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Magnetar Sells Position in Western Refining

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Magnetar and Western Refining

During 4Q14, the fund eliminated its position in Western Refining (WNR) with the sale of 2.1 million shares in the company. WNR had accounted for 1.75% of Magnetar’s third-quarter portfolio.

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Overview of Western Refining

WNR is a refiner and retailer of crude oil and related products. Producing close to 250,000 barrels per day of crude oil and generating over $15 billion in revenues, WNR operates four business segments:

  • Refining – This segment includes two refineries—one in El Paso, Texas, and another in Gallup, New Mexico—that process crude oil and feedstocks into gasoline, diesel, jet fuel, asphalt, and different grades of crude oil.
  • NTI – This segment operates a refinery based out of St. Paul, Minnesota, and includes storage and transportation assets. It also runs 258 retail stores located across the Upper Great Plains.
  • WNRL – With its storage and transportation assets, this segment provides logistics services to WNR’s refineries in the Southwest.
  • Retail – The segment runs 261 retail stores in the Southwest that sell various grades of crude oil as well as convenience store goods to consumers. Under this segment, WNR also operates 50 cardlocks, or commercial fueling locations, that market gasoline and diesel products to contract customers’ vehicle fleets.

Additional retail locations in Arizona

In January 2015, WNR grew its retail operations by adding 31 stores in Southern Arizona through lease arrangements. The retail locations were earlier controlled by Reay’s Ranch. The stores will market various grades of fuel under WNR’s Giant brand. With these additional stores, WNR hopes to increase its retail fuel and merchandise volumes by 10% and 15%, respectively.

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Solid refining results facilitate earnings growth

While revenues in 4Q14 were relatively stable at $3 billion, compared to the same period last year, operating income increased significantly, up to $233 million from $32 million in 4Q13. Higher operating earnings were driven by strong results from the Refining division.

El Paso and Gallup refineries had average crude production of 222,479 barrels per day in 4Q14, 20% more than production in the same period last year. These refineries delivered a gross margin per barrel of $22.13 in contrast to $7.99 in 4Q13. As a result, WNR booked a net income of $131 million this quarter against a net loss of $7.3 million in 4Q13.

Exposure to the energy sector

Magnetar has a sizeable exposure to the energy sector. Its portfolio is 60% invested in this sector, with chief positions in Spectra Energy (SE), Williams Companies (WMB), Cheniere Energy (LNG), Plains Group Holdings (PAGP), Anadarko Petroleum (APC), Halliburton (HAL), and TransCanada (TRP), among others.

You can invest in WNR through the SPDR S&P Oil & Gas Exploration & Production ETF (XOP) and the iShares U.S. Oil & Gas Exploration & Production ETF (IEO). WNR makes up 1.39% of XOP and 0.45% of IEO.

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