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SECTOR: Energy Sector COMPANY: Western Refining Inc. S R. A NALYSTS : J ORGE P IO J R. A NALYSTS : Edison Vo, Knut Kirchoff, nicholas Canova, Chris Sondej,

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Presentation on theme: "SECTOR: Energy Sector COMPANY: Western Refining Inc. S R. A NALYSTS : J ORGE P IO J R. A NALYSTS : Edison Vo, Knut Kirchoff, nicholas Canova, Chris Sondej,"— Presentation transcript:

1 SECTOR: Energy Sector COMPANY: Western Refining Inc. S R. A NALYSTS : J ORGE P IO J R. A NALYSTS : Edison Vo, Knut Kirchoff, nicholas Canova, Chris Sondej, Alex Mitrani, Raditya Purwahjo

2 Investment Recommendation 2 CompanyWestern Refining Inc RecommendationBuy Current Price yr Target Price26.36 % Upside50.4% Key investment drivers 1. Rising price of Gas 2. Rising Consumption of Oil 3. Unrest in the Middle East

3 Industry Snapshot Industry Definition: The oil refining industry consists of companies that specialize in the refining of crude oil into gasoline, diesel Fuel and other oil products. The refining industry also includes the sale refined products at wholesale and retail locations. Industry Size: $437 Billion 3

4 Key Financials: Company Snapshot 4 Revenue$8 Billion P/S.22X TEV$2.37 Billion TEV/EBITDA9.7x Market Cap$1.55 Beta.56

5 Company Snapshot Refine crude OilTransportRetail/Wholesale Purchase Crude Oil 5 The crude is refined into a combination of Gasoline, Diesel Fuel, and Jet Fuel End product is transported by pipeline and truck Sale of gas at retail and wholesale locations Crude oil is delivered to refineries via pipeline

6 MAP 1/17/2014© Dyrect Investing, Ltd.6 El Paso, Texas - 128,000 bpd Gallup, New Mexico - 31,000 bpd Yorktown, Virginia - 70,000 bpd (Temporarily Suspended Sept 2010) Bloomfield, New Mexico - 17,000 bpd (Temporarily suspended Nov 2009) Primarily operates in: West Texas New Mexico Arizona Utah Colorado Mid-Atlantic Region

7 Trends: Crude Oil Unrest in the Middle East has lead to the highest crude oil prices since 2008 and has increased the forecast of future 2011 price per barrel to $105 World Crude oil and liquid fuel consumption grew by an estimated 2.4 million bbl/d. Expected consumption will grow 1.5 million bbl/d in 2011 In 2014 the global oil and gas refining and marketing sector is forecasted to have an 11.4% increase from 2009 (CAGR 2.2%) Data-monitor industry profile 1/17/2014© Dyrect Investing, Ltd.7 Source:EIA.gov

8 Price of WTI Increased production in Canada is creating a downward pressure on the WTI WTI(West Texas Light) Supply buildup at Cushing

9 Gasoline price and demand increase EIA estimates a 28% increase in gasoline prices API estimates a 4% demand increase for gasoline

10 Company Analysis The company has announced a cost reduction effort of $50 million in order to improve margins in anticipation of higher crude oil prices Has expanded its refining capacity through acquisitions of other independent refiners – 2007: Giant Inc. doubled their refinery capacity – Giants New Mexico and Virginia refineries with a $1.5 billion loan.

11 Company Analysis Longhorn pipeline-connects Gulf Coast refineries to the El Paso pipeline, which delivers oil to Phoenix and Albuquerque – Increased profit margins in those cities El Paso-Phoenix pipeline expansion – Western refinery won exclusive rights to use this 1/17/2014BU Finance & Investment Club11

12 Valuation 12 Year2010(e)2011(e)2012(e)2013(e)2014(e) FCF $(67.50) $ $ $ $ DCF WACC7.36% Growth Rate3.00% DCF Value$3,644 B 1yr Price$29.80 Comparables P/S (%w)30% 1yr Price22.24 TEV/EBITDA(%w)30% 1yr Price % Weight 60% Weight 1yr Target Price % Upside50.4%

13 Recommendation Rising Gas Prices Rising Consumption of Oil Unrest in the Middle East 13 CompanyWestern Refining Inc RecommendationBuy Current Price yr Target Price26.36 % Upside50.4%


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