The stunning move by the U.S. Department of Commerce last week to allow the export of condensate products from the United States hit the refining sector hard. Many top firms on Wall Street lowered the boom on the refiners and some saw substantial pressure.
In a new research report, the team at Cowen submit that regulations are largely unchanged and permits for condensate export do not constitute precedent. In fact, their lead analyst continues to think actual crude exports are highly unlikely and there is no change to the spirit of the law. Cowen remains bullish longer term and they see the potential for a meaningful feedstock advantage for U.S. refiners emerging later this year, with U.S. crude production inflecting at 9 million barrels-per-day and Gulf Coast imports baselining at 2.8-3 million barrels-per-day.
Cowen lists five top names to own, especially after Wall Street analysts work down estimates for the second quarter and the balance of the year.
Marathon Petroleum Corp. (NYSE: MPC) is a top refining name investors can buy now in hopes of substantial gains down the road. Marathon has a diversified business that operates through Refining & Marketing, Speedway and Pipeline Transportation segments. The company owns and operates seven refineries in the Gulf Coast and Midwest regions of the United States that refine crude oil and other feedstocks. It also distributes refined products through barges, terminals, and trucks, as well as purchases ethanol and refined products for resale. Shareholders are paid a 1.9% dividend. The Cowen price target is $120. The Thomson/First Call consensus price target is $104.91. Marathon closed Friday at $79.40 a share.
PBF Energy Inc. (NYSE: PBF) engages in the refining and supply of petroleum products. It provides gasoline, ultra-low-sulfur diesel, heating oil, jet fuel, lubricants, petrochemicals and asphalt, as well as unbranded transportation fuels, heating oil, petrochemical feedstocks and other petroleum products. It also has stated in the past that the rising RIN costs will be passed along to the consumer, which makes for bad publicity, but will increase earnings. Shareholders are paid a very solid 3.8% dividend. Cowen has a $35 price target, and the consensus target is at $33.27. PBF closed Friday at $27.01.