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Northern Tier Energy LP Message Board

  • helenandrod helenandrod Sep 10, 2013 4:39 PM Flag

    Crack Spread

    Isn't the difference between northern oil and Texas oil what drives inland refinery's profitability?
    Where bigger spread is more profit.
    The spread is increasing.

    "WCS has been trending lower since reaching $9.25 below WTI June 12 amid supply disruptions in Alberta. The discount increased to $25.75 on Sept. 4, the widest in six months."

    Sentiment: Buy

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    • More important is the difference between "northern oil" and Brent. That spread has been narrowing and will contract further as the Syrian conflict gets resolved.

      • 1 Reply to ehpb1
      • WCS spread is sustained over $25 from $9. Additionally, latest data from rosé rock midstream states Bakken light is $88.09 and sour $82.09 which is similar to WCS. This is good news for NTI and also the fact that they do not pay any significant Trans costs because of MN pipeline ownership mitigates (from annual report). I agree that funds may be selling in anticipation of quarter end but represents a great entry for long term investors. Second quarter 2013 will be low point for NTI earnings and all fundamentals are improving. This includes lower input (above), more capacity from April turnaround, and lower interest expense as balance sheet much better than 2012. TPG can sell shares that do not increase float but they receive no GP incentive distr rights, so I believe this will subside as price is now near IPO. All that being said I cannot find a better place to invest PERIOD and you are paid to wait. The distr WILL be increased for third quarter. I agree it is hard to hold and I am down 10% on my investment Since initial purchase FRIDAY!!! Hard to stomach but long term we are alright so hold on. Any thoughtful response good or bad will be considered. Please no basher BS!

    • The crack spread is the gross margin on the sale of refined products less the cost of the raw material which in this case is petroleum. The last crack spread report I saw from Howard Weil had the Chicago crack spread at around $20. But the fact that the discount on WCS is increasing is good news ! This means NTIs raw material cost is going down . The dividend was down last quarter because they were doing maintenance on the refinery which lowered production. They should be close to full capacity this quarter and earnings are projected to be around 1.05 . That should translate to at least $1.25 payout per unit !

      Sentiment: Buy

    • Great post and is reason not to sell down here. They are going to make more this quarter and distribute more than .68. Don't let the hedge funds take your shares or the shorts on this board scare you, the WCS spread is highest in 6 months!

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