I can't explain the recent selloff in refiners. Crack spreads have weakened but not enough to justify this week's performance. PSX, with it's more diversified businesses, has held up well by comparison.
Encouraging for the refining business
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Earnings look good -- adjusted $1.09 vs .94. Dividend increased 11% to $.70. Expect a good day.
Significant percentage increase in share price on low volume indicates to me that the market makers are accumulating shares that will be sold to Berkshire Hathaway. 2018 is going to be an awesome year of cash flow for PSX.
Check out the Trump Agenda for US Energy Dominance, should benefit all gas & oil companies including Shale companies. Should make the XOP take off.
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$VLO, $TSO, $MPC, $PSX – Note that replies will appear on each refiner page. Refining is a horrible business. Managers buy and sell commodities having no control of prices at either end. To make matters worse, US refiners have historically bought oil from a global cartel that controlled product flow and fixed prices. They then sold fuel commodities into a highly competitive market, where competitors often overproduced and drove prices down to unprofitable levels. There were periods when margins (crack spreads) were exceptional, but these were driven by specific events and were generally unsustainable. It is no wonder that analysts have been less than generous with multiples and buy recommendations. Tightening crack spreads and uncertainty about future government actions -- including border adjustment taxes, renewable fuel requirements and RINs -- further hampers today’s valuations. I own shares of the four refiners noted above – I don’t think I’m crazy. Dividends are great and appear fully sustainable. Stock prices, for reasons noted above, are cheap. All four of these refiners are major players with ocean access. They are all dropping assets into MLPs and all trying to diversify by varying degrees. As an investor, I think that fracking and the growth of US oil production are the main reasons to be optimistic. These four refiners will have access to US produced oil through a growing network of pipelines, as well as access to foreign oil imports. The latter may be a significant advantage for two reasons: 1) I think foreign oil producers will no longer be able to fully control global production – there will be more competition and discounts; and 2) I think the proposed import tax (border adjustment tax) will never pass Congress. In the long term, low oil prices will slow the growth of alternative fuels and electric vehicles. The current administration should curb the growth of bio-fuel requirements by year-end. I don’t know if the RIN program will be modified – VLO, of the four names, would likely benefit the most if that happens. It is very possible that, in the next decade, electric vehicles use will grow in the US, while gasoline usage continues to grow worldwide. If this turns out to be true, export capabilities will play a big role in the future success of US refiners, especially if technology allows the US to be a low cost producer of oil. Well, that’s my unsolicited two cents on refiners. I welcome comments, questions, criticism etc.
$VLO, $TSO, $MPC, $PSX --- These are excerpts from a 6/12 Morgan Stanley note. “Refining stocks performed well last week despite cracks rolling over and disappointing DOE numbers. We stay cautious on refining margins as utilization and inventories remain heightened.” “MS Base Crack Indicator fell 7% last week while U.S. refining stocks rose 5.7%. Regional crack spreads fell 6-9% across the board while U.S refiners outperformed Broader Energy by 3.7%. We believe this is due to a combination of investors using refining for relative safety from other energy subsectors and idiosyncratic driven performance. Overall Energy potentially saw some benefit from the reported “FANG” trade breakdown in the Tech sector.”
what happened today?
Hopefully $95.00/share by year end.
My guess is that PSX is due for a pullback in the short-run. have you guys heard of awesome.stocks. i started receiving their allerts and so far i am happy.
Fire sale prices
MS reviewed its stock ratings on refiners as of May 30th. There were no comments on PSX which maintained an "equal weight" rating and an $88 price target.
Stock getting hammered - looks like below $ 78 is coming up today.
half a buck now, not as bad of a day as we all thought
Over $ 80 only to get clobbered a day later. Same old story with this stock - it can never break and hold $ 80.
Warren - do I hear buyout - perfect price for you.
PSX is the ONLY oil sector PSX acting reasonably well..........IMO, it cannot last. I think people are waiting for ex-dividend on Tuesday, then pullback comes.