Motley Fool is reporting:
What may be considered a great stroke of luck could potentially be one
of HollyFrontier's greatest competitive advantages going forward.
Unlike
large competitors Phillips 66 and Valero, which have a majority of their refining capacity in the Gulf of
Mexico or on the coasts, HollyFrontier's five refineries are all located
in the mid-continent, Rockies, and southwest regions, which puts them
all smack-dab in the middle of the Mississippian Lime, Niobrara,
Permian, and Uinta formations.
The linked article has three nice graphics; when you get there, note that the bottom-most graphic is of HollyFrontier.
The article goes on:
Second, most of these unconventional plays lack sufficient capacity.
So E&P companies that have leveraged their entire portfolios into a
single play -- think SandRidge Energy and its 1.85 million acres in the Mississippian Lime
-- will need to rely heavily on local refiners to buy product.
A bottlenecked market could lead to discounted prices for local crudes.
Bad for E&P, very good for HollyFrontier.
As of right now, several of the younger shale plays, like the
Mississippian lime and the Niobrara, have yet to deliver crude to
HollyFrontier refiners, because the company's refineries are currently
designed to handle Western Canadian Select blend and Christina Lake
crudes. This is probably due to change, though.
CEO Michael Jennings
recently stated in a conference call that he believes the company will
start to see opportunity from these basins within a year. What also
makes this path so attractive is that Gulf refiners such as Phillips 66
and Valero seem more keen on processing heavy oil from the Canadian oil sands rather than mid-continent crudes because of the oil sands' similarity to its current feedstocks.
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