Already winning big on the margin front, the nation’s largest independent refiner Valero (VLO) could be a big beneficiary of the Keystone XL’s approval.
Like Exxon, Valero’s refiners in the Gulf are some of the best equipped to handle the Canadian crude as they have been typically been fed by imports from Mexico and Venezuela. Valero has already committed to taking at least 100,000 barrels a day — roughly 20% of initial capacity — from Keystone XL until 2030 and has begun expanding the hydrocracking capacity at these refineries.
Aside from the profit margin potential, Valero has another reason to win from the Keystone — its option to purchase a chunk of it. VLO has the right to buy up to 15% of the pipeline. With its recent pipeline master limited partnership spinoff, Valero Energy Partners LP (VLP), VLO could be setting itself up for a nice tax-advantaged drop-down if the project is ultimately approved. That could result in higher dividends for shareholders down the road.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.