Stay Away From CVR Refining

This article was originally published by TheStreet  on April 08, 2014

By Sarfaraz A. Khan

NEW YORK (TheStreet) -- An attractive yield isn't everything. Here's why you should stay away from CVR Refining (CVRR_).

CVR Refining is a limited partnership and the refining arm of CVR Energy (CVII_), which, in turn, is mainly a holding company that is also engaged in fertilizer manufacturing operations through CVR Partners (UAN_). CVRR offers attractive yield of 7.80% and it is trading just 6.6 times its trailing earnings. But this $3.4 billion market-cap company is not without risks.

Why This Icahn-Backed Refiner Is Not for the Faint of Heart

This article was originally published on 11/25/13 by TheStreet

NEW YORK (TheStreet) -- CVR Refining (CVRR_) is an independent refiner based in Sugar Land, Texas, with a market cap of $3.3 billion. The firm, which is a master limited partnership (MLP), was formed by CVR Energy (CVI_) to handle its refining and related logistics operations. The most recent quarterly earnings of the refiner witnessed a significant drop. But that was largely due to an equipment failure at one of its refineries, which caused a considerable drop in throughput. More important, CVR Refining has cut down its cash distribution. The business is a variable rate MLP and has just two refineries, which makes it an inherently riskier investment than other traditional MLPs. Although CVR Refining has decent long-term growth prospects, it is certainly not for the fainthearted.

CVR Refining owns two of the seven refineries in Group 3 of the PADD II region of the United States: a 115,000-barrel-a-day oil refinery in Coffeyville, Kan., and a 70,000-barrel-a-day oil refinery in Wynnewood, Okla. The refiner also owns pipelines, crude oil gathering tank farms, storage capacity and other related assets.

The company supplies its products to Kansas, Oklahoma, Missouri, Nebraska and Iowa. This is an area where the demand for gasoline and distillates has exceeded the supply. As a result, CVR Refining benefits from favorable market fundamentals.

Time To Buy Into This Icahn Backed Refiner

From  Seeking Alpha

The following is a "small cap insight" column written by Sarfaraz A. Khan about a company with a market cap of less than $5 billion. 

CVR Energy (CVI) is an oil refiner and marketer of petroleum fuels and a maker of nitrogen fertilizer products. It primarily operates under two segments, petroleum business, called CVR Refining (CVRR), and nitrogen fertilizer business, called CVR Partners (UAN). Both of its subsidiaries are Master Limited Partnerships. So essentially, CVR Energy is a holding company of these two MLPs and owns significant common units of the companies. The market cap of the three firms is presented below.

Market Cap in $ Millions
CVR Energy	3,650
CVR Refining	3,870
CVR Partners	1,320

The main focus of the article is on the holding company. CVR Energy has reasonable valuation and has also made significant improvements in their operations. It is one of the best dividend stocks out there which pays like an MLP. In this article, I will discuss the company's performance over the last five years, its future prospects and present some of the main points which I believe makes this relatively small energy play an attractive buy.

Carl Icahn

Carl Icahn owns nearly 80% of CVR Energy. The billionaire investor initially started with a 14.5% stake in the energy firm in January 2012. CVR Energy has now become Icahn's second largest holding, behind only his Icahn Enterprises.

Quarterly Results

Earlier this month, CVR Energy released its quarterly results (available here) in which its net sales dropped by 3.81% year-over-year to $2.22 billion while …. Read More