These are the details of the announced SPR oil release. Unknown are how other oil importing nations will respond, how OPEC will respond, and whether this will help US refiners. #MPC #PSX
FYI -- An exchange agreement involves return of the principal amount of similar quality crude oil to the SPR, plus payment of an in-kind premium determined according to the period negotiated for return. A letter of credit will be required for the exchange of crude oil.
M
Futures are plunging, management will be buying today.
It was a demoralizing day and week for shareholders of refining stocks. The president's announced plan to release strategic oil reserves, possibly in unison with China, drove down the price of oil and gasoline, as was intended. US refiner profits should not be significantly affected by this action, but that did not seem to matter.
Renewed Covid concerns, highlighted by increasing global infections and the shutdown of Austria, will affect US refiner profits if the trend continues. Passage by the House of the BBB bill, although unlikely to advance in its’ current form, adds more uncertainty as to the government's efforts to limit the use of fossil fuels. Together with the first bill, significant monies will be spent on charging stations and EV subsidies or tax incentives.
So, ignoring the dividends paid this week, VLO, MPC, and PSX lost 8.7%, 7.6%, and 9.1%, respectively for the week. (MPC’s large stock buyback program usually provides something of a floor on “down" days but not much support on “up” days.) I don’t see selling the refiners at these levels. I plan on holding and hope for a reversal starting next week. Nevertheless, we should all be aware of the substantial headwinds. I wish the best of luck to all. #MPC #PSX
S
Quoted from Zacks today:
“MPC is a component of the Zacks Oil and Gas – Refining and Marketing industry group within the Oils and Energy sector. The sector as a whole, which is currently ranked #1 out of all 16 Zacks sectors, has advanced over 35% on the year. We want to target companies that are outperforming, and MPC certainly fits the bill with a greater than 60% return YTD. Marathon Petroleum is showing an impressive record of earnings surprises with a beat notched in each of the last ten quarters. The average surprise over the last four quarters is a remarkable 39.1%.”
W
Have a feeling they are going to blow this quarter out the water. Just in time for the driving season ;)
D
How are those stock buybacks coming? Should have used the money for special cash dividends.
S
Old Energy is still a place to be even as investors are still mostly not on board with that investment thesis.
Simple supply and demand logistics with very little new production coming online, except for some recent investments out of SArabia and UAE, last I heard.
Oil Companies are strongly discouraged to make any new investments (by politics and investors alike). This means existing infrastructure and supplies will almost certainly become more valuable as we move forward.
The Recent release of oil reserves is primarily symbolic, just a drop in the bucket as compared to overall consumption. Last I heard the US was only releasing 50 million barrels and other countries releases are less, that’s not even a day of world consumption. It’s nothing really.
Still looks to me like a lot of future upside. Strong accumulate and hold, can accomplish the ‘accumulate’ by reinvesting the dividends, if one doesn’t want to deploy any other new capital.
Excerpt from 11/9 Barron's article on high energy costs #MPC #PSX "Companies that make or process fuels and chemicals often run on natural gas. Refinery operator Valero Energy (VLO) said that its refinery operating expenses rose 6% in the third quarter largely because of higher natural gas prices. And any other business—including office work—that uses substantial amounts of electricity can be hurt when energy prices rise. Natural gas now accounts for the largest share of U.S. electricity generation."
D
MS 11/3/21 Outline Q3-21 MPC put up solid numbers and guidance. The common investor questions we hear around capital allocation, Martinez renewable diesel capital cost and feedstock strategy, and further quantification of commercial opportunities were largely left unanswered, but 2022 should provide more answers.
-3Q21 results beat marginally -4Q throughput guidance was modestly above expectations, while cost guidance was more in line -Management remains relatively conservative in messaging — while probably a good strategy in the long run, it does leave a few unanswered questions for 2022. We are supportive of MPC management's general desire to build credibility and communicate conservatively, but as a result, this quarter did not bring a ton in the way of updates on some of the major questions we get from investors on the name.
We raise our 4Q EBITDA estimate ~12% to ~$2.4B, largely due to higher throughput vs. our prior model. Meanwhile, our 2022 EBITDA estimate of ~$10.2B (or $10.9B ex-turnarounds) is largely unch'd. We continue to see MPC's valuation as compelling, and the benefits of the ongoing capital return and operational improvement programs not fully priced in. We remain OW with an unch'd $85 PT.
For anyone not aware, both MPC (58 cents) and PSX (92 cents) are trading x-dividend today. VLO (98 cents) trades x-dividend tomorrow, Nov 17. #MPC #PSX
D
No dividend increase in almost 2 years. So we are using all of our money on stock buybacks and bonuses for the top guys?
This is a reprint of a post entered by Highlowsell on the FCX page "Somewhat OT, but since we talk about the EV "revolution" this NYTimes guest essay is worth a read (if you can get to it behind their paywall, and Yahoo allows the link). Excerpt:
"China’s decision a decade ago to knit all the pieces of its battery supply chain together into a comprehensively controlled, globe-spanning industry has yielded it genuine strategic power. Turning ore into electrodes is far trickier than extracting minerals. It has taken China much of the decade to stand up an industry that, according to Wood Mackenzie, an energy research and consulting firm, now possesses about 90 percent of global capacity to process raw lithium, about 70 percent of cobalt and 40 percent of nickel. China also has almost all the manganese- and graphite-refining capacity."
So, building a EV plant, batteries and such, is one thing ain't it? Turning the raw ore into a properly refined product for the batteries, that's quite another thing, eh?"
There is a lot of volatility in energy markets, affecting refiners, drillers, and alternative energy stocks. The climate change conference in Glasgow provides a constant flow of news. Our own president leads the charge against fossil fuels while begging OPEC+ to increase oil production. The US initiative on methane seems innocuous enough but the devil will be in the EPA details.
Refiner sales and crack spreads appear to be growing but the latter can reverse trends at any time. Increases in the price of oil have driven all US drillers and refiners higher, but if gasoline gets too expensive, demand destruction will likely occur… mostly in the form of earlier adoption of electric vehicles. I’m not smart enough to estimate how higher electricity costs, chip shortages, and shipping issues will affect the rate of adoptions for electric cars. Meanwhile, about 5 million cars are sold in the US each year with only 2-3% electric. More people are working at home but, with US economy improving and with declining attractiveness of public transportation, I don’t expect “miles driven” to decline. I am holding my refiner stocks through what I expect to be more volatility – including the possibility of an overall market correction. As always, I may be wrong. Good luck. #MPC #PSX
W
Welcome tech investors. We have a subscription service too - it’s called filling your tank ;)
J
For any of you with an intellectual bent, read Scientific American, September, 1971 ("Energy and Power" issue). Look at the graph at the top left hand page of page 38, "Power Output of Basic Machines" The ubiquitous internal combustion engine in 1950 put out 10,000 kilowats. 70 years ago. The horse put out less than one, and man put out a tenth of a kilowat of power. Factor into that the cost of that out put from the internal combustion engine, which is all over the planet and accessible to the poorest of countries, and you will see why Qatar is building infrastructure to produce more oil. I'm not opposed to conservation and clean air and water--there's plenty of room for help from technology for that (after we address the dirtiest users, China being one). Last year I recalled that article from high school; still had my copy. Those of us around then lived through the energy crises of 1971 and forward. Electrical technology is nowhere near that cost/benefit ratio, efficiency, reliability, or distribution and won't be for eons.
M
If the government releases the oil reserves, what refinery gets them?
S
From Zachs, note the huge revenue beat:
“MPC reported adjusted earnings of 73 cents per share, which beat the Zacks Consensus Estimate of 72 cents. It had incurred a loss of $1.00 per share in the year-ago period. The company’s bottom line was favorably impacted by stronger-than-expected performance from both segments. Precisely, operating income from the Refining & Marketing and the Midstream units totaled $509 million and $1 billion, respectively, ahead of their Zacks Consensus Estimate of $484 million and $984 million.
Marathon Petroleum reported revenues of $32.6 billion that beat the Zacks Consensus Estimate of $17.1 billion and improved 85.9% year over year.”
M
Form 8K Tidbits • Completed ~25% of $10 billion capital return program through Oct 31; committed to complete remaining $7.5 billion by year-end 2022 • Exceptionally strong year-to-date cash flow at MPLX supports a third quarter distribution consisting of a 2.5% increase to the base distribution amount and a special distribution amount; MPC expects to receive a total of $829 million • Midstream segment income from operations, which primarily reflects the results of MPLX LP (NYSE: MPLX), was $1.0 billion in the third quarter of 2021, compared with $960 million for the third quarter of 2020. • As of Sept. 30, 2021, MPC had $13.2 billion of cash, cash equivalents, and short-term investments. There are no borrowings outstanding under the company’s $5 billion five-year bank revolving credit facility. • MPC debt at the end of the third quarter of 2021 totaled $9.1 billion, excluding MPLX debt. MPC’s debt-to-capital ratio, excluding MPLX, was 24% at the end of the third quarter of 2021. • MPLX declared a quarterly cash distribution of $1.28 per common unit for the third quarter of 2021, including a base distribution amount of $0.705 per common unit and a special distribution amount of $0.575 per common unit. The base distribution amount represents a 2.5% increase over the second quarter 2021 distribution. MPC expects to receive a total of $829 million.
Share repurchase
10Q Number of shares repurchased 3rd qtr – 16M Cash paid for shares repurchased $928M Average cost per share $58.78
W
Dr. Siegel thinks dividend stocks will have their day. I personally think the big dogs may be pumping bonds to exit or trim tech and treasuries. Could make energy the place to be.
D
The MPC earnings “beat” was apparently a disappointment to a market that obviously expected more. In addition, the oil price was down today, as were the refiners whose investors ignored the increase in the gasoline prices – at least for now.
https://www.energy.gov/articles/doe-make-available-release-50-million-barrels-crude-oil-strategic-petroleum-reserve
FYI -- An exchange agreement involves return of the principal amount of similar quality crude oil to the SPR, plus payment of an in-kind premium determined according to the period negotiated for return. A letter of credit will be required for the exchange of crude oil.
Renewed Covid concerns, highlighted by increasing global infections and the shutdown of Austria, will affect US refiner profits if the trend continues.
Passage by the House of the BBB bill, although unlikely to advance in its’ current form, adds more uncertainty as to the government's efforts to limit the use of fossil fuels. Together with the first bill, significant monies will be spent on charging stations and EV subsidies or tax incentives.
So, ignoring the dividends paid this week, VLO, MPC, and PSX lost 8.7%, 7.6%, and 9.1%, respectively for the week. (MPC’s large stock buyback program usually provides something of a floor on “down" days but not much support on “up” days.)
I don’t see selling the refiners at these levels. I plan on holding and hope for a reversal starting next week. Nevertheless, we should all be aware of the substantial headwinds. I wish the best of luck to all.
#MPC #PSX
“MPC is a component of the Zacks Oil and Gas – Refining and Marketing industry group within the Oils and Energy sector.
The sector as a whole, which is currently ranked #1 out of all 16 Zacks sectors, has advanced over 35% on the year. We want to target companies that are outperforming, and MPC certainly fits the bill with a greater than 60% return YTD.
Marathon Petroleum is showing an impressive record of earnings surprises with a beat notched in each of the last ten quarters. The average surprise over the last four quarters is a remarkable 39.1%.”
Simple supply and demand logistics with very little new production coming online, except for some recent investments out of SArabia and UAE, last I heard.
Oil Companies are strongly discouraged to make any new investments (by politics and investors alike). This means existing infrastructure and supplies will almost certainly become more valuable as we move forward.
The Recent release of oil reserves is primarily symbolic, just a drop in the bucket as compared to overall consumption. Last I heard the US was only releasing 50 million barrels and other countries releases are less, that’s not even a day of world consumption. It’s nothing really.
Still looks to me like a lot of future upside. Strong accumulate and hold, can accomplish the ‘accumulate’ by reinvesting the dividends, if one doesn’t want to deploy any other new capital.
GLTA
"Companies that make or process fuels and chemicals often run on natural gas. Refinery operator Valero Energy (VLO) said that its refinery operating expenses rose 6% in the third quarter largely because of higher natural gas prices. And any other business—including office work—that uses substantial amounts of electricity can be hurt when energy prices rise. Natural gas now accounts for the largest share of U.S. electricity generation."
MPC put up solid numbers and guidance. The common investor questions we hear around capital allocation, Martinez renewable diesel capital cost and feedstock strategy, and further quantification of commercial opportunities were largely left unanswered, but 2022 should provide more answers.
-3Q21 results beat marginally
-4Q throughput guidance was modestly above expectations, while cost guidance was more in line
-Management remains relatively conservative in messaging — while probably a good strategy in the long run, it does leave a few unanswered questions for 2022.
We are supportive of MPC management's general desire to build credibility and communicate conservatively, but as a result, this quarter did not bring a ton in the way of updates on some of the major questions we get from investors on the name.
We raise our 4Q EBITDA estimate ~12% to ~$2.4B, largely due to higher throughput vs. our prior model. Meanwhile, our 2022 EBITDA estimate of ~$10.2B (or $10.9B ex-turnarounds) is largely unch'd. We continue to see MPC's valuation as compelling, and the benefits of the ongoing capital return and operational improvement programs not fully priced in. We remain OW with an unch'd $85 PT.
"Somewhat OT, but since we talk about the EV "revolution" this NYTimes guest essay is worth a read (if you can get to it behind their paywall, and Yahoo allows the link). Excerpt:
"China’s decision a decade ago to knit all the pieces of its battery supply chain together into a comprehensively controlled, globe-spanning industry has yielded it genuine strategic power. Turning ore into electrodes is far trickier than extracting minerals. It has taken China much of the decade to stand up an industry that, according to Wood Mackenzie, an energy research and consulting firm, now possesses about 90 percent of global capacity to process raw lithium, about 70 percent of cobalt and 40 percent of nickel. China also has almost all the manganese- and graphite-refining capacity."
So, building a EV plant, batteries and such, is one thing ain't it? Turning the raw ore into a properly refined product for the batteries, that's quite another thing, eh?"
https://www.nytimes.com/2021/11/10/opinion/electric-vehicle-climate-battery.html
#MPC #PSX
Refiner sales and crack spreads appear to be growing but the latter can reverse trends at any time. Increases in the price of oil have driven all US drillers and refiners higher, but if gasoline gets too expensive, demand destruction will likely occur… mostly in the form of earlier adoption of electric vehicles. I’m not smart enough to estimate how higher electricity costs, chip shortages, and shipping issues will affect the rate of adoptions for electric cars.
Meanwhile, about 5 million cars are sold in the US each year with only 2-3% electric. More people are working at home but, with US economy improving and with declining attractiveness of public transportation, I don’t expect “miles driven” to decline.
I am holding my refiner stocks through what I expect to be more volatility – including the possibility of an overall market correction. As always, I may be wrong. Good luck.
#MPC #PSX
“MPC reported adjusted earnings of 73 cents per share, which beat the Zacks Consensus Estimate of 72 cents. It had incurred a loss of $1.00 per share in the year-ago period.
The company’s bottom line was favorably impacted by stronger-than-expected performance from both segments. Precisely, operating income from the Refining & Marketing and the Midstream units totaled $509 million and $1 billion, respectively, ahead of their Zacks Consensus Estimate of $484 million and $984 million.
Marathon Petroleum reported revenues of $32.6 billion that beat the Zacks Consensus Estimate of $17.1 billion and improved 85.9% year over year.”
• Completed ~25% of $10 billion capital return program through Oct 31; committed to complete remaining $7.5 billion by year-end 2022
• Exceptionally strong year-to-date cash flow at MPLX supports a third quarter distribution consisting of a 2.5% increase to the base distribution amount and a special distribution amount; MPC expects to receive a total of $829 million
• Midstream segment income from operations, which primarily reflects the results of MPLX LP (NYSE: MPLX), was $1.0 billion in the third quarter of 2021, compared with $960 million for the third quarter of 2020.
• As of Sept. 30, 2021, MPC had $13.2 billion of cash, cash equivalents, and short-term investments. There are no borrowings outstanding under the company’s $5 billion five-year bank revolving credit facility.
• MPC debt at the end of the third quarter of 2021 totaled $9.1 billion, excluding MPLX debt. MPC’s debt-to-capital ratio, excluding MPLX, was 24% at the end of the third quarter of 2021.
• MPLX declared a quarterly cash distribution of $1.28 per common unit for the third quarter of 2021, including a base distribution amount of $0.705 per common unit and a special distribution amount of $0.575 per common unit. The base distribution amount represents a 2.5% increase over the second quarter 2021 distribution. MPC expects to receive a total of $829 million.
Share repurchase
10Q
Number of shares repurchased 3rd qtr – 16M
Cash paid for shares repurchased $928M
Average cost per share $58.78