CVR Refining, LP And CVR Partners, LP Trading At Significant Discount To CVR Energy, Inc.

Includes: CVI, CVRR, UAN
by: Daniel Irvin


CVI holds 2 assets: 53% of UAN and 66% of CVRR.

The market value of CVI's holdings of these two MLPs is currently about 65% of CVI's market cap, close to the lowest point since all three have been publicly traded.

CVI's holdings of CVRR and UAN have traded as high as nearly 105% and have averaged over 80% of CVI's market cap.

Convergence toward mean relative valuations would result in a 20% increase in the market value of CVI's two MLP holdings relative to CVI's market cap.

CVR Energy, Inc. (NYSE:CVI) is a C-corp that owns interests in two MLPs:

  • 53% of CVR Partners, LP (NYSE:UAN), which manufacturers urea ammonium nitrate and ammonia fertilizer products, and
  • 66% of CVR Refining, LP (NYSE:CVRR), a downstream energy company with crude oil refining, gathering and refined petroleum product marketing operations located in the Midwest.

IEP Energy LLC, an indirect subsidiary of Icahn Enterprises LP, owns 82% of CVI, and Carl Icahn is CVI's chairman.

The market value of CVI's holdings in UAN and CVRR is currently close to its lowest level since all three of these entities have been publicly traded. Over the past several years, the market value of CVI's holdings has occasionally exceeded 100% of CVI's market cap and has averaged over 80% of CVI's market value.

A steep drop in the market price of UAN has also caused the relative value of CVI's two holdings to shift. UAN, which at one time accounted for over 30% of the market value of CVI's holdings, has recently fallen below 16%.

Regardless of the prospects for the underlying businesses, regression toward mean relative valuations would result in an increase in the value of the two MLPs of at least 20% relative to CVI's market value.

Of course, there can be no assurance that these valuations will converge.

Disclosure: The author is long CVRR, UAN. The author is short CVI.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.