UPDATE: Miller Tabak Initiates Coverage On Par Petroleum

Miller Tabak initiated coverage on Par Petroleum Corporation PARR Tuesday with a Buy rating and $23 price target.

Analyst Adam Michael believed “Par Petroleum is on the verge of a turnaround year in 2015 as the company regains market share and focuses on higher margin “on-island” refined product sales. The company spent much of 2014 putting the pieces in place that should allow Par to flip to profitability and positive free cash flow next year.”

According to Michael, “Since acquiring the Tesoro Hawaii refinery in September of 2013, Par Petroleum has embarked on a number of turnaround initiatives that should lead to profitability in 2015 and beyond. The company maintains a $1.3 Billion fully intact tax loss carry forward and is backed by Sam Zell and Whitebox Advisors which collectively hold ~ 55 percent of the stock.

“Access to capital and key talent through Zell and his associates has enabled Par Petroleum to move quickly and take advantage of accretive and synergistic acquisition opportunities, as well as identify and exploit “on-island” sales opportunities."

Michael noted that “Par Petroleum is one of the few energy companies that become more profitable as crude prices drop as its fuel costs decline by $8.4 Million per year for every $10/bbl drop in crude prices. With Brent at $65/bbl, we expect Par’s production costs to decline by approximately $23 Million in 2015 compared to 2014.”

The firm’s 2015 EBITDA estimate of $92 Million assumed a $2/bbl operating margin, “which still leaves plenty of upside if Par can hit the high end of its operating margin target.”

Par Petroleum closed Monday at $15.85, up 1.21 percent.