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V-MLPs: A Refined View

By Elliott H. Gue on Jun. 25, 2014

CVR Refining LP shares the same general partner, CVR Energy (NYSE: CVI), as fertilizer producer CVR Partners LP (NYSE: UAN).

The V-MLP owns three primary assets:

  • A 115,000 barrel per day refinery in Coffeyville, Kan., that supplies CVR Partners’ nearby fertilizer plant;
  • A 70,000 barrel per day refinery in Wynnewood, Okla.; and
  • Associated pipelines and other logistics assets to transport crude oil and refined products.

CVR Refining’s two refineries have ready access to crude oil from the Bakken Shale in North Dakota and the Permian Basin in west Texas, two prolific unconventional plays where surging production has led to favorable pricing relative to international benchmarks.

In addition, the Coffeyville facility sources significant volumes of crude oil from Alberta, where Western Canada Select trades for about $87.00 per barrel–a significant discount to West Texas Intermediate (WTI), which goes for $107.00 per barrel. (We examined this pricing dynamic in Price Check on Canadian Oil and Gas.)

Access to cheaper North American crude oils has boosted CVR Refining’s profitability considerably.

And the V-MLP has invested in a series of upgrades to its refineries that enables them to process a wider variety of crude-oil grades, from the lighter output that predominates in major shale plays to heavy-sour varietals produced in Canada. Greater feedstock flexibility translates into superior profitability and ability.

In the first quarter of 2014, CVR Refining’s crude-oil costs averaged about $2.70 per barrel less than the price of WTI delivered to the hub in Cushing, Okla.

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