More Refiners Set For Success in 2011
With the recent down turn in the market, we keep reading more about oil refiners. Oil refiners seem to have no been fazed by this down turn, and can potentially do very well for the remainder of the year. Michael Filloon has compiled some great information on oil refiner stocks you should consider.
HollyFrontier (HFC), in my opinion, is the best run refiner in the space. Although it may not grow as fast as some smaller market cap competitors, it has very good assets. Holly beat second quarter earningsposting $3.58/share vs. the Street’s $3.29/share. Income increased year over year from $1.24/share. For the first six months of 2011, HollyFrontier has earned $5.16/share. The first six months of 2010 earnings were $.71/share.
Alon USA Energy (ALJ) reported second quarter of 2011 earnings at $.30/share versus the Street’s $.35/share. This compares to a loss of $.55/share a year ago. Although Alon missed earnings, it did better than expected. Its shutdown at Krotz Springs decreased operating income by $6 million and the one month delay startup of the hydrocracker unit at Bakersfield cost $7 million. These had a net income per share impact of $.14/share. Refinery operating margin per barrel of throughput in the second quarter of 2010:
- Big Spring margin $9.58
- California refineries average margin $2.87
- Krotz Springs margin -$1.95
CVR Energy (CVI) beat estimates in the second quarter of this year. It had an EPS of $1.48 versus the Street’s estimate of $1.32/share. In the second quarter of 2010, CVR Energy had an EPS of 1 cent. Increased margins for petroleum products and improved prices for nitrogen fertilizer are the main reasons for its improved earnings. CVR Energy’s refinery had margins per crude oil throughput barrel of $25.49 for the second quarter of 2011. The second quarter of 2010 margins were $6.70 per throughput barrel. Gross profit increased to $19.36/throughput barrel versus $1.13 in the second quarter of 2010. CVR Energy is a great way to play the refiners. Analysts estimate it will grow 713% this year and 20% per year for the next five. CVR Energy trades for 7.82 times forward earnings.
Delek US (DK)beat second quarter of 2011 estimates. It reported an EPS of $.80 versus the Street’s estimates of $.69/share. In the second quarter of 2010, Delek had an EPS of $.23. Delek stated WTI had an average discount to Brent of $14 in the second quarter of this year. Its Tyler Texas refinery had margins of $21.26 per barrel versus $8.96 per barrel in the second quarter of 2010. Delek’s El Dorado, Arkansas refinery had margins of $10.90/barrel. Analysts estimate Delek will grow 752.8% this year and 14.55% per year for the next five. Delek currently trades for 8.07 times next years earnings. Delek seems well positioned. Its retail unit is not doing as well as hoped but will pick up when the economy does. Delek had great margins from its Tyler Texas refinery, which should continue for an extended period.
Again, despite the current state of the markets and economy, refiners should be able to maintain good margins. This is what makes them a good option for investors. Additional due diligence will help you make a solid decision, so get your research on and get in on these oil refiners.
Quotes taken from report by Michael Filloon, Read the entire article here.
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