Valero Energy Corp

Hurricane Katrina decimated New Orleans in 2005. What stocks soared following the natural disaster? How did certain economic factors impact the stocks?

As the cycle seems to be turning up, energy companies could be one of the beneficiaries. Does it mean Valero Energy could have an upside? Who owns Valero gas stations?

HollyFrontier (HFC) stock has risen 5.5% since January 2. The stock has risen less than its peers Marathon Petroleum (MPC) and Valero (VLO).

After HollyFrontier’s earnings, RBC lowered its target price on the stock from $68 to $66.

It’s expected distillate production will grow by the end of 2014. Refineries have built new facilities to produce more distillates than gasoline in anticipation of strong global demand growth.

In this series, we’ll be sorting refining stocks in terms of earnings expectations for 4Q17. If we rank them on their likely YoY growth in EPS, then Andeavor (ANDV) occupies the top slot.

In 4Q15, according to Wall Street analyst estimates, Valero is expected to post EPS of $1.40, which would be 23% lower than its 4Q14 adjusted EPS.

HollyFrontier’s refining segment is critical for its overall earnings. The refining segment’s adjusted EBITDA rose 127% to $1.7 billion in 2018.

Tesoro (TSO) noted a contraction in its GRM (gross refining margin) by $10.4 per barrel YoY (year-over-year) to $9.1 per barrel in 3Q16.

The immediate effect of the current crisis between Russia and Ukraine is that it has likely provided some support to oil prices and caused some volatility in oil prices.

Valero’s liquidity In 1H17, Valero Energy (VLO) generated $2785 million in cash from operations. The company had cash outflows of $880 million in the form of capital expenditure and deferred turnaround and catalyst costs and $627 million in the form of dividends. Valero’s liquidity surplus Valero’s cash outflows amounted to around $1507 million in 1H17, […]

Marathon Petroleum’s solvency ratios are higher than the industry average, which is not a comfortable situation.

Valero Energy (VLO) is the second-highest dividend-yielding stock among the seven refining stocks we’re looking at in this series.

Marathon Petroleum’s (MPC) operating income rose 51% yearly to $440 million in the first quarter. The rise in midstream earnings mainly led to the rise in operating income.

Distillate demand and stock levels drive crude demand and crude prices. As a result, energy investors watch distillate inventories closely.

Phillips 66 (PSX) posted its earnings on July 29, 2016. On the day, PSX’s implied volatility fell by 5% to 23.2 compared to the previous day.

Barclays, Goldman Sachs, Credit Suisse, and Wolfe Research have positive recommendations for the stock. They gave price targets equal to $80 per share or above.

In 2Q17, Phillips 66’s revenues missed Wall Street analysts’ estimates by 1%. However, its 2Q17 adjusted EPS of $1.09 surpassed estimates of $1.01.

In 3Q15, Valero noted a rise in its gross refining margin by $2.6 per barrel to $14.4 per barrel, compared to what we saw in 3Q14.

In this article, we’ll compare the gross refining margins of leading American downstream companies.

Of the 17 analysts covering Andeavor (ANDV), 15 (88%) have rated the stock a “buy” so far in August 2017. Two analysts have rated ANDV a “hold.”

Currently, MPC trades at a forward PE (price-to-earnings) ratio of 14.8x, above its peer average of 13.8x.

On a sequential basis, Marathon’s operating income fell by 78%. All the segments reported declines in income in 4Q15 over 3Q15.

Inventories provide a useful snapshot of distillate demand and supply trends, particularly near and during the winter months.

Before analyzing Tesoro’s (TSO) refining index for 2Q16, let’s take a look at TSO’s refining margin trend up to 1Q16.

From 3Q14 to 3Q15, PSX maintained average quarterly cash flow from operations at $1.1 billion. The company has continued its focus on preserving growth.

Phillips 66’s (PSX) refining operations yielded 45% gasoline and 39% distillates in the fourth quarter.

Tesoro Corporation’s (TSO) stock was on an uptrend in 2015, fueled by healthy refining margins. TSO rose 21% in the trailing 12 months up to January 20, 2016.

Valero’s total refining capacity is 3.0 MMbpd (million barrels per day), of which 1.7 MMbpd is located in the US Gulf Coast.

Valero Energy (VLO) released its fourth quarter earnings on January 29. The company reported a net income of $1.2 billion.

In the first half of 2018, Marathon Petroleum (MPC) had $2.249 billion in cash from operations. The company had cash outflows of $1.466 billion.

In this series, we’ll perform a cross-sectional analysis of refining stocks. We’ll examine their moving averages and eight-day price forecasts based on implied volatility, and compare their leverage, liquidity, capex, and refining margins.

The correlation coefficient of Phillips 66 (PSX) versus WTI stands at 0.40.

Four (27%) of the 15 analysts covering DK have rated it a “buy” so far in August 2017.

Last week, as of March 23, residential heating oil prices averaged ~$2.93 per gallon—~11 cents per gallon lower than the week before.

Valero Energy (VLO) posted its 1Q17 results on April 25, 2017. Before we proceed with an earnings review, let’s quickly examine VLO’s 1Q17 performance versus its estimates.

Like gasoline and distillates, heating oil consumption or demand trends matter to refineries.

Refining sector stocks usually perform in line with refining margins and cracks. Since February 2016, refining stocks have been putting up volatile performances.

Marathon Petroleum is growing with its capex and acquisitions, including the latest acquisition of Andeavor.

In 3Q16, Tesoro’s (TSO) refining index values, which are regional crack indicators in the areas where TSO operates, have fallen compared to 3Q15.

The Brent-WTI crude oil spread was $3.78 per barrel on July 16, down from $4.22 per barrel on July 9. The Brent-WTI spread dropped ~10.4% from July 9 to July 16.

Now, let’s look at the forward valuations of Marathon Petroleum (MPC), Tesoro (TSO), Valero Energy (VLO), and Phillips 66 (PSX).

The institutional holdings in Valero Energy (VLO) are higher than the institutional holdings in Marathon Petroleum (MPC), Phillips 66 (PSX), and Western Refining (WNR).

Marathon Petroluem’s net debt-to-EBITDA ratio stood at 1.9x in 4Q16. It’s lower than the average industry ratio of 2.8x.

The Keystone XL Pipeline project is a proposed 1,179-mile pipeline. It begins in Alberta, Canada and extends south to join the existing Keystone Pipeline in Steele City, Nebraska.

US crude oil refinery inputs averaged 17.029 million barrels per day (or MMbpd) during the week ended August 7.

The correlation coefficient of Phillips 66 (PSX) and WTI stands highest among refiners at 0.42.

As of January 5, residential heating oil prices averaged ~$2.97 per gallon, ~$0.08 lower than last week and $1.05 lower than the same week last year.

Now let’s review the stock that’s expected to post the fourth-highest gain: Phillips 66 (PSX).

In the previous part of this series, we discussed refining stocks’ dividend yield trends. Now, we’ll look at the forward valuations for Marathon Petroleum (MPC), Andeavor (ANDV), Valero Energy (VLO), and Phillips 66 (PSX).

Marathon Petroleum (MPC) has been rated by 19 Wall Street analysts. Seventeen analysts (or 89%) have rated it as a “buy” so far in May 2017.

Average valuation multiples Earlier, we discussed refining stocks’ performance in 1Q17 and compared their dividend yields. In this part, we’ll look at Marathon Petroleum’s (MPC), Tesoro’s (TSO), Valero Energy’s (VLO), and Phillips 66’s (PSX) forward valuation. The average forward EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) multiples and average forward PE […]

Heating oil prices are linked to crude prices. As crude prices began to fall late last year, so did heating oil prices. However, last week, crude prices had been rising. This move was mirrored by heating oil prices, as the graph above shows.

Since October 2, 2017, Marathon Petroleum (MPC) stock has risen 15.7%, outperforming the SPDR S&P 500 ETF (SPY). SPY has risen 5.3% in the same period.

There’s only one sector that didn’t decrease—master limited partnerships (or MLPs). MLPs are special corporate structures that pay most of their earnings as distributions to unit holders. MLPs usually have steady growth.

Refining stocks’ valuation In this part, we’ll compare refining stocks’ EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratios with their three-year averages. Marathon Petroleum (MPC), Valero Energy (VLO), Phillips 66 (PSX), and Tesoro (TSO) are trading higher than their historical valuation. MPC was trading at a 10.3x EV-to-EBITDA ratio in 1Q17, compared […]

WTI crude oil futures contracts for December delivery rose by 0.26% October 29. Crude oil prices rose due to technical buying activity and the depreciating US dollar.

In 2013, the Marketing & Specialties segment’s net profit went up 89% to $790 million—from $417 million in 2012. The improved performance was a result of higher Renewable Identification Numbers (or RINs) values.

Since February 2017, downstream stocks have been hit by volatile crack conditions and changing inventory levels. VLO has also witnessed volatility in its stock price.

Marathon Petroleum’s credit rating of BBB is higher than Tesoro. Valero Energy’s (VLO) rating is in line with Marathon Petroleum’s credit rating.

On December 17, Brent crude oil February futures settled at ~$9.41—higher than WTI crude oil February futures.

Since October 1, the beginning of the fourth quarter, HollyFrontier (HFC) stock has fallen 25%.

The Energy Select Sector SPDR ETF (XLE) fell 1.35% in the week to June 19. The ETF tracks a diverse group of ~45 of the largest US energy stocks.

A narrower WTI-Brent spread is a positive for US producers, but a negative for US refiners.

Valero Energy (VLO) stock fell 10.3% on Friday, October 19. That same day, Goldman Sachs downgraded the stock from a “neutral” to a “sell.”

In 2013, net profit from the Chemicals segment increased 20% to $986 million— from $823 million in 2012. The increase in earnings in 2013, compared to 2012, was a result of using NGL feedstock.

There’s no imminent liquidity crisis. PSX is generating enough cash to cover its major needs. Its high debt level is a concern—particularly if there’s any liquidity crunch in the financial market.

The Energy Select Sector SPDR Fund (XLE) lost 0.92% in the week ending June 5. XLE has exposure to many types of energy companies with different exposures to energy prices

Carl Icahn mentions the use of credit default swaps as a form of protection against credit events. He implies that investors should possess sophisticated knowledge of the fixed income markets to enter that playing field.

Valero Energy (VLO) posted its Q3 2018 results on October 25, surpassing Wall Street analysts’ estimate.

Phillips 66’s (PSX) net income improved in the first half of 2014 (or 1H14) versus the same period in 2013. In 1H14, operating revenues increased marginally to $85.8 billion—from $84.4 billion in 1H13.

As of February 16, residential heating oil prices averaged ~$3.03 per gallon. The prices were ~$0.12 per gallon higher than last week.

Tesoro (TSO) achieved a 92% refinery utilization rate in 1Q17—the highest among our select group of four major US refiners.

NYMEX-traded WTI crude oil futures contracts for September delivery fell by 0.24% on September 8. Oversupply concerns were weighing on crude oil prices.

The EIA’s (U.S Energy Information Administration) most recent weekly gasoline and diesel fuel price report showed that US regular gasoline retail prices averaged $2.02 per gallon yesterday.

In this article, we’ll look at refining stocks’ EV-to-EBITDA (enterprise value to earnings before interest, tax, depreciation, and amortization) ratios compared to their three-year historical averages.

Chevron is the second-largest energy giant in the US. However, with a market capitalization of $166.9 billion, it ranks behind ExxonMobil.

In 2013, Phillips 66 generated 67%, 13%, and 6% of its revenues from the United States, the United Kingdom, and Germany, respectively. The company’s other foreign operations contributed ~16%.

US refiners have profited from access to cheaper crude oil inputs. But a series of refinery projects being ramped up in Latin America could stall exports.

Gasoline prices loosely track changes in crude oil prices (USO), usually Brent crude oil prices, the international benchmark.

PSX is trading at 9x its forward EV-to-EBITDA ratio and at 16.4x its forward PE ratio, which is above the peer averages.

Since the beginning of the fourth quarter, Phillips 66 (PSX) stock has fallen 20.3%.

A Reuters survey showed that OPEC’s crude oil production declined by 70,000 bpd to 32 MMbpd in May—compared to the previous month.

Last week, residential heating oil prices fell ~8 cents compared to the prior week, averaging $3.14 per gallon. Prices were 81 cents lower than last year.

Phillips 66 (PSX) is an energy company. It’s based in Texas. Phillips 66 started operating independently as a publicly-traded company on April 4, 2012, when it separated from ConocoPhillips (or COP).

Seven of the 15 analysts covering PSX rated it as a “buy” in June.

Since January 3, 2017, Tesoro stock has fallen 8%, more than its peers Marathon Petroleum and Valero Energy, the leading American downstream companies.

US crude oil refinery inputs averaged ~16.5 million barrels per day (or MMbpd) during the week ended June 26.

A crack spread represents the price difference between refiners’ revenues—achieved through the sale of finished refined products—and refiner costs—that is, the price of crude oil.

Marathon Petroleum’s mean target price is $98 per share, which implies a 57% gain from the current level–the highest among its peers.

Heating oil prices are linked to crude prices. As crude prices began to fall late last year, so did heating oil prices.

Tesoro Logistics LP is a master limited partnership (or MLP) which was formed by Tesoro Corporation in 2011.

US distillate inventories fell by 3.8 MMbbls or 2.7% to 139.2 MMbbls on January 5–12, 2018. The inventories fell by 29.9 MMbbls or 18% from a year ago.

Valero stock fell 7 percent on Oct. 1 after a Goldman Sachs analyst downgraded it to sell. Valero will likely report sales of $17.6 billion in the third quarter.

The currently unstable refining environment has resulted in volatile refining earnings for big US refiners like MPC, VLO, TSO, and PSX.

The wider the crack spread, the more profitable it is for refiners such as Valero Energy (VLO), Phillips 66 (PSX), Marathon Petroleum (MPC), and Tesoro (TSO).

Prior to the Brexit referendum, WTI (West Texas Intermediate) crude oil futures contracts for August delivery rose by 2% and settled at $50.11 per barrel on Thursday, June 23, 2016.

The benchmark US Gulf Coast 3:2:1 crack spread rose 4.4% to $17.385 per barrel in the week to June 26—compared to $16.65 per barrel on June 19.

As of March 16, residential heating oil prices averaged $3.03 per gallon, $0.18 per gallon lower than last week and $1.09 per gallon lower than a year ago.

The latest STEO forecasts that US heating oil prices should average $2.90 per gallon, 25% lower than last year.