Tag Archives: Marathon Petroleum

Business, Finance, Occupation & Industry

BP's Latest Move Highlights Dilemma for Oil Companies

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By Arjun Sreekumar, The Motley Fool

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Last Wednesday, British oil giant BP announced that it had put its U.S. wind power assets up for sale, as the company continues its strategy of focusing on more profitable oil and gas operations.

If it receives a favorable offer, the company thinks it can create more value for shareholders by divesting the wind assets, which are estimated to be worth some $1.5 billion. 

Not only does the decision highlight BP‘s overarching focus on profitability, especially in the wake of the infamous 2010 Gulf of Mexico oil spill, it also underscores a major dilemma that energy companies face – choosing between the need for immediate profits and the option to invest in renewable energy sources over the long term. Let’s take a look.

Beyond petroleum?
BP‘s move to sell its wind power assets may come as a surprise to some, especially considering that the company once referred to itself as “Beyond Petroleum,” reflecting its determination to expand beyond its core oil and gas businesses.

But now, the need to remain profitable appears to be overpowering its prior focus on renewable energy, which began in earnest under Lord Browne‘s leadership from 1995 to 2007.

If the company sells its wind power assets, its biofuels business, which consists primarily of ethanol production facilities in Brazil, would be the last remaining artifact of its earlier push into alternative energy.

More like “Back to Petroleum”
Though a company spokesman denied that the recent move signals a departure from alternative energy, BP‘s decisions over the past few years suggest otherwise.

BP‘s CEO Bob Dudley recently announced that the company has given up on solar, after more than three decades of unprofitable attempts. The company has also ditched plans to develop carbon capture and storage technology, after it threw in the towel on a $500 million Scotland plant in 2007. And last year, it abandoned plans to construct a cellulosic biofuel plant in Florida, a facility that would have turned biological materials, such as wood, grasses, and plants, into ethanol.

Since the infamous 2010 Deepwater Horizon incident, the company has embarked on a highly publicized downsizing effort. Since it sold its Texas City refinery and related inventory to Marathon Petroleum last fall, it has parted with some $38 billion of assets. To date, the company has divested half its pipelines and upstream installations, as well as a third of its producing wells.  

The bigger picture
BP‘s decision to part with its wind power assets highlights an important trend among energy companies. Many are struggling to strike a balance between investing in projects with immediate payoffs, such as drilling for oil, and investing in those with longer-term payoffs, such as renewable energy.

Consider Royal Dutch Shell , for instance. After having invested millions of dollars into a major wind project over the course of eight years, it recently gave up. Citing “unfavorable market conditions” and issues related to “transportation logistics,” the company announced last year that it was pulling …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

The 5 Riskiest Stocks in the S&P 500

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By Dan Caplinger, The Motley Fool

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The S&P 500 includes 500 of the largest U.S. corporations in the stock market, many of which are leaders in their respective industries. Yet not every company in the S&P 500 is equally safe as an investment, and owning the wrong stocks can leave you exposed to massive losses if the market turns against you.

A couple of weeks ago, we looked at a metric called beta, which represents one way of measuring the risk of a stock. Beta looks at a stock‘s rises and falls in response to changing market conditions in the past. Using S&P Capital IQ’s data on beta as our guide, let’s look at the five riskiest S&P 500 stocks over the past five years.

A trio of insurance stocks
Topping the high-beta list are three insurance companies: AIG , Genworth Financial , and Hartford Financial , all of which weigh in with betas above 3. Unfortunately, most investors are far too familiar with the risks that caused AIG‘s downfall in 2008, as extremely high derivatives exposure left the company overexposed to the mortgage meltdown. Similarly, a combination of poor investment returns and liability for guarantees made to policyholders on annuities and variable life insurance policies brought Hartford to the brink during the financial crisis, while Genworth’s mortgage-insurance business created massive potential liability when home prices plunged.

Yet all of these companies have taken steps to reduce their risk lately. AIG has cut its derivatives exposure and sold off many of its assets to focus on its core insurance businesses, and improving business conditions have sent its book value soaring. Genworth has benefited from home prices having hit bottom as well as from new financing activity boosting its mortgage-insurance business. Hartford has arguably made the most dramatic steps, having taken steps to concentrate on property-casualty insurance by choosing not to write new annuities and selling off its retirement plan and individual life insurance businesses. Concentrating on areas of strength should help all three companies going forward, and rebounds in their share prices express investors’ confidence in the moves.

2 other risky plays
Rounding out the top five are Marathon Petroleum and Wyndham Worldwide , with betas of 2.97 and 2.94, respectively. For Marathon, the figure reflects its entire roughly two-year history as a spun-off refinery business, and over that time, spreads between prices of cheap U.S.-produced crude oil and more expensive refined products have sent shares soaring. But as its recent drop shows, the threat of environmental regulation and higher costs looms large over the industry, and if spreads return to normal levels, a reversal could come quickly for Marathon.

Meanwhile, Wyndham was another victim of the financial crisis, as investors believed commercial real estate would plunge just as much as home prices did. When the worst didn’t occur, Wyndham began an incredible run that has tripled its share price since early 2008, before the worst of the downturn …read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Phillips 66 Is Poised to Pop

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By Brian D. Pacampara, The Motley Fool

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool’s free investing community, oil and gas refiner Phillips 66 has earned a coveted five-star ranking.

With that in mind, let’s take a closer look at Phillips 66 and see what CAPS investors are saying about the stock right now.

Phillips 66 facts

Headquarters (founded)

Houston, Texas (1875)

Market Cap

$38.8 billion

Industry

Oil and gas refining and marketing

Trailing-12-Month Revenue

$166.2 billion

Management

Chairman/CEO Greg Garland

CFO Gregory Maxwell

Trailing-12-Month Return on Equity

18.7%

Cash/Debt

$3.5 billion / $7.0 billion

Dividend Yield

1.8%

Competitors

Marathon Petroleum

Valero Energy

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 98% of the 300 members who have rated Phillips 66 believe the stock will outperform the S&P 500 going forward.

Late last month, one of those Fools, All-Star BudandMolly, succinctly summed up Phillips 66 bull case for our community:

Refiners have a monopoly on gas production. Due to regulation there is a virtual block to any new refineries or even expansion of existing ones leaving them without competition. Limited production of gasoline keeps prices high and as oil prices come down due to domestic production increases the spread of input costs to output prices increases.

Of course, there are many different ways to play the energy sector, and The Motley Fool’s analysts have uncovered an under-the-radar company that’s dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: “The Only Energy Stock You’ll Ever Need.” Don’t miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report — it’s totally free.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

The article Why Phillips 66 Is Poised to Pop originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

…read more

Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Why Marathon Petroleum Is Poised to Keep Poppin'

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By Brian D. Pacampara, The Motley Fool

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Based on the aggregated intelligence of 180,000-plus investors participating in Motley Fool CAPS, the Fool’s free investing community, petroleum refiner Marathon Petroleum has earned a respected four-star ranking.

With that in mind, let’s take a closer look at Marathon and see what CAPS investors are saying about the stock right now.

Marathon facts

Headquarters

Findlay, Ohio

Market Cap

$29.8 billion

Industry

Oil and gas refining and marketing

Trailing-12-Month Revenue

$76.6 billion

Management

CEO Gary Heminger (since 2011)

CFO Donald Templin (since 2011)

Return on Equity (average, past 3 years)

21.8%

Cash/Debt

$4.9 billion / $3.4 billion

Dividend Yield

1.6%

Competitors

Chevron

ExxonMobil

Valero Energy

Sources: S&P Capital IQ and Motley Fool CAPS.

On CAPS, 96% of the 189 members who have rated Marathon believe the stock will outperform the S&P 500 going forward.

Just last week, one of those Fools, All-Star BudandMolly, succinctly summed up the Marathon bull case for our community:

Refiners have a monopoly on gas production. Due to regulation there is a virtual block to any new refineries or even expansion of existing ones leaving them without competition. Limited production of gasoline keeps prices high and as oil prices come down due to domestic production increases the spread of input costs to output prices increases.

Of course, there are many different ways to play the energy sector, and The Motley Fool’s analysts have uncovered an under-the-radar company that’s dominating its industry. This company is a leading provider of equipment and components used in drilling and production operations, and poised to profit in a big way from it. To get the name and detailed analysis of this company that will prosper for years to come, check out the special free report: “The Only Energy Stock You’ll Ever Need.” Don’t miss out on this limited-time offer and your opportunity to discover this under-the-radar company before the market does. Click here to access your report — it’s totally free.

Want to see how well (or not so well) the stocks in this series are performing? Follow the TrackPoisedTo CAPS account.

The article Why Marathon Petroleum Is Poised to Keep Poppin’ originally appeared on Fool.com.

Fool contributor Brian Pacampara has no position in any stocks mentioned. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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…read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Approaching 3 Years Since Macondo, Should Investors Look Into BP?

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By David Lee Smith, The Motley Fool

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London-based BP is nearing the third anniversary of its Macondo Gulf of Mexico well disaster, almost certainly the most horrendous incident in U.S. oil and gas history. Increasingly, the key question surrounding the company involves the extent to which it’s recovered from the tragedy and recaptured a role among the desirable additions to energy investment portfolios.

You’ll recall that on the night of April 20, 2010, Transocean‘s Deepwater Horizon rig exploded, burned, and sank, snuffing out the lives of 11 hands who’d been working aboard the deepwater unit. During the next four months, while the world watched in horror, the damaged well spewed a whopping 4.9 million barrels of crude oil into Gulf waters.

The first of a big chunk
While the oil was still gushing uncontrollably from the well, BP established a $20 billion trust fund for victims of the incident. Thus far, however, the company’s payments and commitments have rocketed to about $40 billion.

But that may be far from the ultimate tab. A now six-weeks-long non-jury trial is being conducted in the New Orleans court of U.S. District Judge Carl Barbier to determine the degree of fault attributable to BP and its contractors. That group includes Transocean and Halliburton , which was in charge of cementing the well.

Should Barbier find BP to have been guilty of “gross negligence” in precipitating the disaster, the company could be required to ante up another $18 billion in penalties related to the Clean Water Act. Further, affected Gulf states, led by Louisiana, are awaiting their turn in court to press what they believe could amount to a combined $34 billion for damages and lost tax revenue. The company’s assessment of the validity of the latter claims is, however, best indicated by an absence of reserves against charges for missed tax revenues.

Steady progress
Much of the public’s exposure to BP has been negative for most of the past decade, beginning with a 2005 refinery explosion at its Texas City, Texas, refinery that killed 15 and injured dozens. Nevertheless, the company continues to make operating strides in a variety of locations. Included was the sale of the snake-bitten Texas refinery last quarter to Marathon Petroleum .

And despite the lingering negatives from Macondo, the company expects to spend about $40 billion during the next decade in the Gulf of Mexico, where it remains a leading producer. Indeed, it operates seven facilities in the Gulf, including the giant Mad Dog and Thunder Horse fields. It also has equity interests in another five plays. It operates the Mardi Gras transportation system of five major oil and gas pipelines that serve fields in the prolific Mississippi Canyon and Southern Green Canyon areas.

Created as the Anglo-Persian Oil Company in 1909, BP continues to be active in the Middle East. It’s overseeing the successful remediation of Iraq‘s massive Rumaila field, is involved in joint ventures with …read more
Source: FULL ARTICLE at DailyFinance

Everything Under the Sun

Has Marathon Petroleum Become the Perfect Stock?

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By Dan Caplinger, The Motley Fool

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Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?

One thing’s for sure: You’ll never discover truly great investments unless you actively look for them. Let’s discuss the ideal qualities of a perfect stock and then decide whether Marathon Petroleum fits the bill.

The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:

  • Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it’s certainly a better sign than a stagnant top line.
  • Margins. Higher sales mean nothing if a company can’t produce profits from them. Strong margins ensure that company can turn revenue into profit.
  • Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management’s attention. Companies with strong balance sheets don’t have to worry about the distraction of debt.
  • Moneymaking opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
  • Valuation. You can’t afford to pay too much for even the best companies. By using normalized figures, you can see how a stock‘s simple earnings multiple fits into a longer-term context.
  • Dividends. For tangible proof of profits, a check to shareholders every three months can’t be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.

With those factors in mind, let’s take a closer look at Marathon Petroleum.

Factor

What We Want to See

Actual

Pass or Fail?

Growth

5-year annual revenue growth > 15%

8.9%

Fail
 

1-year revenue growth > 12%

4.1%

Fail

Margins

Gross margin > 35%

10%

Fail
 

Net margin > 15%

4.4%

Fail

Balance sheet

Debt to equity < 50%

27.8%

Pass
 

Current ratio > 1.3

1.59

Pass

Opportunities

Return on equity > 15%

31.4%

Pass

Valuation

Normalized P/E < 20

9.64

Pass

Dividends

Current yield > 2%

1.6%

Fail
 

5-year dividend growth > 10%

NM

NM
       
 

Total score

  

4 out of 9

Source: S&P Capital IQ. NM = not meaningful; Marathon Petroleum paid its first dividend as a spun-off company in Total score = number of passes.

Since we looked at Marathon Petroleum last year, the company has dropped a point, with its dividend yield having fallen below 2%. But shareholders aren’t complaining one bit, as the stock has more than doubled over the past year.

Marathon Petroleum got spun off from its old parent company at just about the …read more
Source: FULL ARTICLE at DailyFinance

Everything Under the Sun

3 Pipeline Deals to Watch

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By Aimee Duffy, The Motley Fool

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Energy Fools who haven’t been able to tear themselves away from the “will we, won’t we?” Keystone XL drama have missed a fair bit of pipeline news already this week. Though the micro story is limited to the companies involved, the details can point to a bigger picture that can affect all energy investors. Let’s look at some of this week’s action.

Natural gas exports
Kinder Morgan petitioned the Federal Energy Regulatory Commission for authorization to increase its shipments of natural gas from Texas to Mexico. The company’s Mier-Monterrey pipeline currently ships 425 million cubic feet of gas per day to the Mexican border, where it connects with a Pemex-owned system. Kinder Morgan wants to boost that amount to 700 mmcf per day. The company hopes to have a decision in hand by June 1.

Mexico will be happy to have the gas. Despite the existence of extensive natural gas reserves — the Eagle Ford Shale doesn’t stop at the border, after all — the country doesn’t have the means to produce the commodity for less than it would cost to buy it from the United States. Until Pemex opens its doors to foreign exploration and production investment, the country will have to be content buying gas from across the border.

NGLs on the go
Boardwalk Pipeline Partners is tag-teaming with Williams to build a natural gas liquids pipeline system from the Utica and Marcellus shales down to the Gulf Coast. The Bluegrass Pipeline would connect Pennsylvania, West Virginia, and Ohio to the petrochemical and refining hubs in Louisiana and Texas. The system would be part new construction and part conversion of an existing natural gas line, with an initial capacity of 200,000 barrels per day.

The fact that part of the planned route already exists enables the joint venture partners to target a completion date sometime in the second half of 2015. Alan Armstrong, the CEO of Williams, anticipates that liquids production in the two shale plays will overwhelm existing infrastructure by 2016.

1 more MLP?
Western Refining is the latest company to announce that it may pursue a midstream spinoff of its oil and logistics assets. The company is currently evaluating its prospects, and if management decides to pursue this option, Western would file a registration statement with the SEC sometime this year.

The market is ripe for MLP spinoffs, and they’re proving particularly popular with refiners. Marathon Petroleum has succeeded in its spinoff of MPLX, and Phillips 66 isn’t far behind. Western has said its extensive retail network won’t be included in the potential MLP. Instead, potential assets for spinoff include four refined products terminals, four asphalt terminals, and crude oil and products pipelines.

Foolish takeaway
These deals are important for the companies involved, but the big picture matters, too. This week alone we’re reminded that Mexico needs our gas, and if any U.S. E&P ever gets in there it will make …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is the U.S. Gulf Coast the New Cushing?

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By Arjun Sreekumar, The Motley Fool

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As the Financial Times wrote last year, the crude oil trade is “in throes of an historic shift.” U.S. Gulf Coast refiners, which had relied on imports of light sweet crude oil from OPEC nations for years, have drastically reduced such imports, courtesy of rising domestic oil production.

A number of pipeline projects – some already in service and others expected to come on line this year – will provide Gulf Coast refiners with more oil than they ever dreamed of, flowing from major production centers like the Eagle Ford Shale and the Permian Basin.

According to some experts, this sharp increase in pipeline capacity to the Gulf could overwhelm local refineries, many of which are ill-equipped to process the lighter grades of crude oil flowing from the Eagle Ford and the Permian.

They argue that this coming deluge of crude to the Gulf will turn the region into the new Cushing, with major consequences for domestic crude oil prices. Let’s take a closer look.

Gulf Coast light oil imports fall
As the production of light oil has increased drastically over the past five years, led by increases in production from the Eagle Ford, the Bakken, and the Permian Basin, Gulf Coast refineries have become less reliant on foreign light crudes from places like Nigeria.

In fact, light crude imports processed in the U.S. Gulf Coast, or PADD 3, fell to less than 0.8 million barrels per day in the first half of 2012 from an average 1.2 million barrels per day in 2010. Tellingly, Phillips 66 recently announced that it expects to process 80% more domestic crude this year than it did in 2012.

And Marathon Petroleum also plans on using much greater quantities of North American crude, having recently boosted capacity at its Detroit refinery by 13%, to 120,000 barrels per day, in order to process Canadian heavy crude, which is even cheaper than Bakken and other grades of domestic crude. Both companies reported fourth-quarter earnings that blew Wall Street estimates out of the water, due largely to their increased access to heavily discounted inland crudes.

New pipeline capacity
Going forward, this trend is expected to continue as increasing pipeline capacity delivers vast quantities of light, sweet crude to Gulf Coast refiners. For instance, the expansion of the West Texas Gulf Pipeline, the Longhorn reversal project, and the first and second phases of the Sunoco Logistics Permian Express Pipeline – all slated for completion this year or the next – are expected to provide a substantial boost to takeaway capacity from the Permian Basin.

Similarly, new projects serving the Eagle Ford region are also expected to go on line this year, though several major ones have already been completed. For instance, one of the biggest pipelines serving this play, the Eagle Ford Enterprise pipeline, went into service last year.

The 147-mile pipeline runs from Lyssy, Texas, to Sealy, Texas, with a targeted capacity of 350,000 barrels per day. At Sealy, the pipeline connects …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Today's 3 Best Stocks

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By Sean Williams, The Motley Fool

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Today looked like it was going to start off decisively negative, with China‘s cabinet voting to make it more difficult for investors in the country to purchase a second home. Inflation has long been a problem in China, and curbs being put in place could create negative headwinds in one of the few countries propping up global growth.

That all changed, however, by mid-afternoon, with the introduction of Republican measures in the House of Representatives aimed at minimizing the amount of spending reductions set to hit the military because of the sequester. The measures will predominantly exempt the FBI and border patrol from the spending cuts, which would be a big boost to defense contractors that rely heavily on government spending to drive their business.

All told, the S&P 500 completely reversed course and finished the day higher by 7 points (0.46%) to close at 1,525.20.

The biggest winner within the index today was insurance, annuity, and mortgage insurance provider Genworth Financial , which jumped 6.7%. As MarketWatch recapped today, Genworth has been attracting the attention of fund manager Seth Klarman, whose firm, Baupost Group, currently owns 15 million shares, or 3%, of Genworth’s stock. Although these aren’t new positions for Klarman, it’s a reminder to investors that Genworth’s underwriting quality is improving right alongside the economy, which could bode well for shareholders moving forward.

Diversified oil and gas company Hess shot higher by 3.5% after it announced a business overhaul that will entail exiting the energy trading and marketing business and selling its gas stations. Instead, Hess plans to double its annual dividend to $1 and repurchase $4 billion worth of its shares. This news comes just weeks after Hess announced that it’d be selling its oil terminals located predominantly on the East Coast. The expected IPO of this spinoff is projected to occur before the end of 2014. Marathon Petroleum was one of the first diversified oil and gas companies to perform such a split, followed closely by ConocoPhillips, and it’s been an incredible success. Marathon’s split allowed growth investors to focus on the oil and gas exploration side of the business, while dividend seekers were able to nab an investment in its refining business. Not surprisingly, Marathon Petroleum shot higher by 5.6% today as well.

Finally, big-box retailer Best Buy advanced by 3.6% after its board of directors approved its regular quarterly dividend of $0.17. Given Best Buy‘s numerous problems with regard to showrooming and lost sales, it’s encouraging to see Best Buy‘s management team express enough confidence in its ongoing cash flow to continue paying out a yield that would amount to 4% annually. I continue to be encouraged by the initiatives Best Buy is putting into place, including price matching, which should give consumers an incentive to spend immediately rather than buying online.

Is Best Buy’s turnaround for real?
The brick-and-mortar versus e-commerce battle wages on, with Best Buy caught in the middle. …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

U.S. Refiners Are Thirsty for Canadian Oil

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By Arjun Sreekumar, The Motley Fool

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U.S. oil refining companies haven’t seen times as good as these since at least the middle of the previous decade. Over the past couple of years, refiners with access to cheap domestic oil have enjoyed solid profit margins and strong earnings, which sent share prices skyrocketing last year.

And with new pipelines providing increased access to those refiners located along the U.S. Gulf Coast, the good times should keep rolling, as more and more cheap crude keeps rolling in. But that’s not all. In their quest to boost margins further, several U.S. refiners have their sights set on oil being produced by our neighbors up north.

Canadian crude, which is of a different quality from oil produced in American shale plays, is one of the cheapest types of oil you can find anywhere. And refiners are doing anything and everything they can to get a piece of the action.

Why Canadian crude is so cheap
It’s worth emphasizing just how cheap Canadian heavy crude has become, even in comparison with domestic crudes like those produced in the Bakken. In the first week of January, the price of Western Canada Select, the benchmark for heavy crude extracted from Canadian oil-sands bitumen, dipped to nearly $40 per barrel below NYMEX West Texas Intermediate (WTI).

Even WTI’s discount to Brent, the global crude oil benchmark, which topped $20 a barrel in early February, pales in comparison. So why exactly is Canadian oil so cheap? There are a couple of important reasons.

One of the biggest reasons is that Canadian oil has to compete with American oil for what limited pipeline capacity that currently exists. Growing crude volumes from Alberta’s oil sands and the Saskatchewan Bakken often end up losing priority to growing volumes from North Dakota’s Bakken shale and supply sources in the Rockies, for instance.

Another reason is that Canada relies heavily on one major export market — the American Midwest. Instead of seeking foreign export markets, a whopping 98% of Canadian crudes are destined for the United States. With the aforementioned lack of pipeline infrastructure, compounded by the delay of the Keystone XL pipeline, Canadian oil producers find themselves uncomfortably levered to a market already inundated with oil extracted in its own backyard.

Refiners seeking Canadian crude
As with any profit-seeking company, U.S. refiners are cognizant of the massive disparity between Canadian crude and other grades of crude commonly used as feedstock. Many are actively seeking ways of capitalizing on this unprecedented price arbitrage opportunity.

Marathon Petroleum is one of them. The Ohio-based refiner recently finished up an expansion of its Detroit refinery, where it increased capacity by 13% to 120,000 barrels per day. The primary objective of the expansion is to capitalize on rising production from Canadian oil sands.

Tesoro is another refiner actively scouring for ways to transport more Canadian crude to its refineries along the American West Coast, where the vast majority of its operations are …read more
Source: FULL ARTICLE at DailyFinance