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. 19, 2014, 4:51 PM
- Exxon Mobil (NYSE:XOM) has put its Torrance, Calif., refinery up for sale, Reuters reports, making it the latest big oil company to consider exiting the state amid tougher environmental standards.
- The 155K bbl/day refinery, in the south part of Los Angeles, is XOM's only refinery in California and the second smallest of its half-dozen U.S. plants.
- XOM may have some trouble making a sale, however, because of the state's environmental regulations and since several refiners including Chevron (NYSE:CVX), ConocoPhillips (NYSE:COP), Tesoro (NYSE:TSO) and Valero (NYSE:VLO) already operate two or more refineries there, limiting their ability to buy others.
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. 29, 2014, 9:10 AM
- Valero Energy (NYSE:VLO) has restarted production at a corn ethanol plant in Indiana that was shuttered more than two years ago by its previous owner.
- VLO bought the plant in March from Aventine Renewable Energy Holdings for $34M, boosting the number of its ethanol plants to 11.
- The plant is expected to boost VLO’s ethanol production to 1.3B gallons/year, putting it behind only Archer Daniels Midland and Poet LLC in ethanol production.
Aug. 21, 2014, 11:35 AM
- Plains All American Pipeline (PAA -0.5%) announces plans to construct a 440-mile pipeline from its Cushing, Okla., terminal to Valero's (VLO +0.2%) Memphis refinery, to provide capacity of up to 200K bbl/day of domestic sweet crude.
- PAA expects total project investment of ~$900M and completion in late 2016.
- PAA says the Diamond pipeline project is underpinned by a long-term shipping agreement with VLO and a related contract for storage and terminalling services at the Cushing terminal.
- VLO holds an option until Jan. 2016 to become a partner in the pipeline and purchase a 50% interest.
Aug. 18, 2014, 3:25 PM
- Valero Energy (VLO +2.3%) has dropped 3% during the past three months and has underperformed its closest peers Marathon Petroleum (MPC +1.6%) and Phillips 66 (PSX +2.1%), but Morgan Stanley’s Evan Calio and Manav Gupta think it’s time for a turnaround.
- While MPC, PSX and Exxon Mobil (XOM +0.2%) have major planned turnaround scheduled for Q4, VLO will be operating at a meaningfully higher utilization rate and is best positioned to capture any widening Gulf Coast differentials resulting from high turnaround activity, the analysts say.
- In addition to VLO's Q4 earnings revision upside, the firm estimate VLO has $800M in MLP-able EBITDA, including organic growth projects, which can be dropped into Valero Energy Partners (VLP +0.7%) in the foreseeable future.
Jul. 30, 2014, 8:42 AM
- Valero Energy (NYSE:VLO) +1.2% premarket after Q2 earnings and revenues beat Wall Street expectations, as VLO's refining segment reported higher volumes and operating income.
- Q2 refining throughput volumes averaged 2.7M bbl/day, an increase of 115K bbl/day from the year-ago quarter, due primarily to less turnaround activity and higher utilization rates spurred by the availability of discounted North American light crude oil on the U.S. Gulf coast.
- Refining operating income rose 18% Y/Y to $1.08B, reflecting higher volumes and bigger discounts on certain kinds of oil, which the company had projected earlier this month.
- The ethanol segment's operating income nearly doubled to $187M, boosted by higher margins related to lower corn costs.
- Expects 2014 capex of $3B, including $870M for logistics investments, most of which are expected to be eligible for drop-down into Valero Energy Partners (NYSE:VLP) in the future.
Jul. 30, 2014, 7:52 AM
Jul. 29, 2014, 11:42 AM
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. 14, 2014, 5:22 PM
- Valero Energy (NYSE:VLO) -2.2% AH after saying it expects to report below consensus Q2 EPS from continuing operations of $1.10-$1.25; analysts had forecast a consensus $1.37.
- VLO sees refining operating income higher Y/Y due to higher throughput volumes as well as wider discounts on sour crude oil and certain types of North American light crude oil, offseting weaker Y/Y gasoline and distillate margins in most regions.
- VLO also expects to report a $0.12/share loss from discontinued operations, related primarily to a non-cash charge associated with recognizing an asset retirement obligation for the Aruba refinery.
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.
VLO vs. ETF Alternatives
Valero Energy Corp is a refining and marketing company. The Company produces conventional gasolines, distillates, jet fuel, asphalt, petrochemicals, lubricants, and other refined products as well as a slate of premium products.
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