CVR REFINING (CVI)

[michaelmerriman]

I've been keeping up with everything I can get my hands on regarding this company for over a year now, thanks in part to the great posters on this board (though I've only posted here a time or two during that period) and have been studying the macro picture of this oil price decline as well and have to agree with you that there is more downside than upside for CVRR valuations at the current moment.

It seems that most people buying the stock now (or promoting the stock through articles like this one are out of touch with how this refinery MLP operates and how it is affected by the broader oil macroeconomic environment. I posted this response in the comment section of the link above, but find it relevant enough to those reading here to repost it:

Most people that write about CVRR do not understand the company. This Cushing-based refiner was a crack-spread play from the beginning, utilizing it's location near the Cushing, OK oil hub to get better prices than Gulf-based refiners buying Brent. That advantage is increasingly reduced as Brent and WTI hover around parity or greatly reduced spreads. No one writes about this.

The second thing that people watching the company know is that oil throughput will be greatly reduced this quarter due to scheduled maintenance, and being a variable-pay MLP this quarter's dividend should be a good deal lower than the last.

Knowing both of these overlooked facts, the unit prices appear and have appeared overpriced for some time. I think the fact that the company trades in many refinery and downstream-focused ETFs has artificially buoyed the share price. I see price going down in the short term from here when Mr. Market realizes what's going on closer to the earnings report. That said, there is still a reason to own this stock but I would not expect capital appreciation or a high dividend payout in the the next few months.