Quick Notes from WNR Presentation

Western Refining did a presentation for RBS today. Here are my back of the napkin notes.

Their 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.

So the imbeciles in D.C. debated for a month over budget cuts, only to slash by $38 billion. What a fucking joke. How did these clowns get so much power? Our government is a dictatorship, bought and sold by special interests. The people do not wield any power, so why take part in the process?

Wake me up when the guillotines are transported to Washington D.C., to punish those who have committed treason against the people of the United Steaks of Amerika (sorry, I went to public school).

After early losses, the market reversed and went higher. Despite crack spreads falling today, refinery related shares recovered. In order to cover my bases, I bought a little ALJ for novelty. It is the least owned by institutions and well positioned to profit from these insane spreads. As I write this, I am up just 0.3% for the day. However, remember, I am preparing a stew, not some Chinese stir fry shit. I have all the ingredients in place and have placed the heat real low, in order to allow the flavors to release—at their full potential.

Naturally, if I am wrong about this stew of mine, I will need to eat my own hands, in order to avoid starvation. But that’s a market, so quit acting like you know anything.

Let me close with this: if you have never made or lost a million dollars in the market, you are not qualified to offer “The Fly” financial advice. Understand, this is the bare minimum of qualifications, in my book. You can be a great little “swing trader” and make lots of cute picks. But you’re not in the same league as me, pal—so fuck off. You’re playing school yard stick ball, while I’m hitting grand slams out of Yankee stadium.

Into the bell, I am liking this oil sands play, WG, into melt up mode.

I bought 10,000 ALJ.

[youtube:http://www.youtube.com/watch?v=Txh5tn4B3fE 616 500]

We’re setting up for another weak trading session. This is starting to become a pattern. As an aside, new issue ARCO should be coming public. I rarely get involved with new issues. However, these fuckers sell Mcdonald’s to unsuspecting people in South America. They are the largest Mcdonald’s franchisee in Latin America. What’s not to like? I will be putting ARCO to the top of my buy list, providing the ipo doesn’t go “dot com stupid” on the first day of trade.

Crack spreads are up again this morning; but it may not make a difference. It seems people want to sell, regardless of the news. Well, to be fair, the news is always bad. I guess some of that toxic information is permeating the psyche of “rich as fuck” money managers. Even so, they have dog brains and will be buying the dips shortly. You can pretty much count on that.

Aside from my refinery holdings, there is nothing that I am emotional about right now, which means I may start selling some stuff in order to raise cash. If my stocks cannot go higher, I have no interest in seeing them go lower. Having said that, I do realize the importance of allowing my stocks to breathe a bit. If the losses are less than 10%, there is little reason for me to flip out and start shredding portfolios.

“The Fly” is preparing for EXTREME grandeur. I am not talking about your regular run of the mill caviar and champagne dinner party extravaganza. I am talking about making so much money, that your arm involuntarily punches random people in the face spectacular. My position is so potent, so concentrated, I emanate electricity, shocking anyone who comes within 40 yards of my domain.

Yes, it’s true, “The Fly” steps out of his car and pisses on yours at red lights and he drops anvils on your trailer park, from his space rocket.

I stepped out today in search of fantasy and all I got was a lesson in non-fiction. The simple facts are this:

1. You cannot compete with me on any level.
2. Your analysis is made for retarded midgets with small arms, like dinosaurs.
3. I am several centuries ahead of you in cognitive development.

While you deviants walk the Earth in search of herpes, “The Fly” is checkmating you, through iron stake to the skull.

In closing, crack spreads are up another 6.5% today, now approaching $29. THERE IS NOTHING ELSE WORTH DISCUSSING. Stocks like WNR, VLO, ALJ, HOC, DK, TSO and CVI are poised to move higher, lighting short sellers on fire with refined kerosene.

I am sick and tired of waiting for fun and exciting shit to happen. I am getting the fuck out of this place.

Off for fun filled adventures, with space clowns and perverted gorillas.

Developing…

We are giving it up fast here. Should the market reverse lower, things could get ugly. Or, people will anticipate that eventuality, start shorting stocks, allowing Ben Bernanke to work his magic and squeeze the shit out of them in pleasant afternoon trading. Either way, we need a 1% move in the Dow and we need that shit now.

Regardless, I am overweight refiners, now making up about 55% of my holdings. I do so knowing the risks associated with concentrating positions. There comes a time, every so often, when risk is needed. For me, this is that occasion.

Look for WNR to rally hard, as that WTI-Brent spread widens, now more than $15 per barrel.

It’s POMO, all day, every day. I warned you to “remember the clam.” Instead of heeding my dire warnings, you shot yourself in the face with a howitzer. Good going pal.

I expect grand things to happen at the opening of trade. I anticipate WNR to move higher, alongside my other stocks. I anticipate to make a great deal of money.

One final note for you WNR lovers: the only way this company fucks up current spreads is through idiotic hedging. Last quarter the company hedged 10% of its production at $16.50, on crack 321. They put up about 40-45mill in collateral.

The upside to the story is their idled refinery at Yorktown, which held over $22 mill in refined crude in reserves. Since then, prices have soared, so I expect that inventory to be worth more. Two things happen at Yorktown: 1. they sell it to another company and use some of the proceeds to pay down debt. 2. They restart the facility and take advantage of current spreads.

One thing you need to know, during Jan-Feb, WNR refineries were knocked offline due to bad weather. However, since then, they’ve been operating at full capacity. Earnings should reflect that. Their debt is not an issue now, with big payments scheduled in 2014 and 2017.

So, what we have here is the best refinery play in the United States, a company with full access to cheap light sweet crude from Cushings, the best play for taking advantage of the spread between Brent and WTI crude.

Target: $24

Using some of my new fundamental search tools, I created the following screen.

Earnings growth using High end estimates versus mean: over 10%
Earnings YOY % Change, relative to next year: over 10%
Upward earnings revisions for next Qt.: over 1
Revenue YOY growth, relative to next year: over 20%
FPE, using high end estimates: any
Short %: any

The results: