Western Refining Arm Launches IPO - Analyst Blog


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Western Refining Logistics, LP - a subsidiary of oil refiner and marketer, Western Refining Inc. ( WNR ) - has launched an initial public offering of 12.5 million common units with a price band of $19-$21. Per company estimates, upon successful completion of the offer this would bring in about $237.5 million-$262.5 million for the newly formed master limited partnership (MLP).

Western Refining Logistics intends to list its common units on the New York Stock Exchange under the symbol "WNRL".

Western Refining is moving ahead with the formation of the MLP owing to significant financial benefits. An MLP can raise money from the bourses but is taxed only at the unit holder level. These are exempted from paying corporate income taxes.

The underwriters have a 30-day option to purchase up to an additional 1.875 million units at the IPO price. The offering represents a 27.4% limited partner interest in Western Refining Logistics. Moreover, if the underwriters exercise their option in full, the limited partner interest would increase to 31.5%. The remaining stake and the distribution rights remain with Western.

The El Paso, Texas-based company formed its subsidiary to own, operate, develop, and acquire terminals, storage tanks, pipelines, and other logistics assets.

Incorporated in 2005, Western Refining is an independent refiner and marketer of refined petroleum products in the south western and mid-Atlantic regions of the U.S. The company operates in three segments, refining, wholesale and retail. Among the three, refining is the major contributor to the company's income.

Western Refining stock trades in a 52-week range of $23.67 to $39.42. The company's stock has been trading at the middle of the range for the greater part of last month with shares settling at $30.50 on Oct 2. Moreover, with volatile industry fundamentals and limited geographic diversification, we do not see any significant price upside for the Western Refining stock in the near-to-medium term.

Western Refining currently holds a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at other stocks in the energy sector that are expected to outperform in the near term. These include Zacks Ranked #1 (Strong Buy) stocks of Stone Energy Corp. ( SGY ), China Petroleum & Chemical Corp. ( SNP ) and Pembina Pipeline Corporation ( PBA ).

PEMBINA PIPELN (PBA): Free Stock Analysis Report

STONE ENERGY CP (SGY): Free Stock Analysis Report

CHINA PETRO&CHM (SNP): Free Stock Analysis Report

WESTERN REFING (WNR): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: MLP , PBA , SGY , SNP , WNR

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