Will Western Refining Beat Its 1Q16 Estimates?
WNR’s stock performance
Western Refining’s (WNR) stock, continuing its December 2015 downtrend, had a weak start to 2016. However, since mid-February 2016, amid volatility, WNR’s stock rose 8%. During this period, refining cracks started strengthening. Plus, refining margin indicators for major refining companies improved.
During the same period, HollyFrontier (HFC) and Valero Energy (VLO) rose 18% and 8%, respectively. PBF Energy (PBF) gained 25%. For exposure to refining stocks, you can consider the Vanguard Energy ETF (VDE), which has ~10% exposure to the sector.
WNR’s capex position
In 2015, Western Refining (WNR) incurred capital expenditure, or 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.
Western Refining (WNR) aims at enhancing its refining capacity organically as well as inorganically (via acquisitions). The recent merger agreement with Northern Tier Energy Partners LP (NTI) is a step in this direction. The merger is expected to enhance WNR’s refining capacity and create more than $10 million of 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, a modification project, with an investment of $112 million, is going on at the St. Paul Park refinery.
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