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
Tue, Aug. 4, 6:07 AM
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.
Fri, Jul. 17, 5:52 AM
Tue, Jul. 14, 3:57 PM
- Although upside among oil refiner stocks seems limited now, Goldman Sachs thinks H2 will be characterized by “dispersion, where company-specific, idiosyncratic leaders” such as Valero (VLO -0.8%), Marathon Petroleum (MPC +0.1%) and Delek US (DK +4.2%) will substantially outperform peers.
- Goldman continues to include VLO in its Americas Conviction List, maintaining a Buy rating and $79 price target. and likes MPC, with a Buy rating and $68 target, expecting Gulf coast refiners to benefit from sturdy gasoline margins, capital allocation, wider spreads and appealing valuations going forward.
- The firm upgrades DK to Buy from Neutral, believing it is well positioned to deliver premium free cash flow on the back of capex declines, while downgrading Phillips 66 (PSX +0.1%) to Neutral from Buy to reflect recent appreciation and expected margin pressure, and raising Western Refining (WNR +1.2%) to Neutral from Sell to reflect midstream value, M&A potential and strong Phoenix margins.
Thu, Jul. 9, 10:47 AM
- Northern Tier Energy (NTI +0.4%) is initiated with an Outperform rating and $30 price target at RBC, which cites NTI's sole refinery - St. Paul Park - as "one of the most advantaged crude slates in the U.S.," mainly on account of its pipeline access to local Bakken and Canadian crudes.
- The firm considers NTI as undervalued because of a general lack of investor interest in the variable-rate MLP refiner structure, as well as the company's dependence on only one refinery.
- At the same time, RBC starts Western Refining (WNR +0.4%) at Sector Perform with a $48 target, saying WNR is caught between two opposing strategic directions - to purchase the remaining 62% of NTI or to sell its refineries to NTI; the uncertainty could be an overhang in the medium term.
- The firm praises WNR's impressive asset portfolio, which it says includes two of the most advantaged refineries in the U.S. and access to local growing crude supplies in the Permian and Four Corners Basins.
Thu, Jun. 18, 7:17 PM
- U.S. oil refiners will maintain positive free cash flows until the seasonally stronger Q4 revives earnings, as they can beat a short-term supply crunch by boosting the use of OPEC oil and diverting exports headed for Canada, Cowen analyst Sam Margolin writes.
- Refiners are getting squeezed by a drop-off in domestic supplies as drillers pull back, but Margolis sees the crunch as temporary and expects supplies of West Texas crude to rebound in response to demand during H2.
- The analyst maintains an Outperform rating on Valero (NYSE:VLO), Tesoro (NYSE:TSO), Marathon Petroleum (NYSE:MPC), Western Refining (NYSE:WNR) and PBF Energy (NYSE:PBF) he predicts Q2 earnings will come in above consensus for VLO, TSO and WNR.
- Margolin rates HollyFrontier (NYSE:HFC), Alon USA Energy (NYSE:ALJ), Calumet Specialty Products (NASDAQ:CLMT) and Northern Tier Energy (NYSE:NTI) at Market Perform.
Fri, May 29, 11:15 AM
- Ethanol companies rise while refiners are off session highs after the EPA announces its renewables fuels mandate.
- The EPA proposes requiring 15.93B gallons of total renewable fuel in 2014, 16.3B gallons in 2015, and 17.4B gallons in 2016, but the proposal for the total renewable fuel requirement falls short of levels Congress mandated, which were 20.5B gallons in 2015 and 22.5B gallons in 2016.
- Also, the EPA cuts 2016 corn-ethanol quota to 14B gallons; U.S. law required 15B gallons of ethanol for 2016.
- Ethanol exposed companies are mostly higher: ADM +0.7%, GPRE +4.2%, PEIX +4.1%, REX +1%, DAR +2%, CZZ -2.2%.
- Among refiners: HFC +0.3%, TSO +1.3%, VLO +0.8%, WNR +1.9%, PBF -1%.
- Biofuel related stocks: GEVO -8.3%, SZYM -2.7%, CDTI -1%, REGI -0.7%.
Tue, May 5, 6:00 AM
Tue, Apr. 21, 4:49 PM
Fri, Apr. 10, 5:17 PM
- The EPA agrees to issue final biofuel quotas for 2014 and 2015 under the federal Renewable Fuel Standard by Nov. 30 in a tentative settlement of an energy industry lawsuit which had challenged EPA delays in establishing the mandates.
- Refiners and biofuel producers have complained that the EPA's repeated delays in setting renewable fuel use requirements have led to uncertainty and volatility in biofuel markets.
- Refiners are required under the RFS to blend a certain amount of biofuels into gasoline and diesel based on the targets established by the EPA; potentially relevant tickers include VLO, TSO, PBF, PSX, ALJ, MPC, WNR, HFC, CVI.
- Biofuels producers also crave the certainty and market demand guaranteed by the annual targets, but they believe the EPA should not back down from setting aggressive renewable fuel quotas; potentially relevant tickers include REGI, FF, AMRS, GEVO, CDTI, SZYM, OTCPK:KIORQ.
Tue, Apr. 7, 6:11 PM
- Energy firms are expected to have the worst earnings decline thanks to the plunge in oil prices, and Barclays' Paul Cheng expects U.S.-based oil majors to report in-line with consensus but sees refiners posting more varied results, with some widely missing the mark.
- Cheng believes PBF Energy (NYSE:PBF) and Western Refining (NYSE:WNR) could see the biggest potential downside surprises, and Marathon Petroleum (NYSE:MPC) possibly delivering the biggest upside surprise.
- On MPC, Cheng thinks 2015 should be a relatively low maintenance year after two years of heavy turnaround cycle; based on MPC’s posted market data, he sees the company’s Q1 refining margin realization averaging $17-$19/bbl vs. his estimate of $17.1/bbl, while retail margins remain better than Q1 2014 levels.
Thu, Mar. 26, 10:59 AM
- Cowen analysts see plenty of room to go in gains for the refinery sector, and moves up Q1 earnings estimates for across the firm's coverage universe.
- Cowen acknowledges that while crack spreads should start moving back to normal levels as industry maintenance winds down after April, margins are still strong, and many expect one of the largest-ever travel seasons this summer.
- The six stocks rated Outperform at Cowen are Delek (NYSE:DK) with a $43 stock price target, Marathon Petroleum (NYSE:MPC) with a $120 target, PBF Energy (NYSE:PBF) at $35, Tesoro (NYSE:TSO) at $90, Valero (NYSE:VLO) at $70 and Western Refining (NYSE:WNR) with a $60 price target.
Wed, Mar. 25, 5:45 PM
- The difference between the price of oil and the gasoline made from it would be bad news for U.S. refiners if the spread shrinks, but Cowen analyst Sam Margolin and Jason Gabelman offer three reasons why they’re not worried.
- With valuations remaining attractive, the analysts see three themes emerging to carry continued outperformance in refineries: positive consumer fuel demand response to lower prices, sustained crude oversupply into the fall turnaround period, and midstream consolidation and growth as a shareholder-friendly use of cash.
- The analysts have Outperform ratings on VLO, TSO, MPC, WNR, PBF and DK; only WNR failed to finish with a solid gain in today's trade.
Wed, Mar. 18, 3:24 PM
- Crude oil prices, in the doldrums yet again after U.S. inventories hit record highs for a 10th week and supplies at the futures' Cushing delivery hub hit a peak, turned around to finish higher following the Fed policy statement.
- Nymex crude rose 2.5% to settle at $44.66/bbl, pushing off earlier lows of $42.25 and the lowest intraday level since March 2009; Brent is up 4.5% at nearly $56.
- The gain could prove only a momentary recovery, however, as "speculation is going to grow about operational capacity being hit in Cushing and what that portends for prices,” according to Again Capital John Kilduff, adding that he sees U.S.crude testing $40 soon.
- U.S. refiners are enjoying big gains as the Brent/WTI spread surpasses $11: TSO +5.1%, CLMT +4.7%, CVI +4.8%, HFC +4.6%, MUR +4.5%, WNR +4.4%, VLO +3.9%, RDS.A +3.9%, CVRR +3.7%, MPC +3.3%, PSX +3.2%, ALJ +3.2%.
- ETFs: USO, OIL, UCO, SCO, BNO, DTO, DBO, UWTI, USL, DWTI, DNO, SZO, OLO, TWTI, OLEM
Thu, Feb. 26, 3:45 PM
- Western Refining (WNR +7.9%) is one of the day's strongest energy gainers after Q4 earnings came in well ahead of estimates, and its Western Refining Logistics (WNRL +2.9%) and 38%-owned Northern Tier Energy (NTI +5.3%) also delivered upbeat Q4 results (I, II).
- Cowen analyst Sam Margolin reiterates an Outperform rating and $60 price target on WNRL, encouraged by management's affirmation that the MLP’s growth remained on track, including a 50% target for third party revenues, with projects slated to begin as far out as 2018.
- WNRL’s share price has lagged by a wide margin YTD, weighing on WNR’s valuation, but WNR is nearing completion of the Tex-New Mex pipeline, while the Bobcat pipeline remains on schedule; including potential dropdowns from NTI, Margolin sees $100M WNRL EBITDA growth by early 2016.
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