Western Refining, Inc. (WNR) Q2 2012 Results Earnings Call August 2, 2012 11:00 AM ET Executives Jeff Beyersdorfer – Treasurer and Director, Investor Relations Jeff Stevens – President and CEO Gary Dalke – Chief Financial Officer Mark Smith – President, Refining and Marketing Analysts Chi Chow – Macquarie Jeff Dietert – Simmons Ed Westlake – Credit Suisse Arjun Murti – Goldman Sachs Evan Calio – Morgan Stanley Paul Sankey – Deutsche Bank Roger Read – Wells Fargo Cory Garcia – Raymond James Presentation Operator
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» Western Refining's CEO Discusses Q1 2012 Results - Earnings Call Transcript
Before we proceed, I would like to make the following Safe Harbor statement. Today’s presentation will contain forward-looking statements and I refer you to the Forward-Looking Statements section of our earnings release and recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances.In addition to reporting financial results in accordance with Generally Accepted Accounting Principles or GAAP, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results, which can be found in the press release, which is posted on the IR section of our website. I’ll now turn the call over to Jeff. Jeff Stevens Thanks, Jeff. Welcome to everyone on the call. Today, we will discuss our second quarter performance. After my opening remarks, Gary will review our earnings in more detail and provide operating guidance for Q3 2012 and then we will open up the call for your questions. The second quarter was one of the most profitable in Western’s history and continues several quarters of strong performance. Over the past year, we have discussed our plans to continue to focus on safe and reliable operations, improve the balance sheet, implement crack spread hedging and reinvest in the business, and I’m pleased to report we are executing very well on this plan. In the second quarter, total refining throughput was approximately 158,000 barrels per day, which is near full capacity and both refineries are currently operating at planned rates. I’m very proud of our employees and their dedication in running our facilities in a safe and reliable manner, which allows the company to continue to capture the current strong margins. We reached a significant milestone in the second quarter in terms of balance sheet improvement. During the quarter, we prepaid and retired our term loan and over the last 12 months we have reduced total debt by $566 million, a reduction of more than 50%.
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. Read the rest of this transcript for free on seekingalpha.com