Oct. 27, 2015, 5:30 PM
- ACCO, ADP, AGCO, AIT, AN, ANTM, APO, ARW, BAH, BDC, BGCP, BOKF, BSX, CARB, CFR, CG, CHMT, CMC, COT, DHX, DORM, DX, EVER, EVR, FCAU, FDML, FLIR, GD, GHM, GNRC, GRMN, HES, HLT, HOT, HSY, HTA, ICE, IDXX, IP, JLL, LFUS, LVLT, MDLZ, NEE, NMR, NOC, NOV, NSC, OXY, PCG, Q, RDWR, RES, ROL, SAH, SAIA, SLAB, SNCR, SO, SONS, SSE, STRA, TECH, TEL, TGI, TKR, UMC, VLO, VLY, VNTV, WBA, WEX, WOOF, XRAY
Oct. 21, 2015, 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.
Oct. 9, 2015, 5:56 PM
- Refinery stocks Tesoro (NYSE:TSO) and Valero (NYSE:VLO) are shining stars in an otherwise gloomy energy sector picture - up a respective 70% and 43% Y/Y, vs. a 21% loss for the S&P 500 Energy Sector Index - and mutual funds are piling in.
- Falling oil prices often benefit refiners because they purchase crude as a feedstock for their refineries which produce valuable fuels such as gasoline and diesel, but portfolio managers say another reason they like the sector is that the management teams at top U.S. refiners have become disciplined about their capital spending plans and are returning more cash to shareholders.
- The number of actively managed mutual funds investing in VLO and TSO surged by a respective 32% to 319 and 20% to 210 this year, with the number of funds holding both companies rising 31% to 151, according to Lipper.
- But Arthur Barry, portfolio manager of the Loomis Sayles Value Fund, says he is worried that VLO's strength has attracted momentum money, fearing that "when things turn, they'll flee the stock."
Oct. 1, 2015, 3:58 PM
- Canadian light synthetic crude and North Dakota Bakken crude for November delivery are rising sharply after Enbridge (ENB +0.4%) gained approval from regulators late yesterday to open its Line 9 crude pipeline.
- ENB has not said when the 300K bbl/day pipeline will start operating but traders say there is demand for light crude in anticipation of the line being filled in the next month or so.
- Light synthetic crude from the oil sands trades at ~$1/bbl above the WTI benchmark, up from $0.10/bbl below WTI yesterday, while Bakken crude delivered to Clearbrook, Minn., trades $0.70 below WTI, up $1.
- Suncor Energy (SU -0.6%), which owns a refinery in Quebec and is one of Line 9's biggest customers, and Valero Energy (VLO +3.6%), which also has a refinery in Quebec, are expected to benefit from being able to replace imported crude with cheaper inland barrels.
- The newly reversed Line 9 will ship mainly light inland crude from Sarnia, Ontario, to Montreal, after previously flowing in the opposite direction, taking imported crude to Ontario.
Sep. 29, 2015, 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%.
Sep. 28, 2015, 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).
Sep. 23, 2015, 4:43 PM
- Valero Energy Partners (NYSE:VLP) agrees to acquire the Corpus Christi Terminal Services Business from Valero Energy (NYSE:VLO) for $465M.
- The business includes two terminals that support VLO's Corpus Christi East and West refineries, with assets consisting of 134 tanks with 10.1M barrels of storage capacity for crude oil, intermediates and refined petroleum products.
- Joe Gorder, CEO of VLP's general partner, says the deal helps the company stay on course to deliver 25%-plus Y/Y distribution growth.
Sep. 21, 2015, 6:52 PM
- Wynn Resorts (NASDAQ:WYNN), Viacom (NASDAQ:VIAB) and Dollar Tree (NASDAQ:DLTR) headline Goldman Sachs' list of 25 companies that could post outsized returns even as more and more stocks are moving in lock-step.
- Goldman’s picks come as return dispersion - the performance gap among stocks - has sunk lately amid turmoil in China and concerns about when the Fed will raise interest rates that has pushed stock correlations to their highest level since 2011.
- Given the low-dispersion setting, Goldman says investors should focus on these 25 stocks that have high “dispersion scores” and 15%-plus upside to the firm’s targets: WYNN, VIAB, DLTR, UAL, LUV, URBN, CBG, JNPR, MPC, NFLX, HBI, SIG, CRM, CERN, VLO, KMX, ENDP, CTSH, ISRG, ETFC, TSN, CCE, CI, REGN, GT
Sep. 15, 2015, 12:56 PM
- House Republicans plan to vote later this month on a bill to lift the 40-year-old U.S. ban on crude oil exports, a move that would please oil companies lobbying Congress but potentially rattle global oil markets already facing volatility and lower prices.
- More than a dozen oil companies including Continental Resources (NYSE:CLR), ConocoPhillips (NYSE:COP) and Marathon Oil (NYSE:MRO), have pushed Congress to lift the ban, arguing that unrestrained U.S. oil exports would eliminate market distortions, streamline U.S. production and boost the economy.
- Some refiners focused on the domestic market such as Phillips 66 (NYSE:PSX), Valero (NYSE:VLO) and Marathon Petroleum (NYSE:MPC) and consumer interest groups oppose the move, saying it would raise gasoline prices.
- Energy stocks are mostly higher today as crude oil rebounds from recent declines.
- ETFs: USO, OIL, UCO, UWTI, SCO, BNO, DBO, DWTI, DTO, USL, DNO, OLO, SZO, OLEM
Sep. 9, 2015, 10:58 AM
- Valero Energy (VLO +1.5%) may soon return to its roots as a buyer of refineries, CEO Joe Gorder tells the Barclays Energy Conference in New York in the company's broadest commitment to acquiring new refineries since 2005 when founder Bill Greehey stepped down.
- As late as this April, Gorder said VLO would grow its existing assets and was not looking to buy plants, but the CEO now says the company already had refineries and logistics assets in its sights.
- Gorder does not say where VLO was shopping for possible purchases, but the CEO expects a higher growth rate in the logistics sector, where VLO, like its competitors, operates an MLP focused on crude oil and refined products pipelines and terminals.
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. 14, 2015, 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
Aug. 10, 2015, 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.
Jul. 30, 2015, 9:09 AM
- Refiners Marathon Petroleum (NYSE:MPC) and Valero Energy (NYSE:VLO) appear to be headed in opposite directions today, as MPC -4.7% premarket after reporting weaker than expected Q2 earnings, hurt by a decline in refining margins, while VLO's Q2 earnings more than doubled, helped by strong margins in its refining operations.
- MPC, unlike other refiners, failed to benefit from the 50% drop in global crude prices in the past year, as its Q2 gross refining margin fell to $14.84/bbl from $16.02 a year earlier.
- Q2 operating earnings in MPC’s refining and marketing segment fell 4.3% Y/Y to $1.21B, while operating earnings in the pipeline segment, which includes MPC’s interest in MPLX, fell 2.5% to $79M.
- In contrast, VLO's Q2 results came in better than expected, with its refining margin rising to $13.71/bbl from $9.84 a year ago.
- VLO says operating income from its two California refineries soared to $295M in Q2, more than 11x the $24M earned in the year-ago quarter.
Jul. 30, 2015, 7:31 AM
- Valero Energy (NYSE:VLO): Q2 EPS of $2.66 beats by $0.24.
- Revenue of $25.2B (-27.8% Y/Y) beats by $5.29B.
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.