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Refiners Surge as Heating Demand Increases

David Becker
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www.iforex.com

The stormy cold weather that has engulfed the eastern portion of the US has created significant demand for heating fuels which has made refiners an attractive play.

Phillips 66 (NYSE:PSX) operates as an independent downstream energy company. The company operates in three segments: Refining and Marketing (R&M), Midstream, and Chemicals.

The company announced last Friday that it received approval from its board of directors for $3 billion in new midstream growth projects. The company will now begin to move forward on both its Sweeny Fractionator One and the Freeport Liquefied Petroleum Gas Export Terminal. Together, the projects will create more than 50 full-time jobs as well as more than 1,000 temporary construction jobs in Texas, according to the company.

The 52-week range of PSX is $54.80 – $79, and the stock hit a fresh 52-week high in January. Earnings declined 34% in the latest quarter but the 3-year growth rate of earnings was a positive 25%. Sales were up 1% quarter over quarter and the three-year growth rate of sales was down 2 %. The company has a profit margin of 3.4%, and the dividend yield is a positive 2.1%.

Recent insider buying makes the stock look attractive. Director William R. Loomis acquired 13,600 shares of this downstream energy company, paying $73.55 per share for a total amount of $1 million. Mr. Loomis increased his stake by 175.26% to 21,360 shares with this purchase. There have been no insider sales on the stock in 2014.

The technical picture for the stock shows that price action is rebounding and attempting to test resistance near the 50-day moving average. Momentum is strong as the MACD (moving average convergence divergence) index has generated a buy signal. This occurs as the spread (the 5-day moving average minus the 13-day moving average) crosses above the 6-day moving average of the spread.

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