SOURCE: Research Driven Investing

Research Driven Investing

March 15, 2013 08:20 ET

Rising Renewable Fuel Credits Raises Concerns of Pressured Margins for Refiners

RDInvesting Provides Stock Research on Tesoro and Western Refining

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 Tesoro Corporation (NYSE: TSO) and Western Refining, Inc. (NYSE: WNR).

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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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Tesoro, through its subsidiaries, operates seven refineries in the western United States with a combined capacity of approximately 675,000 barrels per day. The company's Board of Directors has approved a 33 percent increase to the company's quarterly dividend from $0.15 a share to $0.20 a share. For the fourth quarter of 2012 Tesoro reported a net income of $27 million, compared to a net loss of $124 million a year ago.

Western Refining owns and operates two refineries with a total crude oil throughput capacity of approximately 151,000 barrels per day producing primarily high-value light products such as gasoline, diesel, and jet fuel. The company reported a net income, excluding special items, of $552.3 million for the full year 2012, compared to a net income of $330.4 million a year ago.

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