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Integrated Energy and Refining Stocks: Latest Updates

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Integrated Energy and Refining Stocks: Latest Updates PART 1 OF 3

Why Is Petrobras on the High Volatility List Again?

High implied volatility

On March 2, 2017, Calumet Specialty Products Partners (CLMT) had the highest implied volatility among the integrated energy and refining companies under review in this series.

Why Is Petrobras on the High Volatility List Again?

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Calumet Specialty Products Partners’ implied volatility was 59.7% on March 2. It was ~2.1% higher than its 15-day average.

The implied volatilities of other integrated energy and refining stocks on March 2 were as follows:

  • CVR Refining (CVRR) – 48.3%, ~5.3% less than its 15-day average
  • CVR Energy (CVI) – 46.6%, ~2.4% less than its 15-day average
  • Alon USA Energy (ALJ) – 46.3%, ~4.8% more than its 15-day average
  • Petrobras (PBR) – 44.2%, ~11.2% more than its 15-day average

The rise in Petrobras’ implied volatility, compared to its 15-day average, was the largest among the five integrated energy and refining stocks with the highest implied volatilities. It’s expected to report its 4Q16 earnings on March 20, 2017. On March 1, 2017, Petrobras and Total (TOT) signed contracts sealing a strategic alliance for a package of assets in upstream and downstream businesses. On the same day, Petrobras rose 5%. However, it’s still down ~7% for the trailing week.

Low implied volatility

Now, let’s look at some integrated energy companies and refiners that had low implied volatilities on March 2:

  • ExxonMobil (XOM) – implied volatility of 14.3%, 3.2% more than its 15-day average
  • Chevron (CVX) – implied volatility of 15.2%, at par with its 15-day average
  • BP (BP) – implied volatility of 16.3%, 3.7% more than its 15-day average
  • Total – implied volatility of 17.7%, 0.2% less than its 15-day average
  • Phillips 66 (PSX) – implied volatility of 17.8%, 3.2% less than its 15-day average

The companies with low implied volatilities are mostly integrated energy companies. They have integrated and diversified business models in terms of business and geography. As a result, they’re safer and more financially stable. Stability can translate into lower implied volatility.

Usually, a stock that moves sharper, or is expected to move sharper, experiences high implied volatility. In the next part, we’ll look at integrated energy companies and refiners’ returns.

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