Just like other companies in the energy sector, CVR Refining LP (NYSE:CVRR) has felt the full wrath of the bubble burst in the energy sector. Looking ahead, the stock remains vulnerable to the downward pressure having already shed more than 40% in market value over the past six months. The stock is currently trading at lows of $11.25 a share, less than half its 52-week high of $22.74 a share.
Recently the stock has been trading higher in the market on growing talk that the independent energy company is planning to acquire Delek US holding which owns a 48% stakes in Alon USA Energy. Given that activist investor Carl Icahn owns an 82% stake in the refiner, the market remains confident of the merger coming to pass further fuelling strong interest in the stock.
The acquisition of Delek Holding is reportedly being fueled by the fact that major refiners expect to process less crude in the second half of the year. The merger of the two companies would thus go a long way in consolidating operations between the trios. CFR Refining currently refines up to 185,000 barrels of oil a day while Delek refines 155,000 Bpd and Alon at 147,000 bpd.
CVR Refining has a reputation of low cost and efficient operations, which should go a long way in benefiting the combined company, leading to greater efficiencies. In the event of a merger, it is highly expected that Delek’s holdings will be dropped into CVR refining in a bid to cut down on operation costs to bolster margins.
The acquisition is what CVR Refining LP (NYSE:CVRR) needs f it is to rival the big boys in the industry and enjoy the benefits that come with operating as a large corporation. While the acquisition remains the talk of the town, investors should not pin all their hopes on the deal panning out given the amount of uncertainty that continues to clobber the energy sector.