Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Western Refining, Inc. | form8-kxwnrearningsrelease.htm |
| EX-99.1 - EXHIBIT 99.1 - Western Refining, Inc. | earningsrelease-wnrx93016.htm |
Q3 2016 Earnings Review
November 1, 2016
2
Cautionary Statement on Forward-Looking Statements
This presentation contains forward-looking statements which are protected by the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements
reflect Western Refining, Inc.’s (“Western,” “Western Refining,” or “WNR” as applicable or the context
requires) current expectations regarding future events, results or outcomes. Words such as
“anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,”
“intend,” “may,” “plan,” “position,” “potential,” “predict,” “project,” “strategy,” “will,” “future” and other
similar terms and phrases are used to identify forward-looking statements. The forward-looking
statements contained herein include, but are not limited to, statements about: fourth quarter 2016
guidance, including total throughput, direct operating expenses, maintenance turnaround expenses,
selling, general and administrative expenses (“SG&A”), depreciation and amortization, interest and
debt expense, 2016 budgeted capital expenditures (including maintenance/regulatory and
discretionary expenditures); and crack spread hedge positions and market pricing. These
statements are subject to the general risks inherent in Western Refining, Inc.’s business. These
expectations may or may not be realized. Some of these expectations may be based upon
assumptions or judgments that prove to be incorrect. In addition, Western’s business and operations
involve numerous risks and uncertainties, many of which are beyond its control, which could result
in Western’s expectations not being realized or otherwise materially affect Western’s financial
condition, results of operations, and cash flows. Additional information relating to the uncertainties
affecting Western’s business is contained in its filings with the Securities and Exchange Commission
to which you are referred. The forward-looking statements are only as of the date made. Except
as required by law, Western does not undertake any obligation to (and expressly disclaims any
obligation to) update any forward-looking statements to reflect events or circumstances after the
date such statements were made, or to reflect the occurrence of unanticipated events.
3
Q3 2016 Highlights
S Net income attributable to WNR of $39 million
S Adjusted EBITDA of $184 million
S Western, excluding WNRL: $155 million
S WNRL: $29 million
S Completed sale of St. Paul Park Logistics to WNRL for $210 million
S WNRL completed $193 million equity offering and upsized revolver to $500 million
S Dividend of $0.38 per share
($ in millions, except per share data) Q3 2016 Q3 2015
Net income attributable to Western Refining, Inc. $39 $153
per Diluted Share $0.35 $1.61
Net income attributable to Western excluding special items1 $50 $160
per Diluted Share, excluding special items $0.46 $1.69
Adjusted EBITDA2 $184 $425
1 See Appendix for further detail on net income attributable to Western excluding special items.
2 See Appendix for a reconciliation of Net Income to Adjusted EBITDA and the definition of Adjusted EBITDA.
4
Refining Operating Metrics
Gross Margin
($ per throughput barrel)
1 Excludes realized and unrealized gains/losses from hedging activities and lower of cost or market inventory reserve adjustments.
2 Operating margin is defined as gross margin minus direct operating expenses.
Direct Operating Expenses
($ per throughput barrel)
Operating Margin
($ per throughput barrel)
Q3 2016 Q3 2015
El Pas
o
Gallu
p
$25
$0
$18.51
$11.80
$25
$0
$3.64 $3.71
$25
$0
$14.87
$8.09
$25
$0
$23.08
$14.01
$25
$0
$9.10 $8.10
$25
$0
$13.98
$5.91
21
St. Pau
l
Par
k
$25
$0
$24.57
$11.20
$25
$0
$5.68 $5.94
$25
$0
$18.89
$5.26
5
700
600
500
400
300
200
100
0
$
m
illi
on
s
Beginning
Cash and
Restricted
Cash
Adjusted
EBITDA
Debt
Additions
Debt
Repayments
Cash
Taxes
and
Interest
Paid
Proceeds
from
issuance of
WNRL
common units
Dividends
Paid
Capital
Expenditures
Other
Cash
Changes,
Net
WNRL
Distributions
Ending
Cash and
Restricted
Cash
$200
$461
$184
$179 $185 $18
$137
$39
$41
$78
$8
Q2 2016 to Q3 2016 Consolidated Cash Flow Bridge
1 Restricted cash as of September 30, 2016 and June 30, 2016 was $195.0 million and $1.3 million, respectively.
2 See Appendix for a reconciliation of Net Income to Adjusted EBITDA and the definition of Adjusted EBITDA.
3 On September 15, 2016, NTI sold the St. Paul Park Logistics Assets to WNRL for $195.0 million in cash and 628,224 WNRL
common units.
Western $ 182.0 $ 155.1 $ 124.5 $ (83.2) $ (27.3) $ — $ (41.3) $ (70.4) $ 191.1 $ 14.1 $ 444.6
WNRL 17.6 29.0 54.4 (54.1) (11.8) 185.3 — (7.9) (173.5) (22.5) 16.5
Total $ 199.6 $ 184.1 $ 178.9 $ (137.3) $ (39.1) $ 185.3 $ (41.3) $ (78.3) $ 17.6 $ (8.4) $ 461.1
2
1 13
6
Capital Structure
1 Excludes results of WNRL; NTI debt is non-recourse to Western.
2 Includes Restricted Cash of $195 million.
3 Debt levels shown are face value, excludes unamortized financing costs and premiums.
4 See Appendix for a reconciliation of Net Income to Adjusted EBITDA and the definition of Adjusted EBITDA.
5 Western LTM Adjusted EBITDA includes distributions from WNRL.
As of September 30, 2016
($ millions)
WNR
Consolidated Western
Total Cash and Restricted Cash 2 $ 461 $ 445
Western
Revolving Credit Facility $ — $ —
Term Loan B-1, due 2020 535 535
Term Loan B-2, due 2023 499 499
6.25% Senior Unsecured Notes due 2021 350 350
NTI 1
Revolving Credit Facility 52 52
7.125% Senior Secured Notes due 2020 350 350
WNRL
Revolving Credit Facility 20
7.5% Senior Notes, due 2023 300
Total Long-term Debt 3 2,106 1,786
Shareholders' Equity 2,267 1,665
Total Capitalization $ 4,373 $ 3,451
LTM Adjusted EBITDA 4 $ 687 $ 625
Total Debt / LTM Adjusted EBITDA 3.1x 2.9x
Total Debt / Total Capitalization 48% 52%
5
7
Operations
El Paso Gallup St. Paul Park
Total Throughput (mbpd) 138,000 - 142,000 26,000 - 28,000 85,000 - 90,000
Direct Operating Expenses ($/Bbl) $3.70 - $3.90 $9.75 - $10.00 $4.85 - $5.15
Maintenance turnaround expense ($ millions) — — $15 - $16
Fourth Quarter 2016 Guidance
Other
($ millions)
Western WNRL Total
SG&A $55 $7 $62
Depreciation and Amortization $50 $11 $61
Interest and Debt Expense $31 $7 $38
FY 2016 Capital Expenditures
Maintenance/Regulatory $110 $10 $120
Discretionary 150 20 170
FY 2016 Total Capital Expenditures $260 $30 $290
8
Appendix
9
Reconciliation of Special Items
1 We recompute income taxes after deducting special items and earnings attributable to non-controlling interests.
Three Months Ended
September 30,
2016 2015
(In thousands, except per share
data)
Reported diluted earnings per share $ 0.35 $ 1.61
Income before income taxes $ 56,008 $ 310,215
Special items:
Unrealized loss (gain) on commodity hedging transactions 27,616 (271)
NTI merger reorganization costs 2,666 —
Gain on disposal of assets, net (279) (52)
Net change in lower of cost or market inventory reserve (15,166) 36,795
Earnings before income taxes excluding special items 70,845 346,687
Recomputed income taxes excluding special items (1) (15,158) (96,254)
Net income excluding special items 55,687 250,433
Net income attributable to non-controlling interests 5,704 90,215
Net income attributable to Western excluding special items $ 49,983 $ 160,218
Diluted earnings per share excluding special items $ 0.46 $ 1.69
10
Consolidated Adjusted EBITDA Reconciliation
1 See page 13 for the definition of Adjusted EBITDA.
Three Months Ended Nine Months Ended
September 30, September 30,
2016 2015 2016 2015
(In thousands)
Net income attributable to Western Refining, Inc. $ 38,575 $ 153,303 $ 134,528 $ 393,211
Net income attributable to non-controlling interests 5,733 64,795 52,229 213,722
Interest and debt expense 34,456 26,896 88,065 79,169
Provision for income taxes 11,700 92,117 68,481 229,989
Depreciation and amortization 54,321 51,377 161,331 152,446
Maintenance turnaround expense 27,208 490 27,733 1,188
Gain on disposal of assets, net (279) (52) (1,181) (157)
Net change in lower of cost or market inventory reserve (15,166) 36,795 (102,519) (17,131)
Unrealized loss on commodity hedging transactions 27,616 (271) 54,698 42,073
Adjusted EBITDA 1 $ 184,164 $ 425,450 $ 483,365 $ 1,094,510
11
Consolidated Adjusted EBITDA Reconciliations
Three Month Period Ending
Twelve
Months
Ended
(In thousands)
Consolidated Western Refining, Inc. Dec 2015 Mar 2016 Jun 2016 Sep 2016 Sep 2016
Net income attributable to Western Refining, Inc. $ 13,545 $ 30,538 $ 65,415 $ 38,575 $ 148,073
Net income attributable to non-controlling interests (6,047) 9,047 37,449 5,733 46,182
Interest and debt expense 26,434 26,681 26,928 34,456 114,499
Provision for income taxes (6,034) 18,629 38,152 11,700 62,447
Depreciation and amortization 52,845 52,651 54,359 54,321 214,176
Maintenance turnaround expense 836 125 400 27,208 28,569
Loss (gain) on disposal of assets, net 208 (130) (772) (279) (973)
Net change in lower of cost or market inventory reserve 113,667 (51,734) (35,619) (15,166) 11,148
Unrealized loss (gain) on commodity hedging transactions 8,160 12,483 14,598 27,616 62,857
Adjusted EBITDA 1 $ 203,614 $ 98,290 $ 200,910 $ 184,164 $ 686,978
1 See page 13 for the definition of Adjusted EBITDA.
12
Last Twelve Months
September 30, 2016
Western WNRL
WNR
Consolidated
Net income attributable to Western Refining, Inc. $ 109,229 $ 38,844 $ 148,073
Net income attributable to non-controlling interests 24,280 21,902 46,182
Interest and debt expense 88,194 26,305 114,499
Provision for income taxes 61,994 453 62,447
Loss (gain) on disposal of assets, net 11 (984) (973)
Depreciation and amortization 184,593 29,583 214,176
Maintenance turnaround expense 28,569 — 28,569
Net change in lower of cost or market inventory reserve 11,148 — 11,148
Unrealized loss (gain) on commodity hedging transactions 62,857 — 62,857
Adjusted EBITDA 570,875 $ 116,103 $ 686,978
Distributions from WNRL 53,681
Total Adjusted EBITDA plus distributions $ 624,556
Adjusted EBITDA Consolidation
1 See page 13 for the definition of Adjusted EBITDA.
13
Adjusted EBITDA Definition
The tables on the previous page reconcile net income to Adjusted EBITDA for the periods presented.
Adjusted EBITDA represents earnings before interest and debt expense, provision for income taxes, depreciation,
amortization, maintenance turnaround expense and certain other non-cash income and expense items. However,
Adjusted EBITDA is not a recognized measurement under U.S. generally accepted accounting principles ("GAAP").
Our management believes that the presentation of Adjusted EBITDA is useful to investors because it is frequently
used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. In
addition, our management believes that Adjusted EBITDA is useful in evaluating our operating performance
compared to that of other companies in our industry because the calculation of Adjusted EBITDA generally
eliminates the effects of financings, income taxes, the accounting effects of significant turnaround activities (that
many of our competitors capitalize and thereby exclude from their measures of EBITDA) and certain non-cash
charges that are items that may vary for different companies for reasons unrelated to overall operating performance.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute
for analysis of our results as reported under GAAP. Some of these limitations are:
• Adjusted EBITDA does not reflect our cash expenditures or future requirements for significant turnaround
activities, capital expenditures or contractual commitments;
• Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest
or principal payments on our debt;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and
• Adjusted EBITDA, as we calculate it, may differ from the Adjusted EBITDA calculations of other companies in
our industry, thereby limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available
to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP
results and using Adjusted EBITDA only supplementally.
14
Net Positions
Volume Hedged
(000 barrels)
% of Planned
Production Hedged Strike Price
Mark-to-Market Price1
September 30, 2016
Offsetting
Unrealized
Gain
Period Gasoline Distillate Gasoline Distillate Gasoline Distillate Gasoline Distillate
Positions
($MM) 2
2016 Q4 525 100 6.6% 1.6% $ 11.51 $13.48 $ 11.66 $13.66 $ 17.8
2017 Q1 — 45 —% 1.0% $ — $13.50 $ — $13.37 $ 3.2
Q2 — 45 —% 0.7% $ — $13.50 $ — $13.13 $ 2.3
Q3 — 45 —% 0.7% $ — $13.50 $ — $13.83 $ 2.3
Q4 — 45 —% 0.7% $ — $13.50 $ — $13.58 $ 2.3
2018 Q1 — — —% —% $ — $ — $ — $ — $ —
Q2 — — —% —% $ — $ — $ — $ — $ —
Q3 — — —% —% $ — $ — $ — $ — $ —
Q4 — — —% —% $ — $ — $ — $ — $ —
1 Mark-to-market pricing based on data obtained from the CME Group.
2 Represents unrealized gains on short positions that were closed by the purchase of an offsetting long position as of Q3 2016,
neither of which position will be realized until maturity.
US Gulf Coast Products
Crack Spread Hedge Positions
As of September 30, 2016
15
Net Positions
Volume Hedged
(000 barrels)
% of Planned
Production Hedged Strike Price
Mark-to-Market Price1
September 30, 2016
Offsetting
Unrealized
Gain
Period Gasoline Distillate Gasoline Distillate Gasoline Distillate Gasoline Distillate
Positions
($MM) 2
2016 Q4 50 325 0.6% 4.2% $ 12.49 $ 15.31 $ 13.86 $ 16.86 $ —
2017 Q1 — 375 —% 8.1% $ — $ 14.00 $ — $ 13.72 $ —
Q2 — 375 —% 6.2% $ — $ 14.00 $ — $ 14.36 $ —
Q3 — 375 —% 6.2% $ — $ 14.00 $ — $ 15.09 $ —
Q4 — 375 —% 6.2% $ — $ 14.00 $ — $ 14.77 $ —
2018 Q1 — — —% —% $ — $ — $ — $ — $ —
Q2 — — —% —% $ — $ — $ — $ — $ —
Q3 — — —% —% $ — $ — $ — $ — $ —
Q4 — — —% —% $ — $ — $ — $ — $ —
1 Mark-to-market pricing based on data obtained from the CME Group.
2 Represents unrealized gains on short positions that were closed by the purchase of an offsetting long position as of Q3
2016, neither of which position will be realized until maturity.
Group 3 Products
Crack Spread Hedge Positions
As of September 30, 2016
16
Consolidated
Unrealized Hedging Gains and Losses
($millions)
Balance Sheet Fair Value Income Statement
Period Beg. Of Period End of Period Unrealized Gain (Loss)
2015 Q1 $130.0 $109.9 $(20.1)
Q2 $109.9 $87.6 $(22.3)
Q3 $87.6 $87.9 $0.3
Q4 $87.9 $79.7 $(8.2)
2016 Q1 $79.7 $67.2 $(12.5)
Q2 $67.2 $52.6 $(14.6)
Q3 $52.6 $25.0 $(27.6)
Consolidated
Gains/(Losses) Q1 2016 Q2 2016 Q3 2016 YTD 9-30-16
Realized $17.8 $0.5 $27.8 $46.1
Unrealized $(12.5) $(14.6) $(27.6) $(54.7)
