VLO $66.63 - Valero Energy
The outlook for refiners has changed since we were stopped out of the Valero position several weeks ago. Goldman upgraded Tesoro (TSO) and Holly (HOC) to their America's Buy List last week. Both are great little companies but HOC does not have LEAPS and TSO only refines 600,000 bpd. Valero should always be our pick in a positive refining scenario since they are the largest in the U.S. but also have the largest capability to refine heavy sour crude. They buy this oil for $10-$12 less than the light sweet crude currently in heavy demand. This gives them a guaranteed profit when other refiners are just breaking even. They also have 5,800 of their own service stations giving them a retail component as well.
Valero Energy Corporation owns and operates 18 refineries located in the United States, Canada and Aruba that produce refined products, such as reformulated gasoline blendstock for oxygenate blending, gasoline meeting the specifications of the California Air Resources Board (CARB), CARB diesel fuel, low-sulfur and ultra-low-sulfur diesel fuel, and oxygenates (liquid hydrocarbon compounds containing oxygen). It also produces conventional gasolines, distillates, jet fuel, asphalt, petrochemicals and other refined products. It markets branded and unbranded refined products on a wholesale basis in the United States and Canada through a bulk and rack marketing network. It sells refined products through a network of approximately 5,800 retail and wholesale branded outlets in the United States, Canada and Aruba. During the year ended December 31, 2006, it sold all of its ownership interest in Valero GP Holdings, LLC. In July 2007, the Company sold its Lima, Ohio refinery to Husky Energy Inc.
Buy 2009 $70 LEAP Call VHB-AN currently $9.20
FLR - $143.85 Fluor Corp
We saw a decline in FLR from the $160 high on Monday to trigger our $145 entry on a breakdown on Thursday. This is just above strong support of the 100-Day average at 139 and decent support from the November dip lows. If the market continues lower it would provide an excellent opportunity to average down.
Fluor Corporation, through its subsidiaries, provides engineering, procurement, and construction and maintenance (EPCM) services worldwide. It has five segments: Oil & Gas, Industrial & Infrastructure, Government, Global Services, and Power. The Oil & Gas segment offers design, EPCM, and project management services to upstream oil and gas production, downstream refining, and integrated petrochemicals industries. It also provides consulting services ranging from feasibility studies to process assessment to project finance structuring and studies. The Industrial & Infrastructure segment provides design and EPCM, as well as consulting, planning, structuring, engineering, and construction management services to the transportation, mining, life sciences, telecommunications, manufacturing, commercial and institutional, microelectronics, and healthcare sectors with respect to new construction and refurbishment of existing facilities. The Government segment provides project management services to the United States government, focusing on the departments of energy, homeland security, and defense. The Global Services segment offers operations and maintenance, small capital project execution, site equipment and tool services, industrial fleet outsourcing, plant turnaround services, temporary staffing, materials and subcontract procurement, and construction-related support services. The Power segment provides EPCM, program management, start-up, and commissioning services to the gas, solid fuel, nuclear, and plant betterment markets. The company also operates independently and as a subcontractor, providing unionized management and construction services in the United States and Canada. Fluor Corporation was founded in 1912 and is headquartered in Irving, Texas.
Breakdown trigger: $145 Hit 12/13
Position: 2009 $160 LEAP Call XOB-AL @ $22.30