Rally All Year, Rally Into Next Year? $HFC $VLO
The dip in oil prices mid 2012 opened up many buying opportunities and $HFC and $VLO were no exception. The question is will the rally continue on or should we wait for a pull back. Here is some research for you to consider.
The Oil & Gas Refining & Marketing Industry has soared in 2012 as result of falling commodity prices. The S&P Oil & Gas Refining Index has risen over 40 percent in 2012, outperforming the S&P 500 Index by a large margin. The oil refiner companies have financially benefited from the large crack spread of oil.
Crack spread is a term used in the oil industry and futures trading for the differential between the price of crude oil and petroleum products extracted from it – that is, the profit margin that an oil refinery can expect to make by “cracking” crude oil (breaking its long-chain hydrocarbons into useful shorter-chain petroleum products).
The large difference between Brent crude and WTI crude is generally positive for the refining sector and refining stocks, as they have healthy margins today. The biggest adverse risk is the closing of the crack spread that will decrease oil refiner margins. In addition, U.S. oil refiners are cashing in on the lower price for crude in the U.S. versus overseas. Here are two oil refining companies to consider for your portfolio.
HollyFrontier Corp (HFC) has knocked the cover off the ball in 2012. The stock is up 60% year-to date. The Company has paid 3 special dividends in addition to the quarterly dividends. The Company approved an additional $350 million stock repurchase plan. The latest earnings per share in Q2 were $0.13 above the consensus estimate.
Valero Energy Corporation (VLO) has been rising in price steadily since June 2012. Valero is up 41% in 2012. Valero unveiled plans to potentially break off its retail business from the rest of the company, the latest in a chain of energy companies slimming down assets to sharpen their focus. Valero is working with Credit Suisse Securities to review several options for spinning off its nearly 1,000 retail stations and expects a split could be completed in six months.
This is not an offer to buy or sell securities. Oil investment carries with it very high risks. The information contained within this site has not been nor will it be verified by Turn Key Oil and is subject to change at any time. We are not a United States Securities Dealer or Broker or United States Investment Adviser. Do your own due diligence and consult with a licensed professional before making any investment decisions. Please read our full disclaimer before making any decisions.