HollyFrontier (NYSE:HFC) is a pure play mid-continent oil refinery with five main refining assets. While HollyFrontier is the subject of this essay, let us first describe some important industry fundamentals before moving forward.
Refiners are essentially the intermediaries between two huge markets, which have two different price dynamics: (1) the crude procurement market and (2) the consumer market. A refiner's variable costs are dictated by the crude feedstocks it sources, but the revenues are set, generally, by the larger macro environment of global oil consumption. A survey of the North American refining industry will enforce the notion that geographic location is of the utmost importance -- that is, if one wants a cost advantaged feedstock.
|FREE||SA PRO MEMBERS|
|IDEA GENERATOR||X||Exclusive access to 10 PRO ideas every day|
|INVESTING IDEAS LIBRARY||X||Exclusive access to PRO library of more than 15,000 ideas|
|SECTOR EXPERT NETWORK||X||Exclusive access to all sector experts for direct consultation|
|PERFORMANCE TRACKING||X||Track performance of all PRO stock ideas|
|PROFESSIONAL TOOLS||X||Professional Idea Filters to zero-in based on industry, market cap and more|
|PRO Top long ideas returned 21.7% in 2016**|