Phillips 66 (PSX), Valero Energy Corporation (VLO), Devon Energy Corp (DVN): Look for Gains With These Oil Refiners

In addition, Valero is committed to strengthening its capital structure by paying down debt.  To this end, Valero retired $180 million of 6.7% senior notes that matured in mid-January of this year and expects to retire $300 million of maturing notes in the second quarter of 2013.

Finally, management is committed to providing shareholders with a competitive dividend.  The company’s board of directors approved an increase in the company’s regular quarterly cash dividend on common stock from $0.175 per share to $0.20 per share going forward, representing an increase of more than 14%.  At current prices, the stock yields roughly 1.75%.

Last but not least, Devon Energy (NYSE:DVN) is a competitor in the oil refinery space that is in the midst of a turnaround.  Shares of Devon Energy Corp (NYSE:DVN) have not enjoyed the same rallies as its refining peers.  The stock is trading near multi-year lows and more than 40% below its recent highs from April 2011.

On the surface, Devon Energy Corp (NYSE:DVN)’s most recently reported results were discouraging.  The company reported a net loss of $357 million for the fiscal fourth quarter, or $0.89 per diluted share. However, the true operating performance of the company was not as dire.  Excluding an asset impairment charge and other items securities analysts typically exclude from estimates, Devon Energy Corp (NYSE:DVN) actually earned $0.78 per diluted share in the fourth quarter of 2012.

Asset impairments also led to a loss of $206 million for the full year, representing a loss of $0.52 per diluted share. Excluding adjusting items, the company turned a profit of $1.3 billion or $3.26 per diluted share in 2012.  The company believes its strong production numbers are a reason for optimism going forward.  Devon Energy Corp (NYSE:DVN) recorded the highest production total in the company’s history from its North American property base.  Devon also pays a dividend to shareholders of 1.5% annualized.

The Foolish bottom line

These stocks have strong records of profitability and management teams that understand how to reward shareholders.  Each of them is trading for modest valuations.  The challenge going forward for each of these stocks will be to continue to execute.  These companies have performed extremely well as their margins increase along with decreasing expenses.  However, the energy market can be cyclical, and it remains to be seen if this momentum can continue.  For now, investors certainly can’t complain with the profit numbers, share buybacks, and dividend increases these companies provide.

The article Look for Gains With These Oil Refiners originally appeared on Fool.com and is written by  Robert Ciura.

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