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
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Tue, Aug. 4, 5:30 PM
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Thu, Jul. 30, 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.
Mon, Jul. 27, 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.
Wed, Jul. 8, 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%).
Thu, Jun. 18, 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.
Fri, May 29, 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%.
Wed, May 27, 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.
HFC vs. ETF Alternatives
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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