Hurricane Ike Delivers "Holly Jolly" Present to Some Refiners
The Company: Holly Corp., an independent petroleum refiner.- The Filing: Form 10-Q filed with the SEC on August 8, 2008.
- The Finding: Like most refineries, profitability at Holly depends on the spread between market prices for petroleum products (such as gasoline and diesel fuel) and crude oil prices. In the wake of Hurricane Ike, about 20 percent of U.S. refinery capacity has been idled — creating the perfect storm for refiners, such as Holly Corp., located outside the Houston beltway.
The Upshot: Holly operates through its subsidiaries an 85,000-barrel per stream day (bpsd) refinery located in New Mexico, and a 26,000-bpsd refinery in Utah. In addition, the company has limited exposure to any shut-in production in the Gulf:
- The Navajo Refinery (New Mexico) purchases feedstock from producers in nearby southeastern New Mexico and west Texas.
- The Woods Cross Refinery (Utah) currently obtains its supply of crude oil primarily from suppliers in Canada, Wyoming, Utah and Colorado via common carrier pipelines, which originate in Canada, Wyoming and Colorado.
Today, as the price of feedstock (crude oil) continues to trade lower, and refiners are able to charge more for finished product, it is a good day to be in the refinery business– if one’s operations are located outside Houston.
The Question: Is the “not in my backyard” argument used to explain the lack of new refinery build-out in the U.S. more fiction than fact?
After more than 25 years as an equity analyst and forensic accounting expert, David Phillips now combs through SEC filings for juicy tidbits. He also blogs regularly at the 10Q Detective.
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