Here's a one-year chart showing how the disappearing spread between WTI and BI has depressed the shares of these three refiners beginning with HFC.
Why I Prefer HollyFrontier Over the Other Two
CEO Michael Jennings is one of the big reasons. He not only understands the challenges facing the oil refining business today but he's in touch with the needs of investors.
He and his team are doing a good job of holding down the expenses associated with maintaining HFC's refineries as well as doing what is possible to expand capacity. Looking at HFC's balance sheet compared to its peers also tells me that HFC is one the best-managed refiners in the industry.
The net cash at HFC is around $2 billion which translates close to $10 a share. It owns close to 40% of the units of
Holly Energy Partners
, an MLP created in 2004.
HEP consists of petroleum product and crude pipelines, storage tanks, distribution terminals, and loading rack facilities. Its pipeline assets include approximately 810 miles of refined product pipelines that transport gasoline, diesel, and jet fuel throughout the SW U.S. and Northern Mexico.
HFC's stake in HEP units is worth close to $900 million. In addition its general partnership activities in HEP may be worth up to another half-a-billion dollars. You can learn more about HFC by perusing
its thorough Web site
Even if the oil spread remains very tight HFC has a definitive advantage in obtaining lower-priced crude. That's because its refineries are near some enormous oil production areas like the Bakken Shale. This also saves on transportation costs since proximity again works in HFC's favor.
When it comes to the sustainability of its generous dividend policies, CFO Doug Aron recently commented on this concern. His words reflect an emphasis on Wall Street's worries on the issue.
"We view our regular dividend as sustainable through the cycle, and we'd like to grow it steadily over time," he said. When asked about the special quarterly dividend investors are used to receiving, he said, "We would expect to continue the special dividend program until our earnings stream or balance sheet wouldn't support that distribution."