Markets

Here's Why Shares of Northern Tier Energy Plunged in September

NTI Chart

Shares of declined 11% during the month of September. While most of that decline can be attributed to the general malaise of the broader, as well as energy, markets, the announcement that its Minnesota refinery was undergoing some unplanned maintenance came as an unpleasant surprise to investors.

What: Shares of Northern Tier Energy declined 11% during the month of September. While most of that decline can be attributed to the general malaise of the broader, as well as energy, markets, the announcement that its Minnesota refinery was undergoing some unplanned maintenance came as an unpleasant surprise to investors.

So What: Pretty much the entire broader market was working against shares of Northern Tier this past month, so anything that wasn't spectacular news was likely to hit the company particularly hard. So when the company announced that it would be forced to shut down its refinery for unscheduled maintenance, the market took the news pretty hard.

NTI data by YCharts .

There are two reasons that this is a big deal for Northern Tier in comparison to other refinery companies. The first one is that Northern Tier only operates one refinery, so any downtime can lead to a large impact on both revenue and earnings. The moment the unplanned maintenance was announced, Northern Tier estimated that it could impact the refinery's daily average crude throughput by as much as 5% for the quarter.

The second reason this had an impact on the company's stock price is that Northern Tier operates as a variable rate distribution partnership. This means that 100% of distributable cash gets paid out to investors: no more, no less. This helps the business over the long term because it never has to pay out more in distributions than it can afford in any given quarter -- a very necessary trait when so much of the cash flow comes from one asset.

The downside, of course, is that distribution payments per quarter can go up or down. With less crude being processed, and some maintenance expenses to boot, chances are a future distribution payment will not be as lucrative.

Now What: In all honesty, this is one of the small risks that an investor faces when investing in Northern Tier, but it certainly isn't one that should prevent someone from investing in it or not. As long as these unplanned maintenance outages don't happen frequently, and the company can continue to leverage its advantageous location to source cheap crude, Northern Tier should be able to churn out generous distribution payments.

The next billion-dollar iSecret

The world's biggest tech company forgot to show you something at its recent event, but a few Wall Street analysts and the Fool didn't miss a beat: There's a small company that's powering their brand-new gadgets and the coming revolution in technology. And we think its stock price has nearly unlimited room to run for early in-the-know investors! To be one of them, just click here .

The article Here's Why Shares of Northern Tier Energy Plunged in September originally appeared on Fool.com.

Tyler Crowe has no position in any stocks mentioned. You can follow him at Fool.com or on Twitter @TylerCroweFool .The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

Copyright © 1995 - 2015 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy .

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


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

Other Topics

Stocks

Latest Markets Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More