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.
Investors continue to put their trust in the Delek US Holdings story. Shares of the Brentwood-based oil refining and marketing company (Ticker: DK) are up more than 2 percent today and are now at their highest level since the first few weeks of 2008.
SEE ALSO: Our 2011 coverage of the company's earnings and acquisition
Analyst Kemp Dolliver at Avondale Partners says there were no surprises in the 2012 doctor, hospital and surgery center payment rate recommendations made late last week by the Centers for Medicare and Medicaid Services. The hospital outpatient rate is set to rise 1.5 percent while doctors are technically in line to be paid almost 30 percent less based on the Sustainable Growth Rate formula, but that cut won't make it to market. "We expect Congress will once again 'fix' Medicare physician payments, but the timing is unclear," Dolliver wrote in a note where he affirmed his 'outperform' ratings on HCA, LifePoint and other hospital chains.
At Barclays Capital, analyst Paul Cheng has lifted his price target on shares of Delek US Holdings to $14 from $12. That's good news in itself, but it's worth noting that Delek (Ticker: DK) is this morning trading above $16 and has more than doubled so far in 2011.
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.
In the latest version of its investor presentation, the top execs at Delek US Holdings remind us why they're pumping millions into a multi-year gas station renovation campaign. People really do prefer to spend their money at sharp-looking places, especially when it comes to food.
Delek US Holdings last week paid its top officer a total of $1.6 million in special bonuses, led by CEO Uzi Yemin's $700,000 payout. For Yemin, it's the first bonus since a similar $400,000 award three years ago and it comes on the heels of a strong Q1 report and the expansion of the company's refining operations.
In the filing linked above, Delek also details that Mapco Express Igal Zamir is now working under a new contract that has retroactively upped his 2010 pay and will raise it another 8 percent in January. Zamir joined Mapco two years ago.
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.
On his team's first-quarter conference call Thursday, Delek US Holdings CEO Uzi Yemin said the tumble in commodities prices was a welcome development because, he said, high oil prices aren't sustainable in today's economy. Delek's Q1 profits surged in large part because the West Texas Intermediate oil it refines has been trading at a discount to the benchmark Brent Crude. Delek shares (Ticker: DK) are up more than 4 percent today and more than 80 percent so far this year.
- ALEX B FRUIN INHERITANCE TRUST; CANDACE F STEFANSIC INHERITANCE TRUST; CANDANCE F STEFANSIC INHERITANCE TRUST; FRUIN, ALEX B TRUSTEE; FRUIN ALEX B INHERITANCE TRUST; STEFANSIC, CANDACE F TRUSTEE; STEFANSIC CANDACE F INHERITANCE TRUST; STEFANSIC CANDANCE F INHERITANCE TRUST
- ROSS, BRIDGETT D
- COOKE, ETHEN LANYARD TRUSTEE; COOKE, ETHEN LEWIS ESTATE
- JACOBS, JESSICA ALEXANDRA; JACOBS, ERIKA BESS