Shares of refiner Alon USA Energy (NYSE: ALJ) have been on a tear post-earnings but the rally of ~20% is a bit excessive with much uncertainty present regarding the permitting for a Big Springs refinery expansion. Also, the restarting of the California refineries is now expected in later 2014 so investors interested in the refining space may gain more alpha looking at a name like Valero (VLO +1.31%). Yes, Valero could be exposed to a reduction in ethanol requirements by the EPA. However, the ability of this company to break down heavy crude oil simply can't be overlooked. Plus, Valero is my name of choice if you want to play the strength in distillate (heating oil) margins. To me Alon USA is still too dependent on asphalt margins and the narrowing of the Brent-WTI spread. Valero is more embracing of future fuels evidenced by its financial support of Enerkem and Mascoma to commercialize biofuels, including ones made from switchgrass cellulosic ethanol. Another name that could see investor interest if profits come out of Alon USA is Phillips 66 (PSX +1.52%).
Recent 20% gain in shares of this refiner could cause investors to reallocate profits to this bigger competitor.
About the Author
John Licata is the Founder & Chief Energy Strategist of Blue Phoenix Inc. and the author of “Lessons from Frankenstorm: Investing for Future Power Disruptions”, a 2013 Wiley e-book on the future of energy post Sandy. His ability to cross-pollinate idea generation and analysis of both traditional and unconventional global energy markets has been documented in the global media for north of a decade by the likes of Bloomberg, CNBC, BNN, Yahoo! Finance, Reuters Insider and Fox Business Channel.
John is a proven Strategist with over fifteen years of commodity research experience and unique content creation which has made him a highly sought out public speaker for viewpoints related to the future of energy. Prior to launching Blue Phoenix Inc. in 2005, John held research and trading positions at Dow Jones, Salomon Smith Barney, BrokerageAmerica and on the floor of the New York Mercantile Exchange (NYMEX).
John graduated from Saint Peter’s University with a B.S. in Economics and he received his M.B.A. from the Executive MBA Program at NYU’s Leonard N. Stern School of Business.