Mergers & Acquisitions

Western Refining Set to Expand Retail

Northern Tier acquisition prompting strategy to ‘move the barrel directly to the end user’

EL PASO, Texas -- Retail expansion is in the cards for Western Refining Inc. as it comes out of a “milestone quarter” that saw the acquisition of the remaining portion of Northern Tier Energy LP (NTI) that it didn’t already own.

“We have been successful in the first phase of integrating NTI into Western over the past two and a half years, and we look forward to fully completing the integration as two public companies will now operate as one,” CEO Jeff Stevens said during the El Paso, Texas-based company’s second-quarter 2016 earnings call.

  • Click here for details on Western Refining’s latest earnings.

Stevens discussed the synergies surrounding the integration of NTI.

“We believe just combining the two public companies into one is about $10 million in annual synergies. But we’re going to start highlighting some of these other synergies as we get down the road. We’re going from two accounting systems, two IT systems to one system,” he said. “We’re going to continue to grow the retail and the wholesale and move the barrel directly to the end user, which historically has got us a higher margin.”

Stevens offered some clues about what form that retail expansion would take.

“There are several initiatives we will be undertaking over the next 12 months to enhance our profitability through more direct sales to end users,” he said. “For example, similar to [our] western and Southwest marketing business, we believe we have the opportunity to expand our integrated retail and wholesale marketing distribution network in the upper Midwest.

“This result demonstrates the value of our highly integrated refining and marketing model, even in a more challenging refinery environment," Stevens continued. "Given the location of our refineries, we continue to benefit from direct pipeline access to advantage crude oil. Additionally, we benefited from strong demand for gasoline in the Southwest. Our retail business continues to show strong quarter-to-quarter volume growth.”

Finally,  Western Refining has an approximately 22,000-barrel-per-day wholesale marketing business through a third-party alliance on the East Coast, using Western Refining’s historical line time on Colonial Pipeline. "Starting in January of 2017, we will assume full control of the supply and marketing business, and intend to maximize profitability and grow our wholesale capability," he said.

Western Refining is an independent refining and marketing company that operates refineries in El Paso; Gallup, N.M.; and St. Paul Park, Minn. The company’s retail operations include gas stations and convenience stores in Arizona, Colorado, Minnesota, New Mexico, Texas and Wisconsin, with approximately 265 stores primarily under the Giant and Howdy’s brands and approximately 275 stores under the SuperAmerica brand.

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