Western Refining did a presentation for RBS today. Here are my back of the napkin notes.
If you enjoy the content at iBankCoin, please follow us on TwitterTheir source of crude, from Eagleford Shale and Permian Basin is cheaper than Brent or Gulf oil, especially from Eagleford, due to lack of proper pipeline infrastructure. This crude is not able to flow freely into the Gulf. Therefore, it trades at a discount, to the great benefit of their El Paso refinery.
It will take at least 2 years to build a pipeline from Eagleford to the Gulf.
The new crude coming from Canada to Cushings is also a benefit to them, further exacerbating the spread between Brent and WTI.
Their stated goal is to take all available free cash flow to pay down debt. They want to improve their credit rating.
The #1 priority is to pay down the 10 3/4% and 11 1/4% floaters.
One of their main markets is Phoenix, ideal market for refinery due to demographics.
It is their belief that current 321 crack spreads are sustainable for years to come. This is not an anomaly.
The management of WNR has a large stake in the company, alongside shareholders, owning 41% of shares outstanding.
The idled refinery at Yorktown will either be sold, in order to pay off debt, or restarted, in order to take advantage of current spreads. However, the spreads on the East Coast are not nearly as profitable compared to what they are seeing at El Paso.
FIrst! $WNR FOR THE WIN!
got damn ima be rich
hot damn, ima be rich-er!
Thanks Mr Fly, your going to be rich someday.
Pretty sure he’s doing ok now.
I just got off food stamps 🙂
That’s how the rich get richer;-)
So did I FU by buying TSO instead of WNR? Not the same dynamics at work I am guessing. Damn. Cramer did say to do my homework.
that morgan stanley letter read to me like a slight shortage is upon us,thus leading to the refiners being a super power for months to come……….the fucking stars are lined up for the refiners compadre now is when fortunes are made…………….or lost………………….fig mother fucker
So WNR management isn’t locking in these spreads? What reasons did they give for believing current spreads are not an anomaly?
There were two reasons they cited, indirectly answering your question:
Pipeline to gulf won’t be built for another 2 years, thus maintaining discount between Eagleford crude and Gulf crude
Spread between Brent and WTI should persist.
Yes, I understand they think the “Spread between Brent and WTI should persist” but I want to know WHY they think this.
Gulf crude is usually priced like Brent since both are capable of being put on a ship and sent where needed. As mentioned twice already, there is a pipeline being planned that would allow oil from Eagle Ford to be directed to the Gulf coast. At present Eagle Ford oil can’t be sent to the Gulf via pipeline. Thus EF oil is tied to WTI prices.
WTI in general can’t be piped to the Gulf coast. Pipelines are not exactly two way highways. There is a lot of modification work required to switch directions. Right now those pipelines are set up to go from EF to Cushing (or other parts of the midwest away from the Gulf).
Thus:
EF oil price = WTI price
WTI price < Brent price
-ergo-
EF oil price < Brent price
Q.E.D.
thank you for the summary.
“It is their belief that current 321 crack spreads are sustainable for years to come. This is not an anomaly.”
Then the executives should buy more than 41%, but I think Fly owns the rest.
Wait what VLO has to say about the sustainability on 4/26. Bigger. Better credibility. More coverage.
The refinery trade is back on. Buy it while you can.
I want them to sell Yorktown, not start back up. If consensus is two year sustainability, then the value of Yorktown just spiked higher. Pay off debt with it.
Damn good deer hunting down there. All you need is a truck with an elevated chair so’s you can see over the Mesquite trees and then nail those suckers when they break out of the brush… http://www.youtube.com/watch?v=fAF59GyG9_I&feature=related
Nice.
You would would murder bambi?
http://www.youtube.com/watch?v=PMjwiP29cg4
Hunting is for idiots
Au contraire!
A short history lesson for The Fly…..Refined gentlemen with blue-blooded pedigrees have been blasting bambi to smithereens for centuries. In times past, they did their pursuits from “high rack” carriages pulled by massive muscular Clydesdales (which eventually evolved into the Budweiser wagons we have parading around at the Superbowls we have today.)
Furthermore, long ago and far, far away, “cavewimmens” not only considered men who hunted, as being “hot and hunky”, they viewed the noble Nimrods as the scholars of that day. Doubt me? Look it up!
Shooting an animal from an air conditioned pick up truck while enjoying an adult beverage is equivalent to space aliens blasting earth and humans to ashes with technology unknown to us from the comfort of their fourth dimension vessel somewhere in space.
I say treat animals with respect, unless you need to eat them in the same way they eat each other. I think humans should be compassionate enough to avoid using superior technology to kill other living things for sport, just as powerful things out there in space will hopefully let us be, living out our amoeba like human existence.
Be enough of a human to leave something along.
Btw, in my neighborhood a 75 year old man had a beautiful 150 year old oak tree in “his” yard cut down because he believed the tree was a threat to the roof on his rotting house. 75 years old and this is his level of development….
.
Loved every word of that
*salute*
Do you squat when you piss?
You nailed it, dude.
-DT
You steer it from the platform?
That’s just ultimate.
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See. What could be could be cooler? Even the honorable Senator from Cain-tucky sees the value of such a contraption.
You have not lived until you have deer hunted from the comfort of a pickup truck at night with a spotlight and a case of beer. Note, this is not exactly “legal” on a multitude of issues.
Good times.
It’s still hillbilly shit. Id rather hunt humans
Join NATO forces in Lybia. I heard they pay the troops with oil-land plots.
Libya. However, Gaddafi or Kaddaffi, who the fuck cares.
So they are getting even better crack spread than what is showing on Nymex ???
Yes, I have BIG bannanas now! Thanks, Sir Fly,….I mean your highness,…I mean your wizardness….
Lol. This is exactly why I come here. To read shit like this, from a monkey, no less.
I am ALL IN with $WNR. I know this is bad money management, but this is a HOME RUN. If this masterplan fails me, I will be living on the streets and eating Cup’O’Noodles. See you guys in the 20’s.
Go big or go home.
Whoa! Careful here, young grasshopper Kwame. WNR could be the second coming of CMGI.
Just bringing up the thought…..
This is all useless.all.I care about is if Cramer says buy buy buy
You know, I can’t help but think that is something is a “sure thing” in the market, it tends to rip the faces of those betting on it…
Ohh, I’m long $WNR, and will add on strength, so I want it to happen, but going all in, calling this a home run? That,just maybe, a little scary…
Maybe his trading cost is almost as big as his account.
Let’s hope so. OTOH there are worse things than living on the streets and eating Cup’O’Noodles. On the bright side, it can be an excellent lesson in proper money management.
WNR is a great company, of course. But there are no certainties in the market. To bet your whole account on anything, as if it were a sure thing, is full retard with little dinosaur arms.
(darn stupid smart phone browser/keyboard – can’t edit to correct typos 🙂 )
when are you going to have to register for being such a large owner?
thx for all your hard work. love this site and the news feeder.
Eagle Ford Shale and Permian Basin oil production is forecast to go from 800,000 b/d in 2010 to over 1.5 million b/d in 2015. This, combined with the current WTI/Brent differential should lead to WNR having the two best performing refineries (operating margins) among the independents. Fly’s comment about it taking two years to build a pipeline from these fields to the Gulf Coast is very significant. WNR should have at least a two-year competitive advantage vs. its peers.
As investors better understand the current profitability of these refineries, I think a revaluation/squeeze is likely. In the near term, investors will be reminded that the company locked in margins on 10% of its 2011 production capacity at around a $16.50 Gulf Coast Crack Spread. As this gets marked to market at Q1 and subsequent quarters, gross margins will be negatively impacted in the short run. It should be well known that the company had some Q1 downtime and associated costs that will also impact Q1 results. Lastly, given the high debt levels of WNR and past experience of buying assets at the cyclical peak, I wonder if they have further hedged any more of this year’s production. I really like our chances as investors figure out how high earnings/cash flow could be in Q2 of this year and more broadly, over the next couple of years.
It’s only 10%. my fear is they did more this quarter
taking two years to build a pipeline from these fields to the Gulf Coast is very significant.
How much you want to bet it takes even longer than two years? Some enviro whack job will claim installing the pipeline will disturb the natural habitat of some bullshit rodent that no one has ever heard of before. They’ll tie up the pipeline in courts for ages.
But rest easy, while Amurrica’s paying $9 a gallon for gas the 3-legged, one-eyed, spotted dirt mouse will rest comfortably knowing EnviroFagsRUs have his back.
TRP is being opposed by environmentalists (Re: Tar Sands) at the Federal level for a state (Montana or Dakota) mandate that they tie their Canadian line into the Bakken Fields for additional capacity there. FTO must be getting cheap supplies from Canada and the Bakken cause capacity there via ENB is limited.
Fly, what’s your take on the likely effect on WNR paying out its debt? I understand that this will make the company more attractive for institutions who would bid up the price. However as WACC goes down, the tax shields will also go away. Any ideas?
Tax rate is low for WNR due to environmentally friendly incentives
….which is code for “Texas is unfriendly to environmentalists”.
I’m starting to like WNR…
That’s what she said.
Wow that WTI/Brent spread has dropped to 0% in the last half hour… Yikes!
No it didn’t
I am sitting on a lot of WNR right now it doesn’t hurt as much as it did a week ago…
It’s rumored that at the height of The Cars popularity in the early eighties, lead singer Rik Ocasek had gotten so spoiled with his rocker lifestyle that one night while home from a long global tour, he turned to the nekkid Paulina Porizkova (his wife) alone in his bed next to him and said, “You’re all I’ve got tonight??”
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Many thanks Señor!! For the trade and the solid info
The eagle ford and the Marcellus are the only shale formations that are for sure economic with nat gas at $4.50/mcf, and Eagle Ford has a much higher liquids component, which is more valuable. Pipelines can be reversed but only at great time and expense…bodes well for sustainability
Starting a position in nwl. Nothing wrong with having a few inflationary
Stocks in the bag.
Random Thought, China seems to have three tools that they love to slow their Economy. Rate Hikes, RRR hikes and Gas Price Increases. They are busy with G 20 Photo Op this weekend, but if I had to pick one, I think they are going to play the “raise the Gas Price” card soon. Rate Increase is in June per gossip…
Another coffee play in the works: A Fly Fav
http://www.boston.com/business/articles/2011/04/15/dunkin_said_to_hire_underwriters/
Quality deal. Bain Capital and Tommy Lee?
Buckets of ducquets.
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HOW WNR WILL BEAT ESTIMATES!!11
http://tinyurl.com/3wpqcqm
lol
i lov crack spread on toast,,,,w coffee,,,
kept wnr, sold slv, thought congress would make some sence on spending , dollar would rise,,,,,didnt happen misswed 2.00 so far on slv,,,,any thoughts
Yes, be happy it wasn’t AGQ you sold, lol.
You’ll get your chance to get back into a number of silver plays. Patience.
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New York State of Mind – Empire Mfg index reports a nice jump.
The first April data – and if refutes the slowdown thesis.
Do they still manufacture stuff in New York?
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they manufacture marginal quarterbacks and rapists
Rapists, sure, but last I looked New York was importing all it’s QB’s from the South and/or CA.
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How many people are looking at the inverse H&S on the S&P hourly chart? Probably too many for the measured move to occur; or will it?
trojan horse detected , tearsof.com,,,,,,was blocked from this site!