Oct. 27, 2014, 9:44 AM
- Venezuela is canceling plans to sell its Citgo U.S. refining unit, the country’s finance minister says, apparently the victim of falling oil prices, declining refining margins, and unscheduled downtime among Citgo's refineries.
- Venezuelan officials indicated earlier this year that they were looking to sell Citgo for as much as $10B, and HollyFrontier (NYSE:HFC), Valero Energy (NYSE:VLO), Western Refining (NYSE:WNR), Tesoro (NYSE:TSO) and PBF Energy (NYSE:PBF) were speculated as potential bidders for Citgo's three U.S. refineries.
- Analysts at the risk consultancy Eurasia Group recently warned that a sale of Citgo would leave fewer assets for investors to target if Venezuela defaults.
Oct. 14, 2014, 6:57 PM
- Refiners implore Pres. Obama to remain firm on plans to scale back renewable fuel quotas for 2014, warning that if the administration gives in to Corn Belt demands for higher mandates, it could cause gasoline prices to spike.
- The EPA last year proposed cutting the amount of renewable fuel required for 2014 to 15.2B gallons, ~3B gallons below the amount prescribed in federal statutes, including up to 13B gallons from traditional corn-based ethanol and 2.2B gallons of advanced biofuels.
- But administration officials have hinted they could boost the final targets, justified in part because gasoline consumption has also risen since the proposal was first unveiled last year.
- Among signers of a letter to Obama were Valero (NYSE:VLO) CEO Joseph Gorder and Tesoro (NYSE:TSO) CEO Gregory Goff.
Oct. 9, 2014, 2:57 PM
- J.P. Morgan has a favorable outlook on the refining sector heading into Q3 earnings, as the group has sold off since September on a combination of factors, including fears about the crude export ban being lifted and narrowing crude differentials, despite good product cracks.
- Two of the biggest drops among refiners have been suffered by Valero Energy (VLO -2.7%) and HollyFrontier (HFC -2.6%), each ~13% since the group's peak; of the two, JPM likes VLO going into the quarter, particularly in the event of any favorable updates around capital allocation.
- The firm thinks Tesoro (TSO -3.2%) is set up for another solid quarter but that investors must be expecting it, given that shares are down only ~3%.
Oct. 7, 2014, 3:23 PM
- Amid today's sea of red in stocks, oil refinery names are enjoying gains thanks to a bullish note from Citi analyst Faisel Khan, who upgraded the sector along with some individual refiner stocks, including Phillips 66 (PSX +0.7%) and HollyFrontier (HFC +1%).
- Khan says PSX is positioning itself to become the "premier hydrocarbon logistics provider on the Gulf Coast,” and he sees the refiner's midstream assets generating $2.3B in EBITDA by 2018; Khan upgrades shares to Buy from Neutral.
- HFC also is upgraded to Buy from Neutral by Khan, who thinks HFC’s balance sheet should allow it to pursue various acquisitions and that it has the mechanisms in place to generate $700M-$800M in discretionary cash flow over the next two years.
- Khan also upgraded CVR Refining (CVRR +0.8%) and Alon USA Partners (ALDW +5%) to Buy, raised his price target for Marathon Petroleum (MPC +0.6%) and reiterated his positive outlook for Valero Energy (VLO +1%).
Oct. 2, 2014, 2:48 PM
- RBC Capital Markets’ energy analyst Brad Heffer names Marathon Petroleum (MPC -1.3%) as his top pick, and starts coverage of Tesoro (TSO -0.5%) and Valero (VLO -0.4%) at Outperform, but the stocks are lower as oil prices tumble again.
- Heffer says MPC’s refinery portfolio is well positioned, with leverage to both cheap inland crude in the Midwest and Gulf coast export markets, and the recent Hess acquisition presents a big opportunity to increase retail value going forward; MPC is still early in the drop-down cycle, and it will continue to provide shareholders with solid cash returns going forward.
- TSO is a strong operator in a tough California market, RBC says, who expects synergies from the BP acquisition to continue to improve margins, while VLO is the refiner best positioned to take advantage of Gulf Coast crude spreads, which the firm sees widening substantially in H2 2015 and into 2016.
- Phillips 66 (PSX -1.7%) and HollyFrontier (HFC -0.7%) are rated Sector Perform.
Sep. 10, 2014, 3:28 PM
- Energy stocks, especially refiners, are taking a beating following the latest EIA inventory report that said gasoline stockpiles rose by 2.4M barrels last week, helping send U.S. crude oil futures to 16-month lows (-1.2% to $91.61/bbl) and Brent crude to 17-month lows (-1.1% to $98.02).
- The report is bearish given the large increases in refined product inventories; "even though the crude drawdown was close to expectations, it seemed to disappoint," Again Capital's John Kilduff says.
- The EIA report followed the agency’s updated demand growth report issued yesterday and this morning’s release of OPEC’s report on the oil market; both see lower demand growth this year and next.
- Oil majors are mostly lower: XOM -0.6%, CVX -1.4%, COP -0.3%, but BP (+2.9%) and RDS.A (+1%) are higher.
- Refiners are hit hard: VLO -3.6%, PSX -1.5%, MPC -1.9%, HFC -2.5%, TSO -2.9%, WNR -4.1%, CVI -1.6%, ALJ -1.8%, PBF -3.5%, DK -1.8%, CLMT -1.8%.
- ETFs: USO, XLE, OIL, UCO, ERX, VDE, OIH, SCO, ERY, XOP, DIG, BNO, UGA, DTO, DBO, DUG, IYE, IEO, CRUD, PXE, USL, PXI, PXJ, DBE, FENY, UWTI, DWTI, DNO, RJN, RYE, FXN, SZO, OLO, JJE, DDG, ONG, RGRE, OLEM, TWTI, UBN
Sep. 9, 2014, 6:52 PM
- Venezuela's PDVSA reportedly is seeking preliminary offers for its U.S. unit Citgo Petroleum by the end of September, a deal that could fetch up to $10B.
- Lazard is running the sale process for Citgo on behalf of PDVSA and is said to have sent offering materials to potential buyers; Deutsche Bank is separately exploring a sale of PDVSA's 50% stake in the Chalmette refinery in Louisiana it owns alongside Exxon.
- HollyFrontier (NYSE:HFC), Valero Energy (NYSE:VLO), Western Refining (NYSE:WNR), Tesoro (NYSE:TSO) and PBF Energy (NYSE:PBF) are speculated as logical bidders for Citgo's U.S. refineries in Lemont, Ill.; Lake Charles, La.; and Corpus Christi, Tex.
Aug. 6, 2014, 12:56 PM
Aug. 6, 2014, 11:46 AM
- HollyFrontier (HFC +2.4%) powers higher despite Q2 earnings that missed analyst estimates, as the refiner says it foresees significantly higher margins from turning crude oil into other fuels and asphalt in the current quarter.
- Q2 margins shrank 28% Y/Y to $14.54/bbl produced, but were roughly in line with analyst expectations and offset by higher than expected throughput volumes, Raymond James analysts say, adding that this had been "a common theme this refining earnings season."
- HFC processed 472,590 bbl/day in the quarter, 13% more than a year earlier, but expects to process 405K bbl/day in Q3 due to work at its refineries in El Dorado, Kan., and Artesia, N.M.
- CEO Mike Jennings said in this morning's earnings call that the assets of Venezuela's Citgo would be "a good fit" if they are for sale, adding that the company always looks at M&A possibilities.
Aug. 6, 2014, 7:03 AM
Aug. 5, 2014, 5:30 PM
- ANR, AOL, APO, ARIA, AVA, AVT, BRKR, CEQP, CHK, CLH, CMLS, CNP, CONE, CSTE, CTSH, DBD, DISH, DNR, DVN, DWSN, EE, ELOS, GEO, GOV, GWPH, HFC, HNT, INXN, IPXL, ITC, KELYA, LINC, LIOX, MDLZ, MEMP, MVIS, NAVB, NUS, PERI, PH, PKD, POWR, RDC, RL, ROC, SBGI, SE, SEP, SF, SJI, SKYW, STWD, TAP, THI, TRGT, TWX, VC, VIAB, VITC, VOYA, WD, WIX, WPX, ZINC
Jul. 28, 2014, 12:40 PM
- Refiner stocks are dropping, in line with the margin squeeze that could result from the drop in crude oil prices, Barron's Dimitra DeFotis writes.
- Rising violence in Libya continues to affect energy assets, but attempts for peace between Israel and the Palestinians over the weekend may be taking some of the risk out of energy markets; Brent prices are down nearly 1% to $107.76/bbl, narrowing the spread with West Texas crude, off 0.3% to $101.74.
- ALJ -3.3%, TSO -1.6%, WNR -0.9%, HFC -0.8%, VLO -0.6%, PSX -0.4%, MPC -0.2%.
Jul. 15, 2014, 11:33 AM
- Valero Energy (VLO -0.2%) climbs off sharp early losses after reporting Q2 guidance below Wall Street consensus.
- Wells Fargo analysts expect Q2 throughput volumes will be generally as expected, while capture rates will fall short of prior expectations likely due to weaker crack spreads; it lowers its Q2 and FY 2014 EPS estimates to a respective $1.18 and $5.87 from $1.31 and $6.00.
- Raymond James analysts continue to “tread lightly” with the refiners, skeptical that WTI-Brent spreads can reach heights needed to drive EPS expectations higher for 2015 and beyond.
- Other refiners are mostly higher after early losses: TSO +0.7%, HFC +0.3%, MPC +0.7%, PSX +0.4%, ALJ -0.5%, WNR +0.4%, CVI +0.8%.
Jul. 11, 2014, 3:18 PM
- Citigroup analyst Faisal Khan says he is moving toward a more bullish view of the U.S. refining sector after a bout of selling amid low expectations.
- Khan points to continued growth in U.S. and Canadian oil production, "sticky" oil prices due to Middle East volatility, U.S. oil price differentials that are "somewhat contained" at $5-$10/bbl, and headway on refining closures in the Atlantic basin that is only a matter of time.
- As a result, the Citi team upgrades Marathon Petroleum (MPC +2.2%) to Buy from Neutral, as well as HollyFrontier (HFC +2%) to Neutral from Sell on valuation, but downgrades Alon USA Partners (ALDW -0.8%) to Neutral on the belief that Midland-Cushing differentials have peaked.
- Valero Energy (VLO +1.7%) and Western Refining (WNR +2%) remain the firm's favorites - VLO because it sees “crude-on-crude competition on the U.S. Gulf Coast resulting in greater feedstock discounts at Valero’s high conversion refineries," and WNR for its restructuring potential.
Jul. 9, 2014, 6:54 PM
- Shares of refiners such as Phillips 66 (PSX), Holly Frontier (HFC), Valero Energy (VLO) and Alon USA Energy (ALJ) have suffered since the U.S. government decided to allow the export of some ultra-light crude oil, and Barclays believes upcoming earnings reports aren't likely to help much.
- U.S. refiners have fared better than international peers but still have been hit by the narrowing in most of the key North American crude differentials, although refiners exposed to the Cushing-Midland differential are affected less than most, the firm says.
- As a result, Barclays slashes its current-year earnings forecast for most of the refiners; ALJ's FY 2014 EPS estimate is cut to $0.35 from $1.25 to reflect the company’s lower Q2 throughput guidance at its Big Spring refinery (39M bbl/day vs. 46M bbl/day prior).
- The firm cuts EPS at HFC to $3.00 from $4.35, PSX to $6.20 from $7.95, and VLO to $6.25 from $8.35; only Tesoro (TSO) emerges unscathed, with its estimate left at $5.00.
Jun. 27, 2014, 4:53 PM
- All U.S. crude oil that is processed by a distillation tower - not just condensate - is exempt from the crude export ban, potentially widening the amount of petroleum U.S. producers can send to markets abroad, Reuters reports, citing U.S. government and industry sources.
- By focusing on how the oil is treated rather than what it is, this week's ruling allowing two companies that produce condensate to export the oil if it is processed by a distillation tower appears to open an option for companies that produce traditional crude to get around the export ban by lightly boiling their own oil, the report says.
- The new interpretation of the ruling will add to the speculation over how much of the U.S. shale oil boom might reach overseas markets.
- ETFs: USO, OIL, XLE, UCO, ERX, VDE, OIH, SCO, ERY, DIG, BNO, DTO, DBO, DUG, IYE, CRUD, USL, PXJ, FENY, UWTI, DWTI, DNO, RYE, SZO, FXN, OLO, DDG, OLEM.
- Domestic oil stocks: OAS, NOG, KOG, CLR, WLL, EOX, SM, SFY, PVA, GST, SN, CRK, BBG.
- Global majors: XOM, CVX, BP, RDS.A, RDS.B.
- Refiners: VLO, HFC, MPC, TSO, WNR, ALJ, PSX, PBF, DK, NTI, ALDW, CVI.
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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