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Gold/Mining/Energy : Big Dog's Boom Boom Room
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To: Dennis Roth who wrote (180216)9/10/2013 6:37:26 AM
From: Dennis Roth2 Recommendations

Recommended By
evestor
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US Independent Refiners
EPS Cuts - MPC Risks Rising (Downgrade to Neutral), TSO Already Taken Its Pain
10 September 2013 Report-189 (781.71KB)

Bottom Line: It should not be a surprise for investors after our August 23rd
“A Look at 3Q EPS Risks,” July 24th “2013/2014 Consensus Still Too High,”
that we are lowering numbers. That said, we think a number like c$0.90/sh
for MPC will still be a surprise in 3Q13. We lower our recommendation on
MPC to Neutral. Until evidence emerges of better refining capture at MPC,
logistics alone will not support the shares. We are also concerned that 4Q13
and 2014 earnings are too high for the Group. We are 24% below EPS
consensus for 2014 (see material changes table on page 4 for change to
earnings and target prices). The competition for investor dollars from well
positioned shale E&P and Oil Field Services also needs to be kept in mind.

Focus on MPC: In 2Q13, MPC’s capture rate of our benchmark fell to 59%
from 87% in 2012. This was partly a function of Mid-Con product price
spikes which we did not expect MPC to capture. It was also a function of
distortions in product markets from the high incentive for blenders with an
excess of RINs to discount products for their customers. Two headwinds –
indirect RIN impacts and weak asphalt margins could persist for some time.
While MPC offers value, we prefer to wait for the earnings dust to settle.

Focus on TSO: TSO shares have underperformed significantly. This is
creating an interesting value entry point, though the best time to own a
refiner is typically Oct/Nov – it could still be early.
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