CVR Energy: Refining Down, Fertilizer Up (CVI)

Before the market opened this morning, CVR Energy (NYSE:CVI) released is third quarter earnings. EPS reached $1.16 and revenues totaled $1.58 billion. Analysts expected EPS of $0.75 on revenues of $1.04 billion, so CVR really blew out the doors.  Shares are surging pre-market.

But back in June, CVR killed its plan to spin off its fertilizerbusiness as a master limited partnership. In August, stockholderskilled a plan to offer an additional 10 million shares in a secondaryoffering. Yesterday, CVR withdrew plans for a $125 million offering ofconvertible senior notes.

Operating income from CVR’s petroleum refining business was $20.2million in the quarter, compared with $46.5 million from the fertilizerbusiness. The company sees refining as a drag on its overallprofitability, but it can’t seem to find a way to get rid of it.

The company has only around $60 million in cash on hand, even thoughcash flow from operations in third quarter reached $81.5 million. Thatwas enough to cover $42.2 million of investments and financing, but thecompany can’t keep spending at that rate unless it can borrow orincrease its cash flow. Either case may be difficult going forward.

Regardless, shares are treating this as a win.  Volume is thin but the stock is up 20% at $6.00 pre-market.

Paul Ausick
November 6, 2008