Many LNG (liquefied natural gas) terminals in the US are engaged in the development or expansion of new LNG export facilities.
In terms of PE (price-to-earnings) ratios, larger refining players Tesoro (TSO) and Phillips 66 (PSX) are trading at higher ratios than the average.
Of the 20 analysts covering Marathon Petroleum (MPC) 70% have issued “buy” recommendations.
Of these four refiners, Marathon Petroleum (MPC) has the highest ROE of 24%, while Valero Energy (VLO) has the lowest ROE of 16%.
Valero Energy (VLO) has the highest shareholder yield of 10.4%. MPC, TSO, and PSX stand closer together at 5.6%, 5.7%, and 5.4%, respectively.
Many refiners are now focusing on diversifying their earnings models to shield themselves from the volatile refining environment.
In September 2013, the premium that the distillate crack had over gasoline crack started to widen. This encouraged refiners to boost distillate production.
Shifts in the crack patterns are mostly driven by the demand and supply gap for refined products. This differential also directly impacts inventory levels.
Refining margins are dependent on input crude oil cost, product slate, and prices of refined products and are indicators of overall profitability.
The correlation values of refiners versus benchmark cracks differ primarily because refining operations are carried out in different locations by refiners.
RINs are assigned to renewable fuels produced in or imported to the US. Refiners blend renewable fuels at rates that satisfy the EPA.
The key factors influencing refining profitability include refining capacity, complexity, and utilization rates.
Refining yields indicate the quantity and variety of refined products produced. Higher complexity refineries produce more light hydrocarbons like gasoline.
From September 2011 to September 2016, WTI prices fell 47% and gasoline prices, while WTI fell 48% during the same period.
Of the total consumption of 20.2 MMbpd, in October 2016, gasoline accounts for around 9.1 MMbpd. Distillate fuel oil accounts for 4.1 MMbpd of the total.
The Gulf Coast, a key US refining region, accounted for 9.6 MMbpd of total refining capacity, which represents 52% of the total refining strength in the US.
This series will provide you a complete overview of the refining industry as well as a quick snapshot of downstream sector stocks in the US.
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