Company Increases 2013 Distribution Guidance
- Full year 2013 distribution guidance increased from $4.72 per common unit to $5.50 - $6.50 per common unit
- Full first quarter 2013 distribution guidance increased from $1.21 per common unit to $1.30 - $1.55 per common unit
- Midpoint of new guidance represents a distribution yield of 20 percent based on the March 8, 2013 closing price of $29.86 per common unit
- Midpoint of new guidance represents a distribution yield of 24 percent based on the IPO common unit price of $25.00 compared to a distribution yield of 19 percent based on previous guidance
- 2012 full year adjusted EBITDA was $1.176 billion compared to adjusted EBITDA of $577.3 million for 2011
If CVRR hits the top of the range and that should be possible if the prices currently in existence stick around for the next three quarters. These refineries that turn oil into diesel, gasoline and jet fuel are making a fortune because other countries are buying production from U.S. refineries and this is helping everyone in the sector. The real break is buying oil at $60 a barrel and selling it for $100 or more when refined.
Even if the margins next year are not as good, the yield for 2013 is going to be around 20-25% depending on when you purchased CVRR. That is mind-boggling. Of course investors looking for yield might pay $40 per unit and will drive the yield down to 15%. Yes 15% yield at $40 per unit.
I watched the mortgage reits escalate in price as investors seeking distribution looked for yields of 14-20%.
Do not be surprised if that happens with CVRR after it pays 2-3 distributions.
Macquarie believes the government's forced usage of biofuels is causing unintended consequences that will negatively impact refiners and may result in high RIN prices. The firm recommends taking profits in refiners with the greatest RIN risks and downgraded Valero (VLO) and HollyFrontier (HFC) to Neutral and CVR Energy (CVR) to Underperform. (But strangely, not CVRR).
Credit Suisse upgraded CVR Refining based on Q1 guidance and increased margin forecasts. Price target raised to $34 from $32.
I though this was a stellar report. Made over 100% on the CVRR calls I bought yesterday and sold this morning, quickest 100% I ever made. Also sold ITM calls (and will just keep rolling forward as long as they stay ITM) on my shares this am, so after subtracting that and the estimated ~$6 in distributions over next year from my purchase price, my "effective" basis will be in the 16's. My rationale is that I want to hold a core position in CVRR but still have a decent return on basis even after the (inevitable?) shrinkage of crack spreads , whenever that happens
Very good move buying the calls. I feel a little stupid having purchased 2,000 shares around $25, but then I am in this for 1-2 years, the usual cycle run that refiners seem to enjoy a couple of times each decade.