SOURCE: Research Driven Investing

Research Driven Investing

March 15, 2013 08:20 ET

Refiners Slump as Renewable Fuel Credits Rise to Over US$1.00/Gal in 2013

RDInvesting Provides Stock Research on Marathon Petroleum and Northern Tier Energy

NEW YORK, NY--(Marketwire - Mar 15, 2013) - Shares of oil refiners have slid this past week on concerns that rising renewable fuel credits would begin to pressure margins. The Environmental Protection Agency has propped refineries raising the U.S. ethanol mandate to over 14 billion gallons, compared with 13.2 billion gallons in 2012. Research Driven Investing examines investing opportunities in the Oil & Gas Refining & Marketing Industry and provides equity research on Marathon Petroleum Corp. (NYSE: MPC) and Northern Tier Energy LP (NYSE: NTI).

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"There is a potential real stinker of an issue developing for US refiners on meeting obligations related to the US government's renewable fuels standard (RFS) that could materially impact earnings for many of the companies. The price of renewable fuel credits, known as Renewable Identification Number (RINs), has skyrocketed from under US$0.01/gal for ethanol in late 2012 to over US$1.00/gal this week, significantly increasing the cost of RFS compliance for the US refiners so far in 2013." Macquarie wrote in a recent note to investors.

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Marathon Petroleum Company LP ranks as the fourth largest petroleum refiner in the United States and the largest in the Midwest. Operations are concentrated primarily in the Midwest, Gulf Coast and Southeast regions of the U.S. The company reported earnings of $755 million for the fourth quarter of 2012, compared to a loss of $75 million a year ago.

Northern Tier Energy is an independent downstream energy company with refining, retail, and pipeline operations that serve the PADD II region of the United States. The company's refining business primarily consists of a 74,000 bpd (84,500 barrels per stream day) refinery located in St. Paul Park, Minnesota. For the full year 2012, the company reported a net income of $197.6 million, compared to a net income of $28.3 million a year ago.

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