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Western Refining's CEO Discusses Q2 2012 Results - Earnings Call Transcript

This debt reduction will lower our cash interest expense by approximately $54 million annually, compared to a year ago. We are pleased with the debt reduction we’ve achieved and we believe the improvements we have made in the balance sheet have made Western a much stronger company.

Another key component of our plan is our crack spread hedging activity. Given the strong forward margin environment during the quarter we added to our 2013 and 2014 crack spread hedges, and also put on crack spread hedges for 2015. A summary of our hedge positions as of June 30th can be found on slide five.

We also continue to invest in our business with approximately 40% of our 2012 capital budget dedicated to discretionary projects. Our major initiatives, which include the Delaware Basin Logistic projects and refinery expansions continue to progress on time and on budget.

In addition, we continue to evaluate other projects that will enable us to capitalize on the growing crude production in our region, allowing us to further enhance the value of our assets.

For the second quarter, we generated $365.9 million in adjusted EBITDA. This performance was due to our excellent operations and continued strong refining margins. These margins continue to be driven by the wide Brent/WTI spreads and strong refined product values in our region.

In addition, El Paso refinery benefited from the WTI Midland/Cushing differential, which averaged $4.48 per barrel during the quarter, compared to $0.40 per barrel in Q2 2011.

Our wholesale business performed well in the quarter with significantly higher operating income driven by increased fuel margins, and improved fuel and loop volumes compared to Q2 2011.

In our Retail business we added 11 locations during the quarter by leasing an existing network of stores in Northern New Mexico bringing our total count to 222 stores. This addition is consistent with our strategy to opportunistically grow retail in order to secure a long term outlet for our refinery production.

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