Viva Energy shares: Buy, hold or sell?

Viva Energy Group Ltd (ASX: VEA) shares are sliding today.

Shares in the S&P/ASX 200 Index (ASX: XJO) energy stock closed yesterday trading for $2.45. In early afternoon trade on Wednesday, shares are changing hands for $2.39 apiece, down 2.5%.

For some context, the ASX 200 is up 1.0% at this same time.

Taking a step back, Viva Energy shares remain up 33.5% over the past 12-months, racing ahead of the 7.5% one-year gains posted by the benchmark index.

And that’s not including the 6.7 cents a share in fully franked dividends the energy company paid to eligible stockholders over this time. Viva Energy trades on a 2.8% fully franked trailing dividend yield.

But with investor concerns remaining over the 15 April fire at Viva Energy’s Geelong refinery in Victoria – one of just two remaining in Australia – and with shares still down 5.5% since then, is this ASX 200 stock now a buy, hold or sell?

Should you buy Viva Energy shares today?

Baker Young’s Toby Grimm recently analysed the outlook for this $4 billion ASX energy share (courtesy of The Bull).

According to Grimm:

Energy market dislocation highlights the strategic importance of Viva Energy’s refining operations, particularly in light of the recently enhanced Federal government subsidy framework.

As for the refinery fire, Grimm noted, “While the recent fire at the Geelong facility is a setback, the financial impact appears manageable and unlikely to offset the benefit of elevated refining margins.”

Connecting the dots, Grimm issued a hold recommendation on Viva Energy shares.

He concluded:

Higher fuel prices may weigh on convenience retail performance, which had shown signs of a recovery. Over time, refining margins are expected to normalise, but the stock appears well supported in the near term.

What’s the latest from the ASX 200 energy stock?

In an update on the Geelong refinery fire released on 4 May, Viva Energy revealed that the coming weeks will see it produce diesel and jet fuel at around 80% of capacity. And petrol production will be limited to around 60% capacity while the refinery’s Residue Catalytic Cracking Unit (RCCU) remains offline.

Viva Energy said it expects the required repair work to restart the RCCU to take around six weeks. In June, the company is aiming to ramp production back up to more than 90% of capacity following the restart of the RCCU.

As for any potential impact on Viva Energy shares from the Iran war, the company noted:

The Geelong refinery does not typically source Middle Eastern crude, with current crude sourced predominantly from North and South America, South-East Asia, and Australia. These crude supply flows have not been impacted, and the Geelong refinery has firm crude supply through to July with high confidence that this supply can continue.

The post Viva Energy shares: Buy, hold or sell? appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.