocks of refined products have increased by 57M barrels to hit their highest level on record.
- Denning thinks refining stocks should remain the energy sector's best performers through the summer driving season and amid cheap oil, but by the time 2016 comes around, the growing glut in refined products may be too large for even the most optimistic investor to ignore.
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%).
Jun. 26, 2015, 5:58 PM
- The latest delay in a detailed government review of Tesoro's (NYSE:TSO) proposed $210M Port of Vancouver railport project in Washington state means a final decision will be pushed into 2016, Reuters reports, citing a state council's published schedule.
- The 360K bbl/day Vancouver Energy USA project would be the biggest in the U.S., moving domestic and Canadian crude via rail to the crude-by-rail terminal, where it would be loaded onto vessels to supply west coast refineries.
- Washington's Energy Facility Site Evaluation Council newly published schedule says a draft environmental impact statement will be published in late November, after it had previously expected to release the draft report in late July.
- Earlier: Tesoro's Port of Vancouver planned oil terminal subject to deeper scrutiny (Jun 5)
Jun. 18, 2015, 7:17 PM
- U.S. oil refiners will maintain positive free cash flows until the seasonally stronger Q4 revives earnings, as they can beat a short-term supply crunch by boosting the use of OPEC oil and diverting exports headed for Canada, Cowen analyst Sam Margolin writes.
- Refiners are getting squeezed by a drop-off in domestic supplies as drillers pull back, but Margolis sees the crunch as temporary and expects supplies of West Texas crude to rebound in response to demand during H2.
- The analyst maintains an Outperform rating on Valero (NYSE:VLO), Tesoro (NYSE:TSO), Marathon Petroleum (NYSE:MPC), Western Refining (NYSE:WNR) and PBF Energy (NYSE:PBF) he predicts Q2 earnings will come in above consensus for VLO, TSO and WNR.
- Margolin rates HollyFrontier (NYSE:HFC), Alon USA Energy (NYSE:ALJ), Calumet Specialty Products (NASDAQ:CLMT) and Northern Tier Energy (NYSE:NTI) at Market Perform.
Jun. 5, 2015, 8:49 AM
- Tesoro's (NYSE:TSO) $210M plan to construct the largest U.S. crude-by-rail terminal at the Port of Vancouver could face significant delays after the U.S. Army Corps of Engineers said yesterday it will scrutinize the project under the Clean Water Act and the National Environmental Policy Act.
- The Corps rejected a request for a standardized dock permit that would not have triggered an evaluation; instead, it will undergo a deep evaluation that will consider the project's potential impacts on water, air and endangered salmon.
- The Vancouver Energy USA project is a TSO joint venture designed to receive up to 360K bbl/day of North American crude by rail and transfer it to ocean-going vessels for transfer to west coast refineries.
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 27, 2015, 10:26 AM
- The five-year outperformance of oil refining stocks will continue, Oppenheimer says as it upgrades HollyFrontier (HFC -0.4%), Marathon Petroleum (MPC +0.2%), Phillips 66 (PSX -0.3%) and Tesoro (TSO -0.4%) to Outperform from Market Perform and reiterates an Outperform rating for Valero (VLO -1%).
- The firm says its bullish outlook is supported by favorable fundamentals, including a wide crude differential, low natural gas prices and growing refined product exports; refining valuations remain attractive even given strong stock performance since 2010, as share buybacks, reduced debt and growing dividends mean valuations could extend further.
- Fadel Gheit and his analyst team forecast a Brent-WTI differential of $4-$8, which they consider a "huge competitive advantage to U.S. refiners with processing flexibility."
- Oppy's respective stock price targets for HFC, MPC, PSX, TSO and VLO are $50, $120, $95, $105 and $70.
May 11, 2015, 7:10 PM
- Tesoro (NYSE:TSO) says it is canceling a crude oil pipeline project in Utah because of low oil prices and economic challenges.
- TSO had proposed the 135-mile pipeline to move black waxy crude produced in Utah's Uinta Basin to Salt Lake City-area refineries.
- The project had been under environmental review because 14 miles of the proposed pipeline would have been built on Uinta-Wasatch-Cache National Forest land.
May 1, 2015, 8:17 AM
- Gasoline prices at the pump are up across the U.S. after a rebound in crude oil prices, but nowhere is the jump as severe as in California, where prices have surged by a third in the past week and by ~$1/gal in the past month.
- The swift rise is because of problems at some refineries in the state: Last week, Chevron's (NYSE:CVX) Richmond refinery reported it was flaring, and Tesoro (NYSE:TSO) indicated it was experiencing minor issues at its Martinez refinery - The incidents trimmed output, worried traders and sent wholesale prices shooting up.
- California has been dealing with tight supply after a February explosion at Exxon's (NYSE:XOM) Torrance refinery, and it might take until July before operations there return to normal.
- TSO also is undergoing unplanned maintenance work to solve a problem at its Los Angeles facility, and CVX has shut some units in El Segundo for planned maintenance work.
- Refinery events are seen and treated as trade secrets, so any action by oil companies can cause a pop in the market, oil analyst Tom Kloza says: "There's a few big companies that if all of a sudden they're seen buying aggressively in the market, it's going to prompt speculations like, ‘Oh, they're having problems.'"
Apr. 23, 2015, 6:58 AM
- Tesoro (NYSE:TSO): Q1 EPS of $0.98 may not be comparable to consensus of $1.85.
Apr. 10, 2015, 5:17 PM
- The EPA agrees to issue final biofuel quotas for 2014 and 2015 under the federal Renewable Fuel Standard by Nov. 30 in a tentative settlement of an energy industry lawsuit which had challenged EPA delays in establishing the mandates.
- Refiners and biofuel producers have complained that the EPA's repeated delays in setting renewable fuel use requirements have led to uncertainty and volatility in biofuel markets.
- Refiners are required under the RFS to blend a certain amount of biofuels into gasoline and diesel based on the targets established by the EPA; potentially relevant tickers include VLO, TSO, PBF, PSX, ALJ, MPC, WNR, HFC, CVI.
- Biofuels producers also crave the certainty and market demand guaranteed by the annual targets, but they believe the EPA should not back down from setting aggressive renewable fuel quotas; potentially relevant tickers include REGI, FF, AMRS, GEVO, CDTI, SZYM, OTCPK:KIORQ.
Mar. 30, 2015, 9:44 AM
- TSO now estimates California operating costs of $7.70-$7.95/bbl, and that the Martinez strike and Anacortes, Wash., and Salt Lake City turnarounds will hurt Q1 system capture rates by $1.50-$2.00/bbl; TSO expects improvement in capture rates during Q2 as it completes planned turnarounds.
- TSO also says it reached agreements with the local USW at its Carson, Calif., and Anacortes, Wash., refineries, and employees are returning to work.
Mar. 27, 2015, 9:18 AM
- Tesoro (NYSE:TSO) says it expects to restart its 166K bbl/day Golden Eagle refinery in Martinez, Calif., today, in a sequenced start-up that should take about two weeks.
- TSO workers walked off their jobs at the refinery on Feb. 1 as part of the national strike that later spread to 15 plants, but ratified a new contract on Wednesday.
- As the strike ends, TSO is turning its attention to $390M in planned upgrades at its Anacortes, Wash., oil refinery, partly intended to improve its export capabilities.
Mar. 26, 2015, 10:59 AM
- Cowen analysts see plenty of room to go in gains for the refinery sector, and moves up Q1 earnings estimates for across the firm's coverage universe.
- Cowen acknowledges that while crack spreads should start moving back to normal levels as industry maintenance winds down after April, margins are still strong, and many expect one of the largest-ever travel seasons this summer.
- The six stocks rated Outperform at Cowen are Delek (NYSE:DK) with a $43 stock price target, Marathon Petroleum (NYSE:MPC) with a $120 target, PBF Energy (NYSE:PBF) at $35, Tesoro (NYSE:TSO) at $90, Valero (NYSE:VLO) at $70 and Western Refining (NYSE:WNR) with a $60 price target.
Mar. 25, 2015, 5:45 PM
- The difference between the price of oil and the gasoline made from it would be bad news for U.S. refiners if the spread shrinks, but Cowen analyst Sam Margolin and Jason Gabelman offer three reasons why they’re not worried.
- With valuations remaining attractive, the analysts see three themes emerging to carry continued outperformance in refineries: positive consumer fuel demand response to lower prices, sustained crude oversupply into the fall turnaround period, and midstream consolidation and growth as a shareholder-friendly use of cash.
- The analysts have Outperform ratings on VLO, TSO, MPC, WNR, PBF and DK; only WNR failed to finish with a solid gain in today's trade.
Tesoro Corp is an independent petroleum refiner and marketer in the United States. Its subsidiaries operate through three business segments, transport crude oil and manufacture, transport and sell transportation fuels.
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