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Oil is up somewhere near $96 now, and I was wondering if you know where the CVRR refineries are?
Do you know if they use less expensive Canadian oil, or Bakken oil or what they use and what the differential is about roughly?
And, how it might compare to NTI & ALDW?
CVRR is an independent downstream energy limited partnership with refining and related logistics assets that operates in the mid-continent region. CVRR owns two of only seven refineries in the underserved Group 3 of the PADD II region of the United States.
CVRR owns and operates a 115,000 barrels per day ("bpd") complex full coking medium-sour crude oil refinery in Coffeyville, Kansas and a 70,000 bpd medium complexity crude oil refinery in Wynnewood, Oklahoma capable of processing 20,000 bpd of light sour crude oils (within its 70,000 bpd capacity).
In addition, CVRR also controls and operates supporting logistics assets including approximately 350 miles of owned pipelines, over 125 owned crude oil transports, a network of strategically located crude oil gathering tank farms, and over 6.0 million barrels of owned and leased crude oil storage capacity.
The strategic location of the refineries, combined with supporting logistics assets, provide CVRR with a significant crude oil cost advantage relative to competitors, according to CVRR.
The Coffeyville and Wynnewood refineries are located 100 miles and 130 miles, respectively, from the crude oil hub at Cushing, Oklahoma, and have access to inland domestic and Canadian crude oils that are priced based on the price of West Texas Intermediate crude oil ("WTI"). In the nine months ended September 30, 2012, the crude oil consumed at the refineries was at a discount to the price of WTI of $2.81 per barrel.
CVRR's refineries' complexity allows the company to optimize yields (the percentage of refined product that is produced from crude oil and other feedstocks) of higher value transportation fuels (gasoline and diesel).
Part of what makes this a better opportunity (than ALDW and NTI) is that the main player in the IPO is Carl Icahn. Icahn Enterprises is indicated in the IPO to be taking 4 million of the 20 million offered shares without a discount to other subscribers and the underwriters have options for another 3 million.
Something to be aware of re: NTI. This is from the prospectus. If you hold NTI in an IRA, you should be aware of the UBTI potential.
"Ownership of units by employee benefit plans, other tax-exempt organizations, non-resident aliens, non-U.S. corporations and other non-U.S. persons raises issues unique to those investors and, as described below, may have substantially adverse tax consequences to them. Prospective unitholders who are tax-exempt entities or non-U.S. persons should consult their tax advisor before investing in our units. Employee benefit plans and most other tax-exempt organizations, including IRAs and other retirement plans, are subject to federal income tax on unrelated business taxable income. Virtually all of our income will be unrelated business taxable income and will be taxable to a tax-exempt unitholder."
the crack spreads for CVRR's two refineries near Cushing are much lower than those of NTI's single refinery in Mn, looks to me. CVRR does use some bakken but NTI is much more a pure play on bakken-wti spreads. CVRR's crack spreads may be more insulated from wild swings than NTI's? although both are variable pay MLP's. The options market is signaling that the yield of NTI will be a fair bit less than CVRR's ~19% at today's prices, but NTI's first distribution yielded much more than 19%, and conditions have remained nearly as excellent this Q so there is a disconnect (arbitrage opportunity?) there. I've sold OTM puts on NTI and bought shares of CVRR. Today's news of the significant cash flow coming from CVRR into CVI is going to fuel the buzz around CVRR, which has seen an 18 million share day so far. CVRR insiders bough shares on the open market at $25. There could be solid upside for both NTI and CVRR, but CVRR's yield seems more visible
I predict CVRR's share price will be more volatile than LINE's, given LINE's hedges and thus predictable payouts, as CVRR distributions will vary with crack spread and the price of refined products
but even with an outlook for shrinking crack spreads though, CVRR could yield more than LINE for at least the medium if not long term
there are lots of evolving conditions that will affect CVRR distribution- US production growth, new rail and pipeline infrastructure, the change in price of Brent (with interplay of saudi supply cuts, shrinking norther sea production, with expanded production in US/Canada/iraq etc)- so its yield should be high to compensate for risk
that said, most of the MLP's etc. I have purchased recently with high yields (MMLP, QRE, NRP, PSEC) have all recently jumped in price, now a;; yield under 12%. Even many mreit's aren't yielding much above 12%. Is CVRR yield that much more levered to crack spread than mreit's are to interest spread, to warrant the higher risk premium?
I did the same got out of NTI and into CVRR (actually on Jack's suggestion over at pbkef board) and so far I am glad, CVRR totally looks poised to outperform LINE
CVRR crack spread way lower than NTI's (NTI a pure play on bakken/WTI spread, althoguh CVRR does source a little bakken) and CVRR's 2 refineries near Cushing, with its associated storage/pipeline etc infrastructure, and with insiders buying the IPO, and estimated yield of 19% (at least when price was 25) isl attracting a lot of attention, especially since CVI is posting their special dividend on the back of cash flow pumping out of CVRR
NTI on other hand has less visibility on yield- looks like options market is implying yield way les than CVRR's (although last NTI dist was way higher yield % and conditions remain nearly as excellent so there is a disconnect (arbitrage?) play there perhaps) but CVRR yield has more "visibility"
very few stocks yield more than 12% today (all the high yeild MLP's that sold off, like QRE NRP MMLP and BDC's lie PSEC have all rallied. Even many big name mREIT's not yielding over 12%)
is CVRR levered to crack spread more than mREITs' are levered to interest rate spreads? I'd guess not
meanwhile LINE plods safely along with its hedges, still yielding double EPD, but less than half of wild (variable pay) CVRR