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The shares of oil refining company CVR Energy have almost doubled in value since the U.S. presidential elections, with a major boost for the stock coming from the naming of Carl Icahn as special adviser to president Trump. Icahn is the majority shareholder of CVR Energy, with an 82-percent stake.
As a special adviser, Icahn will be in a position to recommend industry-friendly regulation and encourage the repealment of non-friendly rules. One of these that the investor has been vocally opposing, is the requirement for refiners who don’t blend ethanol into their production to buy credits. The rule, as CNBC points out, is specifically harmful for smaller, merchant refiners such as CVR Energy, who are obliged to buy credits from larger players who have the facilities to blend ethanol into their gasoline, as per EPA requirements.
This rule significantly increased the costs for independent refiners, aggravating an already difficult situation for them, with declining margins wiping out profits last year. The reason for the declining margins, the Motley Fool notes, was the lag between crude oil prices and fuel prices. The former started climbing up last year, but not the latter, troubling investors.
This year, however, is shaping up to be much better for CVR Energy and its peers. CVR boasts some of the lowest production costs in the industry, and thanks to some logistics assets, it has access to crude oil at discount prices.
Thanks to all this, the company is expected to report positive results for the fourth quarter of 2016 and full-2016. Earnings for the quarter are seen at US$0.11, versus earlier expectations of US$0.02 per share, and full-year EPS are projected at US$0.13.
Yesterday, the shares of CVR Energy closed at US$22.21, after hitting a high of US$23.19 in mid-morning trade.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.