Yesterday, 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."
Tue, Sep. 29, 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%.
Fri, Sep. 25, 2:10 PM
Wed, Sep. 23, 9:29 AM
- The first day of fall warrants a look at which stocks tend to perform nicely during the season. A scan by USA Today, relying on data from S&P Capital IQ, finds nine stocks beat the S&P 500 each of the last five falls. The group averaged over a 16% gain during the period.
- Fall winners: Seagate Technology (NASDAQ:STX), Royal Caribbean Cruises (NYSE:RCL), Western Digital (NASDAQ:WDC), Ameriprise Financial (NYSE:AMP), Tesoro (NYSE:TSO), Signet Jewelers (NYSE:SIG), Robert Half International (NYSE:RHI), Wyndham Worldwide (NYSE:WYN), FedEx (NYSE:FDX).
Tue, Aug. 25, 5:35 PM
- investors should stick with "market darlings" - the 25 stocks that had performed the best during the six months before a market pullback - according to the analyst team at RBC.
- The firm notes that although many recent winners are leading the market lower, the extent of the underperformance is just 1%; it also says investing in the group following sharp market pullbacks is a winning strategy over the ensuing week, month and six months.
- RBC's 25 market darlings are AET, ALTR, AMZN, AIZ, CVC, CI, CAG, EA, EQIX, EXPE, GME, GOOGL, HAS, HCA, MNST, NFLX, NKE, PRGO, REGN, SBUX, TSO, TWC, TSS, UA, UHS
Fri, Aug. 14, 3:39 PM
- Tesoro (TSO -1.9%) is lower as shares are downgraded to Sector Perform from Sector Outperform at Scotia Howard Weil, although the price target is raised by $3 to $114, as the firm says it is becoming concerned that investors are growing complacent with a West Coast margin environment well above mid-cycle levels.
- TSO had climbed more than 6% heading into today's trading after strong Q2 earnings and indications that Q3 could be even better; since the results, analyst estimates for Q3 free cash have increased to $4.57/share from $2.77.
- Weil says its general stance on refiners remains constructive into fall turnarounds, with the view that differentials could improve on top of a persistently strong underlying margin environment, but it does not believe TSO will continue to outperform peers.
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, 4:55 PM
- Tesoro (NYSE:TSO) agrees to pay $4M to settle a lawsuit alleging that it discharged hazardous pollutants at its refinery in Martinez, Calif.
- The deal announced late yesterday came after an eight-year investigation by Bay Area regulators who found the company had not properly disposed of the plant’s byproducts in sewer and water-treatment facilities without first removing contaminants that could evaporate and pollute the atmosphere.
- TSO, which operates six refineries in the western U.S., is no longer discharging its waste illegally, the regulators say.
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."
Wed, Aug. 5, 5:02 PM
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.
Thu, Jul. 23, 6:44 PM
- Even as the E&P and oilfield services sectors have slumped again, stocks of refiners such as Valero Energy (NYSE:VLO), Tesoro (NYSE:TSO), Marathon Petroleum (NYSE:MPC) and Western Refining (NYSE:WNR) have jumped 25% or more YTD.
- West coast refiners are big winners right now: Earlier this month, according to Credit Suisse, regional refining margins hit almost $60/bbl, - higher than the oil price itself.
- But Heard On The Street's Liam Denning suspects a top is near, with valuation a factor; VLO, for example, now trades at ~9.6x earnings, above its 15-year average of ~8.5x, which would be closer to just 8x without the wild swings in 2009-10 in the aftermath of the financial crisis.
- The other worry is that the glut of crude oil is morphing into a glut of refined products, such as diesel; U.S. commercial inventories of crude peaked in April and have since dropped by 29.5M barrels, but stocks of refined products have increased by 57M barrels to hit their highest level on record.
- Denning thinks refining stocks should remain the energy sector's best performers through the summer driving season and amid cheap oil, but by the time 2016 comes around, the growing glut in refined products may be too large for even the most optimistic investor to ignore.
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%).
Fri, Jun. 26, 5:58 PM
- The latest delay in a detailed government review of Tesoro's (NYSE:TSO) proposed $210M Port of Vancouver railport project in Washington state means a final decision will be pushed into 2016, Reuters reports, citing a state council's published schedule.
- The 360K bbl/day Vancouver Energy USA project would be the biggest in the U.S., moving domestic and Canadian crude via rail to the crude-by-rail terminal, where it would be loaded onto vessels to supply west coast refineries.
- Washington's Energy Facility Site Evaluation Council newly published schedule says a draft environmental impact statement will be published in late November, after it had previously expected to release the draft report in late July.
- Earlier: Tesoro's Port of Vancouver planned oil terminal subject to deeper scrutiny (Jun 5)
TSO vs. ETF Alternatives
Tesoro Corp is an independent petroleum refiner and marketer in the United States. Its subsidiaries operate through three business segments, transport crude oil and manufacture, transport and sell transportation fuels.
Other News & PR