Life is good for refiners right now. Crude prices are low, finished product prices are high, and the discrepancies in midstream infrastructure give the appearance that this trend could continue for a while. Of all the refiners out there, HollyFrontier Corp (NYSE:HFC) has serendipitously found itself in an ideal position to capitalize on the unconventional shale boom. Let’s check in with the company and see how it landed in this lucky spot.
A cough here, a burp there Hopefully, you ignored the buzz about how the company missed earnings estimates earlier this week, because it doesn’t do the company justice. Yes, the company missed EPS targets, but this was in large part because it experienced some extra costs and some longer delays during some of its facility maintenance. If you look at the margins the company had on what it did process, you would see that the company had some almost absurd crack spreads. The company reported that it had crack spreads for its mid-continent operations of $38 per barrel, which eclipses the 2007 to 2012 average of $7 to $24 per barrel.
The operational fits HollyFrontier Corp (NYSE:HFC) experienced this quarter are more than likely a one-time event, and not really an indication of the company’s health. Other smaller, independent refiners similar to HollyFrontier Corp (NYSE:HFC) had better-than-expected results for the quarter and expect to continue those results for the foreseeable future.
Just lucky, I guess
What may be considered a great stroke of luck could potentially be one of HollyFrontier Corp (NYSE:HFC)’s greatest competitive advantages going forward. Unlike large competitors Phillips 66 (NYSE:PSX) and Valero Energy Corporation (NYSE:VLO) , which have a majority of their refining capacity in the Gulf of Mexico or on the coasts, HollyFrontier’s five refineries are all located in the mid-continent, Rockies, and southwest regions, which puts them all smack-dab in the middle of the Mississippian Lime, Niobrara, Permian, and Uinta formations.