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Understanding Western Refining’s Segmental Performance in 1Q16

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Western Refining’s Western segment

Western Refining’s (WNR) adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) from its Western segment fell from $171 million in 1Q15 to $51 million in 1Q16. The fall was due to a decline in refining margins.

WNR also recorded a fall in gross refining margins, from $16.8 per barrel in 1Q15 to $10.8 per barrel in 1Q16. This was partly offset by a decline in operating costs by $0.3 per barrel in 1Q16 over 1Q15. Still, its net refining margin dropped steeply, from $11.7 per barrel in 1Q15 to $5.9 per barrel in 1Q16. WNR’s total refinery throughput also declined from 167 Mbpd (thousand barrels per day) in 1Q15 to 165 Mbpd in 1Q16.

Understanding Western Refining's Segmental Performance in 1Q16

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Western Refining’s peers also witnessed a fall in their refining margins in 1Q16 as compared to 1Q15. Marathon Petroleum (MPC), Valero Energy (VLO), PBF Energy (PBF), and Phillips 66 (PSX) saw their gross refining margins narrow by $6.2, $4.4, $5.6, and $5.2 per barrel to $10, $8, $5, and $7.1 per barrel in 1Q16, respectively, as compared to 1Q15. For exposure to energy sector stocks, you can consider the PowerShares Dynamic Large Cap Value ETF (PWV), which has ~11% exposure to the sector.

Performance of NTI and WNRL segments in 1Q16

WNR’s NTI (Northern Tier Energy Partners’ Refining, Transport, and Retail Operations) segment reported a decline in its adjusted EBITDA, from $118 million in 1Q15 to $18.5 million in 1Q16. NTI’s net refining margin fell by $11.8 per barrel over 1Q15 to $4.4 per barrel in 1Q16. This was due to a fall in gross refining margins coupled with a rise in operating costs.

WNRL (Western Refining Logistics) is the only segment that saw a rise in adjusted EBITDA in 1Q16 as compared to 1Q15. The segment’s adjusted EBITDA rose from $24.1 million in 1Q15 to $28.4 million in 1Q16. This was due to higher volumes in the pipeline and gathering system, which included the operation of the TexNew Mex pipeline. Volumes from Four Corners and Permian-Delaware basin systems rose. In its wholesale division, WNRL sold higher volumes of fuel with better margins.

Now let’s look at WNR’s recent stock performance.

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