As I've noted before, when it comes to refining stocks, it's great to own the company whose facilities are not bursting into great balls of fire. Monday's explosion at an Alon USA
Like Frontier Oil
At the Navajo facility in New Mexico, utilization significantly improved compared to the disappointing third quarter. Crack spreads narrowed about 25%, from $10.66 per barrel to a nickel under $8. That's a pretty big bite, but lower operating expenses prevented net operating margins from getting gored. For the year, margins were actually modestly higher. Also, because Navajo produces gasoline that exceeds EPA requirements, this refinery also generates significant sulfur credits. Sales of these credits generated $23 million in revenue during the year, but this figure doesn't show up in Navajo's results.
Utah's Woods Cross refinery, which Holly picked up from ConocoPhillips
Woods Cross has a significant position near the Uinta Basin, which holds large reserves of "black wax" crude oil. This lower-grade crude can't be transported beyond Salt Lake City, or else it solidifies. Black wax also competes with heavy Canadian crude, so producers find themselves with far more black wax than they can economically sell. Understandably, local producers Newfield Exploration
Strategically, Holly reminds me of both Frontier and Valero Energy
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Fool contributor Toby Shute doesn't have a position in any company mentioned. The Motley Fool has a disclosure policy.