How Western Refining Logistics Will Benefit from TexNew Mex Deal

(Continued from Prior Part)

Market performance

In the last five years, US refining capacity and utilization rates have increased immensely while demand for gasoline and distillate has decreased. The lower-for-longer phase of crude oil prices due to oversupply is hurting the oil producers, forcing them to cut back capital expenditure. Lowered output from oil producers leads to weaker business for midstream and downstream oil players.

Western Refining (WNR) has gained 25% in market value so far this year. Leading refiners Valero Energy (VLO) and Holly Frontier (HFC) have also returned 30% year-to-date. These three companies account for 23% of the Market Vectors Oil Refiners ETF (CRAK).

Western Refining Logistics (WNRL) has fallen more than 14% this year. Enable Midstream Partners (ENBL) has also fallen ~40% in the same period. The Alerian MLP ETF (AMLP), which is comprised of 23 midstream energy MLPs, has lost ~20% this year.

WNRL’s relationship with its sponsor

Western Refining’s logistics arm makes high quality, cost-advantaged crude oil accessible to refineries in El Paso and Gallup from the Permian and Delaware basins. Western Refining owns 52 cardlocks and 262 retail stores that provide access to end users. The financial strength of Western Refining incentivizes Western Logistics’ growth.

Western Refining posted a record profit in the retail segment in 3Q15 driven by historical high fuel margins and continued growth in merchandise sales. Western Refining, Western Refining Logistics (WNRL), and Northern Tier Energy (NTI) are three publicly traded purposefully designed independent entities under one roof.

Browse this series on Market Realist:

• Part 1 - Western Refining Expanded Its Footprint in the Permian Basin

• Part 2 - How the TexNew Mex Pipeline Will Benefit WNRL’s Cash Flows

• Part 3 - Western Refining Continued Its Superior Performance in 3Q15