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Examining HollyFrontier’s Q2 Refining Index Trend

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Jun. 14 2019, Published 7:41 a.m. ET

HollyFrontier’s refining index

HollyFrontier’s (HFC) refining index values, which are its regional crack indicators, point toward its margin trend. The company publishes these index values for three areas: the Midcontinent, the Rockies, and the Southwest.

Let’s evaluate how these index values have trended in the current quarter.

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Index value trends in the second quarter

In the current quarter, YoY (year-over-year), the index values have risen in all three regions. HollyFrontier’s Midcontinent index value has risen $2.9 per barrel YoY to $21.1 per barrel in the quarter considering the average of its values in April and May, meaning that the industry crack in the Midcontinent has risen in the quarter. Similarly, the index values in the Rockies and Southwest have surged $3.8 per barrel YoY and $2.8 per barrel YoY, respectively, in the second quarter.

HollyFrontier’s most significant refining region is the Midcontinent, which is home to its El Dorado and Tulsa refineries. HFC’s Midcontinent region accounted for 53% of the company’s refining throughput in the first quarter of 2019. The Rockies and Southwest regions processed 20% and 27% of the company’s throughput, respectively, in the quarter.

The index values suggest that higher cracks in all three regions could positively influence HollyFrontier’s refining earnings in the second quarter. Thus, Marathon Petroleum (MPC) and HollyFrontier’s (HFC) refining margin indicators imply YoY recovery in the cracks so far in the quarter. However, Valero Energy’s (VLO) indicators have yet to recover in its two main operating regions.

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