Energy Sector Ideas

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>>> Valero


http://m.kiplinger.com/slideshow/investing/T052-S003-energy-stocks-to-buy-while-oil-prices-are-cheap/index.html?page=6




The world’s largest independent refiner, Valero is raking in profits these days. Falling prices for crude oil and natural gas (its primary “feedstocks”) have boosted profit margins on its refined products. And with demand running strong, Valero reported net income of $1.4 billion in the third quarter of 2015, up 30% from the same period a year earlier. Valero also hiked its quarterly dividend by 25%, to 50 cents a share, bringing its total payout increase for 2015 to a whopping 82%.

One of Valero’s big advantages is the prime location of its refineries, which are along the Gulf Coast of Texas and Louisiana and not far from oil fields in the region. Valero also looks well positioned to export more refined products to Latin America and other areas where demand is climbing, says Robert Thummel, a fund manager at Tortoise Capital Advisors, an investment firm in Kansas City, Kan., that specializes in energy.

Valero’s good times would end if oil rebounded to $70 a barrel; profit margins would shrink, and demand for various fuel products could slump. Yet Valero has other revenue streams to help it stay afloat. It controls Valero Energy Partners (VLP), a master limited partnership that owns pipelines as well as storage and logistics businesses. Valero also sells fuel at more than 7,000 gas stations and operates 11 ethanol plants.

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