They are typically conservative on their crude throughput guidance and then beat the high end. For Q1, guidance was 190,000 to 200,000 bpd; actual - 201.7M bpd. For Q2, guidance was 195M to 205M bpd; actual 210.7M bpd. Now guidance is 175M to 190M bpd. This represents a 10% decline from Q2 guidance on the low side and 7.3% decline from the Q2 guidance on the high side, and my guess is that they will again be a bit over the high side. The analysts consensus estimate for Q3 is 88 cents, and IMO, they are attempting to estimate the distribution as it is virtually impossible to estimate the accounting adjustments. BTW, nice quarter today. GL
Thanks BZ. The report reflects Q2 Chicago 2-1-1 at $21.87 or a little over a $3/barrel improvement from Q1. Although not exhibited in the report, a 3-2-1 would be a little closer than the 2-1-1 for NTI, and since gas had stronger pricing than diesel, it is higher. The NYMEX 3-2-1 Q2 average, before the local PADD market discounts, was $24.57, or a touch under $3.50/barrel improvement. Even though there was some narrowing of the bakken discount, I expect a modest increase in the Q2 distribution even if the company allocates the $10 million to the discretionary cash reserve as outlined in their guidance at zero to $10MM. GL
Hi Blue, we must have been writing about the same time. The above is Gulf Coast fuel vs LLS, which is way low for CVRR. Same report reflects Chicago 2-1-1 at $21.87 for Q2 and would be a much better indicator of the refining spread for CVRR. See message below.
Thanks for the link, Mad cow. I have no idea why you are using gulf coast (lower priced fuel market than midwest) to LLS (Louisiana Light Sweet), which trades at a premium to WTI, for your spread of choice. For quick reference in the same report, you should look at the 2-1-1 Chicago. This would be the closest to CVRR. The report reflects Chicago 2-1-1 for Q2: $21.87 and QTD Q3: $25.02.
For Q2, the EIA NYMEX 2-1-1 average was $23.86. CVRR uses this and then applies their local market discounts. For Q1, the negatives for PADD II, Group III was $4.01, resulting in a net margin of $18.79 from the NYMEX 2-1-1 average of $22.80. I believe the local fuel market negatives will be lighter in Q2, so this quarter should be strong, and it is continuing. The EIA data is a couple weeks behind, but it appears PADD II gas may even be trading at a premium currently.
Interestingly enough, the Q1 Chicago spread in the report was $18.81, which almost matches exactly what CVRR realized. If we get over $21.50, we will certainly be over $1 on the distribution, so I will watch this new data source with a lot of interest. Thanks again and GL
From CEO Q1 CC:
Lastly, I would like to talk about our upcoming turnaround schedule. As you know, we'll bifurcate Coffeyville's turnaround between the fall of 2015 and the first quarter of 2016. The first phase of Coffeyville's turnaround will last between six and seven weeks, and will commence in the last week of September, when we start to shut down certain units.
This first turnaround encompasses about 17% of all the turnaround work that we will be doing. And just so everyone understands this, we will still be processing crude on one of our vacuum units, the remaining units into refinery. Unlike Coffeyville, the Wynnewood turnaround is a full plant shutdown and it is now scheduled for the spring of 2017.
I think the transcriber missed a word somewhere in the "the remaining units into refinery". I take from this that the first part is only 17% and they will still be processing crude, so I would guess only a modest reduction to throughput in Q3 if any. We will see their Q3 throughput guidance when they report at month end. Play it as you see fit, but margins are fantastic right now making this stock severely undervalued at present. Take care.
The NYMEX 2-1-1 spread for April was $23.89, May - $24.42, and my initial number for June s $23.24. EIA should have the month average for June out this next week, but that should be pretty close. So for Q2, the average NYMEX 2-1-1 should be about $23.85. For Q1, CVRR reported $22.80 for the NYMEX 2-1-1 before local market retail negatives of $4.01. So, we have a gain of a $1.05 on the benchmark. We usually get some improvement in the local retail market negatives in Q2 over Q1. Anyway, the yahoo consensus is currently $1.00. I am expecting something in the mid 90 cent area +/- 5 cents.
Of note, the NYMEX 2-1-1 has widened in July and is currently +/- $26, so Q3 is starting off in good shape. GL
Also, from the Q1 CC in late April, the company suffered 175 vacancies from the bankruptcies of four retailers (apparently from December and following YE). The CEO reported that they had made good progress in re-leasing the spaces with 36 leases executed and an additional 57 leases in active negotiations. Further comment indicates the leasing environment remains healthy in Q1 with an average increase in gross rents for new and renewal leases of 10.6%.
Although disappointing for current holders, the re-leasing appears to be going well. So, all and all, the above issues appear to have created an attractive yield (6.5%) and entry price. However, the general market will likely remain volatile for a variety of issues including the Greece negotiations, so one can probably pick their spots to build a position. I also took a look at a couple of other REITS, but quickly eliminated those yielding in the 2-3% range. In general, they still appear highly susceptible to sizable corrections in the current environment. Just my take and GL.
From Investor Place article mid-May:
The specter of rising interest rates has finally coming to a head for a variety of high-yielding asset classes. Among the victims? Master limited partnerships (MLPs), plain ol’ utility stocks … and especially hit hard have been real estate investment trusts (REITs).
Last month, as the Federal Reserve toyed with raising rates, the FTSE NAREIT all-REITs Index sharply fell 4.71%, more than knocking down the prior quarter’s 4.05% gains.
But here’s the thing: REITs can do OK in rising-rate environments. Really.
According to data provided by Morningstar, via Columbia Threadneedle Investments, REITs do feel rising interest rates immediately. However, that knee-jerk reaction eventually fades, and performance rebounds quite sharply. Columbia shows that over the 21 periods of time since 1980 when interest rates rose by at least 50 basis points, the FTSE NAREIT All Equity REIT Index managed to return an average of 16% over the next 12 months.
Translation? The current selloff (as well as the one we’ll see when the Fed actually does raise rates) should be used as buying opportunities by anyone looking for suddenly cheaper sources of income.
The article goes on to recommend 7 REITS to buy for their growing dividends including CBL.
I haven't been in the stock for ages, but started to initiate a position today. I admit, I have some homework to do, but it appears to me that they continue to improve their balance sheet, FFO, and have increased their distributions. They also have a good dividend coverage ratio, and have plenty of room to continue annual dividend increases. Therefore, the sell off does not appear to be stock specific, but fear of the global unknown associated with the Greece negotiations, and possible beginnings of an increasing interest rate environment. The latter has caused many REITS and MLPs to slowly retreat over the last few weeks. It doesn't make too much sense based on alternative investment yields, but I knew I didn't want to fight it. Anyway, the price on this was back in my buy range, and others will begin buying when they get comfortable with market conditions. Personally, I don't feel the economy is all that strong, and Europe could blow up anytime forgoing much concern over a long trend of rate hikes. Hope this helps and GL.
Yes, thanks. The article can be found on governors biofuels coalition org site. There are two more articles as well, one from Bloomberg and one by E&E reporter. Basically, all discuss a surplus of RINs now following the proposed RFS volumes and resulting lower RIN prices. Most trade privately and reportedly, the RIN price was down to 30 cents May 29. GL
I see the 2015 ethanol rins were down to 44.5 to 45 cents for the June/July contracts. The 2014 Rins were 45.5 to 43 cents for the June/July 2015 contracts. So a little more slide.
The CME reflects the 2014 Biodiesel Rins at 61 cents. The 2015 Biodiesel price is at 92 cents, but hasn't changed since at least last night, so it might not have traded or has not been updated. I don't pay for the service to get better info, so hard to say.
The advanced Biodiesel 2015 contract was 77 cents dropping 1-2 cents each month through Feb 2017 to 38 cents. There is no data for the 2014 advanced Biodiesel contract, so I am assuming the 2014 contracts for advanced bioD are done.
Anyway, it looks like the prices on the biodiesel are giving some back from the initial move in the article you relayed and the ethanol rins continue to trend down.
They can choose when they want to make purchases, or can accrue the expense for the given compliance year and thus the end of quarter price is applied for the accrued portion. Off the top of my head, they have until February 28th to settle up for the prior year, but 2014 quota was deferred and the announcement Friday was a proposal, so is still not finalized. After finalizing, then they will have a period of time to comply. Based on their reported accrual, I would guess that 2014 obligation has been filled, or is substantially complete. They might even have even purchased extra that can be used for 2015. This is just my take from what I have read in the past. I am thinking Q2 will be a strong quarter, but we have a ways to go yet. GL
Thanks Sean. Nice find. The conventional biofuel component (corn-based ethanol) far outweighs the allocation for advanced biofuel, biodiesel, & cellulosic components, so good to see that component plummet. Hope it continues and swears off some of those speculators from ever visiting that commodity again. All-in-all, this quarter is looking good. GL
The EPA released their new RFS proposal for 2014 - 2016 this morning. In review, the 11/13 2014 RVO proposal slashed original volume targets across the board with a reduction in conventional biofuels (mostly corn-based ethanol) from 14.4 to 13.01 billion gallons. This proposal took a lot of heat from the ethanol industry and was deferred in 11/14. The new proposal bumps the conventional biofuels target to 13.25 billion gallons from the 11/13 proposal, which is all in biomass diesel and cellulosic biofuel volumes. This is still way down from the original 14.4 bill gal. For 2015, conventional biofuels increase to 13.4 bill gal.
What is particularly interesting is the estimated blending percentage in the new proposal is 9.02%, 9.04%, and 9.63% for 2014, 2015, and 2016. The 11/13 proposal only showed the 2014 percentage of 9.20%. So while the total gallon level is a bit higher, the percentage blend target has dropped further, and from what I have read, even further from the blend wall, a part of the EPA focus. Since the prior proposal was hashed and rehashed and is already17 months late, I would guess it will not be deferred or modified further. On news of a pending announcement, RIN prices began to back down a bit, and subsequent to the announcement, RINs are initially off another 16.5% at 60 cents. With the decreased total blending target percentage down, I am hopeful we will continue to see some further downward price pressure on the RINs. We'll see how it goes, but IMO, this appears to be some pretty good news.
The consensus estimate, essentially an estimate of the distributable CF, is currently 97 cents. We have a ways to go yet and while estimates may ultimately be lowered some more, I still expect a nice improvement over the prior quarter. April and May (to date) have been good months and the company will likely also benefit from the moderation of the local market fuel price negatives. GL
The spot price for RINs at end of Q1 2015 was 72 cents from which I believe the company calculated their Q1 accrued liability on.
Also, WCS is currently running at about an $8.75/barrel discount to WTI, and Bakken crude is about an $11/barrel discount to WTI, the two of which accounted for over 85% of NTI's feedstock in Q1. Q2 is looking very strong so far. GL
Sentiment: Strong Buy
For April, I calculate the NYMEX 3-2-1 benchmark at $24.30. This is well above the Q1 average and points to stronger Q2. Also, at the close today, the NYMEX 3-2-1 was roughly $25.80.
Sentiment: Strong Buy