Carl Icahn's refiner is about one-twentieth the size of Marathon Petroleum. It's nearing a deal to buy some of Marathon's refineries. The price is more than $4 billion, people familiar told the Journal's Collin Eaton. The announcement was set for Tuesday morning, Nov. 3, if the talks held. At press time, it hadn't been made.
CVR Energy is worth close to $6 billion. Its stock is up roughly 120% this year through Monday. Marathon (MPC) is worth around $125 billion. CVR is the seventh-biggest publicly traded refiner in the U.S. Marathon, Valero and Phillips 66 sit ahead of it, each about 20 times its size. Icahn owns roughly 71% of CVR's shares. His son Brett sits on the board. The paper doesn't name which Marathon plants are in the deal.
Why anyone wants a refinery right now
A refinery turns crude oil into diesel, gasoline and jet fuel. The gap between what it pays for crude and what it gets for fuel is the margin. That margin is wide this year. The war in Ukraine and the fighting in the Middle East have shut a big share of the world's refining. CVR's plants in Kansas and Oklahoma are selling fuel at rich prices because of it. So companies are hunting for more plants. ExxonMobil (XOM) and Chevron (CVX) are investing to squeeze more fuel out of Gulf Coast refineries. Last week Valero (VLO) agreed to buy a closed Houston refinery for $320 million. Even a shut plant has a price now.
Here's what the price table says. Oil fell $7.66 a barrel on Monday, Nov. 2. The refiners fell with it. Marathon closed at $430.39, down $14.34. Valero closed at $381.46, down $18.20. Phillips 66 closed at $275.04, down $7.79. Refiners and drillers don't always move together. A driller wants crude high. A refiner wants the gap wide. On Monday they fell as one. Marathon reports earnings Tuesday, by the paper's calendar.
Our read
This is an Investments/Risk · IN04 story. We hold neither CVR Energy nor Marathon Petroleum in any model book. Valero (VLO) is our refiner, held at weight in 12 books. Nothing added. Valero's written trim trigger is a published White House restriction on U.S. diesel exports. This story reports none. The trigger is not met. On the deal itself, we watch. A company where one man owns roughly 71% moves on his decisions. Minority holders ride along. That's fine when the ride is up 120%. It cuts the other way too.
Now to your own money. Most people own energy through a fund, and most never check what kind of energy it holds. Drillers, refiners and pipelines are three different businesses. They answer to three different prices. This week, open your energy fund or your 401(k)'s energy sleeve and read the top ten holdings. Count the refiners. If you thought you owned oil and you mostly own fuel margins, now you know. If the count surprises you, bring the list to your next review. You don't check the roof in the storm. You check it on a dry afternoon like this one.