may 16, 2013...enhance branded wholesale business asphalt optimize asphalt production and 3rd party...
TRANSCRIPT
Investor Presentation
May 16, 2013
- 2 - 2
Forward-Looking Statements
All statements contained in or made in connection with this presentation that are not statements of historical fact are forward-looking statements intended to be covered by the safe harbor provisions of the Securities Act of 1933 or the Securities Exchange Act of 1934. The words ―believe‖, ―intend‖, ―plan‖, ―expect‖, ―should‖, ―estimate‖, ―anticipate‖, ―potential‖, ―future‖, ―will‖ and similar terms and phrases identify forward-looking statements. Forward-looking statements reflect the current expectations of the management of Alon USA Energy, Inc. (―Alon‖) regarding future events, results or outcomes. These expectations may or may not be realized and actual results could differ materially from those projected in forward-looking statements. Alon’s businesses and operations involve numerous risks and uncertainties, many of which are beyond our control, which could result in the expectations reflected in forward-looking statements not being realized or which may otherwise affect Alon’s financial condition, results of operations and cash flows. These risks and uncertainties include, among other things, changes in price or demand for our products; changes in the availability or cost of crude oil and other feedstocks; changes in market conditions; actions by governments, competitors, suppliers and customers; operating hazards, natural disasters or other disruptions at our or third-party facilities; and the costs and effects of compliance with current and future state and federal regulations. For more information concerning factors that could cause actual results to differ from those expressed in forward-looking statements, see Alon’s Form 10-Q for the quarter ended March 31, 2013 which has been filed with the Securities and Exchange Commission and is available on the company’s web site at http://www.alonusa.com. Alon undertakes no obligation to update or publicly release the results of any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of this presentation or to reflect the occurrence of unanticipated events.
- 3 - 3
Table of Contents
I. Business Overview
II. Financial Summary
Appendix: Additional Materials
I. Business Overview
- 5 - 5
Overview of Alon Energy
Alon USA Partners,
LP
Includes the Big Spring refinery (TX) with a throughput capacity of 70,000 bpd
Includes the wholesale fuels marketing business which is integrated through the Big Spring refinery system
Markets gasoline and diesel to ~635 sites under the ALON brand, including Alon Brands stores
Krotz Springs Includes the Krotz Springs (LA) refinery with a throughput capacity of 74,000 bpd
California Includes the Paramount, Long Beach and Bakersfield refineries with a throughput capacity of 70,000 bpd
Asphalt
Owns and operates 11 asphalt terminals in the western U.S. Operations include:
— 50% ownership in Paramount Nevada Asphalt Company, and
— 50% ownership in Wright Asphalt
Second largest supplier of asphalt in California
Second largest supplier of asphalt in Texas
Retail Largest 7-Eleven licensee in the U.S. with 298 retail gasoline / convenience stores in Central and West Texas
and New Mexico (~50% fee owned)
Alon Energy conducts its operations through five business units: Big Spring Refining & Wholesale Fuels Marketing (―Alon USA
Partners, LP‖), Krotz Springs Refining (―Krotz Springs‖), California Refining (―California‖), Asphalt Marketing (―Asphalt‖), and
Retail. ALJ is the general partner and owns 81.6% of the Alon USA Partners, LP
The Company generated $524 million of Adjusted EBITDA for the LTM period ended March 31, 2013 and $157 million of
Adjusted EBITDA for 1st quarter of 20131
1 See page 27 for a reconciliation of Adjusted EBITDA to Net Income under GAAP.
- 6 - 6
Business Strategy
Refining¹
Maintain focus on safety and reliability
Run Big Spring at maximum capacity
Run Krotz Springs at maximum capacity
(using 30,000 bpd of WTI) to leverage recent
capital improvements
Improve crude flexibility in our CA refineries
via the ability to receive advantaged crude by
rail
Maintain operating expense leadership
Optimize crude slate to take advantage of regional
pricing dislocations
Optimize refined product slate to take advantage of
distillate production capacity and strong margin
environment
Maintain capital discipline and continued
investments in high return projects
Enhance branded wholesale business
Asphalt
Optimize asphalt production and 3rd party
purchases
Leverage existing distribution network
Focus in maintaining our market share in premium,
specialty asphalts products (Emulsions, Polymer
Modified Asphalts (―PMA‖) and Ground Tire Rubber
(―GTR‖) blends)
Optimize Zero-Pen shipments to the West Coast
Retail
Continue improvement of operations through
Clean TEAM efforts: remodel interior and
exterior retail sites and selectively increase
store count
Increase fuels sold under ALON brand
Increase sales of high margin food products
and inventory turns
Expand and grow the retail locations in target
markets
Optimize pricing
Operational Focus Commercial Focus
1 Refining includes Big Spring and Wholesale Marketing, Krotz Springs and the California complex.
- 7 - 7
Alon USA Strategic Advantages
Strategically Located Refineries with Advantageous Sources of Crude Supply
Significant Exposure to High Margin Distillates
Physically Integrated Retail and Wholesale Network
Diversified Operations Provide Stability
High Quality Assets with Low Operating Costs
Leading Blended and Modified Asphalt Producer
Strong Liquidity Position and Flexibility provided by Supply & Off-take Agreements at each
refinery
Experienced Management Team
- 8 - 8
California
Arizona
Texas
Oklahoma
Arkansas
Louisiana
Bakersfield
Tucson
El Paso
Nederland
Duncan
Abilene
Wichita Falls
Big Spring
Albuquerque
Bloomfield
Moriarty
Midland / Odessa
New Mexico
Nevada
Oregon
Washington
Paramount/
Long Beach
Portland
Willbridge
Richmond Beach
Elk Grove
Flagstaff
Mojave
Fernley
Tulsa
Corpus Christi
Houston
Krotz Springs
Lubbock
DFW
Third-Party Terminal
Asphalt Terminal
Refinery
Key Retail Cities
Exchange Terminal
Alon Pipelines
Third Party Pipelines
Wright JV Asphalt Terminal
Alon USA Terminal
Phoenix
Orla
South Marsh
Island Loop
Empire
Strategically Located Assets
Refinery
Capacity
(bpd)
Nelson
Complexity
Big Spring 70,000 10.8
Krotz Springs 74,000 8.3
California 70,000 TBD
- 9 - 9
Diversified Operations Provide Stability
Three separate refinery complexes provide asset and geographic diversification
Five business units (Big Spring and wholesale fuels marketing, Krotz Springs refining, California refining,
asphalt marketing and retail) provide business diversification
— Regional differences in Alon’s refining base (Louisiana, Texas and California) provide diversification
during price dislocations
— Asphalt business is typically counter-cyclical to refining environment
— Retail business provides steady and predictable cash flows
LTM March 31, 2013 Gross Margin by
Business Unit
LTM March 31, 2013 Production by
Refinery
Total Gross margin: $1,089 million Total Production: 152Mbpd
Big Spring, 59.6%
Krotz Springs, 22.1%
California, 1.3%
Asphalt, 3.7%
Retail, 13.4%
$1,089
million
Big Spring, 43.7%
Krotz Springs, 44.2%
California, 12.1%
152Mbpd
- 10 - 10
Flexible Refineries with Low Operating
Expenses
LTM March 31, 2013 Refinery Operating Expenses ($/bbl) – Mid-Continental and Gulf Coast Groups
Source: Derived from public company filings with SEC.
Note: Refinery direct expense is a per barrel measurement calculated by dividing direct operating expenses by total throughput volume.
(1) VLO Mid-Continent region includes the McKee, Ardmore, and Memphis Refineries.
(2) HFC Mid-Continent region includes the El Dorado and Tulsa Refineries.
(3) VLO Gulf Coast region includes the Corpus Christi , Port Arthur, St. Charles, Texas City, Aruba, Houston, Three Rivers and Meraux Refineries.
Mid-Continent Peer Group Gulf Coast Peer Group
$3.57 $4.41 $4.46 $4.80 $5.07 $5.34
$6.34 $6.35
$10.00
$3.57 $3.94 $4.23
VLO Mid-Continent (1)
CVICoffeyville, KS
ALJ Big Spring,TX
WNR El Paso,TX
HFC Mid-Continent (2)
DK Tyler, TX HFC Navajo,NM
CVIWynnewood,
OK
WNR FourCorners, NM
VLO GulfCoast (3)
ALJ KrotzSprings, LA
DK El Dorado,AR
- 11 - 11
Crude Differentials
Beginning in 2011, WTI related crudes have shown a substantial divergence from historical trends and
differentials for LLS and Buena Vista crudes are significantly greater than any time in past 5 years
¹ 5 Year Average of 2008 to 2012
² YTD as of Mar 2013
Louisiana Light Sweet
("LLS")
GC321
5 Year Average --$15.35
YTD 2013---$28.40
WC3111 (BV)
5 Year Average --$10.56
YTD 2013 ---$11.06
GC 211 (HSD/LLS)
5 Year Average --$8.08
YTD 2013 ---$8.20
West Texas Sour ("WTS")West Texas
Intermediate ("WTI")
Buena Vista
("BV")
5 Year Average¹ --$86.00 YTD 2013² ---$94.27
WTI - WTS 5 Year Average --$2.99
YTD 2013 ---$11.41
WTI - BV 5 Year Average --$(3.47)
YTD 2013 ---$(15.76)
LLS - WTI 5 Year Average --$7.25
YTD 2013 ---$20.22
- 12 - 12
Big Spring Refinery Overview
On November 20, 2012 Alon USA Partners, LP (―ALDW‖)
completed an initial public offering as a variable rate MLP
— Issued 11.5 million of common units raising $184 million (The public
owns an 18.4% limited partner interest in Alon Partners)
The Big Spring refinery located in Big Spring, Texas
— 70,000 bpd (~26 million bbl/year) sour crude cracking refinery
— 10.8 Nelson Complexity
Captive wholesale fuels marketing business supplies substantially
all of Alon Retail segments
Closest refinery to robust West Texas crude oil production
(Permian Basin), which provides a significant crude cost advantage
Additional benefit from running ~76% West Texas Sour (―WTS‖),
which traded at an average discount to West Texas Intermediate
(―WTI‖) of $11.41/bbl for the three months ended March 31, 2013
Product price advantage based on favorable location
— Gulf Coast refiners pay ~$2.50/bbl to ship light products to our region
Majority of the units have been rebuilt at Big Spring refinery post
February 2008 fire
— Since 2008, the Company invested ~$500 million to rebuild
equipment and make other refinery improvements
Entered into a Supply and Off-take Agreement with J. Aron in
March 2011
$7.64
20.89
23.50
28.76
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
2010 2011 2012 1Q 2013
$ /
bb
l
Refinery Operating Margin
80%
80% 76%76%
15%
16%21%
19%5%
4%3%
5%49,028
63,61468,946
59,476
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2010 2011 2012 1Q 2013
bpd
WTS crude WTI crude Blendstocks
Refinery Throughput
50% 49% 50% 50%
32% 32% 32% 32%
6% 7% 6% 6%
11% 12% 11% 11%
99.1% 99.8% 99.8% 99.4%
0%
20%
40%
60%
80%
100%
2010 2011 2012 1Q 2013
Gasoline Diesel/jet Asphalt Other
Refinery Product Yield
*
* Lower throughput is due to reformer regeneration and maintenance work
- 13 - 13
Big Spring sources substantially
all of its crude oil locally from
the Permian Basin
The Permian Basin is
experiencing a drilling and
production renaissance, with
482 active drilling rigs
Lack of logistics infrastructure
limits crude oil transport to the
Gulf Coast, creating attractive
opportunities for Big Spring to
purchase at a significant
discount
¹ Baker Hughes, RigData, U.S. Energy Information Administration. Rig data as of November 2, 2012.
² Production Data obtained from RRC Production Data Query on March 27, 2013
Big Spring is in the Heart
of the Permian Basin
Permian Basin Activity Overview1
Active
Drilling Rigs
Existing pipelines
Proposed/under construction
Year Oil Produced (million bbl.)
2005 253
2006 252
2007 251
2008 260
2009 260
2010 270
2011 295
2012 312
Crude Oil Production2
- 14 - 14
Krotz Springs Refinery Overview
74,000 bpd sweet crude residual cracking refinery
8.3 Nelson Complexity
Historically processed a mix LLS and HLS type
crudes.
Access to 30,000 bpd of WTI Midland priced crude
through the AMDEL pipeline and using our existing
railcars to ship and additional 6,000 bpd of WTI
Midland priced crude oil to a railcar unloading terminal
facility at Krotz Springs
High liquid recovery of over 101%
One of the newest refineries in the U.S. (1980)¹ with
industry low operating costs
Access to domestic and foreign crude markets
through the Louisiana Offshore Oil Port (―LOOP‖)
High distillate yield capability of ~40%
Refinery Product Yield
¹ Source: US Energy Information Administration.
$2.24 $3.05
$8.30
$13.14
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
2010 2011 2012 1Q 2013
$ /
bb
l
Refinery Operating Margin
30% 43%
98%
99%
69% 54%2%
1%
1%
3%
39,244
59,72067,877
58,439
-5,000
15,000
35,000
55,000
75,000
2010 2011 2012 1Q 2013
bpd
WTI crude Gulf Coast sweet crude Blendstocks
Refinery Throughput
40% 42% 43% 46%
48% 46% 42% 38%
12% 13% 16% 18%
100.4% 100.6% 101.2% 102.3%
0%
20%
40%
60%
80%
100%
2010 2011 2012 1Q 2013
Gasoline Diesel/Jet Other
*
* Lower throughput is due to reformer regeneration and maintenance work
- 15 - 15
California Refineries Overview
Integrated complex consisting of the Paramount, Long Beach and Bakersfield refineries with a throughput capacity of
70,000 bpd
Operates in one of the largest distillate markets in the U.S
Since 2011 heavy West Coast crude pricing increased relative to mid-continent based crudes. This has primarily been
driven by the rapid increase in production of U.S. domestic crudes in the mid-continent region, for which logistics are not
readily available to transport to major refining regions on the U.S. Gulf Coast
The California complex used heavy crude to produce approximately 30% asphalt whose demand is at cyclical lows.
Asphalt demand is expected to rise with the passing of the new federal highway spending bill, and revival of the housing
market which is at its strongest since 2006
Operated at low throughput rates in 2010 -12 due to high crude pricing and weak asphalt demand
In the 4th quarter of 2012, ceased operations for interim period while reconfiguring crude mix from heavy to light crudes
which will allow the system to utilize its high distillate production capability (~44%) and reduce lower value heavy product
(primarily asphalt) yields
In the interim period, significantly reduced operating expenses in the California system
Submitted permit applications to allow shipment via rail of light mid-continent crudes such as Bakken, WTI to replace
heavy West Coast crudes (expect to receive permits and complete infrastructure build out during the 4th quarter of 2013)
In the longer term, the California system is expected to benefit from a significant increase in light sweet Monterey shale oil
production (the EIA estimates the Monterey shale has 20 billion barrels of recoverable resources representing 64% of the
total recoverable shale oil in the lower 48 states)
- 16 - 16
Leading Asphalt Supplier
¹ Source: Internal Alon Asphalt marketing analysis and market studies.
Operates 11 asphalt terminals in the
western U.S. Operations include:
— 50% ownership in Paramount Nevada
Asphalt Company – the largest
GTR/PMA plant in Nevada, and
— 50% ownership in Wright Asphalt
Products Company which brings
exclusive rights to Neste’s GTR
technology
Second largest supplier of asphalt in
California and Texas
Supplies advanced asphalt products such
as rubberized asphalt, PMA and GTR
— Increasingly specified by government
agencies for use in highway projects in
Texas
Strategic access to the California asphalt
market
— California and Texas are the largest
asphalt consuming states in the U.S.
— California highway budget for asphalt
is larger than in previous years
Krotz Springs
Paramount
Among U.S. Refiners:
#7 asphalt supplier in U.S.
#2 asphalt supplier West of Mississippi
#1 asphalt supplier in PADD V states
#1 Ground Tire Rubber asphalt marketer in U.S.
#1 purchaser of polymers for paving asphalt products
Houston
Tulsa
Phoenix
Flagstaff
Willbridge
(Portland)
Elk Grove
(Sacramento)
Bakersfield
Mojave
Fernley
(Reno)
Paramount /
Long Beach
Big Spring
Corpus Christi
Richmond Beach
(Seattle)
Refineries
Asphalt terminals
Wright asphalt 3rd party throughput
Legend
- 17 - 17
Summary Financial Performance
- Asphalt
2010 2011 2012 1Q 2013
WTI $/bbl. $79.41 $95.07 $94.14 94.27$
Blended Asphalt Sales (000’s tons) 780 915 842 130
Non-Blended Asphalt Sales (000’s tons) 83 181 105 22
Total Asphalt Sales (000’s tons) 863 1,096 947 152
Sales Price/ton (blended) 477$ 541$ 590$ 540$
Sales Price/ton (non blended) 326$ 327$ 372$ 392$
Asphalt Margin/ton 51$ 27$ 43$ 62$
Polymer Modified Asphlat (000’s tons) 56 33 80 4
Ground Tire Rubber Asphalt (000’s tons) 31 87 118 8
Emulsions (000’s tons) 86 67 51 4
Total Speciality Asphalt (000’s tons) 173 187 249 16
Speciality Asphalt % of total sales volumes 25% 17% 26% 11%
Speciality Asphalt Sales price $/ton 569$ 569$ 611$ 483$
Speciality Asphalt Realizations % of WTI 128% 107% 116% 92%
Paving Grade Asphalt Realizations % of WTI 99% 93% 101% 95%
- 18 - 18
Alon Energy’s retail business unit is the
largest 7-Eleven licensee in the U.S. with 298
stores (~50% fee owned) in Central and West
Texas and New Mexico
The retail business unit has nearly doubled its
store count since 2006
Recently completed re-branding effort from
FINA branded gasoline stations to ALON
brand
Retail Asset Overview
Location Total
Big Spring, Texas 8
Wichita Falls, Texas 11
Waco, Texas 11
Midland, Texas 17
Lubbock, Texas 21
Albuquerque, New Mexico 23
Odessa, Texas 35
Abilene, Texas 41
El Paso, Texas 83
Other locations in Central and West Texas 48
Total Stores 298
Physically Integrated Retail Network
- 19 - 19
Attractive Retail Store Economics
Merchandise Sales Retail Fuel Sold
142.2
156.7
170.8 173.9
0
20
40
60
80
100
120
140
160
180
200
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
2010 2011 2012 LTM 1Q 2013
Gallons Sold (in millions) Fuel Margin ($ per gallon)
281.7
298.2
315.1 314.9
25.0%
26.0%
27.0%
28.0%
29.0%
30.0%
31.0%
32.0%
33.0%
34.0%
$260
$270
$280
$290
$300
$310
$320
2010 2011 2012 LTM 1Q 2013
Merch Sales (in $ millions) Merch Gross Profit % of Revenue
- 20 - 20
Initial Public Offering
- Alon USA Partners, LP (NYSE: ALDW)
Completed initial public offering of Big Spring and Wholesale Marketing via a Master Limited
Partnership structure under the ticker ―ALDW‖ on the NYSE on November 20, 2012 - Initial issue of 18.4% of common units to public at offer price of $16.0/unit raising $184 million of gross
proceeds
- Market value of equity at IPO - $1.0 billion
- Net debt at IPO: $305 million
- Enterprise value at IPO: $1.3 billion
$5
$10
$15
$20
$25
$30
$35
Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13
ALJ & ALDW Stock Price (as of May 7, 2013)
ALJ Closing Price ALDW Closing Price
- 21 - 21
Debt Reduction
In the 4th quarter of 2012 we
reduced net debt by $282 million
of which: – $171 million from the proceeds of
IPO of ALDW, and
– Additional reduction in debt with
cash flows from operations
In the 1st quarter of 2013 we
further reduced by net debt by
$137 million
Total net debt reduction over 12
months period ending March 31,
2013 was $530 million
0
200
400
600
800
1,000
1Q-12 2Q-12 3Q-12 4Q-12 1Q-13
$ m
illio
ns
Net Debt
(in $ millions) 1Q-12 2Q-12 3Q-12 4Q-12 1Q-13
Total Debt 914 874 799 587 586
Net Debt 864 817 753 471 334
II. Financial Summary
- 23 - 23
Summary Financial Performance
- Refining
*Note: In Q3 2011 the WC 3-2-1 (Buena Vista) benchmark was changed to WC 3-1-1-1 (Buena Vista)
2010 2011 2012 1Q 2013
Pricing Statistics:
GC 3-2-1 $8.22 $23.37 $27.43 $ 28.40
GC 2-1-1 (HSD/LLS) $5.26 $7.00 $11.29 $ 8.20
WC 3-1-1-1 (Buena Vista)* $8.34 $9.20 $13.08 $ 11.06
Operating Statistics:
Big Spring Refinery:
Throughput (bpd) 49,028 63,614 68,946 59,476
Operating margin/bbl. $7.64 $20.89 $23.50 $ 28.76
Operating expense/bbl. $5.05 $4.23 $4.00 $ 5.68
California Refinery:
Throughput (bpd) 17,596 22,815 17,877 N/A
Operating margin/bbl. $1.08 ($1.31) $2.36 N/A
Operating expense/bbl. $7.73 $7.32 $12.59 N/A
Krotz Springs Refinery:
Throughput (bpd) 39,244 59,720 67,877 58,439
Operating margin/bbl. $2.24 $3.05 $8.30 $13.14
Operating expense/bbl. $4.36 $3.67 $3.85 $4.42
- 24 - 24
Historical Crack Spreads
$7.64
$20.89
$23.50
$28.76
$2.24 $3.05
$8.30
$13.14
$1.08
($1.31)
$2.36
$8.22
$23.37
$27.43 $28.40
$5.26 $7.00
$11.29
$8.20
$8.34
$9.20
$13.08
$11.06
($5.00)
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
2010 2011 2012 1Q 2013
($ /
bb
l.)
Big Spring Operating Margin Krotz Springs Operating Margin California Operating Margin
Historical Gulf Coast 321 Crack Spread Historical Gulf Coast 211 Crack Spread (LLS) Historical West Coast 3111 Crack Spread (BV)
- 25 - 25
Historical Capex
Capital and Turnaround Expenditures by Type ($millions)
Capital and Turnaround Expenditures by Asset ($millions)
$25 $23 $32
$7
$10 $21 $18
$4
$16
$56 $30
$1
$5
$17
$14
$1
$2
$3
$9
$2
$2
$2
$2
$60
$122 $105
$14
$0
$20
$40
$60
$80
$100
$120
$140
2010 2011 2012 1Q 2013
Big Spring Krotz Springs California Retail Asphalt Other
$13 $10 $11 $5
$26 $31
$53
$6
$21
$82
$15
$2
$60
$122
$105
$14
$0
$20
$40
$60
$80
$100
$120
$140
2010 2011 2012 1Q 2013
Chemcat & Turnaround Regulatory & Sustaining Growth
Appendix
- 27 - 27
Adjusted EBITDA Reconciliation
Note: Adjusted EBITDA per press release
(in $ 000's) 2010 2011 2012 1Q 2013
Net Income (122,932) 42,507 79,134 54,184
Non-controlling interest in income (loss) of subsidiaries (9,641) 1,241 11,463 19,467
Income tax expense (benefit) (90,512) 18,918 49,884 30,590
Interest expense 94,939 88,310 129,572 21,292
Depreciation and Amortization 102,096 113,730 121,929 31,163
Gain on bargain purchase (17,480) - - -
(Gain) loss on disposition of assets (945) (729) 2,309 (18)
Unrealized (gains) losses on commodity swaps - (31,936) 31,936 -
(Gain) loss on heating oil call option crack spread contracts - 36,280 7,297 -
Adjusted EBITDA (44,475) 268,321 433,524 156,678