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Andeavor to Expand Presence in Mexico, Aims Cost Reduction

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Andeavor recently announced its intention of constructing a new terminal for the refined products at the Mexican state-run electric utility, Comisión Federal de Electricidad’s (“CFE”) Rosarito storage facility, located in the Baja California state. Per the terms of Andeavor’s deal with CFE’s subsidiary, CFEnergía, the former will take lease of the site for a long-term, where it plans to build the facility.

Andeavor expects to invest $100 million in the project, which will enable the company to reduce its import expenses. With the completion of the project, Andeavor will bring fuel directly in the Baja California state from its West Coast refineries.

Moreover, the facility is expected to support the growth of its ARCO®-branded stations. Notably, the company forayed into the Mexican market last year and currently has around 67 stations in the states of Baja California and Sonora. This move is line with the company’s organic growth strategy.

The San Antonio, TX-based downstream company expects the move to increase its hold in the growing market of Mexico. It complements the company’s strong processing capacity of 1.2 million barrels a day, through its 10 refineries. Andeavor, which is set to be acquired by Marathon Petroleum (MPC - Free Report) in a $23.3 billion deal, anticipates the project to take almost two years to complete, once it receives the mandatory permits.

Price Performance

Andeavor has gained 61.9% in the past years compared with 13.9% rise of its industry.

Zacks Rank and Stocks to Consider

Currently, Andeavor carries a Zacks Rank #3 (Hold).

Investors interested in the Energy sector can opt for some better-ranked stocks in the same space like Delek US Holdings, Inc. (DK - Free Report) and HollyFrontier Corp. (HFC - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Brentwood, TN-based Delek is an energy company. The company’s top line for 2018 is anticipated to improve 39.2% year over year, while its bottom line is expected to increase 230.2%.

Dallas, TX-based HollyFrontier is an independent refining company. For 2018, its bottom line is likely to be up 145.3%. In the last four reported quarters, the company delivered an average positive earnings surprise of 41.3%.

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