WNR’s analyst ratings
In the earlier part of this series, we looked at Western Refining’s (WNR) stock performance. In this part, we will examine the ratings by analysts covering the stock.
WNR’s analyst ratings show that 43% of the surveyed analysts covering the stock rate it as a “buy.” Around 57% rate it as a “hold.” The highest 12-month price target for WNR stands at $52, indicating a whopping 89% gain from current levels. None of the analysts rate WNR as a “sell.” However, the lowest price target of $27 implies a 2% fall from current levels. The average 12-month price target stands at $41, indicating a 49% rise from current levels.
WNR’s peers HollyFrontier (HFC), Marathon Petroleum (MPC), and Tesoro (TSO) have been rated as a “buy” by 35%, 83%, and 47% of analysts, respectively. For exposure to refining sector stocks, investors can consider the Vanguard Energy ETF (VDE), which has ~10% exposure to the sector.
WNR is expanding its refining and logistics footprints
Western Refining (WNR) aims to enhance its refining capacity via organic as well as inorganic growth. The recent merger agreement with Northern Tier Energy Partners (NTI) is a step in this direction. Post-merger, WNR’s refining capacity is expected to rise to 253,800 bpd (barrels per day) from the current 156,000 bpd. The merger is expected to create more than $10 million in operational synergies for the merged entity. The transaction is expected to close in 1H16.
In terms of organic growth, WNR is undertaking an expansion project at the El Paso refinery to raise its capacity by 10,000 to 15,000 barrels per day. Plus, the company is investing $112 million in a modification project at the St. Paul Park refinery.
WNR also aims at growing its logistics segment. WNR plans to expand its crude oil pipeline network. Plus, the NTI merger is expected to provide further dropdown opportunities to Western Refining Logistics (WNRL).
In 2015, Western Refining (WNR) incurred capex of $291 million. In 2016, WNR plans to incur capex to the tune of $355 million, of which $207 million is likely to be spent on discretionary projects.