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.
Jun. 27, 2014, 3:59 PM
- Refiners are lower again today after a slight bounce yesterday, as investors resume wariness over the U.S. government's move to allow exports of ultra-light crude oil.
- But Credit Suisse analysts say there’s more to the drop in refiners: U.S. refining is still linked to the world, there is overcapacity in global refining and the risk premium in the oil price is rising, and this week the market was reminded that the lightest barrels (condensate) in U.S. production can be exported (via distillation towers) at relatively low cost, creating more runway for black oil.
- The firm downgrades Holly Frontier (HFC -2.5%), and says Tesoro (TSO -0.7%) needs to beat convincingly in 2Q earnings... to drive further relative upside”; however, Marathon Petroleum (MPC -1.7%) "is becoming significantly more interesting after underperforming,” while it sees most potential in niche refiners such as Delek US (DK -3.4%) and Western Refining (WNR -0.9%).
- Also: VLO -1.1%, ALJ -2.5%, PSX -0.7%, PBF -3.5%, CVI +0.4%, CLMT +1.5%.
Jun. 27, 2014, 11:58 AM
- HollyFrontier (HFC -1.7%) is downgraded to Neutral from Outperform with a $50 price target, down from $63, at Credit Suisse, which predicts the macro economy to negatively affect HFC's operational recovery.
- The firm views global refiners as over-capacitated fears, and expects Middle East uncertainty to decrease the price of imports in H2 2014; due to recent crude oil spikes, it is concerned about the company's Q4 results.
- Credit Suisse has cut HFC's Q2 EPS outlook by 18% and Q3 by 16%.
Jun. 26, 2014, 3:33 PM
- Most refiners recover part of yesterday's big drop, which some say was an overreaction to the U.S. government move to allow two oil companies to export ultra-light crude oil for the first time: TSO +2.8%, VLO +2%, PSX +1%, CVI +0.7%, CLMT +0.7%, WNR +0.6%, MPC +0.2%, ALJ -1%, PBF -0.6%, HFC -0.3%.
- The death of U.S. refiners is "greatly exaggerated," Cowen analysts say: "The spirit of the law - that hydrocarbon liquids produced in the U.S. must be processed in the U.S. - remains in place, and permits for condensate exports do not constitute precedent for crude oil... We continue to see potential for a meaningful feedstock advantage for U.S. refiners emerging later in 2014."
- Ned Davis Research, however, thinks the news is "potentially game changing for refiners," since it signals a change in the government’s position on oil exports more broadly and noting that it is the export ban, plus inadequate pipeline infrastructure, that has fed recent refiner outperformance.
Jun. 25, 2014, 7:17 PM
- The decision to allow two Texas companies to export condensates looks like a win for Eagle Ford Shale crude producers at the expense of refiners and companies planning to build processing plants along the Gulf coast.
- Today's selloff in refiners reflected concern that the groups will lose some of their competitive edge if condensate exports become common: Valero Energy (NYSE:VLO), the largest U.S. refiner, dropped 8.3%, PBF tumbled 10.7%, PSX fell 4.2%, and HFC slid 6.7%.
- Oppenheimer notes that PXD, DVN, MRO, COP and MUR produce the most Eagle Ford condensate, and could benefit if U.S. condensate prices close some of the gap with European prices; EOG, the largest Eagle Ford producer, produces little condensate and likely benefits little from the lifting of the condensate ban.
- Investor reaction toward Gulf Coast gathering and processing MLPs such as EPD, MMP, KMP and NGLS was more muted, since plans to build splitters in Texas may be undermined by even modest rule changes in the crude export ban that allow Eagle Ford producers to sell condensate after running it from the wellhead to their own nearby - and much cheaper - distillation towers.
Jun. 25, 2014, 12:47 PM
Jun. 25, 2014, 10:18 AM
- Refiners take a beating in early trading, as a lift of the ban on U.S. oil exports is expected to narrow the WTI-Brent spread, which could cause refiners' profits drop if they are forced to pay higher prices to compete with international buyers for U.S. crude.
- “We don’t think the current system needs to be changed,” Valero Energy tells Bloomberg.
- Yesterday's rulings gave Pioneer Natural Resources (PXD +2.6%) and Enterprise Products Partners (EPD +1.4%) permission to ship ultralight oil to foreign buyers - a narrow ruling, but one that is likely to spark similar requests from other companies, and increase lobbying for a full lifting of the 40-year-old ban on exporting crude oil.
- Refining stocks are broadly lower: VLO -7.4%, PBF -5.8%, MPC -5.7%, WNR -5.5%, DK -5.4%, HFC -4.6%, ALDW -4.6%, TSO -3.8%, NTI -3.5%, PSX -2.9%, ALJ -2.7%, CVI -2.3%.
May. 15, 2014, 4:59 PM
- Oil refiners will be required to further curb air pollution from storage tanks, flares and heavy-oil processing equipment under proposed rules released today by the EPA.
- The proposed rules also would require refiners for the first time to measure concentrations of cancer-causing benzene at their fence lines and provide the data to the public.
- Top refiners include VLO, TSO, PSX, ALJ, MPC, WNR, HFC, CVI, DK and CLMT.
May. 6, 2014, 7:02 AM
May. 5, 2014, 5:30 PM
- ACM, ACOR, AER, AKRX, AME, ARCC, ARCO, ARW, BCE, BCS, CBOE, CNK, COCO, CRTO, CRZO, CYNO, DISCA, DNR, DTV, DWRE, EMR, EXH, EXLP, FE, GDP, GLDD, HCP, HFC, HPT, HSH, HSIC, HTH, IFF, ISIS, KWK, MMP, MNTA, MONT, MOS, MPW, MSO, MVIS, MWIV, NRG, [[NTi]], NUS, ODP, OXF, PDCE, PQ, PRIM, RDC, RHP, RTI, RTRX, STWD, TDG, TGH, TPH, TW, UBS, VMC, VSH, VTG, WCG, WNR, XRAY, ZBRA, ZTS.
Apr. 28, 2014, 12:45 PM
- Prices of U.S. crude grades such as West Texas Intermediate are starting to disconnect from Brent benchmark prices again, rebounding to ~$9/bbl two weeks after hitting a low for the year of less than $3.70.
- Stocks at the Cushing, Okla., hub have dropped by 16M barrels since late January but have jumped by 43M on the Gulf coast; overall, U.S. commercial crude oil inventories now stand at their highest level on record, according to Barclays.
- With the oil stuck there with nowhere to go, Gulf coast refiners can name their price - great for the likes of Valero Energy (VLO +1.9%), because they can then refine that oil into products such as gasoline that are allowable for export.
- Also today: PSX +0.9%, MPC +1.8%, HFC +0.7%, TSO +1.3%, CVI +0.9%, WNR +0.2%, PBF +1.1%, CLMT +2.3%, ALJ -1.2%.
- ETFs: USO, OIL, UCO, SCO, DTO, DBO, BNO, CRUD, USL, UWTI, DNO, DWTI, SZO, OLO, OLEM, TWTI
Mar. 26, 2014, 6:38 PM
- HollyFrontier (HFC) +1.2% AH as it announces plans to enter the mid-continent asphalt business in an attempt to expand its Southwest asphalt production and marketing business.
- A subsidiary of HFC is entering into a long term lease with NuStar GP Holdings (NSH) unit NuStar Logistics for the Port of Catoosa asphalt terminal, enabling HFC to begin supplying polymer modified and PG asphalts to the mid-continent market.
Mar. 17, 2014, 6:52 PM
- Pain for investors in refiners such as Valero (VLO), Tesoro (TSO), Phillips 66 (PSX), HollyFrontier (HFC) and Marathon Petroleum (MPC) may be ready to turn into gain, Barclays says as it sees the U.S. refining segment among the market’s best-performing groups over the next year or two.
- The firm thinks the narrow LLS-Brent differential during the past two months mostly has been due to poor weather affecting both production and the logistics necessary to transport the production to refineries.
- Barclays believes investors should overweight the entire U.S. refining industry, but particularly favors VLO, which is "best positioned to take advantage of the changing Gulf Coast crude oil landscape,” and TSO, when “investors start to shift their focus to relative underperformers within the refining sector.”
Mar. 5, 2014, 6:21 PM
- Energy Secretary Ernest Moniz said at the CERAWeek conference this week that the oil industry has failed to make a convincing case for why the U.S. government should allow the export of domestic oil when the U.S. still imports 5M bbl/day.
- The statement should please America's refiners, who have enjoyed increased profits from buying U.S. oil on the cheap to produce products such as gasoline.
- At the same time, Moniz went further than before in suggesting the Obama administration could redo the economic analysis that underpins its decisions on exporting American natural gas.
- Moniz also dismissed speculation that the Obama administration has in mind a hard cap on possible natural gas exports.
- Refiners: PSX, MPC, HFC, VLO, TSO, WNR, NTI, DK, CLMT, ALJ, CVI.
Feb. 27, 2014, 3:46 PM
- Oil refiners are getting hit today as Brent crude falls to its lowest price in more than a week on rising tensions in Ukraine, shrinking the premium to West Texas crude to the narrowest level since October.
- Given Ukraine’s location, the country's situation obviously will impact Brent more than WTI; meanwhile, WTI’s losses are limited after U.S. government data yesterday showed crude supplies at Cushing, Okla., declining to a four-month low.
- Phillips 66 (PSX -2.8%) has dropped 3.5% YTD, while Delek US (DK -5.3%) has plunged 17%, Valero (VLO -4.3%) has slipped 3.8%, Holly Frontier (HFC -3.1%) has fallen 8.2% and Marathon Petroleum (MPC -4.4%) is off 8.5% in 2014.
- Other decliners today: TSO -1.5%, ALJ -5.4%, WNR -4.2%, CVI -3.4%, CLMT -0.7%.
- ETFs: USO, OIL, UCO, SCO, DBO, DTO, BNO, CRUD, USL, DNO, UWTI, SZO, DWTI, OLO, OLEM, TWTI
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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