Valero Energy (VLO +3.8%) has recouped early losses following a disappointing Q2 update and is making new highs for the day, as downside guidance apparently was priced in. Most refining peers also are higher: ALJ +3.7%, WNR +3.6%, HFC +3.5%, TSO +3.2%, CVI +2.9%, ALDW +2.6%, MPC +2.6%, PSX +2.5%, DK +1.8%, CVRR +1.7%, NTI +1.7%.
Shares of oil refiners are trading lower after Valero (VLO) said it expects Q2 earnings to come in below current estimates. VLO -4.1% AH to ~$33, and several refining peers also are lower: NTI -2.9%, ALJ -2.9%, WNR -2.6%, HFC -2.5%, TSO -2.4%, MPC -2.1%, PSX -1.8%.
Refiners are oversold, Tudor Pickering says, after margins have been squeezed as WTI prices climb much faster than Brent. As North American supply growth continues, the spread will widen and support refiners' stocks, the firm says; with refiners off 20%-40% from their peaks, believers in North American crude supply growth should be buying here. CVI +6.3%, HFC +4.7%, PSX +2.9%, TSO +2.5%, VLO +1.9%.
"The days of $20 spreads have passed," BAML says as it grows more cautious on refiners whose earnings face strong headwinds from the collapse in WTI-Brent spreads. The firm downgrades Marathon Petroleum (MPC) to Neutral from Buy, while also cutting HollyFrontier (HFC) and Calumet Specialty Products (CLMT). (earlier)
WTI crude settled well above $101/bbl, cutting the premium of North Sea Brent to barely $3 and continuing to hit U.S. inland refiners that had thrived on ~$20 premiums for much of 2012. "Stay away from these stocks until we know in the next 3-4 weeks whether this trend is temporary," Oppenheimer's Fadel Gheit advises. Since May 1: HFC -16%, WNR -13%, CVI -8%, MPC -6%.
Refiners HollyFrontier (HFC -5.2%), Marathon Petroleum (MPC -0.7%) and Valero (VLO -1.4%) are downgraded to Underweight from Neutral at J.P. Morgan, which says traditionally weaker H2 results and narrowing differentials between Brent prices and WTI will keep shares range-bound even as the companies' long-term finances still look good. The firm prefers Phillips 66 (PSX +0.1%) and Tesoro (TSO -0.6%).
Renewable fuel advocates praise today's Supreme Court decision not to hear a challenge to higher ethanol blends of gasoline, permitting the EPA's move to allow the sale of gasoline containing 15% ethanol to stand. Opponents warn of potential engine damage and higher prices for consumers. Refiners: ALJ -4.8%, VLO -4.6%, TSO -4.1%, PSX -3.4%, MPC -3.3%, WNR -3.1%, HFC -1.9%.
HollyFrontier (HFC) announces unplanned downtime to fluid catalytic cracking units at its largest refinery in El Dorado, Kan., and its Cheyenne, Wyo., refinery. Both outages are expected to last 10 days.
More on HollyFrontier's (HFC) Q1 results: Earnings rose 38% as refinery margins improved and revenue declined at a slower-than-expected rate. Refinery gross margins were $23.32/bbl, up 34% vs. $17.46/bbl in the year-ago quarter. Production averaged ~407K bbl/day. But operating expenses were $265.1M ($6.68/bbl) vs. $241.6M ($5.51/bbl). Shares -2.3% premarket.
bonnie12+ FollowFollowing- Unfollow|Send Message25 Nov 2013
Brent "spread" now 16 bucks and change. Should be good news for $HFC, plus dividend @.30 and special of .50 declared...
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Daddy-Boy+ FollowFollowing- Unfollow|Send Message18 Nov 2013
I'm very bullish on $HFC. WTI/Brent spread is widening and the next quarter should bring larger earnings.
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TFCAB+ FollowFollowing- Unfollow|Send Message15 Nov 2013
$TSO $HFC Barron's Bounce? Barrons positive on both. LONG TSO VLO WNR
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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.