HollyFrontier Corp. (HFC, Financial) released its first-quarter 2017 results on May 3.
HollyFrontier closed the quarter with a net loss of 19 cents, a 233.3% decline from the first quarter of 2016 when the energy company reported a loss of 5.7 cents. The figures are adjusted to one-time charges and computed on an average number of common shares outstanding (diluted). The company missed analysts’ expectations on income by 7 cents, generating a negative surprise of 58.30%.
Source: Yahoo Finance
HollyFrontier says that “this decrease was driven by lower product sales due to maintenance at the El Dorado, Tulsa and Navajo refineries, partially offset by $8.4 million in earnings attributable to our recently acquired PCLI (Petro-Canada Lubricants) operations.”
The refinery gross margin, on a consolidated basis, increased 2% from $7.74 per produced barrel in first-quarter 2016 to $7.59 per produced barrel in first-quarter 2017.
On a consolidated basis, HollyFrontier refined 391,840 barrels per day versus 415,850 barrels per day over that same period and sold 384,820 barrels (of produced products) per day versus 413,360 barrels (of produced products) per day over the first quarter of 2016. While the daily number of barrels of refined products sold in the first quarter of 2017 was 427,520 versus a daily number of 445,930 barrels of refined products sold in the comparable quarter of one year ago.
The company's total operating costs and expenses increased 60.3% on a year-over-year basis, from $1.94 billion to $3.11 billion. Refining operating expenses were around $7.11 per produced barrel sold versus an average $5.77 per produced barrel sold during the comparable period of 2016. The increase in total operating expenses includes $36.0 million in costs derivable from the company’s integration of Petro-Canada Lubricants’ operations.
HollyFrontier President and CEO George Damiris commented on the acquisition of Petro-Canada Lubricants for which the company used cash of $862.1 million: “We closed the PCLI acquisition on Feb. 1 and PCLI continues to meet or exceed our expectations. Adjusted EBITDA for February and March was $28.0 million, in line with our annual guidance range. We remain confident in our $20.0 million per year synergy target and in the potential for significant margin uplift by increasing Group III base oil production through feedstock optimization. We are excited about our growing presence in the lubricants industry and are encouraged by our progress integrating PCLI into HFC."
As of Dec. 31, 2016, HollyFrontier had approximately $129.5 million in cash and securities and the total long-term debt amounts to $991 million.
HollyFrontier is trading at $25.87 per share, down $1.30 or minus 4.78% from the previous trading day with a price-book (P/B) ratio of 1 and a price-sales (P/S) ratio of 0.44. The forward price-earnings (P/E) ratio is 13.32; for 2017 analysts expect the energy company will generate an EPS of $1.52.
The company pays an annual dividend of $1.32 per share through quarterly payments of 33 cents, bringing the dividend yield to 4.66%.
As of today, the majority of analysts suggest holding shares of HollyFrontier with a recommendation rating of 2.9 out of 5. The recommendation rating ranges between 1.0 (Strong Buy) and 5.0 (Sell). The average target price per share is $32.17, which represents a 24.4% upside from the current share price. Therefore, analysts forecast a substantial upside in the coming months.
Disclosure: I have no positions in HollyFrontier.
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