HF Sinclair beats profit estimates, says CEO to take voluntary leave | ReutersSkip to main content[Exclusive news, data and analytics for financial market professionalsLearn more aboutRefinitiv]HF Sinclair Corp logo is seen displayed in this illustration taken, April 10, 2023. REUTERS/Dado Ruvic/Illustration [Purchase Licensing Rights, opens new tab]- Companies[HF Sinclair Corp]FollowFeb 18 (Reuters) - HF Sinclair [(DINO.N), opens new tab] topped Wall Street estimates for fourth-quarter profit on Wednesday, ...

Core Insights - Valero Energy Corporation (VLO) stock is nearing its 52-week high of $206.77, closing at $196.91 on February 12, with a 50.3% increase compared to a 30.2% gain in the broader sub-industry [1][7] - Valero operates 15 refineries across the U.S., Canada, and Peru, with a combined throughput capacity of 3.2 million barrels per day, setting it apart from other independent refiners [2] - The current softness in crude oil prices is expected to benefit Valero by lowering input costs, as the West Texas Intermediate spot crude price is projected to drop from $65.40 per barrel in 2025 to $53.42 in 2026 [5] - Valero's refineries possess operational flexibility to process various feedstocks, allowing for adjustments in production based on market conditions, which enhances profitability [6] Financial Metrics - Valero's stock trades at a trailing 12-month EV/EBITDA of 7.73X, which is above the industry average of 5.06X [7][10] - Competitors Phillips 66 and HF Sinclair have trailing 12-month EV/EBITDA ratios of 13.03X and 6.82X, respectively [10] Market Position - The company is expected to benefit from strong refining margins due to lower crude prices, enabling it to convert cheaper feedstock into high-value products [9] - Despite the potential for profitability, Valero's current valuation suggests it may be overvalued, prompting a recommendation for investors to wait for a more favorable entry point [12]

Summary of Key Points from the Conference Call on Chinese Oil Product Exports Industry Overview - The conference call focused on the outlook of the China refining market and trends in Chinese oil product exports, hosted by JLC as part of the Energy Symposium Week [1][2]. Core Insights - **Export Quota Stability**: JLC expects China's refined product export quota to remain broadly flat in 2026, with limited growth projected through 2030. The first batch of 2026 export quotas was released in late December and showed no year-over-year change [3][7]. - **January Export Decline**: Preliminary data indicated that Chinese oil product exports fell by 8% year-over-year in January [3][13]. - **Future Quota Estimates**: For 2026/27, JLC estimates the refined oil product export quota could reach approximately 41-42 million tons, reflecting a modest increase of about 1-2% year-over-year, primarily due to the commissioning of HAPCO expected by mid-to-late 2026 [3][9]. - **Regulatory Constraints**: Despite an anticipated surplus in the domestic market, JLC believes that Chinese regulators are unlikely to ease export controls due to concerns over carbon emissions and energy security [3]. Domestic Demand and Supply Dynamics - **Peak Demand**: JLC forecasts that the demand for major oil products in China peaked in 2024, with gasoline and diesel demand declining by 3% and 2% year-over-year in 2025, respectively. Jet fuel demand also saw a 2% decline, attributed to reduced travel activity linked to the lunar new year timing [11]. - **Refining Capacity Growth**: China's total refining capacity is expected to rise towards 20 million barrels per day (mb/d) by 2030, driven by new capacity additions from HAPCO and Sinopec [12][20]. - **Refinery Run Estimates**: For 2026, a slight year-over-year increase of 1.4% in refinery runs is anticipated, with independent refiners expected to see a 5.5% increase, while state-owned enterprises (SOEs) may experience a 0.6% decrease [12]. Investment Recommendations - **Reliance Industries (Buy)**: The stock is viewed favorably due to strong earnings growth across segments and attractive valuation. Refining fundamentals are supported by tight product markets through CY27, with potential upside risks from a revival in crude sourcing from Venezuela [24]. - **S-Oil (Buy)**: S-Oil is recommended due to positive refining margins, favorable feedstock economics, nearing capex completion, and attractive valuation. The target price remains at W120,000 based on a 6.5x 2028E EV/EBITDA multiple [25][26]. Risks and Considerations - **Downside Risks for Reliance**: Key risks include lower-than-expected refining and chemical margins, project delays, and higher future capital expenditures [24]. - **Downside Risks for S-Oil**: Risks include weaker-than-expected refining margins, delays in the Shaheen project, and currency fluctuations [26]. Additional Insights - The second batch of 2026 export quotas is expected to be released in June, which may provide further clarity on export trends [3].

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the **oil and refining industry**, focusing on crude oil prices, refining margins, and geopolitical risks affecting supply and demand dynamics. Core Insights and Arguments 1. **Crude Oil Price Trends** - Crude oil prices have strengthened due to disruptions and rising risk premiums, with a near-term target of **$70/bbl for Brent** [1] - The situation with Iran remains fluid, with expectations of escalation before de-escalation, impacting price volatility [1][2] - Recent discussions regarding US-Iran negotiations have eased immediate risk premiums, but concerns about upside risks persist due to US actions and Indian purchases of Russian oil [2] 2. **Refining Margins** - Refining margins are expected to compress further due to: - Potential oil supply disruptions or diversions from Russian oil [4] - Higher year-on-year refinery capacity growth and availability [4][17] - Looser fundamentals of gasoline compared to middle distillates [4][17] - Gasoline inventories are surging, pressuring gasoline crack spreads, while gasoil and jet fuel cracks are supported by tighter inventories and geopolitical risks [5][37] 3. **Geopolitical Risks** - Middle distillates, including gasoil and jet fuel, are more vulnerable to geopolitical disruptions than gasoline due to higher exports from the Middle East [41][42] - The US seeks to negotiate Iran's nuclear disarmament and missile control, while Iran is open to nuclear talks but resistant on other fronts [2][10] 4. **US Oil Inventories** - US commercial crude oil inventories fell by **3.5 million barrels** to **420.3 million barrels**, which is **-3.5 million barrels** compared to the same period last year [62] - Diesel inventories decreased by **5.6 million barrels** to **127.4 million barrels**, while gasoline inventories rose by **0.7 million barrels** to **257.9 million barrels** [63][64] 5. **Market Dynamics** - The US oil market is experiencing a tightening of crude oil and diesel stocks due to cold weather affecting heating demand and refinery activity [62] - The amount of oil on-water worldwide fell by **9.0 million barrels** to **1305.9 million barrels**, indicating a potential shift in supply dynamics [55] Other Important Insights - The geopolitical landscape remains uncertain, with ongoing negotiations between the US and Iran potentially impacting oil prices and market stability [9][11] - The passing of Saif al-Islam Gaddafi in Libya could shift domestic political dynamics, potentially stabilizing the oil sector if governance improves [13] - OPEC+ has quietly tightened supply, with exports dropping from **31 million barrels per day** in early Q4 2025 to **29 million barrels per day** in January 2026 [14] This summary encapsulates the critical points discussed in the conference call, highlighting the interplay between geopolitical factors, market dynamics, and inventory trends in the oil and refining industry.

Core Insights - Phillips 66 (PSX) reported fourth-quarter 2025 adjusted earnings of $2.47 per share, exceeding the Zacks Consensus Estimate of $2.11, and improved from an adjusted loss of 15 cents per share in the same quarter last year [1][10] - Total quarterly revenues reached $36.3 billion, surpassing the Zacks Consensus Estimate of $30.2 billion, and increased from $34 billion year-over-year [1][10] Segmental Performance - **Midstream**: Adjusted pre-tax quarterly earnings were $717 million, slightly up from $708 million in the prior year, driven by higher volumes [3] - **Chemicals**: Adjusted pre-tax earnings fell to $19 million from $72 million in the previous year, primarily due to weaker margins [4] - **Refining**: Adjusted pre-tax earnings improved to $542 million from a loss of $759 million in the year-ago quarter, attributed to higher realized refining margins and the acquisition of WRB Refining [5] - **Marketing & Specialties**: Adjusted pre-tax earnings increased to $439 million from $185 million in the prior year, benefiting from higher marketing fuel margins [7] - **Renewable Fuels**: The segment reported an adjusted pre-tax loss of $19 million, down from adjusted pre-tax earnings of $28 million in the previous year [8] Refining Margins - Realized refining margins worldwide rose to $12.48 per barrel from $6.08 in the year-ago quarter, with significant increases in various regions: Central Corridor ($13.06 from $6.68), Gulf Coast ($12.48 from $5.58), West Coast ($8.85 from $5.74), and Atlantic Basin/Europe ($12.60 from $6.09) [6] Financial Overview - Total costs and expenses decreased to $32.9 billion from $34 billion year-over-year, mainly due to lower purchased crude oil and products [11] - The company generated $2.75 billion in net cash from operations, up from $1.2 billion in the previous year, with capital expenditures totaling $682 million and dividends paid out amounting to $482 million [12] - As of December 31, 2025, cash and cash equivalents stood at $1.1 billion, with total debt at $19.7 billion, reflecting a debt-to-capitalization ratio of 39% [12]

Core Viewpoint - Marathon Petroleum exceeded Wall Street's profit expectations for the fourth quarter, driven by robust refining margins [1] Group 1: Financial Performance - The company reported a significant increase in profits, attributed to strong refining margins [1] - The fourth-quarter results surpassed analysts' forecasts, indicating a positive trend in financial performance [1] Group 2: Industry Context - The refining sector is experiencing favorable conditions, contributing to improved margins for companies like Marathon Petroleum [1] - Strong demand for refined products has bolstered the overall profitability of the refining industry [1]

Core Insights - Valero Energy Corporation reported a strong fourth-quarter performance, with adjusted net income of $1.2 billion, or $3.82 per share, surpassing analyst estimates of $3.27 per share [1] Group 1: Financial Performance - The refining margin per barrel of throughput increased significantly to $13.61 in Q4 2025 from $8.44 in Q4 2024 [2] - For the full year 2025, Valero's refining margin per barrel rose to $12.29, up from $10.62 in 2024 [2] - Adjusted operating income in the refining segment soared to $1.7 billion in Q4 2025, compared to $441 million in Q4 2024 [3] Group 2: Throughput Volumes - Total throughput volumes increased to 3.113 million barrels per day (bpd) in Q4 2025, up from 2.995 million bpd in Q4 2024 [2] - Crude throughput volumes for the full year 2025 rose to 2.988 million bpd, compared to 2.912 million bpd in 2024 [3] Group 3: Market Dynamics - Valero has reportedly purchased Venezuelan crude from Vitol Group and Trafigura, which are authorized to market Venezuela's oil [4] - Valero, along with Marathon and Phillips 66, operates complex refineries on the Gulf Coast designed to process heavy crude from Venezuela [4] - Analysts from BofA indicated that Valero could potentially process an additional 200,000 bpd of Venezuelan crude in the near term [4]

Core Insights - Valero Energy Corporation (VLO) has outperformed Phillips 66 (PSX) over the past year, with a stock price increase of 32.7% compared to PSX's 15.9% gain [1] - Both companies are positioned to benefit from the current softness in crude oil prices, which is expected to enhance refining margins [4][6] Group 1: Valero Energy Corporation (VLO) - VLO's operational flexibility allows its refineries to adjust product yields based on market conditions, providing a strategic advantage [4] - The current market environment is expected to support strong refining margins, aiding VLO's profitability despite the cyclical nature of the refining industry [5] - VLO is more sensitive to refining margins and can benefit when crude prices are weak, making it attractive to investors who are comfortable with higher volatility [13] Group 2: Phillips 66 (PSX) - PSX's diversified business model across midstream, chemicals, and renewables provides greater stability and lower volatility in cash flows [6][7] - The company is focusing on streamlining its asset base through targeted divestitures and strategic acquisitions, such as the EPIC NGL acquisition, to enhance long-term earnings visibility [8] - PSX trades at a higher EV/EBITDA of 14.44X compared to VLO's 8.83X, indicating investor preference for its diversified model [12]

Core Viewpoint - Valero Energy Corporation (VLO) is expected to report a significant increase in fourth-quarter earnings, with a consensus estimate of $3.19 per share, reflecting a 398.4% year-over-year improvement, despite a projected revenue decline of 6% to $28.9 billion [2][5]. Earnings Performance - VLO has consistently exceeded earnings estimates in the past four quarters, with an average surprise of 138.8% [3]. - The company has experienced four upward and two downward revisions in earnings estimates over the last 30 days [2]. Earnings Estimates and Trends - The current earnings estimate of $3.19 per share shows a positive trend compared to previous estimates, with a 3.57% increase over the last 30 days [3]. - The Earnings ESP (Expected Surprise Prediction) stands at -2.90%, indicating a lower likelihood of an earnings beat this quarter [4]. Market and Operational Factors - Valero is anticipated to benefit from strong refining margins due to lower crude prices, which averaged $59.64 per barrel compared to $70.74 in the prior-year quarter, thus reducing feedstock costs [5][6]. - However, the company faces challenges in the Renewable Diesel segment and increased depreciation and amortization expenses related to the closure of the Benecia Refinery, which may negatively impact earnings [7]. Stock Performance and Valuation - VLO's stock has increased by 32.4% over the past year, outperforming the industry average of 16% [8]. - The company is currently considered overvalued, with a trailing 12-month EV/EBITDA ratio of 9.02X, significantly higher than the industry average of 4.66X [9]. Company Overview - Valero Energy operates 15 refineries with a combined throughput capacity of 3.2 million barrels per day, providing operational flexibility to process various feedstocks [11]. - The company maintains a strong financial position with a low debt-to-capitalization ratio of 18% as of September 30, 2025, and utilizes excess free cash flow for share buybacks [13]. Industry Context - The refining industry is cyclical and volatile, with margins dependent on crude oil prices and demand for refined products, which can fluctuate significantly [13]. - Other refining companies like Phillips 66 and Par Pacific Holdings are also expected to benefit from favorable refining margins due to tightened supply and resilient demand for refined fuels [16].

Core Insights - Phillips 66 (PSX) is a diversified energy company with operations in refining, midstream, chemicals, renewable fuels, and marketing, experiencing significant gains in its refining segment due to strong refining margins in 2025 [1][7] - The company’s refining business is expected to benefit further in Q4 2025 from widening light-heavy crude spreads and increased Canadian crude production [1][2] Refining Segment Performance - PSX operates a complex refinery network capable of processing various feedstocks, including heavy sour crude like Western Canadian Select (WCS), which is anticipated to become cheaper in upcoming quarters [2][7] - Additional WCS production and winter diluent blending are expected to enhance Canadian production in Q4 2025 and Q1 2026, leading to a decline in heavy crude prices, which will benefit PSX's refining operations [2][3] Market Dynamics - The potential reopening of Venezuelan oil and gas reserves for U.S. refiners may introduce Venezuelan heavy sour crude to the market, further exerting downward pressure on heavy crude prices, thus supporting strong refining margins for PSX [3] Competitor Overview - Valero Energy Corporation (VLO) operates 15 refineries with a combined throughput capacity of 3.2 million barrels per day, allowing it to serve diverse markets [4] - Par Pacific Holdings (PARR) has a refining capacity of 219,000 barrels per day and operates in Hawaii and the Pacific Northwest, along with a logistics segment [5] Financial Performance - PSX shares have increased by 19.7% over the past year, outperforming the industry composite stocks, which rose by 12.7% [6] - The company’s current enterprise-value-to-EBITDA (EV/EBITDA) ratio stands at 14.32X, significantly above the industry average of 4.47X [9] Earnings Estimates - The Zacks Consensus Estimate for PSX's 2025 earnings has seen downward revisions recently, with current estimates at $6.16 for the year and $11.98 for 2026 [10][11]