Western Refining, Inc. (WNR): New Analyst Report from Zacks Equity Research - Zacks Equity Research Report


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We are maintaining our Neutral recommendation on Western Refining shares ahead of fourth quarter results. We like the company for its shareholder friendly financial policy and the initiatives to improve reliability while reducing operating costs. However, in an effort to tighten fuel emission norms, the EPA has proposed new gasoline standards, asking refiners to significantly curb sulfur content in gasoline starting from 2017. These new standards are expected to hit the company hard. Compliance with the new rules is expected to raise capital expenditures for downstream operators like Western Refining. The company is also faced with volatile industry fundamentals and limited geographic diversification, which may further limit its ability to generate positive earnings surprises.


Incorporated in 2005, El Paso, Texas-headquartered Western Refining Inc. (WNR) is an independent refiner and marketer of refined petroleum products in the Southwestern and Mid-Atlantic regions of the U.S. The company operates in three segments: Refining (accounted for 93% of the company's total 2013 operating income), Wholesale (5%), and Retail (2%). Additionally, Western Refining owns the general partner and approximately 65% of the limited partnership interest of Western Refining Logistics L.P. (WNRL), and the general partner and approximately 39% of the limited partnership interest in Northern Tier Energy L.P. (NTI).

Refining: The Refining segment manufactures and sells various grades of gasoline, diesel fuel, jet fuel and other refined products to customers through its own service stations and wholesale group, independent wholesalers and retailers, commercial accounts, and sales and exchanges with major oil companies. Western Refining owns and operates two refineries a 128,000 barrels per day (Bbl/d) facility in El Paso, Texas and a 25,000 Bbl/d refinery in Gallup, New Mexico. This segment also operates a crude oil transportation and gathering pipeline system in the Four Corners region of New Mexico, an asphalt plant in El Paso, three stand-alone refined product distribution terminals, and four asphalt distribution terminals.

Until 2009, Western also operated a 17,000 Bbl/d refinery near Bloomfield, New Mexico and a 70,000 Bbl/d facility in Yorktown, Virginia. However, in response to the weak refining margin environment, Western Refining decided to consolidate the operations of its Four Corners refineries (Bloomfield and Gallup) into one at the Gallup refinery and shutdown its Yorktown refining operations. Despite shuttering the Bloomfield and the Yorktown facilities, Western continues to operate the refinery's products terminal.

Wholesale: Western Refining also owns and operates a Wholesale division that includes several lubricant and bulk petroleum distribution plants, unmanned fleet fueling operations, a bulk lubricant terminal facility, and a fleet of finished product and lubricant delivery trucks. Through this group, the company purchases commercial wholesale petroleum products from the refining group, and from third-party suppliers and then distributes them to customers primarily in Arizona, California, Colorado, Nevada, New Mexico, Texas and Utah.

Retail: The Retail segment distributes motor fuels (gasoline, diesel fuel) to the general public through a network of approximately 229 convenience stores and gas stations located in New Mexico, Arizona, and Colorado, primarily under the Giant', Mustang , Howdy's', and Sundial' names.

Western Refining, Inc. (WNR): Read the Full Research Report
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WESTERN REFING (WNR): 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.

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