Western Refining Buys NTI Interest - Analyst Blog


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Oil refiner and marketer Western Refining Inc. ( WNR ) has acquired 100% general partner interest and 38.7% limited partner interest in Northern Tier Energy LP ( NTI ) from ACON Investments LLC and TPG Capital - the private equity sponsors of the latter. The transaction was settled at a consideration of $775 million. The remaining limited partner units, apart from Western Refining's recently acquired 35.6 million units - remains publicly traded.

The acquisition is a strategic move by Western Refining to gain access to areas that have direct pipeline connectivity to crude oil resources in the Bakken, Permian, San Juan, and western Canada regions. The assets under transaction include the 89,500 barrels per day (Bbl/d) St. Paul Park refinery at Minnesota that has pipeline connectivity to Bakken and Canadian crude oil.   

Western has also acquired a 17% stake in a crude oil pipeline with 455,000 Bbl/d capacity and other logistics assets like product terminals, rail facilities and the Mississippi river dockage. Also, the company now owns the SuperAmerica retail chain that has a network of 163 company-operated convenience stores.

Per management, the deal would have an immediate effect on its earnings and cash flow. The move not only increases the geographic reach of the company's refining business but also increases its scale of operations, reaching refining capacity of 242,500 barrels per day.

The El Paso, Texas-based company partly funded the deal through a senior secured term loan of $550 million. The remaining $245 million (including fees and other expenses) was settled in cash by Western.

The limited partner interest at NTI should benefit shareholders as it would generate a variable distribution for them, in addition to the traditional distribution from Western Refining Logistics LP ( WNRL ).

Western Refining is an independent refiner and marketer of refined petroleum products in the Southwestern and Mid-Atlantic regions of the U.S. that 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 consider other stocks in the energy sector like the Zacks Ranked #1 (Strong Buy) SM Energy Company ( SM ) which is expected to outperform in the same time frame.

NORTHERN TIER (NTI): Free Stock Analysis Report

SM ENERGY CO (SM): Free Stock Analysis Report

WESTERN REFING (WNR): Free Stock Analysis Report

WESTERN REF LOG (WNRL): Free Stock Analysis Report

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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: NTI , SM , WNR , WNRL

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