Western Refining Eyes Bigger Stake in Northern Tier Energy

EL PASO, Texas -- Western Refining Inc. (WNR) really likes the investment it made in Northern Tier Energy LP and will "seriously consider" purchasing more of the company, WNR President and CEO Jeff Stevens said during its fiscal second-quarter earnings call Tuesday.

As CSNews Online reported in November, WNR bought 100 percent of the general partner interest and 38.7 percent of SuperAmerica parent Northern Tier Energy for a total consideration of $775 million. Stevens did not directly answer a Wall Street analyst's question Tuesday regarding whether WNR would purchase the entire remainder of Northern Tier Energy it does not already own.

"We really like [Northern Tier Energy's] assets," Stevens remarked, noting that there is also the potential for some of WNR's wholesale assets to be "dropped down" into Northern Tier. However, he said there is no timetable if such a decision is made.

"We will do what's in the best interest of our shareholders," he said. "We are looking into our options."

In addition to the possible movement of its wholesale assets, combining WNR's retail assets with Northern Tier Energy's SuperAmerica division could be another option. Stevens confirmed in February that both companies were considering such a transaction. While he did not discuss the possible retail merger Tuesday, if WNR buys more shares of Northern Tier Energy, it would increase the probability that the two retail divisions would merge in an effort to cut costs and streamline operations.

As for WNR's earnings, operating income in its retail division nearly tripled to $1.56 billion for the second quarter ended June 30, compared to $589 million in the year-ago period.

Strength was seen in the company's retail fuel segment as WNR sold 78 million gallons of fuel, a gain of about 1.5 million gallons year over year. The average fuel sale price per gallon -- net of excise taxes -- rose by a penny to $3.13, but fuel margins per gallon declined by 3 cents to 17 cents per gallon.

Merchandise sales rose nearly $2 million to $68.3 million. Merchandise margins declined a slight 0.2 percent to 28.7 percent.

WNR operated 229 convenience stores and gas stations as of June 30, an increase of seven locations compared to the prior year.

Companywide, WNR reported a net profit of $128.8 million, vs. $126.8 million in its 2013 second quarter.

"The second quarter was another very good quarter for Western," said Stevens.

El Paso-based Western Refining Inc. operates convenience stores under the GIANT, Sundial, Howdy's and Mustang brand names.