The Refinery Boom

Todays top stocks to buyProcessing oil has never been so profitable…

Want to know a long-term play with great earnings and excellent future cash flow?

Look no further than the domestic refinery boom.

Over the past few years, the production of shale oil from places like the Bakken in North Dakota and the Eagle Ford in Texas has kick started the country’s oil production to levels not seen since 1992.

But not only is domestic oil flying high, Canadian oil sands are producing more as well.  Canada’s oil industry shrugged off criticism as it cranked up production to four million barrels per day last December – its highest ever output, according to the International Energy Agency.

Combined, North American oil production is expected to lead the way in terms of countries outside the 12-member OPEC cartel, the U.S. Energy Department said.

Of course, with all that oil being produced, all of it has to make it to market somehow.

And that’s where refineries come in. Because they’re the connecting link between producers and consumers, domestic oil refineries are swimming in cash as a result.

Take a look at just a few of these companies:

Want to know a long-term play with great earnings and excellent future cash flow?

Look no further than the domestic refinery boom.

Over the past few years, the production of shale oil from places like the Bakken in North Dakota and the Eagle Ford in Texas has kick started the country’s oil production to levels not seen since 1992.

But not only is domestic oil flying high, Canadian oil sands are producing more as well.  Canada’s oil industry shrugged off criticism as it cranked up production to four million barrels per day last December – its highest ever output, according to the International Energy Agency.

Combined, North American oil production is expected to lead the way in terms of countries outside the 12-member OPEC cartel, the U.S. Energy Department said.

Of course, with all that oil being produced, all of it has to make it to market somehow.

And that’s where refineries come in. Because they’re the connecting link between producers and consumers, domestic oil refineries are swimming in cash as a result.

Take a look at just a few of these companies:

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You can add in Western Refining Inc. (NYSE:WNR), Marathon Petroleum Corp (NYSE:MPC), and HollyFrontier Corp (NYSE:HFC) as well… the list goes on.

One of the big shale beneficiaries last year was ExxonMobil, whose refinery division earned $1.77 billion in Q4 2012 alone – four times what they generated a year earlier.

Very impressive, to say the least.

But why the sudden change in profits – especially in an industry that’s been slow to recover from the great recession?

“The entire structure of the US refining industry has been turned on its head,” says Robin West, of PFC Energy, an energy consultancy. “Up until recently, oil was imported, refined on the coast and then transported inland. Now the crude is being produced inland and sent to the coasts and it’s a goldmine for the refineries that have access to it.”

According to the Financial Times, onshore production in states led by North Dakota and Texas has opened a wide gap between prices for inland US oil and internationally traded crude.

As of this writing, international benchmark Brent crude trades for about $100.39 per barrel while US West Texas Intermediate at Cushing, Oklahoma, trades for $87.55.

Refiners that secure supplies of those cheaper crudes have a competitive advantage.  They can increase margins here at home, and make themselves more competitive in export markets, especially in emerging economies such as Mexico where fuel demand is still growing.

That’s why refiners are some of the hottest stocks on the market right now.

Of course, there are still certain risk factors to watch out for.  New refining capacity could come on stream – potentially zapping some of the profits these companies are enjoying.

But in the meantime, I believe there is still a couple of years left in this magnificent bull market for investors to profit.

If you think that 2012 was a good year for refineries… 2013 could be even better.

Yours in profits,
Todays top stocks to buy
John Holt
for Top Stock Millionaire

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