UBS on U.S. Independent Refiners: 2012 A Weaker Year for Refining Profits
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UBS on U.S. Independent Refiners: 2012 A Weaker Year for Refining Profits
Analyst, Craig Weiland, said, "Mid Continent margin forecast slashed on back of new WTI & Brent deck: We’ve lowered our composite refining margin indicator to reflect a substantial downgrade to Mid Continent refining margins on the back of the introduction of new UBS oil price forecasts, which imply a 2012 WTI-Brent differential of $7/Bbl. We’ve slashed our 2012 Mid Cont margins by 37% to $14/Bbl and have fine-tuned other regional margin outlooks."
"We've cut our 2012 EPS estimates by 39% and modestly lowering our 2013 EPS estimates by 5%. Our price targets have been reduced by an average of 15% to reflect a lower EBITDA outlook for 2012-13."
"Roadmap to refiner equities: We expect coastal refiner equities to remain weak vs peers in early 2012 on the back of a dismal 4Q11 earnings season as well as increased competition from substantial global refinery capacity additions (including the start up of the 325 MBbld Motiva expansion project at Port Arthur, TX). However, near term weakness could present a good entry point in VLO. Mid Continent refiners may be somewhat insulated from product imports stemming from global capacity growth, but also face the headwind of a narrowing WTI-Brent spread this year. Still, we estimate HFC offers value, assuming $14/Bbl Mid Cont margins."
UBS rates Valero (NYSE: VLO) and HollyFrontier (NYSE: HFC) at Buys
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Analyst, Craig Weiland, said, "Mid Continent margin forecast slashed on back of new WTI & Brent deck: We’ve lowered our composite refining margin indicator to reflect a substantial downgrade to Mid Continent refining margins on the back of the introduction of new UBS oil price forecasts, which imply a 2012 WTI-Brent differential of $7/Bbl. We’ve slashed our 2012 Mid Cont margins by 37% to $14/Bbl and have fine-tuned other regional margin outlooks."
"We've cut our 2012 EPS estimates by 39% and modestly lowering our 2013 EPS estimates by 5%. Our price targets have been reduced by an average of 15% to reflect a lower EBITDA outlook for 2012-13."
"Roadmap to refiner equities: We expect coastal refiner equities to remain weak vs peers in early 2012 on the back of a dismal 4Q11 earnings season as well as increased competition from substantial global refinery capacity additions (including the start up of the 325 MBbld Motiva expansion project at Port Arthur, TX). However, near term weakness could present a good entry point in VLO. Mid Continent refiners may be somewhat insulated from product imports stemming from global capacity growth, but also face the headwind of a narrowing WTI-Brent spread this year. Still, we estimate HFC offers value, assuming $14/Bbl Mid Cont margins."
UBS rates Valero (NYSE: VLO) and HollyFrontier (NYSE: HFC) at Buys
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