MORGAN
NORTH
STANLEY
RESEARCH
AMERICA
Morgan Stanley & Co. LLC
Evan Calio
Evan.Calio@morganstanley.com
+1 212 761 6472
Manav Gupta
Manav.Gupta@morganstanley.com
+1 212 761 8194
February 18, 2014
Industry View
In-Line
Refining & Marketing
Can we All Just Get Along?
Unlike ‘13 that saw E&P and refining alternating
outperformance in distinct periods, we believe both
sectors can outperform in the current environment
(product led oil market). PSX sets high bar on PSXP
dropdown, we expect MPC will follow.
Demand pulls both refiners and E&P. Despite a
negative consensus view of Energy, global oil markets
remain tight and we believe energy interest and
allocations will return. See Interest Returning, E&P
Weekly, February 17, 2014. We expect firm product
markets to incent distillate restocking as GC/US enters
peak refining turnarounds. Over the weekend 2 more
GC refineries began turnarounds and expected turns
increased for both PADDs 2 and 5. US distillate stocks
remain 22% below the 5 yr average. We also expect US
GC crude differentials will moderately widen into
turnarounds, allowing both sectors to perform. Severe
winter weather is causing product shortages and as a
result, normal US distillate exports to Europe have
reversed and with the opening of distillate arbs from NW
Europe to the US East Coast.
PSX sets the bar high, will MPC match? (pg 2). On
Valentine’s Day, PSX expressed love for PSXP,
announcing a dropdown of Gold Line System and the
Medford Spheres for total proceeds of $700MM. The
dropdown exceeds MS’ initial estimate of ~$200MM and
almost doubles the current EBITDA at PSXP. The
dropdown strikes “Gold” and confirms PSX’s willingness
to pull value forward and bolster its midstream business
via PSXP. Our midstream analyst, Stephen Maresca,
believes the transaction is 56% accretive for PSXP.
See, PSXP Strikes ‘Gold’, published Feb 14th, 2014.
While this drop-down is a hard act to follow, we believe
MPC with over $1Bn MLPable EBITDA (and growing)
could announce a similar sized drop down in the
near-future. MPC management is cognizant of Street
expectations following its initial drop-down.
Refiners outperform, Energy outperforms (the
“worm has turned”). For only the 3rd time in ‘14,
Refiners outperformed. Refiners were up 2.8%,
outperforming Energy by 1.6% and S&P by 0.5%.
Ins ide This Week in Refi ning
PSX Sets the Bar High, Ball is in MPC’s Court
Investment Perspectives
Earnings Estimates and Equity Performance
MLP Performance
Weekly Crack Spread Performance
US Ref ining Turnaround Schedule
Global Planned Crude Unit Turnarounds
US Crude Oil Markets and Fundamentals
US and Global Refined Product Crack Spreads
Refined Product Fundamentals
Refining Sector: Thesis, Themes and Ratings
Refining and Marketing Comparable Metrics
EPS Sensitivity to Change in Differentials
Commodity Forecasts
US Crude Oil Prices
Key Inf rastructure Changes in 2013
Weekly EIA Petroleum Status Report
Economic Forecasts
Fifth Annual Ref ining Corporate Access Day
Publications and Content Index
Disclosures
Page
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36
Permian Basin Energy Summit
Tuesday, April 1 - Thursday, April 3, 2014
Location: Midland, TX
Details: Corporate Presentations and Extended Q&A
Please contact your Morgan Stanley Sales Rep with any questions
Morgan Stanley does and seeks to do business with
companies covered in Morgan Stanley Research. As
a result, investors should be aware that the firm may
have a conflict of interest that could affect the
objectivity of Morgan Stanley Research. Investors
should consider Morgan Stanley Research as only a
single factor in making their investment decision.
For analyst certification and other important
disclosures, refer to the Disclosure Section,
located at the end of this report.
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
PSX Sets the Bar High, Ball is in MPC’s Court
PSX first MLP Dropdown Strikes Gold. On Thursday Feb
13th, 2014, PSX (OW) announced dropdown of Gold Line
System and the Medford Spheres to PSXP for total proceeds of
$700MM. The dropdown exceeds MS initial estimate of
~$200MM and almost doubles the current EBITDA at PSXP.
This deal confirms PSX’s willingness to pull value forward
(cash proceeds and higher GP cash flows) and bolster its
midstream business via aggressively growing PSXP. The
faster PSX executes its portfolio shift towards mid-stream and
chemicals and away from refining, the faster it will re-rate, in
our view. Morgan Stanley’ Midstream Analyst, Stephen
Maresca, believes the transaction is ~56% accretive to PSXP.
See, PSXP Strikes ‘Gold’, published Feb 14th, 2014.
Total consideration for sale is $700MM, including $400MM of
PSXP cash on hand and $140MM of units issued to PSX (at
$38.86) plus $160MM note payable to PSX (4.5% yield):
highlighting PSX’s commitment to PSXP. PSX will enter into
minimum volume commitments of 5–10 years for over 80% of
the expected throughput volume. PSXP expects that these
assets will contribute approximately $65MM- $70MM of
EBITDA in their first full year of operation. Annual maintenance
capital expenditures are expected $3MM-$4MM. We believe
first drop was funded without PSXP issuance for speed, ease
and costs until PSXP can use short-form registration (7/23/14).
MPC with over $1Bn MLPable EBITDA ($800mm in existing
midstream EBITDA and organic project portfolio that should
yield $300MM in EBITDA upside by ‘16) will announce a similar
sized drop-down in the near-future. In the past, MPC
management has guided towards 15-20% distribution growth
that paces asset monetization at 14-18 years. However, we
believe, PSX has set a strong precedent putting additional
pressure on MPC to accelerate pace of dropdowns. MPC’s
first dropdown of $10MM EBITDA in 1H2013, was below
market expectations. MPC management is cognizant of
expectations and that MPLX competes with PSXP for
shareholder capital. Given the new management at MPLX, we
expect a MPC dropdown within the next few months.
Exhibit 1
MLPable EBITDA at MPC- Highest Amongst Peers
Assets dropped into PSXP will include:
(1) The Gold Line System, consists of a 681-mile refined
products pipeline system that runs from PSX’s Borger refinery
(Texas) to Cahokia, Illinois, with access to the PSX’s Ponca
City refinery in Oklahoma as well as two parallel 54-mile lateral
lines from Paola, Kansas to Kansas City, Kansas. The system
has a maximum throughput capacity of 132mbpd and includes
four terminals located in: Wichita, Kansas; Kansas City,
Kansas; Jefferson City, Mo. and Cahokia, Ill., with 4.3 million
barrels of storage capacity.
Source. MPC Company Presentation
Exhibit 2
Growth Projects Add to MLPX EBITDA
(2) The Medford Spheres, located in Medford, Okla., with a
total working capacity of 70mbpd and scheduled to commence
operation March 1, 2014 providing an outlet for delivery of
refinery-grade propylene from the PSX’s Ponca City refinery
through interconnections with third-party pipelines, to Mont
Belvieu, Texas.
Will MPC match it? The comparison between MPLX and
PSXP is natural given comparable drop-down potential of two
recently formed mid-stream MLPs by two refiners spun out
Integrated Oil companies in last several years. We believe
Source. MPC Company Presentation
2
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Investment Perspectives
Exhibit 6
Weekly Equity Performance
SRS (EU), 15.6%
ALJ, 5.5%
TSO, 4.9%
E&P, 4.5%
PBF, 4.2%
NES1V (EU),
3.9%
MPC, 3.8%
HFC, 2.9%
Int. Oil, 2.9%
US R&M, 2.8%
Two more GC refineries to start planned turnarounds.
First, Exxon will start a planned turnaround at its 500mbpd
Baton Rouge, Louisiana refinery. Units that will remain offline
during the 8 week turnaround include 90mbpd CDU, 32mbpd
Delayed Coker, 45mbpd Diesel Hydrofiner (HULA), and
30mbpd Reformer Feed Hydrofiner (RHLA). Second, PSX
should commence a planned turnaround on the 60mbpd CDU
and 15mbpd Coker 1 units at its 242mbpd Lake Charles
refinery located in Westlake, Louisiana. Oil-out procedures will
start February 18 or 19 and actual turnaround will start a week
later and last for 5-6 weeks.
Euro R&M, 2.7%
Oil Svcs, 2.7%
CVR, 2.6%
S&P 500, 2.3%
PSX, 2.2%
WNR, 2.1%
VLO, 2.1%
Energy, 0.8%
MLP's, 0.6%
NTI, 0.4%
DK, -0.4%
-15%
-10%
-5%
0%
5%
10%
15%
20%
Source: Thomson Reuters, from Feb 7, 2013 to Feb 14, 2014
Exhibit 7
Refining
Energy
S&P 500
250
200
150
100
50
Source: Thomson Reuters, Morgan Stanley Research
Note: Energy and Refining represent equal-weighted indices
Aug-13
Feb-13
Aug-12
Feb-12
Aug-11
Feb-11
Aug-10
Feb-10
Aug-09
0
Feb-09
Indexed Performance (start = 100)
Historical Refining Performance vs. Market
300
Weekly DOE report shows higher utilization and lower
implied demand. Refinery utilization increased 1% last week
to 87.1%, as Lower PADD 1 (-2.1%) was offset by higher
PADD 5 (+1.4%) utilization. Crude oil stocks increased by
3.3MMbbls, while Cushing stocks drew by 2673mbbls (-6.6%)
to 37.6MMbbls. Refined product stocks decreased 1.2MMbbls
last week, while total implied product demand decreased
569mbpd, yet remained up 558mbpd YoY (+3%) on a 4-wk
avg. basis. Motor gasoline implied demand decreased 1.4%
WoW, as finished motor gasoline production increased by
70mbbls and stocks decreased by 0.2MMbbls. Implied
demand for distillate fuel fell by 5.1%, Jet fuel implied demand
decreased 10.8% WoW, while other refined products demand
was up by 11.5%.
Unplanned outages at Tesoro. On Feb 12, 2014 TSO
experienced an unplanned outage at its 167mbpd Golden
Eagle, refinery caused by a chemical release that impacted the
15mbpd b/d SF Alkylation Unit. Two plant personnel suffered
minor injuries. The exact restart date of the Alkylation Unit is
unknown. Meanwhile, there are unconfirmed reports that on
Friday a small fire at TSO’s 57.5 mbpd Salt Lake City, Utah
refinery left the plant without power but there were no injuries
from the incident. TSO is working to restore power at this unit.
Refiners want Tier 3 gasoline timeline (‘17) extended by 2
years. The US oil industry plans to ask the White House to
provide more time to comply with forthcoming Tier 3 gasoline
standards that reduce Sulphur particulates in gasoline. Senior
policy advisors at the American Petroleum Institute (API) have
indicated that refineries could have trouble meeting all the
proper permitting and construction needs to upgrade their
systems within that three-year timeframe. As a result, API
plans to ask for a five-year compliance timeline, which would
push the start to 2019. API estimates that the necessary
upgrades will cost the industry $10Bn, resulting in 6-9c/gal
increase in gasoline prices. Tier 3 rules are expected from the
EPA in the next few months.
3
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Morgan Stanley and Consensus Estimates
Exhibit 3
Morgan Stanley EPS Estimates Versus Consensus
Com pany
Refiners
ALJ
TRSL Consensus
MS vs. Consensus
Quarterly Estim ates
**2Q13
**3Q13
4Q13E
Annual Estim ates
2012
2013E
2014E
YoY EPS Grow th
'13 vs '12 '14 vs '13
0.27
0.26
5%
(0.46)
(0.29)
-57%
(0.09)
(0.15)
38%
4.32
2.03
0.58
0.43
37%
0.62
0.84
-26%
(0.87)
(0.79)
0.06
0.97
DK
TRSL Consensus
MS vs. Consensus
0.71
0.79
-10%
(0.03)
0.06
-151%
0.12
0.15
-24%
4.70
4.62
2.09
2.25
-7%
3.03
2.43
25%
(0.56)
(0.51)
0.45
0.08
HFC
TRSL Consensus
MS vs. Consensus
1.40
1.41
-1%
0.41
0.66
-37%
0.22
0.23
-4%
8.49
8.57
3.70
3.68
1%
4.35
4.40
-1%
(0.56)
(0.57)
0.18
0.19
MPC
TRSL Consensus
MS vs. Consensus
1.83
1.93
-5%
0.59
0.61
-3%
2.09
1.15
81%
9.65
9.69
6.71
5.85
15%
5.92
9.28
-36%
(0.30)
(0.40)
(0.12)
0.59
PBF
TRSL Consensus
MS vs. Consensus
0.73
0.79
-7%
(0.47)
(0.07)
NM
0.76
0.56
34%
7.32
6.36
1.50
1.30
15%
2.36
3.11
-24%
(0.79)
(0.80)
0.57
1.39
PSX
TRSL Consensus
MS vs. Consensus
1.53
1.83
-16%
0.87
0.94
-7%
1.34
1.10
22%
7.15
7.95
5.99
5.64
6%
7.33
7.36
0%
(0.16)
(0.29)
0.22
0.30
TSO
TRSL Consensus
MS vs. Consensus
1.56
1.46
7%
0.44
0.50
-12%
0.04
0.30
-88%
6.60
6.70
2.75
3.04
-9%
3.79
5.92
-36%
(0.58)
(0.55)
0.38
0.95
VLO
TRSL Consensus
MS vs. Consensus
0.97
0.93
5%
0.62
0.41
49%
1.78
1.66
7%
5.62
4.84
4.54
4.41
3%
5.46
5.75
-5%
(0.19)
(0.09)
0.20
0.30
WNR
TRSL Consensus
MS vs. Consensus
1.28
1.20
7%
0.33
0.51
-36%
0.43
0.56
-24%
4.29
5.08
2.96
3.08
-4%
3.73
3.64
2%
(0.31)
(0.39)
0.26
0.18
Source: Thomson Reuters, Morgan Stanley Research estimates; WNR EPS includes realized hedge impact only and reflects impact of convertible bond in share count
** 2Q13 and 3Q13 consensus est. reflect Street est. a week before the company reported results. This allows us to track names that
have consistently outperformed Street expectations (VLO).
4
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Consensus EPS Revisions and Short Interest
Exhibit 4
Exhibit 6
2014 Consensus EPS Revisions (Past 1 Months)
2014 Consensus EPS Revisions (Past 3 Months)
ALJ, 39.7%
WNR, 8.0%
MPC, 34.8%
MPC, 2.9%
WNR, 28.2%
PSX, 2.9%
VLO, 26.6%
VLO, 2.7%
DK, 21.7%
ALJ, -1.7%
PSX, 14.6%
TSO, -2.7%
HFC, 12.7%
HFC, -2.8%
PBF, 10.6%
DK, -4.4%
TSO, 6.1%
PBF, -5.8%
-10%
-5%
0%
5%
10%
15%
20%
0%
10%
20%
30%
40%
50%
Source: Thomson Reuters, Morgan Stanley Research
Source: Thomson Reuters, Morgan Stanley Research
Exhibit 7
Exhibit 5
2014 Consensus EPS Revisions (Past 12 Months)
Short Interest as a % Shares Outstanding
PSX, 5.5%
WNR, 18.2%
VLO, -2.5%
ALJ, 9.2%
TSO, -4.0%
MPC, -4.7%
PBF, 8.1%
WNR, -8.1%
HFC, 7.5%
HFC, -21.5%
ALJ, -27.6%
TSO, 6.9%
DK, -40.4%
DK, 4.0%
-50%
-40%
-30%
-20%
-10%
0%
10%
VLO, 1.9%
Source: Thomson Reuters, Morgan Stanley Research
MPC, 1.8%
PSX, 1.0%
0%
5%
10%
15%
20%
Source: Thomson Reuters, Morgan Stanley Research
5
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Comparative Performance Table
Exhibit 8
Global Refining – Equity Performance
TRSL
Ticker
Curr.
2/14/2014
Price
52-w k
High
52-w k % Below % Above
Low
52W-HI 52W-LO
Last
Week
Last
Last 3
Last 6 Last 12
Month Months Months Months
YTD
2014
S&P 500
.SPX-UT
USD
(0.7%)
23.8%
2.3%
(0.0%)
2.7%
9.1%
20.9%
(0.5%)
29.6%
Energy
ER/Y-CM
USD
618.12
651.67
548.87
(5.1%)
12.6%
0.8%
(2.9%)
(3.0%)
3.0%
6.2%
(5.1%)
22.3%
2.3%
Oil Services
OSX-X
USD
272.28
290.76
234.60
(6.4%)
16.1%
2.7%
(1.4%)
(6.1%)
3.7%
6.4%
(3.1%)
27.6%
1.8%
Integrated Oil
.SSIOGMD-SP
USD
564.47
621.37
538.55
(9.2%)
4.8%
0.9%
(6.2%)
(3.6%)
(0.4%)
2.1%
(8.9%)
18.1%
(0.6%)
AMZ-P
USD
467.41
468.24
378.68
(0.2%)
23.4%
0.6%
2.9%
4.1%
6.3%
7.5%
0.8%
20.4%
(1.2%)
DNRM/Y-CM
USD
126.06
149.25
108.77
(15.5%)
15.9%
1.0%
(5.4%)
1.3%
3.2%
(15.5%)
(5.9%)
6.3%
60.5%
(7.1%)
2013
2012
Indices
MLP
US Refining
1,838.63 1,850.84 1,485.01
13.4%
Commodities
WTI
OILWTIN
USD
100.30
110.53
86.68
(9.3%)
15.7%
0.4%
8.3%
7.0%
(6.1%)
3.1%
1.9%
7.2%
Brent
OILBLCD
USD
109.07
119.34
96.79
(8.6%)
12.7%
(0.1%)
3.0%
0.5%
(0.9%)
(8.5%)
(1.6%)
(1.0%)
4.1%
Henry Hub
NNGSBAL
USD
5.51
8.03
3.27
(31.4%)
68.5%
(8.0%)
26.4%
56.5%
68.5%
67.0%
27.8%
25.3%
15.4%
Gulf Coast 3:2:1 (WTI)
USD
15.04
35.02
5.96
(57.1%)
152.2%
7.9%
(19.2%)
76.3%
24.7%
(45.0%)
(4.7%)
(36.1%)
80.2%
Northeast 2:1:1 (Brent)
USD
12.90
19.37
7.15
(33.4%)
80.5%
9.0%
(7.6%)
67.8%
6.1%
(50.3%)
18.2%
(43.8%)
114.4%
West Coast 3:2:1 (ANS)
USD
13.96
23.64
4.07
(41.0%)
242.8%
11.9%
74.9%
14.9%
22%
(35.0%)
33.3%
(13.7%)
(20.8%)
Mid-Continent 3:2:1 (WTI)
USD
16.26
41.16
6.00
(60.5%)
171.2%
10.0%
(2.4%)
86.1%
(3.5%)
(44.7%)
25.4%
(38.0%)
97.3%
107.7%
US Refiners
Alon USA Energy
ALJ
USD
14.70
20.89
8.55
(29.6%)
71.9%
5.5%
(9.2%)
17.1%
23.4%
(28.1%)
(11.1%)
(8.6%)
Delek US Holding
DK
USD
29.36
41.47
19.83
(29.2%)
48.1%
(0.4%)
(9.9%)
11.8%
(0.4%)
(25.1%)
(14.7%)
35.9%
121.9%
CVR Energy
CVI
USD
37.66
72.32
33.03
(47.9%)
14.0%
2.6%
(10.6%)
0.0%
(15.7%)
(33.2%)
(13.3%)
(22.8%)
101.1%
Holly Frontier Corp
HFC
USD
46.28
59.20
38.98
(21.8%)
18.7%
2.9%
(4.9%)
(0.6%)
1.5%
(18.2%)
(6.9%)
6.7%
98.9%
Marathon Petroleum
MPC
USD
87.71
92.73
61.32
(5.4%)
43.0%
3.8%
(1.6%)
11.2%
19.0%
5.5%
(4.4%)
45.6%
89.2%
PBF Energy
PBF
USD
26.04
42.50
20.15
(38.7%)
29.2%
4.2%
(8.1%)
(7.9%)
15.0%
(32.4%)
(17.2%)
8.3%
NM
Phillips 66
PSX
USD
75.93
79.00
54.80
(3.9%)
38.6%
2.2%
(0.7%)
12.4%
29.2%
17.1%
(1.6%)
45.3%
NM
Tesoro
TSO
USD
50.26
65.75
40.90
(23.6%)
22.9%
4.9%
(7.8%)
(8.5%)
(1.8%)
(8.9%)
(14.1%)
32.8%
88.6%
Valero Energy
VLO
USD
49.86
53.64
33.00
(7.0%)
51.1%
2.1%
(4.8%)
16.4%
35.7%
15.6%
(1.1%)
61.7%
62.1%
Western Refining
WNR
USD
38.34
43.00
25.62
(10.8%)
49.6%
2.1%
(4.0%)
(0.2%)
23.2%
6.1%
(9.6%)
50.4%
112.1%
Saras
SRS-MI
EUR
1.15
1.19
0.82
(3.7%)
40.9%
15.6%
34.0%
31.8%
16.2%
15.0%
38.4%
(16.1%)
2.4%
Neste
NES1V-HE
EUR
15.58
17.94
10.41
(13.2%)
49.7%
3.9%
10.3%
2.1%
17.6%
38.6%
8.4%
47.1%
25.2%
(13.2%)
Europe Refiners
ERG
ERG-MI
EUR
10.27
10.63
6.51
(3.4%)
57.8%
(1.3%)
(2.3%)
13.2%
30.4%
43.8%
5.4%
27.8%
Galp
GALP-LB
EUR
11.63
13.40
10.20
(13.2%)
14.0%
2.2%
(2.2%)
(3.3%)
(8.6%)
(2.3%)
(2.4%)
1.3%
3.3%
OMV
OMV-VI
EUR
33.63
39.69
29.61
(15.3%)
13.6%
3.8%
(5.9%)
(6.2%)
(3.2%)
11.2%
(3.3%)
27.2%
16.7%
MOL
MOL-BU
HUF
13,750
18,250
13,500
(24.7%)
1.9%
0.1%
(4.5%)
(5.0%)
(15.1%)
(21.4%)
(5.0%)
(18.5%)
2.3%
Tupras
TUPRS-IS
TL
40.10
56.25
35.50
(28.7%)
13.0%
(2.1%)
(4.9%)
(4.5%)
(8.9%)
(17.3%)
(6.5%)
(16.7%)
28.8%
PKN Orlen
PKN-WA
PLN
40.71
57.40
37.50
(29.1%)
8.6%
(0.2%)
(3.7%)
(6.4%)
(10.2%)
(19.7%)
(0.7%)
(17.2%)
46.0%
21.2%
Asia Refiners
Reliance Industries
S-oil
Show a Shell
RELIANCE-IN
INR
822.05
927.90
763.90
(11.4%)
7.6%
0.9%
(6.7%)
(3.5%)
(5.0%)
(4.0%)
(8.2%)
6.6%
010950-SE
KRW
67,100
101,500
65,900
(33.9%)
1.8%
0.9%
(3.9%)
(7.8%)
(14.4%)
(31.8%)
(9.3%)
(28.8%)
4.0%
5002-TO
JPY
948
1,150
558
(17.6%)
69.9%
1.3%
(3.5%)
(10.9%)
(0.2%)
82.3%
(11.2%)
118.9%
(6.0%)
HPCL
HINDPETRO-IN
INR
236.35
325.00
158.00
(27.3%)
49.6%
(2.1%)
8.1%
12.6%
23.5%
(24.7%)
(0.4%)
(18.4%)
15.0%
Caltex
CTX-AU
AUD
19.93
23.77
16.80
(16.2%)
18.6%
3.8%
4.7%
8.0%
6.7%
4.1%
(0.6%)
4.4%
63.2%
Esso
ESSO-TH
THB
6.35
10.70
5.30
(40.7%)
19.8%
(2.3%)
9.5%
(5.9%)
(11.2%)
(40.7%)
5.8%
(40.6%)
(6.5%)
Source: Thomson Reuters, Morgan Stanley Research
6
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
MLP Performance (Refinery Related Highlighted)
Exhibit 9
Exhibit 10
Weekly MLP Price Performance
YTD MLP Price Performance
NSH, -0.2%
KMR, -0.2%
KMP, -0.5%
ETP, -0.6%
KMI, -0.6%
EVEP, -0.6%
DPM, -0.7%
LINE, -0.9%
NS, -1.0%
TGP, -1.1%
CVRR, -1.1%
ARP, -1.5%
RGP, -1.5%
APL, -1.5%
EEQ, -1.6%
EROC, -1.7%
TCP, -1.8%
EPB, -1.8%
EEP, -4.2%
BWP, -44.5%
-50%
-40%
XTEX, 13.1%
PSXP, 11.8%
VLP, 8.4%
SEP, 6.4%
HCLP, 6.2%
XTXI, 5.8%
ACMP, 5.5%
ETE, 4.8%
MWE, 4.7%
SMLP, 4.5%
GMLP, 4.5%
CQP, 4.3%
NRGM, 4.1%
NGLS, 4.0%
TRGP, 3.9%
OKS, 3.8%
TLLP, 3.7%
SXL, 2.8%
WES, 2.8%
PAA, 2.5%
ALDW, 1.9%
EPD, 1.7%
WNRL, 1.7%
ATLS, 1.2%
BPL, 0.9%
AMZ-P, 0.6%
MMP, 0.6%
WPZ, 0.5%
MPLX, 0.4%
OILT, 0.4%
NTI, 0.4%
HEP, 0.3%
RRMS, 0.1%
PNG, 0.0%
PNG, 0.0%
DKL, -0.1%
NKA, -25.0%
-30%
PSXP, 14.7%
XTEX, 12.4%
NSH, 11.7%
TLLP, 11.0%
EQM, 10.6%
MWE, 9.7%
TRGP, 9.5%
XTXI, 9.0%
MMP, 8.7%
WNRL, 8.6%
VLP, 8.5%
SXL, 8.4%
SMLP, 7.2%
MPLX, 6.9%
LINE, 6.7%
OKS, 6.4%
OILT, 6.3%
DKL, 6.2%
NGLS, 5.8%
ETE, 5.6%
ARP, 5.4%
SEP, 5.0%
PAA, 4.2%
GMLP, 4.0%
BPL, 3.8%
HCLP, 3.7%
CQP, 3.2%
NS, 2.6%
ACMP, 2.1%
HEP, 2.0%
NTI, 2.0%
KMR, 1.9%
ATLS, 1.5%
WES, 1.4%
RGP, 1.0%
EVEP, 0.9%
EPD, 0.8%
AMZ, 0.8%
PNG, 0.0%
BWP, -47.6%
-20%
-10%
Source. Thomson Reuters, from Feb 7, 2014 to Feb 14, 2014
0%
10%
20%
KMP, -1.1%
WPZ, -1.4%
EEQ, -1.7%
DPM, -2.8%
TCP, -2.9%
RRMS, -3.1%
TGP, -4.1%
NRGM, -4.6%
APL, -5.6%
ETP, -5.8%
KMI, -6.2%
CVRR, -7.3%
EEP, -7.3%
EROC, -9.9%
ALDW, -11.2%
EPB, -13.9%
NKA, -19.4%
-60% -50% -40% -30% -20% -10%
0%
10%
20%
Source. Thomson Reuters, from Jan 1, 2014 to Feb 14, 2014
7
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Weekly Crack Spread Performance
Exhibit 11
Weekly Refining Indicators Performance
Weekly Average
Last Yr
This Wk Last Wk
14-Feb-14 7-Feb-14 14-Feb-13
3-2-1 Refining Margins ($/bbl)
US Gulf Coast (WTI)
US Gulf Coast (LLS)
US Northeast (Brent)
US West Coast (ANS)
US Mid-Continent (WTI)**
Northw est Europe (Brent)
Global Product Cracks ($/bbl)
US Avg. Gasoline*
US Avg. Diesel*
US Avg. Fuel Oil*
NW Europe Gasoline (Brent)
NW Europe Diesel (Brent)
NW Europe Gas Oil (Brent)
NW Europe Fuel Oil (Brent)
Singapore Naptha (Dubai)
Ethanol Blending Margin ($/gal)
Crude Oil Differentials
US-Europe (LLS/Brent)
US Mid-Continental (LLS/WTI)
Sw eet-Sour Spread (LLS/Mars)
Light-Heavy Spread (LLS/Maya)
Light-Canadian Spread (WTI/WCS)**
US-Asia Spread (LLS/Dubai)
Comm odity Prices
WTI ($/bbl)
Brent ($/bbl)
Henry Hub Nautral Gas ($/Mcf)
Quarterly Average
QTD
Last Q Last Yr.
1Q14
4Q13
1Q13
Yearly Average
2012
2013
2014
Rolling
% Change
5 Year
This Week vs.
Average Last Wk Last Yr. Hist. Avg
4Q13
QTD vs.
1Q13 Hist. Avg
15.04
11.39
12.90
13.96
16.26
7.78
13.07
10.18
14.15
12.08
14.61
7.10
30.24
9.60
13.01
18.50
33.21
12.44
15.96
9.83
12.60
10.52
15.57
7.16
12.40
9.32
9.04
10.23
10.27
6.15
19.31
10.73
12.42
20.45
27.26
11.32
26.34
9.70
13.92
17.04
28.62
11.78
17.64
9.60
11.78
14.94
20.54
9.61
16.03
9.57
12.58
10.32
15.75
7.09
16.15
7.02
10.75
14.79
18.28
9.32
15%
12%
(9%)
16%
11%
10%
(50%)
19%
(1%)
(25%)
(51%)
(37%)
(7%)
62%
20%
(6%)
(11%)
(17%)
29%
5%
40%
3%
52%
16%
(17%)
(8%)
1%
(49%)
(43%)
(37%)
(1%)
40%
17%
(29%)
(15%)
(23%)
9.71
23.98
(0.85)
4.42
15.64
11.93
(16.92)
(2.92)
0.77
7.19
26.56
0.65
3.07
16.05
12.25
(16.87)
(1.35)
0.72
17.07
29.77
(4.51)
9.35
18.79
15.31
(16.09)
(1.30)
0.67
7.12
23.83
(3.00)
0.28
1.13
0.89
(1.32)
(0.93)
0.76
4.01
21.51
(5.97)
1.69
16.15
12.57
(20.21)
(3.38)
0.80
20.01
22.85
(7.02)
10.28
15.56
10.83
(13.67)
(7.70)
0.30
17.09
24.56
(6.10)
9.56
18.75
13.15
(12.16)
(6.05)
0.61
12.67
22.11
(8.25)
7.23
16.33
11.88
(17.65)
(5.09)
0.59
7.11
22.67
(4.49)
0.99
8.64
6.73
(10.77)
(2.16)
0.78
12.09
17.72
(7.11)
6.77
14.64
11.65
(13.45)
(3.00)
0.36
35%
(10%)
(232%)
44%
(3%)
(3%)
0%
116%
7%
(43%)
(19%)
(81%)
(53%)
(17%)
(22%)
5%
125%
16%
(20%)
35%
(88%)
(35%)
7%
2%
26%
(2%)
113%
77%
11%
(50%)
(83%)
(93%)
(93%)
(93%)
(72%)
(5%)
(64%)
4%
(57%)
(97%)
(93%)
(92%)
(90%)
(88%)
153%
(41%)
34%
(58%)
(96%)
(92%)
(92%)
(90%)
(69%)
109%
(2.90)
5.80
2.89
14.47
22.66
1.43
(3.76)
5.52
3.06
14.21
19.54
0.28
(0.58)
21.49
5.91
9.77
24.06
5.36
(4.16)
7.37
3.26
15.69
19.47
(0.49)
(8.25)
3.58
5.20
11.62
31.22
(5.55)
1.77
10.63
5.25
6.79
16.66
3.98
(0.23)
17.61
4.83
12.11
22.30
2.83
(1.43)
9.35
5.11
10.03
24.43
2.00
(3.78)
7.49
3.12
15.86
19.47
0.05
0.91
10.02
4.64
11.34
17.69
3.61
(23%)
5%
(6%)
2%
16%
411%
401%
(73%)
(51%)
48%
(6%)
(73%)
(417%)
(42%)
(38%)
28%
28%
(60%)
(50%)
106%
(37%)
35%
(38%)
(91%)
(335%)
(31%)
(38%)
131%
17%
(112%)
NM
(27%)
(30%)
38%
10%
(113%)
100.11
108.81
6.09
97.67
106.95
6.13
94.14
103.00
4.04
94.10
111.94
2.75
86.33
95.43
3.77
2%
2%
-1%
4%
-8%
83%
16%
14%
61%
(1%)
(2%)
37%
2%
4%
26%
11%
13%
36%
96.57
118.65
3.32
96.11
107.63
5.11
97.56
109.39
3.74
98.01
108.79
3.72
96.30
108.51
4.42
*Av g. product crack spread includes regional ref ined product benchmark and respectiv e crude slate: Gulf Coast = LLS, Mid-Con = WTI, Midwest = WTI, Northeast = Brent, West Coast = ANS
**Rolling 5-Year Av erage includes October 2006 Through Present; Light-Canadian spread includes Edmonton Lloy d bef ore May 2008
Source: Bloomberg, Morgan Stanley Research
Exhibit 12
Refining Exposure by Company
Com pany
R&M
Contrib.
Ticker 2012e EPS
Total
Capacity
(Mbpd)
Refining Exposure
PADD 1
PADD 2
PADD 3
PADD 4
PADD 5
(Northeast) (Mid-Con) (Gulf Coast) (Rockies) (West Coast) Europe
Asia
Other
Refiners
Alon USA Energy
ALJ
100%
247
-
-
62%
-
Delek US Holding
DK
100%
140
-
-
100%
-
HollyFrontier Corp
HFC
88%
443
-
59%
23%
Marathon Petroleum
MPC
95%
1,644
-
38%
62%
PBF Energy
PBF
100%
540
69%
31%
11%
15%
Phillips 66
PSX
69%
2,227
Tesoro
TSO
100%
847
-
15%
10%
Valero Energy
VLO
100%
2,810
-
Western Refining
WNR
100%
154
-
-
36%
-
19%
38%
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3%
16%
-
77%
11%
61%
-
100%
-
-
16%
10%
-
3%
-
-
9%
-
8%
-
-
Integrated Oil Com panies
Chevron Corp
CVX
15%
1,950
4%
-
17%
2%
29%
ExxonMobil
XOM
20%
6,246
8%
5%
24%
-
2%
28%
Murphy Oil
MUR
15%
125
-
-
-
-
100%
-
-
39%
9%
27%
5%
-
-
Source: Company Data, Morgan Stanley Research
8
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Estimated US Refining Turnaround Schedule
Exhibit 13
Estimated US Planned and Ongoing Refinery Turnarounds for 2014 for CDU Capacity (ie varies for downstream units)
Company
Location
CDU Capacity
Offline (mbpd)
Estimated Estimated Duration
(Days)
Start Date End Date
Type
Notes
PADD 1
Philadelphia Energy SolutioPhiladelphia, PA
Philadelphia Energy SolutioPhiladelphia, PA
United Refining Company Warren, PA
PBF
Paulsboro, NJ
55
85
70
80
29-Jan-14
22-Feb-14
10-Mar-14
15-Mar-14
7-Mar-14
7-Mar-14
13-Apr-14
21-Apr-14
38
14
35
38
planned
planned
planned
planned
Planned turnaround
Planned turnaround
Planned turnaround
Planned turnaround
75
130
80
83
70
85
15-Feb-14
4-Apr-14
7-Apr-14
5-Sep-14
19-Sep-14
4-Oct-14
16-Mar-14
23-May-14
26-May-14
19-Oct-14
12-Nov-14
2-Nov-14
30
50
50
45
55
30
planned
planned
planned
planned
planned
planned
Planned Turnaround
Planned Turnaround
Planned Major Turnaround
Planned Major Turnaround
Planned Major Turnaround
Planned Major Turnaround
Garyville, LA
Texas City, TX
Convent, LA
Corpus Christi, TX
Westlake, LA
Tuscaloosa, AL
Baton Rouge, LA
Alliance, LA
Corpus Christi, TX
McKee, TX
Chalmette, LA
Port Arthur, TX
Big Spring,TX
Norco, LA
Old Ocean, TX
110
80
100
165
72
34
90
250
40
65
100
240
65
260
72
15-Jan-14
7-Feb-14
7-Feb-14
4-Feb-14
18-Feb-14
1-Feb-14
17-Feb-14
5-Mar-14
1-Mar-14
1-Mar-14
15-Apr-14
5-Jul-14
6-May-14
26-Sep-14
5-Sep-14
21-Feb-14
27-Feb-14
21-Mar-14
10-Mar-14
30-Mar-14
2-Mar-14
30-Mar-14
20-Apr-14
30-Mar-14
21-Mar-14
24-May-14
3-Aug-14
19-Jun-14
9-Nov-14
19-Oct-14
38
21
43
35
41
30
42
47
30
21
40
30
45
45
45
planned
planned
planned
planned
planned
planned
planned
planned
planned
planned
planned
planned
planned
planned
planned
Reduced rate due to work on heat exchanger
Major Turnaround
Major Turnaround
planned turnaround
Major planned turnaround could be delayed
Major planned turnaround could be delayed
Major Turnaround
planned turnaround
Major Turnaround
Major Turnaround
Major Turnaround
planned turnaround
planned turnaround
planned turnaround
planned turnaround
Sinclair, WY
Commerce City, CO
Salt Lake City, UT
Billings, MT
Sinclair, WY
28
31
45
58
28
28-Oct-13
31-Jan-14
1-Mar-14
4-Apr-14
4-Apr-14
14-Feb-14
21-Feb-14
1-Apr-14
1-May-14
13-May-14
110
22
32
28
40
planned
planned
planned
planned
planned
Planned Turnaround
Planned Turnaround
Major Turnaround and Revamp Tie-Ins
Planned Turnaround
Planned Turnaround
Paramount, Cal
Anacortes
El Segundo, Cal
Valdez,Alaska
Carson, Cal
51
42
170
60
60
31-Oct-12
1-Mar-14
28-Apr-14
9-May-14
14-Aug-14
3-Jan-15
11-Apr-14
27-May-14
30-May-14
10-Sep-14
795
42
30
22
28
Planned
Planned
planned
planned
planned
Poor economics, shutdown could be permanent
Planned
Planned
Planned
Planned
PADD 2
BP America Incorporated Whiting, IN
Flint Hills Resources
Pinebend, MN
VLO
Memphis, TV
MPC
Catlettsburgs, KY
PBF
Oregon. OH
National Cooperative Refin MC Pherson
PADD 3 + Caribbean
MPC
MPC
Motiva
CITGO Petroleum
PSX
Hunt Refining Company
XOM
PSX
VLO
VLO
Chalmette Refining
Motiva
Alon
Motiva
PSX
PADD 4
Sinclair
Suncor Energy
CVX
XOM
Sinclair
PADD 5
ALJ
Shell
CVX
Petro Star Incorporated
TSO
Note: Shading represents ongoing turnarounds.
Source: Bloomberg, Company Data
9
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Estimated US Planned Crude Unit Turnarounds
Exhibit 14
Exhibit 17
Total US Turnarounds (mbpd)
PADD 3 (Gulf Coast) Turnarounds (mbpd)
2,000
5 Yr Range
5 Yr Avg
2012
2013
5 Yr Range
2014
5 Yr Avg
2012
2013
2014
1,200
1,800
1,600
1,000
1,400
1,200
800
1,000
600
800
600
400
200
400
200
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Feb
Jan
0
0
Source: Bloomberg, Company Data, Morgan Stanley Research
Source: Bloomberg, Company Data, Morgan Stanley Research
Exhibit 18
PADD 4 (Rockies) Turnarounds (mbpd)
Exhibit 15
PADD 1 (East Coast) Turnarounds (mbpd)
500
450
400
350
300
250
200
150
100
50
0
5 Yr Range
5 Yr Avg
2012
2013
140
2014
5 Yr Range
5 Yr Avg
2012
2013
2014
120
100
80
60
40
20
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
PADD 5 (West Coast) Turnarounds (mbpd)
200
300
100
200
0
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Dec
400
Nov
300
Oct
500
Jan
400
0
2014
500
600
100
2013
Sep
2014
Aug
2013
2012
Jul
2012
5 Yr Avg
Jun
5 Yr Avg
5 Yr Range
May
5 Yr Range
600
Apr
PADD 2 (Midwest) Turnarounds (mbpd)
Mar
Exhibit 16
Jan
Feb
Exhibit 19
Source: Bloomberg, Company Data, Morgan Stanley Research
700
Source: Bloomberg, Company Data, Morgan Stanley Research
Feb
Jan
Jan
0
Source: Bloomberg, Company Data, Morgan Stanley Research
Source: Bloomberg, Company Data, Morgan Stanley Research
10
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Estimated Global Planned Crude Unit Turnarounds
Exhibit 20
Exhibit 22
Total Canada Turnarounds (mbpd)
700
5 Yr Max
5 Yr Min
5 Yr Avg
N. America (US + Canada) Turnarounds (mbpd)
2012
2013
2014
2,000
5 Yr Max
5 Yr Min
5 Yr Avg
2012
2013
2014
1,800
1,600
600
500
1,400
1,200
400
1,000
300
Source: Bloomberg, Company Data, Morgan Stanley Research
Source: Bloomberg, Company Data, Morgan Stanley Research
Exhibit 21
Exhibit 23
Total Latin American Turnarounds (mbpd)
700
5 Yr Max
5 Yr Min
5 Yr Avg
2012
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
0
Mar
0
Feb
400
200
Jan
100
Feb
800
600
200
Total Europe Turnarounds (mbpd)
2013
2014
2,000
5 Yr Max
5 Yr Min
5 Yr Avg
2012
2013
2014
1,800
1,600
600
500
1,400
1,200
400
1,000
300
Source: Bloomberg, Company Data, Morgan Stanley Research
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
0
Mar
0
Feb
400
200
Jan
100
Feb
800
600
200
Source: Bloomberg, Company Data, Morgan Stanley Research
11
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Crude Differentials
Exhibit 24
Exhibit 27
WTI less Brent ($/bbl)
WTI & LLS less Maya ($/bbl)
$30
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
($5)
May-11
Feb-11
$0
WTI less Maya
LLS less Maya
$25
$20
$15
($10)
$10
($15)
$5
($20)
Nov-13
Feb-14
Nov-13
Feb-14
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
$0
($5)
($25)
($10)
($30)
($15)
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg Morgan Stanley Research
Exhibit 25
Exhibit 28
LLS less Brent ($/bbl)
WTI & LLS less Canadian Oil Sands ($/bbl)
$10
$60
WTI less Canada Oil Sands
LLS less Canada Oil Sands
$50
$5
$40
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
($5)
Feb-11
$0
$30
$20
($10)
$10
($15)
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
$0
($20)
Prior to May 2008, WTI differential based on Edmonton Lloyd crude blend with Western
Canadian Select blend used thereafter Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
Exhibit 29
WTI & LLS less Mars Sour Crude ($/bbl)
Exhibit 26
Brent & WTI less Bakken Crude ($/bbl)
WTI less Mars
$15
Brent less Bakken
$10
$50
$5
$40
Dec-13
Oct-13
Aug-13
Jun-13
Apr-13
Feb-13
Dec-12
Oct-12
Aug-12
Feb-14
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
($15)
Jun-12
$0
Apr-12
($10)
Feb-12
$10
Dec-11
($5)
Oct-11
$20
Feb-11
$0
$30
-$10
LLS less Mars
Bakken less WTI
($20)
($25)
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
12
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Crude Oil Stocks
Exhibit 30
Exhibit 33
PADD 1 (Northeast) Crude Stocks (mbbl)
PADD 4 (Rockies) Crude Stocks (mbbl)
20,000
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
21,000
18,000
19,000
16,000
17,000
14,000
Source: EIA, Morgan Stanley Research
Source: EIA, Morgan Stanley Research
Exhibit 31
Exhibit 34
5 Yr Max
5 Yr Min
5 Yr Avg
Dec
Nov
Oct
Sep
Aug
Jul
PADD 5 (West Coast) Crude Stocks (mbbl)
PADD 2 (Mid-Continent) Crude Stocks (mbbl)
140,000
Jun
May
Apr
Mar
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
11,000
Mar
8,000
Feb
13,000
Jan
10,000
Feb
15,000
12,000
2013
2014
64,000
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
60,000
120,000
56,000
100,000
52,000
80,000
48,000
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Feb
44,000
60,000
Source: EIA, Morgan Stanley Research
Source: EIA, Morgan Stanley Research
Exhibit 35
Exhibit 32
Cushing, OK Crude Stocks (mbbl)
PADD 3 (Gulf Coast) Crude Stocks (mbbl)
58,000
210,000
5 Yr Max
5 Yr Min
5 Yr Avg
2013
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
2014
48,000
200,000
190,000
38,000
180,000
28,000
170,000
18,000
160,000
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Feb
Jan
8,000
150,000
Source: EIA, Morgan Stanley Research
Source: EIA, Morgan Stanley Research
13
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Refinery Crude Throughputs
Exhibit 36
Exhibit 39
Total US Refiner Crude Throughputs (mbpd)
PADD 3 (Gulf Coast) Crude Throughputs (mbpd)
Source: EIA, Morgan Stanley Research
Source: EIA, Morgan Stanley Research
Exhibit 37
Exhibit 40
650
5 Yr Max
5 Yr Min
5 Yr Avg
2013
Dec
2014
Nov
Oct
Sep
2013
PADD 4 (Rockies) Crude Throughputs (mbpd)
PADD 1 (Northeast) Crude Throughputs (mbpd)
2,000
5 Yr Avg
Aug
Jan
5 Yr Min
Jul
3,000
Dec
11,000
Nov
4,000
Oct
12,000
Sep
5,000
Aug
13,000
Jul
6,000
Jun
14,000
May
7,000
Apr
15,000
Mar
8,000
Feb
16,000
Jan
5 Yr Max
2014
May
2013
Apr
5 Yr Avg
Mar
5 Yr Min
Feb
5 Yr Max
Jun
9,000
17,000
5 Yr Max
2014
5 Yr Min
5 Yr Avg
2013
2014
1,800
600
1,600
550
1,400
1,200
500
1,000
450
800
Source: EIA, Morgan Stanley Research
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Source: EIA, Morgan Stanley Research
Exhibit 38
PADD 2 (Mid-Continent) Crude Throughputs (mbpd)
4,000
5 Yr Max
400
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
600
5 Yr Min
5 Yr Avg
2013
2014
3,750
Exhibit 41
PADD 5 (West Coast) Crude Throughputs (mbpd)
3,250
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
3,000
3,500
2,750
3,250
2,500
3,000
2,250
2,750
2,000
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
1,750
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
2,500
Source: EIA, Morgan Stanley Research
Source: EIA, Morgan Stanley Research
14
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Product Cracks
Exhibit 42
Exhibit 45
West Coast 3:2:1 (ANS)
US Average 3:2:1 Crack Spread
$40
5 Yr Max
5 Yr Min
$35
5 Yr Avg
2013
$30
2014
$25
$50
5 Yr Max
$45
5 Yr Min
5 Yr Avg
$40
2013
$35
2014
$30
$20
$25
$15
$20
$15
$10
$10
$5
$5
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
Exhibit 43
Exhibit 46
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
$0
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
$0
Mid-Continent 3:2:1 (WTI)
Gulf Coast 3:2:1 (LLS)
5 Yr Max
5 Yr Min
2014
$25
$20
2013
5 Yr Avg
$15
5 Yr Max
5 Yr Min
5 Yr Avg
2013
$50
$45
$40
2014
$35
$30
$25
$10
$20
$15
$5
$10
$0
$5
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Feb
Jan
$0
($5)
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
Exhibit 47
Midwest 3:2:1 (WTI)
Exhibit 44
Northeast 3:2:1 (Brent)
$30
5 Yr Max
5 Yr Max
5 Yr Min
2014
2013
5 Yr Avg
$55
5 Yr Min
5 Yr Avg
$25
2013
$45
Source: Bloomberg, Morgan Stanley Research
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Jan
Dec
Nov
Oct
($5)
Sep
$0
Aug
$5
Jul
$5
Jun
$15
May
$10
Apr
$25
Mar
$15
Feb
$35
Jan
$20
Feb
2014
Source: Bloomberg, Morgan Stanley Research
15
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Gasoline Cracks ($/bbl)
Exhibit 48
Exhibit 51
Mid-Continent Gasoline Crack (WTI)
US Average Gasoline Crack
5 Yr Max
$40
$50
5 Yr Max
5 Yr Min
5 Yr Min
$35
2014
$30
2013
5 Yr Avg
$25
2014
$40
2013
5 Yr Avg
$30
$20
$20
$15
$10
$10
$5
$0
$0
($5)
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Feb
Jan
($10)
($10)
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
Exhibit 52
Exhibit 49
West Coast Gasoline Crack (ANS)
Gulf Coast Gasoline Crack (LLS)
5 Yr Max
$60
$25
5 Yr Max
5 Yr Min
2014
2013
5 Yr Avg
$20
$15
$10
5 Yr Min
$50
2014
2013
$40
5 Yr Avg
$30
$5
$20
$0
$10
($5)
$0
($10)
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Jan
($10)
($15)
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
Exhibit 53
Exhibit 50
Midwest Gasoline Crack (WTI)
Northeast Gasoline Crack (Brent)
$60
$30
5 Yr Max
5 Yr Min
2014
2013
5 Yr Avg
$25
$20
5 Yr Min
$50
2014
2013
$40
$15
$30
$10
$20
$5
$10
$0
5 Yr Max
5 Yr Avg
$0
($5)
Dec
Nov
Oct
Sep
Aug
Jul
Jun
Apr
Mar
May
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Feb
Jan
($10)
($10)
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
16
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Diesel Cracks ($/bbl)
Exhibit 54
Exhibit 57
Mid-Continent ULSD Crack (WTI)
US Average ULSD Crack
$40
5 Yr Max
5 Yr Min
2013
2014
5 Yr Avg
$70
$35
$60
$30
$50
$25
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
$40
$20
$30
$15
$20
$10
$10
$5
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Jan
$0
$0
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
Exhibit 58
Exhibit 55
West Coast ULSD Crack (ANS)
Gulf Coast ULSD Crack (LLS)
$35
$30
5 Yr Max
5 Yr Min
5 Yr Avg
2013
5 Yr Max
2014
5 Yr Min
5 Yr Avg
2013
2014
$30
$25
$25
$20
$20
$15
$15
$10
$10
$5
$5
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Jan
$0
$0
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
Exhibit 59
Exhibit 56
Midwest ULSD Crack (WTI)
Northeast ULSD Crack (Brent)
$60
$40
5 Yr Max
5 Yr Min
5 Yr Avg
2013
5 Yr Max
2014
$35
5 Yr Min
5 Yr Avg
2013
2014
$50
$30
$40
$25
$30
$20
$15
$20
$10
$10
Source: Bloomberg, Morgan Stanley Research
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
$0
Feb
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
$0
Jan
$5
Source: Bloomberg, Morgan Stanley Research
17
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Other US Product Cracks
Exhibit 60
Exhibit 63
NY Harbor 54-Grade Jet Fuel Crack (Brent)
$30
Feb
Dec
Oct
Jul
Apr
May
$0
5 Yr Min
Apr
$0
Jan
$5
Nov
$5
Sep
$10
Aug
$10
Jun
$15
May
$15
Mar
$20
Feb
$20
Jan
$25
Mar
5 Yr Max
$25
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg Morgan Stanley Research
Exhibit 61
Exhibit 64
Gulf Coast #2 Heating Oil (LLS)
$30
5 Yr Min
5 Yr Max
5 Yr Avg
2013
2014
Dec
2014
Nov
2013
Oct
5 Yr Avg
Sep
5 Yr Min
Aug
5 Yr Max
Jul
$30
Jun
NY Harbor #2 Heating Oil (Brent)
Gulf Coast 54-Grade Jet Fuel Crack (LLS)
5 Yr Avg
2013
2014
$25
$30
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
$25
$20
$20
$15
$15
$10
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
Exhibit 62
Exhibit 65
Ethanol vs. Gasoline Pricing ($/gal)
Dec
Nov
Oct
Sep
Jan-14
Dec-13
Nov-13
Oct-13
Sep-13
Jul-13
Aug-13
Jun-13
May-13
Apr-13
M ar-13
Feb-13
Jan-13
Aug-13
Feb-13
Aug-12
Feb-12
Aug-11
Feb-11
Aug-10
Feb-10
Aug-09
($2)
Dec-12
($1)
Nov-12
$0
Oct-12
$1
Sep-12
$2
1.50
1.40
1.30
1.20
1.10
1.00
0.90
0.80
0.70
0.60
0.50
0.40
0.30
0.20
0.10
0.00
Jul-12
$3
Feb-09
Aug
Ethanol D6 RIN Prices
Gasoline-Ethanol Spread
Aug-12
Ethanol
Jun-12
Gasoline
May-12
$4
Jul
Jun
May
Apr
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
Apr
May
$0
Mar
($5)
Feb
$5
Jan
$0
Mar
$10
$5
Source: Bloomberg, Morgan Stanley Research
Source: Bloomberg, Morgan Stanley Research
18
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Global Product Cracks
Exhibit 66
Exhibit 68
Northwest Europe 3:2:1 Crack (Brent)
$25
5 Yr Max
5 Yr Min
5 Yr Avg
Northwest Europe Gasoil Crack (Brent)
2013
2014
$18
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
$16
$20
$14
$12
$15
$10
$8
$10
$6
$4
$5
$2
Source: Bloomberg, Morgan Stanley Research
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
$0
Jun
May
Apr
Mar
Feb
Jan
$0
Source: Bloomberg, Morgan Stanley Research
Note: 5-year range only available since November 2007
Exhibit 69
Exhibit 67
Northwest Europe 95 RON Gasoline Crack (Brent)
Singapore 3:2:1 Crack Spread (Dubai)
$35
$25
5 Yr Min
5 Yr Max
5 Yr Avg
2013
5 Yr Max
2014
5 Yr Min
5 Yr Avg
2013
2014
$30
$20
$25
$15
$20
$10
$15
$5
$10
$0
$5
($5)
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Source: Bloomberg, Morgan Stanley Research
Jan
$0
($10)
Source: Bloomberg, Morgan Stanley Research
19
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Gasoline Fundamentals
Exhibit 70
Exhibit 72
Gasoline Implied Demand (mbpd)
Gasoline Production (mbpd)
10,500
10,000
5 Yr Max
5 Yr Min
5 Yr Avg
2013
5 Yr Max
2014
5 Yr Min
5 Yr Avg
2013
2014
9,500
10,000
9,000
9,500
8,500
9,000
8,000
Source: EIA, Morgan Stanley Research
Source: EIA, Morgan Stanley Research
Exhibit 71
Exhibit 73
Gasoline Stocks (mbbl)
250,000
5 Yr Max
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Jan
Feb
7,500
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
8,500
Gasoline Imports (mbpd)
5 Yr Min
5 Yr Avg
2013
1,800
2014
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
1,600
1,400
225,000
1,200
1,000
800
200,000
600
400
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Feb
Jan
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Mar
200
175,000
Source: EIA, Morgan Stanley Research
Source: EIA, Morgan Stanley Research
Exhibit 74
Gasoline Days of Cover
30
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
28
26
24
22
20
18
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: EIA, Morgan Stanley Research
20
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Distillate Fundamentals
Exhibit 75
Exhibit 77
Implied Distillate Demand (mbpd)
6,500
5 Yr Max
5 Yr Min
Distillate Production (mbpd)
5 Yr Avg
2013
2014
5,500
6,000
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
5,000
5,500
4,500
5,000
4,000
4,500
4,000
3,500
Source: EIA, Morgan Stanley Research
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Exhibit 78
Distillate Stocks (mbbl)
5 Yr Max
Jan
Source: EIA, Morgan Stanley Research
Exhibit 76
200,000
3,000
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
3,500
Distillate Imports (mbpd)
5 Yr Min
5 Yr Avg
2013
2014
700
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
600
180,000
500
160,000
400
140,000
300
200
120,000
100
Source: EIA, Morgan Stanley Research
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Jan
Feb
0
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
100,000
Source: EIA, Morgan Stanley Research
Exhibit 79
Distillate Days of Cover
50
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
45
40
35
30
25
20
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Source: EIA, Morgan Stanley Research
21
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Other US Refined Product Market Fundamentals
Exhibit 80
Exhibit 83
Total US Refining Utilization Rate (%)
Total US Implied Refined Product Demand (% YoY)
10%
100
5 Yr Max
5 Yr Min
5 Yr Avg
2013
4-WK MA YoY
2014
95
13-WK MA YoY
5%
90
0%
85
-5%
80
75
-10%
70
Jan-14
Jul-13
Jan-13
Jul-12
Jan-12
Jul-11
Jan-11
Jul-10
Jan-10
Jan-09
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Jul-09
-15%
65
Source: EIA, Morgan Stanley Research
Source: EIA, Morgan Stanley Research
Exhibit 84
Exhibit 81
Total Crude Oil Stocks (ex-SPR, mbbl)
Implied Jet-Kerosene Fuel Demand (mbpd)
2,000
5 Yr Max
5 Yr Min
5 Yr Avg
2013
450,000
2014
1,800
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
400,000
1,600
350,000
1,400
300,000
1,200
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
Jan
250,000
1,000
Source: EIA Morgan Stanley Research
Source: EIA, Morgan Stanley Research
Exhibit 85
Exhibit 82
US Vehicle Miles Traveled (YoY%)
US Propylene Stocks, non-fuel use (mbbl)
5 Yr Max
6,000
5 Yr Min
5 Yr Avg
2013
2014
4%
YoY (Current Month)
YoY (3 Month MA)
3%
2%
5,000
1%
4,000
0%
3,000
-1%
2,000
-2%
-3%
1,000
Source: EIA, Morgan Stanley Research
Sep-13
Mar-13
Sep-12
Mar-12
Sep-11
Mar-11
Sep-10
Mar-10
Sep-09
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
0
Mar-09
-4%
Source: Department of Transportation, Morgan Stanley Research;
Note: data released after a two-month lag
22
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Refined Product Stocks
Exhibit 86
Exhibit 89
Total US Refined Product Stocks (MMbbl)
Total PADD 3 (Gulf Coast) Product Stocks (mbbl)
5 Yr Max
800
5 Yr Min
5 Yr Avg
2013
2014
210,000
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
200,000
190,000
750
180,000
170,000
700
160,000
150,000
650
140,000
Dec
Nov
Oct
Sep
Aug
Jul
Jun
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Total PADD 4 (Rockies) Product Stocks (mbbl)
Total PADD 1 (Northeast) Product Stocks (mbbl)
5 Yr Max
Source: EIA, Morgan Stanley Research
Exhibit 90
Exhibit 87
190,000
Dec
May
Apr
Mar
Feb
Jan
Source: EIA, Morgan Stanley Research
Feb
Jan
130,000
600
5 Yr Min
5 Yr Avg
2013
14,000
2014
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
13,000
180,000
170,000
12,000
160,000
11,000
150,000
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
8,000
110,000
Mar
9,000
120,000
Jan
130,000
Feb
10,000
140,000
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
100,000
Source: EIA, Morgan Stanley Research
Exhibit 91
Source: EIA, Morgan Stanley Research
Total PADD 5 (West Coast) Product Stocks (mbbl)
Exhibit 88
73,000
Total PADD 2 (Midwest) Product Stocks (mbbl)
5 Yr Max
5 Yr Min
5 Yr Avg
2013
2014
68,000
5 Yr Max
140,000
5 Yr Min
5 Yr Avg
2013
2014
63,000
130,000
120,000
58,000
110,000
53,000
100,000
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
80,000
Dec
Nov
Oct
Sep
Aug
Jul
Jun
May
Apr
Mar
Feb
Jan
48,000
90,000
Source: EIA, Morgan Stanley Research
Source: EIA, Morgan Stanley Research
23
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Refining Sector: Investment Thesis
Industry View: In-Line: We have a strong preference for Gulf
Coast assets in 2014 where we see the best year-over-year
rate of change for both heavy and light crude differentials. We
expect WTI to converge with LLS following Keystone and also
expect the Brent-LLS differentials will drive increased volatility
on the Brent-WTI spreads. We expect the Brent-LLS spread
will widen and track Gulf Coast turnarounds, peaking in
mid-May and toughing in early summer. The Gulf Coast has
the most turnaround activity relative to any other PADD in the
past 5 years supporting relatively better GC refining margins in
1H14. We also expect cheaper heavy crudes post Keystone
XL GC, and associated Cushing heavy inventory drain, will
support VLO and MPC margins. PSX will see the most multiple
expansion in the sector as it grows and shifts its asset base to
higher multiple businesses in chemicals and midstream over
the next few years. We prefer E&P over Refining and
Integrated.
Exhibit 93
YTD R&M Stock Performance
S&P 500, 0.5%
VLO, -1.1%
PSX, -1.6%
MPC, -4.4%
Energy, 5.1%
HFC, -6.9%
Refining, 9.0%
WNR, -9.6%
ALJ, -11.1%
Exhibit 92
Energy Sector and Market YTD Performance
TSO, -14.1%
20%
DK, -14.7%
PBF, -17.2%
1.9%
-20%
0%
-0.5%
-3.1%
-15%
-10%
-5%
0%
Source: Thomson Reuters, Morgan Stanley Research
-5.7%
-9.0%
-20%
E&P
S&P 500
Oil Services
Integrated
Refining
Source: Thomson Reuters, Note: Energy subsectors represent equal-weighted indices
Exhibit 94
Exhibit 95
Refining Coverage: EV / NTM Consensus EBITDA
Refining Coverage: EV / Complexity Barrel
$1,500
9.0x
8.0x
$1,250
6.0x
$1,000
5.0x
$750
4.0x
$500
3.0x
$250
2.0x
1.0x
1/31/2013
1/31/2012
1/31/2011
1/29/2010
1/30/2009
1/31/2008
1/31/2007
1/31/2006
1/31/2005
1/30/2004
1/31/2003
1/31/2002
1/31/2001
1/31/2000
Aug-13
Feb-13
Aug-12
Feb-12
Aug-11
Feb-11
Aug-10
Feb-10
Aug-09
Feb-09
Aug-08
Feb-08
Source: Thomson Reuters, Morgan Stanley Research
1/29/1999
$0
0.0x
1/30/1998
NTM EV/EBITDA
7.0x
Source: Thomson Reuters, Company data, Morgan Stanley Research
24
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Independent Refiners: Investment Thesis, Catalysts and Risks
Investment Thesis
Potential Catalysts
Risks
Big Spring refinery runs advantaged WTS crude oil, while low complexity
Krotz Spring partially runs expensive LLS crude (yet see an emerging LLs
discount). Lowered debt leverage with MLP cash proceeds. Retail’s
contribution to earnings is positive to help offset less profitable refining.
Gross margin improvement at Krotz
spring refinery. As higher% of
EBITDA is dropped to the MLP level
the multiples should Re-rate. Spinout
of retail business could unlock value
with proceeds used to reduce
leverage.
Alon suggested it is still open to
M&A, with a possible dilutive or
debt-heavy acquisition. Few
refining assets makes ALJ
exposed to unexpected outage,
with a poor operating history.
DK
(EW)
Operates in refinery in Tyler, Texas, and El Dorado, Arkansas refinery with
exposure to advantaged Mid-Con crudes and sweet-sour differential. Feed
slate change at both refineries is underway and DK will have access to
additional 25mbpd of Mid-land crude at both refineries by mid 2013. Largest
relative retail exposure of the independent refiners provides greater
earnings stability over time, but lower upside leverage to refining margins.
Mid-Con crude production exceeds
cheap takeaway capacity, leading to
longer-term $4-10 WTI differentials
and benefit. Widening of the
sweet-sour spread.
Delek suggested it is still open to
M&A, with a possible dilutive or
debt-heavy acquisition. Continued
poor margins in the Gulf Coast and
narrow sweet-sour spreads.
HFC
(EW)
Strong advantages in both crude slates and niche markets (Rockies and
Southwest) drive premium returns and multiple, with merger integration and
Tulsa refinery integration adds further benefit. Advantaged crude slate runs
all WTI and WTI-linked crude slate (WTS, WCS, and Black Wax crude oils).
MLP Holly Energy Partners (HEP), 41% owned by HFC, and GP 100%
owned by HFC stable and growing IDR income, with possibility to drop down
further midstream assets following integration of Frontier midstream.
Mid-Con crude production exceeds
cheap takeaway capacity, leading to
longer-term $4-10 WTI differentials
and benefit. Operating efficiencies
from merger and Tulsa integration.
UNEV pipeline drives higher realized
margin from Las Vegas market.
Pipeline reversals occur more
quickly than expected, eliminating
WTI-linked vs. waterborne crude
differentials. Further project
delays of UNEV pipeline, missing
winter month window of high
margin Las Vegas deliveries.
MPC
(OW)
Premium Mid-Continent refiner opportunity with 33% exposure (40% in YE
2012) to structurally advantaged Mid-Con. Strong asset base/mix
enhanced by Detroit upgrade coming online 4Q12. Strong Gulf Coast
presence at Garyville provides exposure to heavy light spreads and exports
of product to LatAm and Europe. MPC refining trades at 2.0 vs. peers at 2.7
on fwd EV, one of the lowest in the group. Highest growth MLP with $4-8Bn
of potential future sales in drop-downs.
Early closure of BP Texas City acq.
Sustained wide crude differentials
into 2013 and wider global cracks
spreads from demand and outages.
Strong ramp in Utica oil production.
Higher takeaway capacity than
expected, eliminating WTI-linked
vs. waterborne crude differentials.
Narrowing sweet and sour
differentials.
PBF
(EW)
Fifth largest independent refiner, with 33% exposure to structurally
advantaged Mid-Con crudes. With its rail transport project, PBF should
deliver Bakken crude to the East Coast at ~$12/bbl, or $2-3/bbl below other
East Coast refiners. PBF has only East Coast coking capacity where
heating rail cars will deliver raw bitumen to the East Coast at ~17/bbl cost,
Feed-slate change associated with
getting additional 80mbpd of Bakken
and 80mbpd of raw WCS. MLP
creation ($100MM EBITDA) provides
valuation uplift and cash.
Better capture rates in East Coast
post reconfiguration. Delay in
delivery of heated coil (1,600) or
general purpose rail cars
PSX
(OW)
Second largest independent refiner, with a well positioned Mid-Con/Gulf
Coast core asset base (refining, midstream, chemicals). 76% of earnings
levered to secular growth in North American oil production, CPChem and
DCP JV on their way to being fully self-funding. Moving +300mbpd of
advantaged crude to GC, E. Coast and W. Coast will boast profitability.
Stronger global product demand
supports cracks or better chemical
margins. Acceleration of DCP
dropdowns. Higher ethylene
margins.
Slower dropdowns at DCP.
Higher global refining supply
reduces global utilization and
cracks. Weaker chemical margins
deter PSX plan to increase
chemicals earnings contribution.
TSO
(EW)
Primarily a West Coast refiner with five refineries in the region, which is
more structurally protected from refined product competition outside of the
region. TSO’s Mid-Con refiners are among the most profitable in the US.
Including Anacortez, approximately 32% of feedstock is mid-con structurally
advantaged. Potential for ~$350mm EBITDA improvements from internal
growth projects with a short payback period that include: Salt Lake Black
Wax, Anacortes Bakken rail project, Mandan DDU and Wilmington VDU.
Synergy from BP’s Carson
acquisition. Further dropdowns into
TLLP provide multiple uplift and cash.
Improved Opex costs via tighter
system management. Hawaii closure
saves the company $300-$350MM in
working capital.
West Coast recovery remains
evasive with low crack spreads.
Crude differentials narrow from
weaker supply and competition
from FTC forces sale of
Wilmington for Carson closure
approval.
VLO
(OW)
Largest US independent refiner, provides leverage to global cracks.
Complex refining system benefits from wider sweet-sour and heavy-light
diffs with exposure to WTI discounts via Mid-Con capacity (10%) and Maya
crude. Gulf Coast refineries able to export diesel to secular demand trends
in Lat. Am. and would benefit from widening LLS-Brent differentials.
Strategic capex spend begins to positively impact earnings and FCF
(dividend ability) in 2H12, as projects complete. Acquisition of Pembroke in
UK will be accretive to earnings and adds geographic diversification with
ability to export distillate product to US NE.
Retail spinoff and MLP creation.
Wider crude differentials as US
crudes begin to flood the US GC.
Ultimately, wider heavy-light and
sweet-sour differentials when
Canadian bbls hit the GC. Stronger
global refined product demand,
where VLO has most exposure to
growth of emerging markets and
export opportunities
Narrowing of heavy-light and
sweet-sour spreads as resid
prices in Maya formula compress.
Motiva start-up (325kbd). Latin
American demand improvements
were temporal rather than secular.
Overpays for future acquisition,
diluting shareholders and
weakening existing asset base.
WNR
(EW)
Deleveraging story with asset sales supporting capital restructuring, debt
reduction and removal of covenant heavy, debt obligations. Emerging as a
niche refiner in the Southwest with ability to run 100% WTI/WTI-linked crude
slate (Permian vs. Mid-con). El Paso is a simple refiner with sweet crude
intake from West Texas (Permian basin) supporting margin-rich markets in
Arizona, New Mexico and Juarez, Mexico. We see MLP potential in 2013.
Further deleveraging as high FCF
allows repayment of high cost debt.
Newly announced strategic projects
drive incremental returns and
commodity agnostic growth. Further
crude production surprise from
horizontal Permian plays leads to
higher realized margin benefit.
Pipeline reversals occur more
quickly than expected (Longhorn),
eliminating WTI-linked vs.
waterborne crude differentials and
Mid-Con benefits. Management
does not execute on further
restructuring of the company.
Potential dilutive acquisition.
ALJ
(EW)
25
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Exhibit 96
US Refining and Marketing Comparable Metrics
VLO
TSO
PSX
WNR
ALJ
HFC
DK
MPC
PBF
Average
VLO
TSO
PSX
WNR
ALJ
HFC
DK
MPC
PBF
Average
VLO
TSO
PSX
WNR
ALJ
HFC
DK
MPC
PBF
Average
VLO
TSO
PSX
WNR
ALJ
HFC
DK
MPC
PBF
2/14/2014
Price
$49.86
$50.26
$75.93
$38.34
$14.70
$46.28
$29.36
$87.71
$26.04
Rating
O
E
O
E
E
E
E
O
E
Price
Target
62.00
65.00
93.00
47.00
19.00
54.00
39.00
100.00
29.00
Refining Capacity (mbpd)
2011
2012
2013E
2,910
2,869
2,810
665
672
878
2,227
2,227
2,227
155
247
443
140
1,142
493
155
247
443
140
1,142
540
Price / Earnings
2012
2013
8.9x
11.0x
7.6x
18.3x
NA
12.7x
7.4x
12.9x
3.4x
25.2x
5.4x
12.5x
6.2x
14.0x
9.1x
13.1x
NM
18.1x
6.9x
15.3x
MS EPS Estimates
2012
2013
5.62
4.54
6.60
2.75
7.15
5.99
5.15
2.96
4.32
0.58
8.49
3.70
4.70
2.09
9.65
6.71
NM
1.44
156
247
443
140
1,672
540
2014E
9.1x
13.3x
10.3x
10.3x
23.8x
10.6x
9.7x
14.8x
7.4x
12.1x
2014E
5.46
3.79
7.34
3.73
0.62
4.35
3.03
5.92
3.54
Ratings
Equity Enterprise
Value
Value
27,722
31,993
7,016
10,004
47,934
50,218
3,938
4,099
927
1,371
9,344
8,184
1,757
1,601
29,207
29,959
2,532
2,697
and Capitalization
Div.
Yield
2012
1.8%
23%
2.0%
8%
2.1%
15%
2.3%
5%
1.6%
50%
6.9%
-22%
3.4%
-29%
1.9%
-14%
4.6%
100%
3.0%
5%
Net Debt/ Cap
2013E 2014E
18%
8%
35%
28%
4%
-6%
13%
-12%
46%
41%
-19%
-20%
-7%
-11%
6%
11%
100%
100%
12%
5%
Net Refining Margin / Barrel
2011
2012
2013E 2014E
$5.47
$7.18
$5.91
$7.43
$9.50 $11.80
$5.75
$4.54
$2.43
$8.19
$4.39
$4.11
$19.68 $18.19 $11.82 $13.49
$4.78
$9.67
$5.27
$5.39
$15.21 $19.59
$9.93 $10.02
$8.71 $11.33
$6.89
$9.60
$7.48 $10.03
$6.17
$5.00
$1.26
$5.87
$2.61
$3.26
$8.28 $12.00
$7.02
$7.45
Operations
Utilization Rate
$ Gross Margin / Barrel
2011
2012
2013E
2012
2013E 2014E
84%
91%
95%
$10.99
$9.69 $11.21
87%
87%
81%
$16.34 $11.52 $11.11
116%
111%
112%
$12.71
$9.47
$8.53
2011
$3.84
$4.37
$6.55
$ Opex / Barrel
2012
2013E
$3.80
$3.79
$4.54
$5.76
$4.52
$5.07
2014E
$3.77
$6.57
$4.42
92%
59%
90%
79%
103%
87%
89%
$6.92
$6.06
$5.51
$4.53
$1.53
$4.54
$4.87
$7.28
$6.41
$5.43
$4.43
$1.47
$4.74
$4.74
$5.82
$6.02
$5.63
$4.37
$6.39
$5.17
$5.37
96%
63%
94%
87%
105%
89%
91%
95%
53%
88%
89%
95%
84%
88%
Valuation
Price / Cons. Earnings
2012
2013
2014E
10.3x
11.3x
8.7x
7.5x
16.5x
8.5x
NM
13.5x
10.3x
7.6x
12.5x
10.5x
7.2x
34.6x
17.5x
5.4x
12.6x
10.5x
6.3x
13.1x
12.1x
9.0x
15.0x
9.5x
N/A
20.0x
8.4x
7.6x
16.6x
10.7x
$25.47
$16.08
$25.02
$15.76
$11.50
$10.62
$16.05
2013
5.6x
7.8x
7.5x
5.6x
4.8x
5.4x
4.8x
6.5x
6.3x
6.0x
$19.17
$12.18
$16.09
$11.31
$12.24
$8.16
$12.20
$19.31
$11.41
$15.65
$13.97
$11.38
$8.42
$12.82
EV/ EBITDA
2014E 2015E
5.3x
5.2x
6.5x
4.9x
6.5x
6.0x
5.2x
4.8x
4.5x
3.8x
5.0x
4.7x
4.0x
4.3x
7.6x
6.1x
4.8x
3.5x
5.6x
5.0x
Morgan Stanley Versus Consensus
Consensus EPS Estimate
MS EBITDA ($MM)
2012
2013E
2014E
2013
2014E 2015E
$4.84
$4.41
$5.75
5,669
6,088
6,097
$6.70
$3.04
$5.92
1,286
1,541
2,044
NM
$5.64
$7.36
6,730
7,772
8,381
$5.08
$3.08
$3.64
730
789
858
$2.03
$0.43
$0.84
285
307
359
$8.57
$3.68
$4.40
1,529
1,649
1,748
$4.62
$2.25
$2.43
332
403
371
$9.69
$5.85
$9.28
4,607
3,937
4,938
$6.36
$1.30
$3.11
431
567
763
2012
5.3x
4.7x
NM
4.4x
3.3x
2.6x
2.9x
4.8x
N/A
4.0x
$7.35
$6.91
$6.17
$4.41
$6.08
$5.55
$5.68
EV / Cons. EBITDA
2013
2014E
6.0x
4.6x
7.3x
5.1x
7.7x
6.4x
5.6x
5.3x
5.5x
4.6x
5.2x
4.7x
4.7x
4.4x
7.1x
5.1x
6.9x
3.8x
6.2x
5.0x
2015E
4.5x
4.6x
6.1x
4.6x
3.9x
4.3x
3.9x
4.7x
3.2x
4.4x
Consensus EBITDA ($MM)
2012
2013
2014E 2015E
6,047
5,312
6,967
7,082
2,140
1,365
1,970
2,174
NM
6,488
7,895
8,168
932
726
778
898
415
251
299
351
3,135
1,574
1,744
1,902
560
339
367
414
6,212
4,212
5,830
6,428
979
394
711
839
Source: Company data, Thomson Reuters, Morgan Stanley Research, WNR estimates reflect conversion of dilutive bonds. For valuation methodology and risks associated with any price targets
above, please email morganstanley.research@morganstanley.com with a request for valuation methodology and risks on a particular stock
Valuation Methodology Our price targets are based on a DCF value of the WTI Differential benefit and EV/EBITDA multiple of the
remaining stub EBITDA contribution (ex-WTI differential benefit), using normalized multiples on the stub value; multiples are generally
in line with historical mid-cycle values.
26
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Exhibit 97
US Refining and Marketing Comparable Metrics: Pure Refining Valuations and Forward EV Valuations
DK
HFC
MPC
PBF
PSX
TSO
VLO
WNR
Average
Refining EV
2012
615
6,610
14,494
1,597
23,998
4,039
24,434
2,009
Refining EV
2013E
2014E
776
731
6,089
5,971
16,804
17,507
2,086
1,805
21,252
19,077
6,050
5,394
23,224
20,945
2,009
1,740
Refining Valuation
Refining EBITDA
2013E
2014E
2015E
259
336
302
1,330
1,570
1,661
3,248
3,829
3,438
371
502
663
4,359
5,356
5,974
1,144
1,160
1,651
5,397
5,888
5,897
554
591
657
2015E
706
5,795
16,909
1,378
15,470
4,723
19,547
1,404
Refining EV/ EBITDA (MS)
2013E
2014E
2015E
3.0x
2.2x
2.3x
4.6x
3.8x
3.5x
5.2x
4.6x
4.9x
5.6x
3.6x
2.1x
4.9x
3.6x
2.6x
5.3x
4.6x
2.9x
4.3x
3.6x
3.3x
3.7x
2.9x
2.1x
4.6x
3.6x
3.0x
EV/ EBITDA (consensus)
2013E
2014E
2015E
4.7x
4.4x
3.9x
5.2x
4.7x
4.3x
7.1x
5.1x
4.7x
6.9x
3.8x
3.2x
7.7x
6.4x
6.1x
7.3x
5.1x
4.6x
6.0x
4.6x
6.1x
5.6x
5.3x
4.6x
6.3x
4.9x
4.7x
Source: Company Data, Thomson Reuters, Morgan Stanley Research
Exhibit 98
Exhibit 99
Valuations Based on 2014 EBITDA
EV/ EBITDA (consensus)
EV/ EBITDA (Ms)
Valuations Based on 2015 EBITDA
EV/ EBITDA (consensus)
Refining EV/EBITDA (fwd)
EV/ EBITDA (Ms)
Refining EV/EBITDA (fwd)
7.0x
8.0x
Mid-Cycle Valuation
Mid-Cycle Valuation
7.0x
6.0x
6.0x
5.0x
5.0x
4.0x
4.0x
3.0x
3.0x
2.0x
2.0x
1.0x
1.0x
0.0x
0.0x
DK
HFC
MPC
PBF
PSX
TSO
Source: Company Data, Thomson Reuters, Morgan Stanley Research
VLO
WNR
DK
HFC
MPC
PBF
PSX
TSO
VLO
WNR
Source: Company Data, Thomson Reuters, Morgan Stanley Research
27
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
EPS Sensitivity to Change in Differentials
Exhibit 100
Exhibit 103
Brent-Bakken $1/bbl EPS Sensitivity
LLS-WTI $1/bbl EPS Sensitivity
Brent-Bakken
LLS-WTI
$0.20
$0.35
$0.18
$0.30
$0.16
$0.25
$0.14
$0.12
$0.20
$0.10
$0.08
$0.15
$0.06
$0.10
$0.04
$0.05
$0.02
$0.00
$0.00
PBF
TSO
PSX
HFC
WNR
Source. Company Data and Morgan Stanley
HFC
DK
ALJ
PBF
TSO
VLO
PSX
MPC
Source. Company Data and Morgan Stanley Research
Exhibit 104
Exhibit 101
Brent-Maya $1/bbl EPS Sensitivity
Brent-WCS $1/bbl EPS Sensitivity
Brent-Maya
Brent-WCS
$0.25
$0.25
$0.20
$0.20
$0.15
$0.15
$0.10
$0.10
$0.05
$0.05
$0.00
$0.00
MPC
PBF
HFC
VLO
PSX
MPC
PSX
Source. Company Data and Morgan Stanley Research
Source. Company Data and Morgan Stanley
Exhibit 105
Exhibit 102
Brent-Mars $1/bbl EPS Sensitivity
Brent-LLS $1/bbl EPS Sensitivity
Brent-Mars
Brent-LLS
$0.60
$0.35
$0.30
$0.50
$0.25
$0.40
$0.20
$0.30
$0.15
$0.20
$0.10
$0.10
$0.05
$0.00
$0.00
WNR
HFC
DK
VLO
ALJ
Source. Company Data and Morgan Stanley Research
MPC
PBF
PSX
TSO
MPC
VLO
PSX
Source. Company Data and Morgan Stanley Research
28
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Morgan Stanley Commodity Forecasts
Exhibit 106
Exhibit 108
Brent Forward Prices ($/bbl)
Morgan Stanley Base Commodity Forecasts
WTI Crude
2010
2011
2012
2013E
2014E
Q1
$78.88
$94.60
$103.03
$94.30
$93.00
Q2
$78.05
$102.34
$93.35
$94.01
$98.50
Q3
$76.21
$89.54
$92.20
$107.75
$99.25
Q4
$85.24
$94.06
$88.23
$98.08
$96.50
Annual
$79.60
$95.14
$94.20
$98.54
$96.81
Long-term
$88.00
$88.00
$88.00
$88.00
$88.00
Brent Crude
2010
2011
2012
2013E
2014E
Q1
$76.78
$105.21
$118.69
$112.83
$105.00
Q2
$78.63
$116.80
$108.73
$103.54
$105.00
Q3
$76.41
$112.90
$109.90
$112.00
$105.00
Q4
$86.93
$109.31
$110.49
$110.00
$105.00
Annual
$79.69
$111.06
$111.95
$109.59
$105.00
Long-term
$95.00
$95.00
$95.00
$95.00
$95.00
Natural Gas
2012
2013E
2014E
Q1
$2.77
$3.36
$4.00
Q2
$2.26
$4.09
$4.00
Q3
$2.82
$3.93
$4.00
Q4
$3.36
$4.19
$4.00
Annual
$2.80
$3.89
$4.00
Long-term
$4.00
$4.00
$4.00
$4.00
$4.00
Source: Bloomberg, Morgan Stanley Research estimates
Exhibit 107
2013 Crack Spread Forecast
US Crack Forecast (2014)
Q1
Blended Cracks
Gulf Coast 5-3-2 (Brent)
Gulf Coast 3-2-1 (Brent)
Gulf Coast 2-1-1 (Brent)
Gulf Coast 5-3-2 (WTI)
Gulf Coast 3-2-1 (WTI)
Gulf Coast 2-1-1 (WTI)
NY 2-1-1 (Brent)
Northeast 6-3-2-1 (Brent)
West Coast 3-2-1 (ANS)
West Coast 4-3-1 (ANS)
Pacific NW 5-3-1-1 (ANS)
Mid-Con 3-2-1 (WTI)
Mid-Con 2-1-1 (WTI)
Mid-Con 6-3-2-1 (WTI)
Differentials
LLS less Maya
LLS less Mars
Brent less WTI
Brent less LSS
Brent less WCS
Brent less Bakken
Cushing less Midland
WTI less WTS
WTI less Lloyd WCS
KERN River less ANS
WTI less ANS
DURI less ANS
Tapis less ANS
ANS less Mars
ANS less Maya
Q2
Q3E
Q4E
Annual
$7.79
$7.75
$8.23
$19.79
$19.75
$20.23
$12.32
$10.75
$15.47
$15.60
$17.11
$21.20
$21.68
$17.05
$8.54
$8.50
$9.03
$15.04
$15.00
$15.53
$13.79
$14.64
$17.29
$17.43
$19.12
$16.45
$16.97
$11.90
$7.03
$7.00
$7.43
$12.78
$12.75
$13.18
$11.35
$9.93
$14.65
$14.77
$16.20
$14.20
$14.63
$10.45
$3.77
$3.75
$3.98
$12.27
$12.25
$12.48
$5.83
$5.07
$7.85
$7.91
$8.68
$13.70
$13.93
$11.69
$6.78
$6.75
$7.17
$14.97
$14.94
$15.36
$10.82
$10.10
$13.82
$13.93
$15.28
$16.38
$16.80
$12.77
$8.00
($7.50)
$12.00
$11.50
$33.00
$13.75
$4.50
$4.75
$21.00
($10.00)
$3.00
($5.00)
$5.00
$1.00
$8.00
$8.00
($2.00)
$6.50
$6.00
$28.00
$14.75
$2.00
$2.25
$21.50
($10.00)
$3.00
($5.00)
$5.00
$1.00
$8.00
$9.00
($1.00)
$5.75
$5.00
$22.00
$16.00
$2.00
$2.25
$16.25
($10.00)
$3.00
($5.00)
$5.00
$1.00
$8.00
$10.00
($3.00)
$8.50
$7.00
$25.00
$15.00
$2.25
$2.50
$16.50
($10.00)
$3.00
($5.00)
$5.00
$1.00
$8.00
$8.75
($3.38)
$8.19
$7.38
$27.00
$14.88
$2.69
$2.94
$18.81
($10.00)
$3.00
($5.00)
$5.00
$1.00
$8.00
$120
Feb-14
Last Week
Last Month
Last Year
$110
$100
$90
$80
$70
0
6
12
18
24
30
36
42 48 54
Months
60
66
72
78
84
90
Source: Bloomberg, Morgan Stanley Research
Exhibit 109
Forward 3:2:1 Brent Crack Spread ($/bbl)
Feb-14
$18
$16
$14
$12
$10
$8
$6
$4
$2
$0
2
4
Last Week
6
8
10
Months
Last Month
12
14
Last Year
16
18
Source: Bloomberg, Morgan Stanley Research
Source: Morgan Stanley Research estimates
29
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
US Crude Oil Prices
Exhibit 111
WTI Differential to Waterborne Crude Oil ($/bbl)
WTI - Brent
$0
WTI - LLS
($5)
($10)
($15)
($20)
($25)
($30)
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
($35)
Feb-11
We believe wider differentials at Cushing are secular yet
will become increasingly connected and driven by
conditions on the US Gulf Coast. The reversal of Seaway,
start-up of Keystone in addition to rail volume growth has
compressed the WTI-LLS spread to ~$8/barrel from as high as
$30/bbl. We believe as additional take-away capacity is added
in 2014, Brent-WTI will be driven by conditions on the USGC
and increasing driven by the Brent-LLS spread with seasonality
in 1Q and 4Q providing the largest discounts. We expect WTI
and LLS will converge within $1-4/bbl and WTI-Brent to
average ~$8/bbl and LLS-Brent to average ~$7 in 2014. We
expect continued upside volatility in outages. We also see
other logistically challenged crude streams benefiting select
assets (Utica, heavy and sours).
Source: Bloomberg, Morgan Stanley Research
Exhibit 112
Front Month WTI and WTI Time spreads ($/bbl)
$120
Exhibit 110
Mid-Con Crude Oil Prices ($/bbl)
$100
$80
$60
$40
$20
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
$0
Front Month less Second Month
$2
$0
($2)
($4)
Nov-13
Aug-13
May-13
Feb-13
Nov-12
Aug-12
May-12
Feb-12
Nov-11
Aug-11
May-11
Feb-11
($6)
Source: Bloomberg, Morgan Stanley Research
Exhibit 113
$/bbl
Forward WTI/Brent Prices ($/bbl)
Source: Bloomberg, Morgan Stanley Research; prices as of Feb 14, 2014
Feb-14
18
16
14
12
10
8
6
4
2
0
0
5
10
15
Last Week
20
25
30 35
Months
Last Month
40
45
Last Year
50
55
60
65
Source: Bloomberg, Morgan Stanley Research
30
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Key Infrastructure Changes in 2013
Exhibit 114
Impact of Infrastructure and Turnarounds on Differentials in 2013/14
1Q13
Name
Type
Incremental
Capacity
(mbpd)
Seaway
Pipeline
250
✓
✓
✓
ENB Line 5
Pipeline
50
W. Texas Gulf
Pipeline
110
Rail
70
Turnaround
56
PBF Energy
Refinery Cokers (Mid-con)
2Q13
Refinery CDUs (Mid-con)(YoY) Turnaround
(614)
SU Firebag st. 4
Production
62.5
CVE Christina Lake D
Production
40
✓
✓
Pipeline
75
✓
Longhorn reversal
Pipeline
75<-->
Permian Express
Pipeline
90
ENB Line 9 reversal
Pipeline
50<-->
Enterprise / Plains ph. 2
Pipeline
200
✓
✓
✓
✓
Turnaround
(99)
Refinery CDUs (Mid-con)(YoY) Turnaround
266
CNQ Horizon Mining
Production
10
Delek US
Rail
10
Eddystone
Rail
80
Pipeline
100
Production
110
Pipeline
150
Turnaround
76
Refinery CDUs (Mid-con)(YoY) Turnaround
158
MEG Christina Lake 2B
Production
35
Refinery Cokers (Mid-con)
Turnaround
39
Refinery CDUs (Mid-con)(YoY) Turnaround
399
Keystone GC first oil
Kearl
Longhorn expansion
Refinery Cokers (Mid-con)
4Q13
Heavy
Bakken North
Refinery Cokers (Mid-con)
3Q13
Light
✓
✓
✓
✓
▼
▼
▼
▲
✓
✓
✓
✓
✓
✓
✓
✓
Expect~80mbpd of heavy & limited WTI-Brent impact
▼
Part of larger series of projects
Narrows Midland
Ramps until 2Q14
▼
▲
Fewer q-o-q coker turns
More turnarounds means less processing capacity
▲
▲
Expected to reach capacity mid-2013
Expected to reach capacity mid-2013
Brings Bakken into W. Canada, return to US in blend
▼/▲
▼/▲
Narrows Midland
Tighten Midland vs. Cushing
▼
Part of larger series of projects
▼/▲
▲
▲
✓
✓
✓
✓
▼
▼
✓
✓
Begins at phase 1 terminus; narrows EF
▲
▼
Fewer turnarounds means more processing capacity
Ramps 2Q13-3Q13
▼
▼
Increases access to inland and WCS
▲

▲
Bakken to Philadelphia-area refineries
▼
✓
✓
▼
▼
300<-->
Permian Express expansion
Pipeline
60
CVE Christina Lake E
Production
40
CNQ Kirby South
Production
10
Keystone GC Proj.
Pipeline
700
Sunshine West Ells
Production
5
✓
Refinery
180
✓
▲
▼
▲
Ramps through early 2014
▼
Fewer q-o-q coker turns narrows WCS
Fewer turnarounds means more processing capacity
Houston, TX to Houma, LA
Further ramp

▲
▼
Fewer q-o-q coker turns narrows WCS
Fewer turnarounds means more processing capacity
▲
▲
✓
Expected to reach capacity YE13 or early 2014
▲
▼
▼/▲
▼/▲
✓
✓
Assume light initially, pressures LLS-WTI
Narrows Midland, pressures Brent- WTI
▼
✓
✓
✓
Higher q-o-q coker turns widens WCS
▲
▼/▲
Pipeline
✓
Notes

▼/▲
✓
✓
▲
▼
Ho-Ho reversal
New Coking Capacity
Local Differentials Impact
PADD 2,4
PADD 3
W. Canada
▼
Ahead of schedule
Limited impact
Full ramp, 100% imports displaced, Clears Cushing,
Widens Brent-LLS
Limited impact
Whiting 102mbpd coker swap adds net 260mbpd
Heavy runs; online 4Q13, ramps 1H14
Source. Morgan Stanley Research
Exhibit 115
Estimated Rates for Rail
Origin:
Destination:
Miles
Capacity (bbl)
Williston, ND
Stroud, OK
1,345
64,881
Williston, ND
St Jam es, LA
1,961
64,881
Williston, ND
Port Arthur, TX
1,926
64,881
Williston, ND
Philadelphia, PA
1,888
64,881
Williston, ND
Los Angeles, CA
2,256
64,881
Williston, ND
Cherry Point, WA
1,191
64,881
Edm onton, AB
Paulsboro, NJ
2,552
64,881
Edm onton, AB
Vancouver, BC
781
64,881
Rail Options
Rail Rate
Fuel Surcharge
Total Rail Rate
$5.21
$0.85
$6.06
$10.20
$1.24
$11.43
$7.11
$1.22
$8.33
$12.68
$1.19
$13.88
$9.01
$1.43
$10.43
$5.98
$0.75
$6.73
$16.58
$1.61
$18.19
$5.74
$0.43
$6.17
Loading Costs
Trucking
Transloading
$2.43
$1.88
$0.55
$2.43
$1.88
$0.55
$2.43
$1.88
$0.55
$2.43
$1.88
$0.55
$2.43
$1.88
$0.55
$2.43
$1.88
$0.55
$2.43
$1.88
$0.55
$2.43
$1.88
$0.55
Unloading Costs
Trucking
Transloading
TOTAL COST
$0.55
$0.00
$0.55
$9.04
$0.55
$0.00
$0.55
$14.41
$0.55
$0.00
$0.55
$11.31
$1.86
$1.31
$0.55
$18.16
$2.00
$1.45
$0.55
$14.87
$0.55
$0.00
$0.55
$9.71
$2.00
$1.45
$0.55
$22.62
$2.00
$1.45
$0.55
$10.60
Source. . Morgan Stanley Research
31
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Weekly DOE Petroleum Status Report
Exhibit 116
Crude Oil and Refined Product Statistics, Week Ending Feb 7
Crude Oil Inventories (MMbbl)
PADD 1
PADD 2
PADD 3
PADD 4
PADD 5
Total US
Cushing, OK
SPR
This Wk. Last Wk.
10.2
10.5
105.4
108.5
173.6
169.8
20.0
19.6
52.2
49.6
361.4
358.1
37.6
40.3
696.0
696.0
Chg %
(3.0%)
(2.9%)
2.3%
2.1%
5.1%
0.9%
-6.6%
0.0%
Crude Oil Flow s (m bpd)
Oil Dom estic
Im ports Production
PADD 1
790
PADD 2
1,832
PADD 3
3,912
PADD 4
296
PADD 5
1,099
Total US
7,929
8,132
Last Week
6,887
8,044
Last Year
7,513
7,064
Refinery Inputs (m bpd)
Crude Oil Utlization Utlization
Inputs
(%) Last Wk.
PADD 1
971
75.0
77.1
PADD 2
3,567
94.8
95.1
PADD 3
7,949
88.0
86.0
PADD 4
493
78.0
81.8
PADD 5
2,235
81.5
80.1
Total US
15,215
87.1
86.1
Last Week
15,049
86.1
Last Year
14,310
83.8
Total
Refined
Products
Total US
18,541
vs. Last Week
(3.0%)
vs. Last Month (1.7%)
vs. Last Year
(2.7%)
Total
Motor
Gasoline
8,911
(1.4%)
4.6%
0.3%
Reformulated
Gasoline
2,932
(0.7%)
5.4%
(0.1%)
Crude and Refined Product Im plied Dem and (m bpd)
Total
Conventional
Kerosene
Total
< 15 ppm
Gasoline
Jet Fuel Distillate Fuel Distillate Fuel
5,979
1,458
4,971
4,653
-1.8%
(10.8%)
(5.1%)
-1.5%
4.2%
(10.1%)
(1.8%)
4.4%
0.5%
(4.3%)
(1.1%)
4.2%
> 15 ppm
Distillate
Fuel
319
(37.8%)
(47.4%)
(43.0%)
Residual
Fuel Oil
570
(15.4%)
(3.4%)
(9.7%)
Propane,
Propylene,
Other Oils
2,060
22.3%
(2.2%)
16.1%
Total
Refined
Products
Total US
16,780
vs. Last Week
0.7%
vs. Last Month
1.8%
vs. Last Year
2.3%
Total
Motor
Gasoline
8,866
0.8%
6.5%
(0.3%)
Reformulated
Gasoline
2,933
(0.6%)
5.5%
(0.1%)
Refined Product Production (m bpd)
Total
Conventional
Kerosene
Total
<15 ppm
Gasoline
Jet Fuel Distillate Fuel Distillate Fuel
6,145
1,483
4,598
4,213
2.0%
4.1%
0.3%
1.2%
0.9%
(3.1%)
-2.4%
-0.4%
7.5%
3.3%
5.5%
4.8%
>15 ppm
Distillate
Fuel
386
(8.5%)
(19.1%)
14.2%
Residual
Fuel Oil
404
(12.0%)
(20.0%)
(13.5%)
Propane,
Propylene
1,429
1.6%
0.6%
14.0%
Total
Refined
Products
Total US
674.3
vs. Last Week
(0.2%)
vs. Last Month (3.2%)
vs. Last Year
(6.8%)
Total
Motor
Gasoline
233.1
(0.8%)
(0.0%)
(0.1%)
Finished
Motor
Gasoline
40.2
(0.5%)
(2.6%)
(30.9%)
Refined Product Stocks (MMbbl)
Total
Gasoline Blending Kerosene
Total
<15 ppm
Component
Jet Fuel Distillate Fuel Distillate Fuel
192.9
37.0
113.1
92.9
-0.8%
2.4%
(0.6%)
-1.4%
0.5%
(0.3%)
(8.8%)
-9.5%
10.2%
(4.5%)
(10.2%)
-6.8%
>15 ppm
Distillate
Fuel
20.2
3.0%
(5.2%)
(23.1%)
Residual
Fuel Oil
37.7
(0.4%)
(0.2%)
7.4%
Propane,
Propylene,
Other Oils
236.4
0.1%
(4.8%)
(12.8%)
Total
Refined
Products
Total US
1,771
vs. Last Week
(9.7%)
vs. Last Month 28.5%
vs. Last Year
(14.3%)
Total
Motor
Gasoline
350
(43.5%)
(13.6%)
(42.7%)
Finished
Motor
Gasoline
15
(73.2%)
87.5%
87.5%
Refined Product Im ports (m bpd)
Total
Gasoline Blending Kerosene
Total
<15 ppm
Component
Jet Fuel Distillate Fuel Distillate Fuel
335
98
269
151
-40.6%
512.5%
-14.1%
-6.2%
-15.6%
104.2%
29.3%
75.6%
-44.4%
108.5%
88.1%
147.5%
>500 ppm
Distillate
Fuel
86
-30.1%
(30.1%)
3.6%
Residual
Fuel Oil
142
(26.4%)
39.2%
(45.8%)
Propane,
Propylene,
Other Oils
912
11.2%
48.3%
-9.1%
Finished
Gasoline
586
17.7%
21.1%
Refined Product Exports (m bpd)*
Residual
Distillate Fuel
Jet Fuel
Fuel
1,296
156
372
-3.2%
26.8%
-1.1%
19.7%
27.9%
(7.0%)
Other Oils
875
-0.2%
9.6%
Total US
vs. Last Month
vs. Last Year
Total Refined
Products
3,661
2.2%
20.2%
Propane,
Propylene
376
1.6%
135.0%
*exports reported second week of each month and estimated by the DOE
Source: EIA, Bloomberg, Morgan Stanley Research
32
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Global Economic & Leading Indicators
Exhibit 117
Morgan Stanley GDP Estimates (YoY Change)
4.0%
US GDP (yoy % change)
3.1%
2.8%
3.0%
4.0%
3.1%
2.9%
2.50%
2.0%
EMU GDP (yoy % change)
2.8%
1.8%
1.7%
1.5%
0.90%
2.0%
1.8%
2.0%
1.4%
0.4%
1.6%
0.0%
1.0%
-0.5%
-2.0%
0.0%
0.0%
-4.0%
-1.0%
-4.1%
-6.0%
-2.0%
-7.0%
-2.6%
-3.0%
2005
2006
2007
2008
2009
-8.0%
2010
2011
2005
2012E 2013E 2014E
2006
2007
2008
2009
2010
12.0%
14.0%
11.6%
12.0%
10.0%
10.4%
2012E 2013E 2014E
India GDP (yoy % change)
China GDP (yoy % change)
13.0%
2011
9.9%
9.3%
9.1%
9.0%
10.3%
9.6%
10.0%
9.3%
9.2%
7.5%
8.0%
8.2%
8.2%
8.0%
7.5%
7.2%
6.80%
7.90%
6.1%
6.0%
5.9%
6.0%
4.0%
4.0%
2.0%
2.0%
0.0%
0.0%
2005
2006
2007
2008
2009
2010
2011
2012E 2013E 2014E
2005
2006
2007
2008
2009
2010
2011
2012E 2013E 2014E
Source: Morgan Stanley Research
Exhibit 118
Exhibit 119
ECRI Weekly Leading Index (1992=100)
US Industrial Production Index (Indexed: 2007=100)
150
105
100
140
95
130
90
120
85
80
110
Mar-13
Mar-12
Mar-11
Mar-10
Mar-09
Mar-08
Mar-07
Mar-06
Mar-05
Aug-11
Aug-10
Aug-09
Aug-08
Aug-07
Aug-06
Aug-05
Aug-04
Aug-03
Aug-02
Source: Bloomberg, Morgan Stanley Research
Mar-04
75
100
Source: Bloomberg, Morgan Stanley Research
33
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Fifth Annual Refining Corporate Access Day
34
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Coverage Team, Refining Publications & Content Index
North American Integrated Oil, Exploration and Production and Refining Coverage Team
Evan Calio
Drew Venker
Benny Wong
Manav Gupta
Jacob Dweck
Evan.Calio@MorganStanley.com
Drew.Venker@MorganStanley.com
Benny.Wong@MorganStanley.com
Manav.Gupta@MorganStanley.com
Jacob.Dweck@MorganStanley.com
(212) 761-6472
(212) 761-3729
(212) 761-3729
(212) 761 8194
(212) 761-6172
Exhibit 120
Refining and Marketing Publications
Title
PBF Energy: LIFO Benef its Drive Beat
Ref ining & Marketing:Return of the RIN?
Tesoro Corp: 4Q13 Miss & 2014EPS Risks
Ref ining & Marketing:Seasonal Trade Tailw inds as Big Gulf Coast Beats
Phillips 66:PSX 4Q13 Earnings Recap Asset Sale Insights
Marathon Petroleum:Beat + Gulf Coast Crude Build Fuels Rally
Valero Energy: Best Gulf Coast Leverage
Ref ining & Marketing:Spot Dif f s Trump Results
Valero Energy: VLO Raises the Bar
Ref ining & Marketing:Crude Exports Washington Focus as LLS Dif f s Erode
Ref ining & Marketing:Ref ining Outlook 2014
Integrated Oil: E&P and Ref ining Tug-of -War to Continue in 2014
Ref ining & Marketing:Inventories Cleaning Up
Ref ining & Marketing:Year-End Review :The-Tug-of War Continues
Tesoro Corp:Synergy Dominates Analyst Day Discussion
Ref ining & Marketing:Gulf Coast Trif ecta
MPC:Spot Commodity Markets Trumping Analyst Day
Ref ining & Marketing:MPC Analyst Day and Cushing Conundrum
MPC:Show Me the Midstream
Ref ining & Marketing:Back in the Fold
Ref ining & Marketing:Cushing Builds + Peak Ethanol Support Sector
Western Ref ining: Another Winning Transaction
Ref ining & Marketing:Into the Seasonal Low
Delek:Earnings Recap
Tesoro: 3Q13 Earnings Miss: Low Cal. Turnaround Headw inds
HollyFrontier: Mid-Con Miss: Outlook In-line
Ref ining & Marketing:Mixed Earnings: Current Market Fueling Optimism
PSX:Favorite f or Chemicals Midstream & Cash Returns
Valero Energy: Positive Start to Earnings
Ref ining & Marketing: Earnings Week Ahead
Ref ining & Marketing: Bounce or Bottom?
Ref ining & Marketing: RIN Relief Rally
Ref ining & Marketing: Tropical Storm Karen & Keystone Approach the GC
Video: Low ering Brent-WTI / Ref ining Review , Feedback, & Implications
Ref ining & Marketing: Negative Revisions into 2014
Ref ining & Marketing: Getting Better Takes Longer: Low er Estimates & Targets
Ref ining & Marketing: Cracks Falling Faster than Runs into Fall Maintenance
Ref ining & Marketing: Bad but Not Broken
Ref ining & Marketing: Favoring Gulf Coast over Mid-Con in the Near-term
HollyFrontier Balanced Risk-Rew ard;Low ering to Equal-w eight
Ref ining & Marketing: Takeaw ays f rom Houston Energy Summit 2013
Phillips 66: Successf ul MLP Highlights Valuation and Upside
Ref ining & Marketing: Recap, RINs Resolution and Turnarounds
Delek: Earnings Miss on Low er Capture and Narrow ing Dif f s
HollyFrontier: In-line Qtr, Low er Spot Margins Weigh on Stock
Alon USA: In-line Results and Outlook
Ref ining & Marketing: Earnings Recap: Focus Narrow ing Margins and RINs Improving
PBF Energy: Another Challenging Quarter
TSO: Beat and Dividend Raise
PSX: The Def ensive Ref iner
Ref ining & Marketing: Good Old Days - Are they Here to Stay?
VLO: 2Q13 Earnings Recap:Ethanol and Methanol
Ref ining & Marketing: RFS Breakdow n Sooner than Expected: Gas Could Spike
Ref ining & Marketing: Buying Bad New s?
Inde x
PBF
Coverage
TSO
Coverage
PSX
MPC
VLO
Coverage
VLO
Coverage
Coverage
Coverage
Coverage
Coverage
TSO
Coverage
MPC
Coverage
MPC
Coverage
Coverage
WNR
Coverage
DK
TSO
HFC
Coverage
PSX
VLO
Coverage
Coverage
Coverage
Coverage
Coverage
Coverage
Coverage
Coverage
Coverage
Coverage
HFC
Coverage
PSX
Coverage
DK
HFC
ALJ
Coverage
PBF
TSO
PSX
Coverage
VLO
Coverage
Coverage
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Universe
Date
13-Feb-14
10-Feb-14
5-Feb-14
3-Feb-14
29-Jan-14
29-Jan-14
29-Jan-14
27-Jan-14
23-Jan-14
20-Jan-14
14-Jan-14
12-Jan-14
23-Dec-13
16-Dec-13
10-Dec-13
9-Dec-13
4-Dec-13
2-Dec-13
2-Dec-13
25-Nov-13
18-Nov-13
13-Nov-13
11-Nov-13
7-Nov-13
7-Nov-13
6-Nov-13
4-Nov-13
30-Oct-13
29-Oct-13
28-Oct-13
21-Oct-13
14-Oct-13
7-Oct-13
4-Oct-13
30-Sep-13
30-Sep-13
23-Sep-13
16-Sep-13
9-Sep-13
9-Sep-13
3-Sep-13
19-Aug-13
12-Aug-13
8-Aug-13
8-Aug-13
7-Aug-13
5-Aug-13
2-Aug-13
2-Aug-13
1-Aug-13
29-Jul-13
23-Jul-13
23-Jul-13
15-Jul-13
Source: Morgan Stanley Research
35
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Disclosure Section
The information and opinions in Morgan Stanley Research were prepared by Morgan Stanley & Co. LLC, and/or Morgan Stanley C.T.V.M. S.A., and/or
Morgan Stanley Mexico, Casa de Bolsa, S.A. de C.V., and/or Morgan Stanley Canada Limited. As used in this disclosure section, "Morgan Stanley"
includes Morgan Stanley & Co. LLC, Morgan Stanley C.T.V.M. S.A., Morgan Stanley Mexico, Casa de Bolsa, S.A. de C.V., Morgan Stanley Canada
Limited and their affiliates as necessary.
For important disclosures, stock price charts, valuation methodology and risks associated with any price targets, and equity rating histories regarding
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Analyst Certification
The following analysts hereby certify that their views about the companies and their securities discussed in this report are accurately expressed and
that they have not received and will not receive direct or indirect compensation in exchange for expressing specific recommendations or views in this
report: Evan Calio.
Unless otherwise stated, the individuals listed on the cover page of this report are research analysts.
Global Research Conflict Management Policy
Morgan Stanley Research has been published in accordance with our conflict management policy, which is available at
www.morganstanley.com/institutional/research/conflictpolicies.
Important US Regulatory Disclosures on Subject Companies
As of January 31, 2014, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in
Morgan Stanley Research: HollyFrontier Corporation, Marathon Petroleum Corporation, PBF Energy Inc, Tesoro Corp.
Within the last 12 months, Morgan Stanley managed or co-managed a public offering (or 144A offering) of securities of PBF Energy Inc, Phillips 66,
Tesoro Corp.
Within the last 12 months, Morgan Stanley has received compensation for investment banking services from HollyFrontier Corporation, PBF Energy
Inc, Phillips 66, Tesoro Corp.
In the next 3 months, Morgan Stanley expects to receive or intends to seek compensation for investment banking services from Alon USA Energy, Inc.,
Delek US Holdings Inc, HollyFrontier Corporation, Marathon Petroleum Corporation, PBF Energy Inc, Phillips 66, Tesoro Corp, Valero Energy
Corporation, Western Refining Inc..
Within the last 12 months, Morgan Stanley has received compensation for products and services other than investment banking services from Delek
US Holdings Inc, HollyFrontier Corporation, Marathon Petroleum Corporation, PBF Energy Inc, Phillips 66, Tesoro Corp, Valero Energy Corporation.
Within the last 12 months, Morgan Stanley has provided or is providing investment banking services to, or has an investment banking client
relationship with, the following company: Alon USA Energy, Inc., Delek US Holdings Inc, HollyFrontier Corporation, Marathon Petroleum Corporation,
PBF Energy Inc, Phillips 66, Tesoro Corp, Valero Energy Corporation, Western Refining Inc..
Within the last 12 months, Morgan Stanley has either provided or is providing non-investment banking, securities-related services to and/or in the past
has entered into an agreement to provide services or has a client relationship with the following company: Alon USA Energy, Inc., Delek US Holdings
Inc, HollyFrontier Corporation, Marathon Petroleum Corporation, PBF Energy Inc, Phillips 66, Tesoro Corp, Valero Energy Corporation, Western
Refining Inc..
An employee, director or consultant of Morgan Stanley is a director of Valero Energy Corporation. This person is not a research analyst or a member
of a research analyst's household.
Morgan Stanley & Co. LLC makes a market in the securities of Alon USA Energy, Inc., Delek US Holdings Inc, HollyFrontier Corporation, Marathon
Petroleum Corporation, PBF Energy Inc, Phillips 66, Tesoro Corp, Valero Energy Corporation, Western Refining Inc..
The equity research analysts or strategists principally responsible for the preparation of Morgan Stanley Research have received compensation based
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Morgan Stanley uses a relative rating system using terms such as Overweight, Equal-weight, Not-Rated or Underweight (see definitions below).
Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we cover. Overweight, Equal-weight, Not-Rated and Underweight are not the
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Global Stock Ratings Distribution
(as of January 31, 2014)
For disclosure purposes only (in accordance with NASD and NYSE requirements), we include the category headings of Buy, Hold, and Sell alongside
our ratings of Overweight, Equal-weight, Not-Rated and Underweight. Morgan Stanley does not assign ratings of Buy, Hold or Sell to the stocks we
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36
MORGAN
STANLEY
RESEARCH
February 18, 2014
Refining & Marketing
Stock Rating Category
Coverage Universe
Investment Banking Clients (IBC)
% of
% of % of Rating
Total
Count
Count Total IBC Category
Overweight/Buy
Equal-weight/Hold
Not-Rated/Hold
Underweight/Sell
Total
1014
1315
101
543
2,973
34%
44%
3%
18%
311
392
26
96
825
38%
48%
3%
12%
31%
30%
26%
18%
Data include common stock and ADRs currently assigned ratings. Investment Banking Clients are companies from whom Morgan Stanley received
investment banking compensation in the last 12 months.
Analyst Stock Ratings
Overweight (O). The stock's total return is expected to exceed the average total return of the analyst's industry (or industry team's) coverage universe,
on a risk-adjusted basis, over the next 12-18 months.
Equal-weight (E). The stock's total return is expected to be in line with the average total return of the analyst's industry (or industry team's) coverage
universe, on a risk-adjusted basis, over the next 12-18 months.
Not-Rated (NR). Currently the analyst does not have adequate conviction about the stock's total return relative to the average total return of the
analyst's industry (or industry team's) coverage universe, on a risk-adjusted basis, over the next 12-18 months.
Underweight (U). The stock's total return is expected to be below the average total return of the analyst's industry (or industry team's) coverage
universe, on a risk-adjusted basis, over the next 12-18 months.
Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months.
Analyst Industry Views
Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the
relevant broad market benchmark, as indicated below.
In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant
broad market benchmark, as indicated below.
Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant
broad market benchmark, as indicated below.
Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index;
Europe - MSCI Europe; Japan - TOPIX; Asia - relevant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index.
.
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37
MORGAN
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RESEARCH
February 18, 2014
Refining & Marketing
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38
MORGAN
The Americas
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United Kingdom
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Industry Coverage:Refining & Marketing
Company (Ticker)
Evan Calio
Alon USA Energy, Inc. (ALJ.N)
Delek US Holdings Inc (DK.N)
HollyFrontier Corporation (HFC.N)
Marathon Petroleum Corporation
(MPC.N)
PBF Energy Inc (PBF.N)
Phillips 66 (PSX.N)
Tesoro Corp (TSO.N)
Valero Energy Corporation (VLO.N)
Western Refining Inc. (WNR.N)
Rating (as of) Price* (02/14/2014)
E (09/11/2012)
E (02/02/2011)
E (09/09/2013)
O (07/08/2011)
$14.7
$29.36
$46.28
$87.71
E (07/08/2013)
O (09/11/2012)
E (03/15/2011)
O (09/11/2012)
E (02/29/2012)
$26.04
$75.93
$50.26
$49.86
$38.34
Stock Ratings are subject to change. Please see latest research for each company.
* Historical prices are not split adjusted.
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