Valero tapped as top refiner at BofA, citing advantaged heavy oil exposure

halbergman/E+ via Getty Images

Valero Energy (VLO +7.8%) is added to Bank of America's US1 List as the firm's top refining idea, saying the company is "positioned to exploit the risk of a permanent reset in crude flows from Russia to sub optimal refiners unable to process the sour/heavy fraction of its benchmark Urals grade."

"Valero's diversified portfolio, advantaged heavy oil exposure and focus on shareholder distributions as a use of excess cash have positioned the shares to take advantage of an upward reset in international natural gas that, if sustained well below current levels, needs a higher global refining margin to clear barrels," BofA's Doug Leggate writes, believing Valero "will benefit through the cycle with material exposure to a wide light heavy crude differential, high quality assets and scale."

"Of all U.S. refiners, we see VLO's pure play advantage returning mid-cycle cash flows to levels last seen in 2015 and supporting fair value we believe is reasonably ~$135/share," according to Leggate.

Valero recently received a similar best-in-class endorsement from Morgan Stanley, which also named the stock its top pick among U.S. refiners.

Comments

[jacksalmon]

It is interesting to see VLO lose almost 50% of yesterday's gain as thought what prompted the gain, in 24 hours time, was rejected or viewed as insignificant. There is certainly no follow-up buying on the taking of short-term profits. PSX is being hurt even more than VLO today.

[charged]

Once they dump all their Russian relationships. Only major that has not. Won’t invest or go to a Valero station. Blacklist Valero.

[Florida_Dreaming]

Huge refiner fan here but this war completely ruined my thesis. When people can't afford gas and can't afford food and can't afford housing that equals a recession and no bueno zone for refiners. Pre war we were cruising along with value outperforming growth bigly and set to outperform more as they raised rates. Now things are more bonkers than I've ever seen in my life and it all has happened in less than two weeks. Never seen this much over reaction/incompetence in my life from up above. And to think we were just getting over a two year pandemic. lol. Gone.

[CrankySandman505]

@Florida_Dreaming beyond recession I feel....

[JoeMonte]

$135 a share would be great as well as the dividend.

[Stash2]

@JoeMonte From your mouth to God's ear! 135 would be marvelous, but....as long as oil is at these levels, demand destruction is in play. Last July, I set up a trading position in addition to my core position and did so at 77 with a price target of 90. I trimmed half of the trading position today and about 11% of my total position. Problem with this stock is that if peace is declared (which I pray for), I think it takes an immediate 10% hit. Bulls make money, Bears can make money, but pigs get slaughtered. I love this company and have held since 2009 in varying amounts; however, I had to trim a bit. Look also at PSX. A bit pricey now but I expect also price targets will be expanded on this one as well.

[Florida_Dreaming]

@Stash2 All you need to do is go to the gas stations and look at random pumps. Before you'd see $48.56 now you see and even $40. These people are no longer going inside to buy a soda either. Recession is already here people just don't realize it yet.