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Yahoo
30-05-2025
- Business
- Yahoo
4 Refining & Marketing Stocks to Watch as Margins Stay Tight
The Zacks Oil and Gas - Refining & Marketing industry is standing at a crossroads. On paper, things look solid—refined product inventories are tight, demand for gasoline and diesel is up, and long-term fundamentals remain constructive. Yet, refining margins tell a different story. Despite favorable supply-demand dynamics, market sentiment remains shaky. Concerns around economic slowdown and regulatory uncertainty, particularly in renewable diesel, have weighed on valuations and earnings expectations. Still, not all is gloom. U.S. refiners enjoy structural advantages like domestic crude access and low-cost inputs. And four names — Marathon Petroleum MPC, Phillips 66 PSX, Valero Energy VLO and Galp Energia GLPEY — stand out with strong assets, smart capital allocation, and long-term positioning that could reward patient investors. Industry Overview The Zacks Oil and Gas - Refining & Marketing industry consists of companies involved in selling refined petroleum products (including heating oil, gasoline, jet fuel, residual oil, etc.) and a plethora of non-energy materials (like asphalt, road salt, clay and gypsum). Some companies also operate refined product terminals, storage facilities and transportation services. The primary activity of these firms involves buying crude/other feedstocks and processing them into a wide variety of refined products. Refining margins are extremely volatile and generally reflect the state of petroleum product inventories, demand for refined products, imports, regional differences and capacity utilization in the industry. Other major determinants of refining profitability are the light/heavy and sweet/sour spreads. Refiners are also prone to unplanned outages. 3 Trends Defining the Oil and Gas - Refining & Marketing Industry's Future Margin Compression Despite Healthy Fundamentals: Despite low inventories and solid demand trends, refining margins have lagged expectations. Fundamentals appear strong — diesel and gasoline demand are up year over year, and inventory levels are tight — yet refining margins have remained muted. This disconnect may reflect broader macroeconomic concerns, such as the risk of a slowdown or recession, which is weighing on investor sentiment. Refiners are operating in a cautious environment where markets are pricing in pessimism, even as supply-demand dynamics suggest tighter Market and Policy Uncertainty Weigh on Renewable Diesel: The shift from the Blenders' Tax Credit (BTC) to the Production Tax Credit (PTC) has made renewable diesel less profitable. Many producers are seeing lower returns due to feedstock qualification issues and unclear policy direction — especially with possible changes to California's Low Carbon Fuel Standard (LCFS) rules. As a result, output is being cut, and a recovery will likely depend on a strong rebound in renewable fuel credits or clearer regulatory support, both of which are uncertain right Support Long-Term Refining Outlook: The refining industry appears well-positioned for an improved mid-cycle environment, supported by long-term fundamentals and structural advantages in the U.S. market. Marathon Petroleum expects global demand growth for refined products to persist, even as some 800,000 barrels per day of capacity is set to come offline across the U.S. and Europe. In parallel, U.S. refined product inventories remain below five-year averages, setting a favorable tone for margin expansion. Add to this the U.S. refining sector's locational advantage—easy access to domestic crude, low-cost natural gas and butane, and a flexible asset base—and it paints an encouraging picture for U.S. refiners. Zacks Industry Rank Indicates Bearish Outlook The Zacks Oil and Gas - Refining & Marketing is a 13-stock group within the broader Zacks Oil - Energy sector. The industry currently carries a Zacks Industry Rank #139, which places it in the bottom 43% of 245 Zacks group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to industry's position in the bottom 50% of the Zacks-ranked industries is a result of a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are becoming pessimistic about this group's earnings growth potential. As a matter of fact, while the industry's earnings estimate for 2025 has gone down 38.3% in the past year, the same for 2026 has fallen 19.7% over the same the dim near-term prospects of the industry, we will present a few stocks that you may want to consider for your portfolio. But it's worth taking a look at the industry's shareholder returns and current valuation first. Industry Underperforms Sector & S&P 500 The Zacks Oil and Gas - Refining & Marketing industry has fared worse than the broader Zacks Oil - Energy Sector as well as the Zacks S&P 500 composite over the past industry has gone down 16.9% over this period compared with the broader sector's decrease of 8.2%. Meanwhile, the S&P 500 has gained 12.5%. Industry's Current Valuation Since oil and gas companies are debt-laden, it makes sense to value them based on the EV/EBITDA (Enterprise Value/ Earnings before Interest Tax Depreciation and Amortization) ratio. This is because the valuation metric takes into account not just equity but also the level of debt. For capital-intensive companies, EV/EBITDA is a better valuation metric because it is not influenced by changing capital structures and ignores the effect of noncash the basis of the trailing 12-month enterprise value-to EBITDA (EV/EBITDA), the industry is currently trading at 3.76X, significantly lower than the S&P 500's 16.65X. It is also below the sector's trailing 12-month EV/EBITDA of the past five years, the industry has traded as high as 6.95X and as low as 1.79X, with a median of 3.60X, as the chart below shows. 4 Stocks in Focus Marathon Petroleum: It is a leading independent refiner, transporter and marketer of petroleum products. Marathon Petroleum's access to lower-cost crude in the Permian, Bakken, and Canada helps it benefit from the differentials. The Zacks Rank #3 (Hold) company's exceptional cash flow generation and aggressive shareholder returns are the key drivers for stock price appreciation. You can see the complete list of today's Zacks #1 Rank stocks here. Findlay, OH-based Marathon Petroleum has a market capitalization of $48.7 billion. MPC beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters. Shares of MPC have lost 9% in a year. Phillips 66: Based in Houston, TX, Phillips 66 is a diversified and integrated energy company established following the 2012 spin-off of ConocoPhillips' downstream operations. As one of the world's leading refiners, Phillips 66 operates 13 refineries, primarily in the United States, with a total refining capacity of 2.2 million barrels per 66 beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, the average being 10.6%. Shares of this Zacks Rank #3 company have lost 19% in a year. Valero Energy: San Antonio, TX-based Valero Energy is the largest independent refiner and marketer of petroleum products in the United States. The company has a refining capacity of 3.2 million barrels per day across 15 refineries located throughout the United States, Canada and the United Energy beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters and missed in the other, the average being 122.9%. Shares of this Zacks Rank #3 company have lost 18% in a year. Galp Energia: It is a Portuguese integrated energy firm with a significant presence in the downstream segment. The company's Refining and Marketing unit is responsible for the supply and trade of oil and biofuels, and the operation of oil and gas refineries. It operates two refineries in based in Lisbon, has a four-quarter average earnings surprise of 56.8%. The firm has a market capitalization of $11.3 billion. This #3 Ranked company's shares have decreased 25% in a year. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Marathon Petroleum Corporation (MPC) : Free Stock Analysis Report Valero Energy Corporation (VLO) : Free Stock Analysis Report Phillips 66 (PSX) : Free Stock Analysis Report Galp Energia SGPS SA (GLPEY) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
13-05-2025
- Business
- Yahoo
Calumet Renewables Expansion Is Unlocking Value: Analyst
BofA Securities analyst Conor Fitzpatrick initiated coverage on Calumet, Inc (NASDAQ:CLMT) with a Buy rating and a price forecast of $15. The analyst noted that Calumet's Montana Renewables unit is advancing its MaxSAF project to boost sustainable aviation fuel output from ~40 million to over 250 million gallons annually, aiming to tap into stronger pricing and subsidy benefits over renewable diesel and petroleum. According to Fitzpatrick, the expansion is expected to nearly double EBITDA from 2025 to 2027 and is supported by interest-free DOE loans, reducing execution plans to monetize the asset to cut debt, which could bring parent leverage below 2.5x through deconsolidation and repayment. The analyst pointed out that Calumet underperformed during the ramp-up of its biofuels unit, Montana Renewables, due to margin pressure, but recent developments may shift momentum. Reports suggest that the Environmental Protection Agency is preparing to increase demand for Renewable Identification Numbers, or RINs, beginning in 2026, following lobbying from oil and agricultural interests. Meanwhile, California is in the process of re-approving measures to boost demand for Low Carbon Fuel Standard, or LCFS credits. Prices for RINs have approximately doubled since December 2024, and the analyst expects them to remain within a favorable range, with some upside potential as regulatory developments advance. A recovery in demand for LCFS credits is also anticipated, which would support higher margins. For the investment thesis to materialize, the analyst notes that the company must demonstrate margin recovery in financial performance, achieve meaningful volume growth at MRL, and make tangible progress toward monetizing MRL and reducing overall leverage. Price Action: CLMT shares are trading higher by 5.84% to $13.89 at the last check on Tuesday. Image by Phongphan via Shutterstock Date Firm Action From To Feb 2022 HC Wainwright & Co. Maintains Buy Nov 2021 Wolfe Research Upgrades Peer Perform Outperform Nov 2021 Cowen & Co. Upgrades Market Perform Outperform View More Analyst Ratings for CLMT View the Latest Analyst Ratings Up Next: Transform your trading with Benzinga Edge's one-of-a-kind market trade ideas and tools. Click now to access unique insights that can set you ahead in today's competitive market. Get the latest stock analysis from Benzinga? CALUMET (CLMT): Free Stock Analysis Report This article Calumet Renewables Expansion Is Unlocking Value: Analyst originally appeared on © 2025 Benzinga does not provide investment advice. All rights reserved. Sign in to access your portfolio
Yahoo
05-05-2025
- Automotive
- Yahoo
Supply issues, compliance costs drive up California fuel prices, EIA says
By Nicole Jao (Reuters) -Drivers in California pay higher prices at the pump than any other state in the country due to supply issues, costs from environmental compliance and fuel requirements, and high state taxes and fees, the U.S. Energy Information Administration said on Monday. In March, costs from Californian environmental programs such as Cap-and-Trade and the Low Carbon Fuel Standard added as much as $0.54 per gallon, the latest data showed. Consumers in California also pay around $0.90 per gallon in taxes and fees as of March, the highest in the country, the EIA said. WHY IT'S IMPORTANT California is the largest U.S. gasoline market but several fuelmakers have ceased operations at less profitable facilities, citing regulatory challenges and market dynamics. Six plants have shut since 2008, two of which have converted to producing renewable fuels. The state will likely see even higher gasoline prices as refinery closures put pressure on fuel supply and force the state to rely more on imports from countries like India and South Korea. Retail prices for regular grade gasoline in the state often exceed the national average by more than a dollar per gallon, the EIA said. CONTEXT In October, California Governor Gavin Newsom signed into effect ABX2-1, a bill designed to prevent fuel supply shortages in the state that gives regulators more control over inventory levels for refiners. Shortly after, Phillips 66 announced plans to shut its large Los Angeles-area oil refinery in the fourth quarter of 2025. Last month, Valero Energy announced plans to cease operations at its San Francisco-area oil refinery next year. Sign in to access your portfolio
Reuters
05-05-2025
- Business
- Reuters
Supply issues, compliance costs drive up California fuel prices, EIA says
May 5 (Reuters) - Drivers in California pay higher prices at the pump than any other state in the country due to supply issues, costs from environmental compliance and fuel requirements, and high state taxes and fees, the U.S. Energy Information Administration said on Monday. In March, costs from Californian environmental programs such as Cap-and-Trade and the Low Carbon Fuel Standard added as much as $0.54 per gallon, the latest data showed. The Reuters Power Up newsletter provides everything you need to know about the global energy industry. Sign up here. Consumers in California also pay around $0.90 per gallon in taxes and fees as of March, the highest in the country, the EIA said. WHY IT'S IMPORTANT California is the largest U.S. gasoline market but several fuelmakers have ceased operations at less profitable facilities, citing regulatory challenges and market dynamics. Six plants have shut since 2008, two of which have converted to producing renewable fuels. The state will likely see even higher gasoline prices as refinery closures put pressure on fuel supply and force the state to rely more on imports from countries like India and South Korea. Retail prices for regular grade gasoline in the state often exceed the national average by more than a dollar per gallon, the EIA said. CONTEXT In October, California Governor Gavin Newsom signed into effect ABX2-1, a bill designed to prevent fuel supply shortages in the state that gives regulators more control over inventory levels for refiners. Shortly after, Phillips 66 (PSX.N), opens new tab announced plans to shut its large Los Angeles-area oil refinery in the fourth quarter of 2025. Last month, Valero Energy (VLO.N), opens new tab announced plans to cease operations at its San Francisco-area oil refinery next year.
Yahoo
04-04-2025
- Business
- Yahoo
Ares launches Sagepoint RNG developer, plus news from Opal, EnVitec, Nexus
This story was originally published on Waste Dive. To receive daily news and insights, subscribe to our free daily Waste Dive newsletter. This is the latest installment in Waste Dive's Biogas Monthly series. Ares Management is launching a new renewable natural gas platform named Sagepoint Energy, bringing together several growing assets with a plan for expansion. The business is a combination of Dynamic Renewables and BC Organics, in which Ares purchased a majority stake in 2023, and National Organics, a logistics platform launched under Ares in 2024. Aaron Johnson, a veteran of the renewable natural gas space and no stranger to the world of private capital, is Sagepoint's CEO. He's been the CEO of Dynamic since December 2023. He previously led RNG developer Kinetrex Energy, and became president of RNG for Kinder Morgan after the energy infrastructure company acquired Kinetrex in 2021. Sagepoint plans to hit the ground running with acquisitions, according to Johnson. 'Honestly, I don't intend to slow down here,' he said. 'We've assembled the team for it and we're executing fairly quickly on it.' Less than two weeks after the combination was announced, Sagepoint announced the acquisition of Lynx Renewable Energy Kansas and Renewable Power Producers. The two each operate a landfill-gas-to-RNG asset, and Sagepoint plans to immediately expand Lynx's facility at the Plumb Thicket Landfill in Harper, Kansas. The centerpiece of the combined company is its other RNG-producing facility, BC Organics. The site uses 16 digester tanks to process about one million gallons of manure per day. National Organics, the logistics network spearheaded by Johnson at Ares, operates dozens of trucks between several dairy farms in the Green Bay, Wisconsin, area and the BC Organics facility. It also receives 40% of its feedstock via pipeline, returning nutrient-rich water to farms for reuse. The company is planning to continue growing its portfolio of landfill projects. Johnson said that's in part to balance against the dairy exposure Sagepoint already has — he noted a lack of clarity regarding federal tax credits and California's Low Carbon Fuel Standard update make that business a bit riskier at the moment. "We have quite a few, candidly, projects that we've grandfathered and done some of the initial construction, but to push forward on some of those dairy projects, we'll definitely need clarification from [the California Air Resources Board,]" Johnson said. Sagepoint is also exploring the possibility of codigesting other kinds of organic waste in its facilities. Johnson said he's learned to operate with an 'all-of-the-above strategy' in the RNG space over the years, and will carry out that philosophy at Sagepoint. 'Ares is very prolific in this area, and I think for us we are very bullish,' Johnson said. Credit pricing as of April 2, 2025 D3 RIN prices: $2.462 Down from $2.465 in 2024 D5 RIN prices: $1.025 Up from $0.935 in 2024 $61 Price per metric ton of carbon dioxide equivalent in Oregon's Clean Fuels Program $56 Price per metric ton of carbon dioxide equivalent in California's Low Carbon Fuel Standard Source: EcoEngineers Carbon Market Snapshot, April 2 Opal Fuels commissioned three landfill-gas-to-RNG projects last year, increasing its RNG output 41% to 3.8 million mmBtus, it announced in its full-year earnings release. Full-year revenue also improved 17% year over year to about $300 million, the company reported. '2024 was a solid year for OPAL Fuels, we made strong progress on our operational and strategic objectives and have positioned the company for continued success this year and for many years to come,' Adam Comora, co-CEO of OPAL Fuels, said in a statement. Last year, Opal reported owning and operating 26 total projects, including 11 which produce RNG and 15 which produce 'renewable power.' Of its RNG projects, two use dairy biogas and the rest use landfill gas. The company can generate up to 8.8 million mmBtus of RNG through its existing portfolio. The company also reported six RNG projects in construction, with the possibility to convert more of its power-generating sites to RNG in the future. SoCalGas has received approval from the California PUC for a contract with Organic Energy Solutions to receive RNG made from organic waste, the gas utility announced in March. It's the first contract approved by the commission under SB 1440, which sets short- and medium-term targets for investor-owned gas utilities to procure RNG. The law, passed in 2022, was designed to support California's short-lived climate pollutant law, SB 1383, by setting up a market for the gas produced by processing organic waste. SB 1440 does not allow for dairy biomethane to be used, since such projects can already benefit from the state's Low Carbon Fuel Standard. The commission set a target for investor-owned utilities to procure about 17.6 billion cubic feet of RNG annually by 2025, or the biomethane from about 8 million tons of organic waste. It set a further goal for utilities to displace about 12.2% of fossil natural gas with RNG by 2030. Organics Energy Solutions' project will be located in San Bernardino. It's expected to begin supplying RNG in the second half of 2026. EnviTec completed its fifth project in partnership with SJI Renewable Energy Ventures, a large dairy digestion plant in South Dakota. The 177,000 mmBtu system processes 300,000 gallons of manure a day. SJI and EnviTec are planning a portfolio of 15 total projects. Three others are currently ramping up production, including EnviTec's first Minnesota facility, per a release. EnviTec also touted its supply chain, noting the concrete tanks for its digester plants are manufactured locally. Germany-based EnviTec has built more than 700 biogas plants since 2002 across 18 countries. Nexus W2V began construction on an anaerobic digestion facility that will accept packaged food and other organic materials in La Porte, Indiana, in March. The facility is the company's first. The site is part of a $140 million plan for Nexus to break into waste-to-value development. It comes after a $75 million structured equity investment from Orion Infrastructure Capital. The Kingsbury Bioenergy Complex in La Porte is expected to support "dozens" of long-term positions once complete, per a release. It's scheduled to begin operations in late 2026. Nexus W2V is part of a family of companies based in Texas that offer wraparound waste-to-value services. It started in Texas in 2013 as an advisory firm, but expanded to include engineering and technical services. In 2023, Nexus received its first outside investment — a $50 million growth equity round backed by an affiliate of Greenbacker Capital Management, Ontario Power Generation Pension Fund and Liberty Mutual Insurance. Recommended Reading Waste companies report RNG progress; plus news from Aemetis, Waga and more Sign in to access your portfolio
