Western Refining Inc. (WNR) announced that it has entered into an agreement to drop down the southwest wholesale business to its master limited partnership (MLP) unit, Western Refining Logistics, LP (WNRL).
The transaction will fetch about $360 million for the oil refiner and marketer and will comprise cash and Western Refining Logistics units. The deal is anticipated to close around Oct 15.
The assets under sale have fuel sales of about 79,000 barrels per day dedicated to Western Refining and to other third-party customers. Western Refining’s southwest wholesale business also includes a lubricant products distribution business and crude oil trucking operations located in the Permian and San Juan basins.
The company added that on closure of this deal, both the parties intend to sign a 10-year fuel supply and crude oil trucking agreement. As per Western Refining, the southwest wholesale business has an expected 2015 earnings before interest, taxes, depreciation and amortization (EBITDA) of about $40 million.
Management mentioned that the drop down of assets should significantly boost the partnership’s EBITDA, which should allow Western Refining Logistics to maintain its distribution growth.
El Paso, TX-headquartered Western Refining is an independent refiner and marketer of refined petroleum products in the Southwestern and Mid-Atlantic regions of the U.S.
Western Refining Logistics is a fee-based MLP that owns logistics assets associated with terminalling, transportation and storage of crude oil and refined products. Western Refining owns general partner, along with 65% of the limited partnership interest in the partnership.
Both Western Refining and Western Refining Logistics carry a Zacks Rank #3 (Hold), implying that they are expected to perform in line with the broader U.S. market in the next one to three months.
Meanwhile, one could consider better-ranked players from the oil refining and marketing industry like CVR Refining, LP (CVRR) and Murphy USA Inc. (MUSA). Both these stocks sport a Zacks Rank #1 (Strong Buy).
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