Unlike our previous analysis, today we take a stable and comprehensible company is engaged in extraction of crude oil. The company got its name in 2012 after the merger of the two companies The Carlyle Group and Sunoco Inc., and has become the largest oil refinery on the East Coast. Market Review Philadelphia Energy Solutions is holding two subsidiaries that are engaged in logistics and refining of oil. Refinery Company operates on the largest complex in Petroleum Administration for Defense Districts (PADD) number one. This complex is tenth in USA in terms of size. According to U.S. Energy Information Administration,there are 137 operating oil refineries at US market. All country is divided on 5 PADDs which in total consist of 139 refineries that capacity is 17,7 Million barrel per calendar day. Analyzing pie charts below, we can see that PES operates on the smallest PADD in country: Distribution of refineries in USA by PADD Distribution of refinery capacity by PADD. In spite of low size of PADD company’s capacity it is one of the highest in country. Also company refine 25% of whole PADD 1. This share is highest in region. Logistic: Since the beginning of 2015 PES has employed rail line with 4 trains that manage to unload an average of 280 thousand barrels per day. Company believes that with this division of business into 2 segments provides some flexibility in the allocation and access to the capital. Engaged with the IPO money will be invested into the company’s growth, which must be balanced between two segments. This information provided in IPO prospectus. Growth Drivers Repeal of US ban on oil export which in turn will bring the growth of demand. The key features of US Oil Shale are relatively low costing production and the ability to store some amount in well poste restante. Thus the company has a significant oil reserves that can go for export. Innovation that the company has already made Increase of US and World crude oil production in the United States. Especially, light, sweet domestic crude oil, which is a preferred feedstock for refineries with cat-cracking configurations such as the Philadelphia refining complexDevelopment of shale formations Bakken, Eagle Ford and Permian.Competitive Strengths Refining Assets with Significant Scale and Flexibility. This company is a large-scale facility with a combined distillation capacity of 335,000 bpd, which is expressed in position of one of the largest refining complex in PADD I and the 10th largest in the United States. Access to Low Cost Domestic Crude Oil and Flexible Logistics. Low costs for access to crude oil allow to obtain a competitive advantage over companies that have to deal with the costs of transportation, etc.High-Value Product Slate. The company is located in PADD I, the largest refined products market in the United States. PADD I accounted for approximately 34% of aggregate demand for gasoline, distillate fuel oil, kerosene and other. Experienced Management Team. Philadelphia Energy Solutions management team is experienced in the operation of refining and logistics assets, as well as the execution of organic growth and acquisition strategies.Company is confident in its financial position and intends to pay quarterly cash dividends of approximately $0.10 per shareRisks Changes in global and local economic conditions Growth of dollar exchange rate Domestic and foreign demand for fuel products, especially in the United States, China and India; Uncertainty of price Worldwide political conditions, particularly in significant oil producing regions such as the Middle East, West Africa, Russia and Latin America;The level of foreign and domestic production of crude oil and refined products and the volume of crude oil, feedstock and refined products imported into and exported from the United States; Instability of Middle East region with high value of proved reserves Valuation Before discussing of team estimates it’s it essential to take into account data on crude oil prices. The sharp decline which has took place during last two years has caused by growth of world supply and demand falls on Asian markets. It is clearly shown on the graph below. Source: Investing.com Based on our expectations of crude oil prices and drivers of growth that was discussed previously we can estimate approximate fair price of company shares. Due to entrance of USA and Iran on the world oil market price won’t rise. So, we cannot expect high value of company growth rate. PES will incur some lose in free cash flow because of low prices. On the other hand, development on company operation predisposes us to use positive rate of growth. Company’s WACC was estimated as median in the industry. Thus, employing discounted cash flows. Source: company data and team estimates So, using this data our estimated share price equals to $17,89. This value is higher than expected average $16,5. Summary Usually IPOs are associated with young company in the beginning of the business cycle, but at this time we are talking about exactly the opposite asset. The company not only has a strong position, but is also a leader on the US east coast. Perhaps the record low price of crude oil and hence a fall in prices for gasoline and other petroleum products have a negative impact on the share price at the first issue and it will be the best moment to enter. So, we expect future price approximately $17,89 per share.