Valero Energy (VLO) is the largest independent refiner in the US. As opposed to the very crowded trade in oil, this trade probably is me and a few other people :) Refiners are not loved right now. But when stocks rally in the face of bad news it can give us good signals that things can be turning. If crude were to fall just to mid $80s at this point in the coming months, this would help the sector. And if crude were not priced in dollars I'd think this would be quite a feasible result. THe problem is the peso... errr greenback falls daily; so in turn crude rises.
- Independent refiner Valero Energy Corp (VLO) said on Tuesday its third-quarter earnings fell 20 percent on a steep drop in refining margins and warned that the current quarter remained "difficult."
- The sharp contraction in refining margins from the record levels reached in the second quarter have eroded earnings at all the major U.S. refiners as crude oil prices rallied versus the prices in gasoline and other products.
- "So far in the fourth quarter, the margin environment has been difficult as prices for refined products have failed to keep pace with the increase in feedstock costs," Bill Klesse, chairman and chief executive, said in a statement.
- Net income fell to $1.27 billion, or $2.09 a share, from $1.60 billion, or $2.55 a share, in the year-ago period.
- Analysts had sharply cut their forecast for the quarter last month from $2.01 per share after the company said its margins has shrank and it expected earnings between $1.30 to $1.40 per share.
Long Tesoro and Frontier Oil in fund; no personal positions
2 comments:
At what point, will you take advantage of the high oil prices and pile into the drillers? I think that NOV could double again and still be cheap.
Hi, NOV isnt technically a driller - more of an arms merchant. The action today on NOV is very good - I am putting it closer to a CLB/FTI - oil services group.
I have underweight CLB now as its a bit pricet, and FTI pulled back nicely to 60 so I started to overweight FTI and NOV. I am being a bit cautious because I think oil might drop once it hits $100 and baby with bathwater type of selling might happen in oil services even if it makes little sense. Thats the only reason I am not heavier into NOV. I do agree its a heck of a value here. RIG/GSF (actualy drillers) meet Nov 9th for merger so that group might get a lift once that is through. Anyhow my caution is more of oil potentially selling of once we tag $100, and then they sell anything oil related. Even the good ones, but from valuation perspective NOV is a favorite. The refiners are also signaling either crude will be dropping or gas prices will be going up or some combination of both - otherwise their strength here makes little sense ...
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