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. 30, 2014, 10:47 AM
- Last week's surprise move by the U.S. government to allow the export of condensate products hit the refining sector hard, but the analyst team at Cowen remains bullish on top refiners, believing actual crude exports are highly unlikely and there is no change to the spirit of the law.
- Cowen remains bullish for the longer term and sees potential for a meaningful feedstock advantage for U.S. refiners emerging later this year, with U.S. crude production inflecting at 9M bbl/day and Gulf Coast imports baselining at 2.8M-3M bbl/day.
- Cowen's five favorite refiners are MPC, PBF, TSO, VLO, WNR; the condensate export issue took a toll on the stocks, and investors can buy some of them as much as 15% cheaper than two weeks ago.
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. 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, 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%.
Jun. 23, 2014, 5:58 PM
- Tesoro Logistics (TLLP) agrees to acquire three marketing terminals, a storage facility and a refined products pipeline from Tesoro (TSO) for $270M.
- The three refined products terminals are adjacent to TSO's refineries at Martinez, Calif., Anacortes, Wash., and Kenai, Alaska, with expected total throughput of 35K-45K bbl/day; the marine crude oil and heavy products storage facility has a capacity of 1.5M barrels and is located adjacent to TSO's Anacortes refinery.
- TLLP expects the deal to add $28M to annual EBITDA.
Jun. 12, 2014, 11:22 AM
- The refining analysts at Cowen say that although Q2 earnings estimates are coming down and Q3 also could prove challenging, they believe asset quality will be rewarded and see higher crude prices as setting up a buying opportunity in their five favorite sector names.
- Topping the list is Marathon Petroleum (MPC), which Cowen rates at Outperform with a $120 price target; the firm's other favorites are PBF, TSO, VLO and WNR.
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. 2, 2014, 10:24 AM
- California, the biggest gasoline market of all the U.S. states and the third largest oil refining state, more than doubled the volume of oil it received by rail during Q1 as deliveries from Canada surged.
- California unloaded 1.41M barrels in the quarter, up from 693,457 a year ago, with Canadian deliveries making up half the total.
- Trains are bringing more to California even as projects face more scrutiny after a series of accidents involving rail cars carrying fuel: Tesoro (TSO) is 6-8 weeks behind schedule in receiving regulatory permits for a rail-to-marine crude transloading terminal in Washington state, and city regulators yesterday said they’re delaying until June an environmental report on a rail-offloading complex Valero (VLO) has proposed at its Benicia refinery in northern California.
May. 1, 2014, 2:59 PM
- Tesoro's (TSO +1.2%) plan for a crude oil rail-to-barge project at the Port of Vancouver in Washington has been delayed as the refiner awaits state requirements for an environmental impact statement, CEO Greg Goff said in today's earnings call.
- The project had been targeted to start up in late 2014 or early 2015; Goff said construction is now expected to begin during that time frame, with initial inland U.S. crude volumes running through the railport in mid-2015.
- Goff also says the estimated cost of the project has risen to $150M-$190M from ~$100 originally.
Apr. 30, 2014, 5:38 PM
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
Apr. 4, 2014, 11:43 AM
- UBS analysts say the best is yet to come for U.S. refiners, believing growth in U.S. light oil production from shale risks overwhelming the country’s ability to absorb the barrels with the potential for a price blowout in the difference between Brent crude and Louisiana Light Sweet, with refining stocks as big beneficiaries.
- With oil prices hovering near $100 mark and the busy summer travel season coming soon, demand should only increase; if refinery investors get the spread blowout many are looking for by Q4, the firm thinks it could get exciting for the top names.
- UBS top refining stocks to buy now: CVRR, NTI, PSX, TSO, VLO, WNR.
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. 11, 2014, 2:44 PM
- Two contractors performing maintenance work at Tesoro’s (TSO -0.4%) Golden Eagle refinery in northern California suffered burns yesterday when they were splashed with sulfuric acid, an accident that occurred in the same processing unit where two employees were burned by acid last month.
- The first incident prompted state and federal regulators to raise broader questions about how TSO runs the plant; TSO said an investigation by the U.S. Chemical Safety Board was biased and that the agency overstepped its bounds.
- TSO claims yesterday's accident is unrelated to the Feb. 12 chemical release.
TSO vs. ETF Alternatives
Tesoro Corp is an independent petroleum refiner and marketer in the United States. Its subsidiaries, operating through three business segments, primarily transport crude oil and manufacture, transport and sell transportation fuels.
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