Delek US Holdings officials late on Tuesday said their cash-cow refineries in Texas and Arkansas will run well below capacity for the next few weeks because of various factors. In Tyler, Texas, a power interruption last week has resulted in the idling of part of the facility. In the Natural State, Delek execs have only partially replaced the supplies Exxon took away late last month. Those factors mean Delek's refining operations will process around 110,000 barrels per day in May — 22 percent below capacity and Q1 output — and 120,000 barrels in June.
The news could put a dent in shares of Delek (Ticker: DK), which closed Tuesday trading at $15.93. They're up 40 percent year to date.
The surge in oil exploration and production from the middle of the United States is creating a powerful tailwind for refiners of West Texas Intermediate, the FT reports. (Registration required.) As output has ramped up, prices have fallen, boosting refining margins. And the trend shows signs of strengthening, powering shares of companies such as Delek US Holdings (Ticker: DK) even higher.
Analysts believe the regional refiners could get even cheaper oil in early 2012, further attracting investors to bid up their shares.Evan Calio, at Morgan Stanley, said that the WTI-Brent discount could expand to $50 a barrel by next spring.
“Less than five per cent of global refining capacity can process WTI-advantaged crude oils, capturing the differential and directly increasing gross margins,” he said.
Delek's Q1 report talked about the strengthening trend, which looks likely to drive a strong Q2. Brentwood-based Delek is scheduled to report its numbers on Aug. 4. Analysts are looking for a profit of 69 cents per diluted share, up from 23 cents a year ago.
Delek US Holdings says its recently acquired El Dorado refinery in Arkansas is back to running at normal capacity after a pipeline disrupted by Mississippi River flooding resumed its regular business. Delek became the majorit owner of the refinery and other assets through a $95 million deal wrapped up in March.
Delek US Holdings this morning said the Mississippi River floods have disrupted some of the crude oil supplies that would ordinarily make their way to its El Dorado, Ark., refinery. The Brentwood-based company is improvizing through other means but says its capacity at El Dorado is down by at least a quarter to a maximum of 60,000 barrels per day until normal crude deliveries resume. Shares of Delek (Ticker: DK) are up almost 2 percent in the first minutes of trading.