Investor Presentation

Transcription

1 Investor Presentation January 2013

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 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 September 30, 2012 which has been filed with the Securities and Exchange Commission and is available on the company s web site at 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 Table of Contents I. Business Overview II. Financial Summary Appendix: Additional Materials - 3-3

4 I. Business Overview

5 Overview of Alon Energy 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 82% of the Alon USA Partners, LP The Company generated $334 million of Adjusted EBITDA 1 for the LTM period ended September 30, 2012 and expects to generate approximately $430 million of Adjusted EBITDA for calendar year 2012 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 ~630 sites under the ALON brand, including Alon Brands stores Krotz Springs Includes the Krotz Springs (LA) refinery with a throughput capacity of 83,100 bpd California Asphalt Includes the Paramount, Long Beach and Bakersfield refineries with a total nameplate capacity of 90,000 bpd and a current configuration throughput of 57,000 bpd 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 Largest supplier of asphalt in California Second largest supplier of asphalt in Texas Retail Largest 7-Eleven licensee in the U.S. with 300 retail gasoline / convenience stores in Central and West Texas and New Mexico (~50% fee owned) 1 See page 30 for a reconciliation of Adjusted EBITDA to Net Income under GAAP

6 Business Strategy Refining¹ Asphalt Operational Focus 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 asphalt production and 3 rd party purchases Leverage existing distribution network Commercial Focus 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 Focus in maintaining our market share in premium, specialty asphalts products (Emulsions, Polymer Modified Asphalts ( PMA ) and Ground Tire Rubber ( GTR ) blends) Optimize 0-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 1 Refining includes Big Spring, Krotz Springs and the California complex

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 - 7-7

8 Strategically Located Assets Refinery Exchange Terminal Alon USA Terminal Third -Party Terminal Asphalt Terminal Wright JV Asphalt Terminal Alon Pipelines Alon Pipeline (unfinished) Third Party Pipelines Portland Richmond Beach Washington Willbridge Oregon Nevada Key Retail Cities Elk Grove California Fernley Mojave Paramount/ Long Beach Bakersfield Arizona Bloomfield New Mexico Oklahoma Tulsa Phoenix Tucson Flagstaff Albuquerque El Paso Moriarty Lubbock Wichita Falls Abilene Big Spring Orla Midland / Odessa Duncan DFW Houston Arkansas Louisiana Krotz Springs Empire Texas Corpus Christi Nederland South Marsh Island Loop 1 California Refineries include the Bakersfield, Long Beach and Paramount refineries with a nameplate capacity of 90,000 bpd and a current configuration capacity of 57,000 bpd

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 9/30/2012 Gross Margin by Business Unit Total Gross margin: $821mm LTM 9/30/2012 Production by Refinery Total Production: 155Mbpd Retail, 15.4% California, 14.5% Asphalt, 6.2% California, - 0.3% $821mm 155Mbpd Big Spring, 44.4% Krotz Springs, 13.2% Big Spring, 65.4% Krotz Springs, 41.1% - 9-9

10 Significant Exposure to High Margin Distillates Favorable exposure to distillates, which continue to see strong margins and are expected to remain well above gasoline margins for the near and medium-term The forward markets currently indicate USGC diesel prices ~$14.00/bbl over USGC gasoline prices for the next twelve months Alon Distillate Yield % vs. Peers Historical and Forward Diesel and Gasoline Cracks (Based on WTI) $50.00 $40.00 $30.00 $20.00 $10.00 $0.00 $(10.00) Historical USGC Gasoline Crack Spread Avg. Forward USGC Gasoline Crack Spread Forward USGC ULSD Crack Spread Forward USGC Gasoline Crack Spread Historical USGC ULSD Crack Spread Avg. Forward USGC USLD Crack Spread Source: Platts, Argus, NYMEX, Goldman Sachs and Credit Suisse. As of October 9, Peer Group SEC filings for LTM period ended June 30, 2012 (peer group comprises of CVR Energy, Delek, HollyFrontier, Tesoro, Valero, and Western Refining). Peer Group also includes PBF as of twelve months ended December 31, Big Spring and Krotz Springs from ALJ SEC filings for LTM period ended June 30, California refining s yield assumes 62,500 bpd throughput running light crudes sources from either mid-con basins or locally from the Monterey producing at current configuration of 44% distillate yield

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. 5 Year Average¹--$ $93.01 YTD 2012³---$ Year Average --$ $95.07 YTD $ Year Average --$ $ YTD $ Year Average --$ $ YTD $ West Texas Sour ("WTS") West Texas Intermediate ("WTI") Buena Vista ("BV") Louisiana Light Sweet ("LLS") WTI - WTS 5 Year Average --$ $2.06 YTD $4.09 WTI - BV 5 Year Average --$ $(13.36) YTD $(13.97) LLS - WTI 5 Year Average --$ $16.76 YTD $15.25 GC321 5 Year Average --$10.68² $23.37 YTD $27.54 WC3111 (BV) 5 Year Average --$ $9.20 YTD $12.84 GC 211 (HSD/LLS) 5 Year Average --$ $7.00 YTD $12.05 ¹ 5 Year Average of 2006 to 2010 ² As reported in annual 10K filling ³ YTD as of Sep

12 Big Spring Refinery Overview On November 20, 2012 Alon USA Partners, LP ( ALDW ) completed on initial public offering as a variable rate MLP $25.00 $20.00 Refinery Operating Margin 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 $ / bbl. $15.00 $10.00 $5.00 $0.00 $12.80 $12.83 $4.35 $ ,000 bpd (~26mm bbl/year) sour crude cracking refinery 10.2 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 ~80% West Texas Sour ( WTS ), which traded at an average discount to West Texas Intermediate ( WTI ) of $4.13/bbl for the nine months ended September 30, 2012 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 ~$500mm to rebuild equipment and make other refinery improvements Entered into a Supply and Off-take Agreement with J. Aron in March 2011 bpd ($5.00) 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, % 80% 60% 40% 20% 0% 0 ($3.18) YTD 3Q ,145 65,413 7% 6% 5% 7% 89% 86% Refinery Throughput 37,793 5% 11% 84% 59, Q2012 Gasoline Diesel/jet Asphalt Other 12 4% 15% 81% 49,028 5% 15% 80% 63,614 4% 16% 67,884 3% 19% 80% 79% YTD 3Q2012 Sour crude Sweet crude Blendstocks 12% 12% 9% 11% 32% 29% 45% 47% Refinery Product Yield 98.7% 99.2% 98.1% 99.4% 99.1% 99.8% 99.8% 20% 13% 28% 38% 14% 11% 12% 11% 9% 6% 7% 6% 32% 45% 32% 32% 33% 50% 49% 50% YTD

13 Big Spring is in the Heart of the Permian Basin Big Spring sources substantially all of its crude oil locally from the Permian Basin Permian Basin Activity Overview 1 The Permian Basin is experiencing a drilling and production renaissance, with 482 active drilling rigs According to the EIA, oil production in the Permian Basin increased to 1.0 million bpd in December 2011 and is expected to increase to 1.55 million bpd by January 2014 Lack of logistics infrastructure limits crude oil transport to the Gulf Coast, creating attractive opportunities for Big Spring to purchase at a significant discount Active Drilling Rigs Existing pipelines Proposed/under construction Source: Baker Hughes, RigData, U.S. Energy Information Administration. ¹ Rig data as of November 2,

14 Krotz Springs Refinery Overview 83,100 bpd sweet crude residual cracking refinery 7.7 Nelson Complexity Historically processed a mix LLS and HLS type crudes, currently processing 30,000 bpd of WTI based crudes (processed 17,000 bpd of WTI based crudes during 2Q 2012 and expects to process 30,000 bpd of WTI based crudes by end of 2012) 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 ~44% bpd $ / bbl Refinery Operating Margin $8.00 $7.55 $7.25 $5.66 $6.00 $4.00 $3.05 $2.24 $2.00 $ YTD 3Q2012 Refinery Throughput 75,000 66,413 58,184 59,720 1% 55,000 5% 48,337 1% 6% 39,244 35,000 2% 74% 95% 99% 94% 98% 15,000 25% -5, YTD 3Q2012 WTI crude Gulf Coast sweet crude Blendstocks Refinery Product Yield 100% 80% 60% 101.1% 101.5% 100.4% 100.6% 101.1% 11% 11% 12% 13% 18% 46% 44% 48% 46% 42% 40% 20% 43% 46% 40% 42% 41% ¹ Source: US Energy Information Administration. 0% YTD 3Q2012 Gasoline Diesel/Jet Other

15 Krotz Springs Refinery Crude Slate The Krotz Springs Refinery now has the ability to process significantly higher amount up to 30,000 bpd of WTI crude at Midland crude prices plus transportation, which will significantly reduce crude oil costs going forward and improve refining margins Krotz Spring Refinery ¹ YTD 3Q2012 WTI ,640 Light sweet crude 43,361 22,942 23,810 46,774 49,381 Heavy sweet crude 11,979 22,258 14,535 11,802 - Blendstocks 2,844 3, Total refinery throughput BPD - 58,184 48,337 39,244 59,720 66,413 1 Krotz Springs Refinery was purchased in 2008 and data is based on period from July 1,

16 California Refineries Future Integrated refining complex currently configured to operate as a 57,000 bpd heavy crude oil refinery (10.5 Nelson complexity)1 Operates in one of the largest distillate markets in the U.S. and is relatively insulated from the rest of the U.S. Asphalt demand is currently at cyclical low and is expected to rise due to the passing of new federal highway spending bill and strong new housing starts, which are at the highest level since June 2006 Operated at low throughput rates in third quarter of 2012 due to weak asphalt demand and high crude pricing. Ceased operations in California for interim period while reconfiguring current crude mix Currently Bakken is trading at parity to WTI and while Buena Vista is trading at $16.50/bbl. higher than WTI Short-term Plan in place to change crude mix by accessing price advantaged mid-continent light crudes from places such as the Bakken shale via rail Lighter crude slate will allow California to fully utilize its high distillate production capability of ~44% (vs. 34% currently) and reduce lower value heavy product yields such as Asphalt Longer-term Expected to benefit from significant increase in light/sweet Monterey Shale oil production over the next few years The EIA estimates the Monterey Shale has 20 billion barrels of recoverable resources representing 64% of the total recoverable shale oil resource in the U.S. lower 48 states $ / bbl $3.00 $2.00 $1.00 $0.00 ($1.00) ($2.00) $2.73 Refinery Operating Margin $1.65 $1.83 $1.08 ($1.31) $ YTD 3Q2012 Refinery Throughput Refinery Product Yield 1 California Refining include the Bakersfield, Long Beach and Paramount refineries with a nameplate capacity of 90,000 bpd and a current configuration capacity of 57,000 bpd

17 California Refineries Crude Slate The California Refineries run medium and heavy sour crudes, which have historically traded at a discount to WTI, providing the California Refineries with a crude cost advantage Alon plans to utilize an existing rail line to deliver light sweet inland crudes like Bakken, Niobrara etc. to the California complex which will provide cheaper feedstock benefits, improved light product yields and reduce low-margin asphalt production Well positioned to take advantage of expected Monterey Oil Shale production in Kern County California Refineries¹ YTD 3Q2012 Medium sour crude 20,839 8,014 13,408 3,502 5,677 9,903 Heavy crude 40,700 22,590 17,420 13,688 14,962 10,259 Blendstocks ,176 1,310 Total refinery throughput BPD 61,762 31,099 31,158 17,596 22,815 21,472 1 California Refineries were purchased in 2006 and data is based on period August 1, 2006 to

18 Leading Asphalt Supplier 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 Paramount / Long Beach Legend Willbridge (Portland) Elk Grove (Sacramento) Refineries Fernley (Reno) Bakersfield Mojave Asphalt terminals Richmond Beach (Seattle) Flagstaff Phoenix Wright asphalt 3 rd party throughput 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 Tulsa Big Spring Houston Corpus Christi Krotz Springs ¹ Source: Internal Alon Asphalt marketing analysis and market studies

19 Summary Financial Performance - Asphalt YTD 3Q2012 WTI $/bbl. $99.56 $61.82 $79.41 $95.07 $96.17 Blended Asphalt Sales (000 s tons) 1, Non-Blended Asphalt Sales (000 s tons) Total Asphalt Sales (000 s tons) 1,298 1, , Sales Price/ton (blended) $ 512 $ 410 $ 477 $ 541 $ 623 Sales Price/ton (non blended) $ 315 $ 170 $ 326 $ 327 $ 381 Asphalt Margin/ton $ 113 $ 46 $ 51 $ 27 $ 47 PMA (000 s tons) GTR (000 s tons) Emulsions (000 s tons) Total Speciality Asphalt (000 s tons) Speciality Asphalt % of total sales volumes 21% 23% 25% 17% 26% Speciality Asphalt Sales price $/ton $ 640 $ 436 $ 569 $ 569 $ 611 Speciality Asphalt Realizations % of WTI 115% 126% 128% 107% 113% Paving Grade Asphalt Realizations % of WTI 100% 109% 99% 93% 107%

20 Physically Integrated Retail Network Alon Energy s retail business unit is the largest 7-Eleven licensee in the U.S. with 300 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

21 Attractive Retail Store Economics Retail Fuel Sold Merchandise Sales LTM 3Q12 Gallons Sold (in millions) Fuel Margin ($ per gallon) $0.25 $0.20 $0.15 $0.10 $0.05 $0.00 $320 $310 $300 $290 $280 $270 $260 $250 $ % % % % % 30.5% 30.0% 29.5% LTM 3Q12 Merch Sales (in $ millions) Merch Gross Profit % of Revenue Note: Retail subsidiaries will be Unrestricted Subsidiaries for purposes of the Financing

22 Grow Top Line Results - Retail Fuel Volumes & In-Store Sales ($/# in millions) Retail: 3 rd Quarter Gallons Retail: 3 rd Quarter In-Store Sales $85 $79.3 $80 $74.9 $75 $69.4 $70 $65 $ Q09 3Q10 3Q11 3Q12 $60 3Q09 3Q10 3Q11 3Q12 Retail: 3 rd Quarter YTD Gallons Retail: 3 rd Quarter YTD In-Store Sales $250 $238.1 $225.8 $225 $211.7 $202.7 $ YTD 3Q09 YTD 3Q10 YTD 3Q11 YTD 3Q12 $175 YTD 3Q09 YTD 3Q10 YTD 3Q11 YTD 3Q

23 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, Initial issue of 18.4% of common units to public at offer price of $16.0/unit raising $184.0 million of gross proceeds - Market value of equity at IPO - $1.0 billion - Debt: $334 million ($250 debt + revolver balance at closing) - Enterprise value at IPO: $1.334 billion $30.00 ALJ and ALDW Stocks $25.00 $20.00 $15.00 $10.00 $5.00 1/3/2012 2/3/2012 3/3/2012 4/3/2012 5/3/2012 6/3/2012 7/3/2012 8/3/2012 9/3/ /3/ /3/ /3/2012 ALJ Closing Price ALDW Closing Price

24 The Debt Reduction in 2012 In $ millions 1, Net Debt Q Q Q Q 2012F* During first nine months of 2012 we reduced our net debt by $140 million Further net debt reduction in 4Q 2012 of $260 million of which: $171 million from the proceeds of initial public offering of ALDW Assumes additional reduction in debt with cash flows from operations* (in $ millions) Q Q Q Q 2012F* Total Debt 1, Net Debt * Based in I/B/E/S consensus estimates for Alon USA Energy Q4 12 EBITDA of $96 million, capital expenditures of $17 million, and interest expense of $20 million Assumes positive changes in working capital similar to changes in Q $30 million Reduction in gross debt of $200 million including $171 million from ALDW IPO and subsequent paydown of $29 million, plus additional amortization of $2 million of retail debt

25 II. Financial Summary

26 Summary Financial Performance - Refining YTD 3Q 2012 Pricing Statistics: GC $10.47 $7.24 $8.22 $23.37 $27.54 GC (HSD/LLS) $11.28 $5.58 $5.26 $7.00 $12.05 WC (Buena Vista)* $12.35 $9.60 $8.34 $9.20 $12.84 Operating Statistics: Big Spring Refinery: Throughput (bpd) 37,793 59,870 49,028 63,614 67,884 Operating margin/bbl. ($3.18) $4.35 $6.03 $18.84 $23.85 Operating expense/bbl. $5.40 $4.21 $5.06 $4.25 $3.92 California Refinery: Throughput (bpd) 31,099 31,158 17,596 22,815 21,472 Operating margin/bbl. $1.65 $1.83 $1.08 ($1.31) $1.60 Operating expense/bbl. $5.63 $4.82 $7.73 $7.32 $10.35 Krotz Springs Refinery: Throughput (bpd) 58,184 48,337 39,244 59,720 66,413 Operating margin/bbl. $7.25 $5.66 $2.24 $3.05 $7.55 Operating expense/bbl. $4.35 $4.22 $4.36 $3.67 $3.86 *Note: In Q the WC (Buena Vista) benchmark was changed to WC (Buena Vista)

27 Historical Crack Spreads

28 Historical Capex Capital and Turnaround Expenditures by Asset ($millions) $140 $120 $100 $80 $60 $40 $20 $0 $106 $3 $4 $13 $26 $58 $3 $2 $4 $17 $60 $122 $56 $2 $2 $5 $16 $10 $21 $1 $9 $17 $28 $11 $25 $23 $ YTD 3Q2012 Big Spring Krotz Springs California Alon Brands Asphalt Other $84 Capital and Turnaround Expenditures by Type ($millions) $140 $120 $100 $106 $17 $122 $80 $60 $40 $20 $0 $60 $65 $21 $9 $26 $31 $37 $25 $13 $10 $ YTD 3Q2012 Chemcat & Turnaround - 28 Regulatory - & Sustaining Growth 28 $82 $84

29 Appendix

30 Adjusted EBITDA Reconciliation (in $ 000's) YTD 3Q 2012 LTM as of September 2012 Net Income (122,932) 42,507 56,947 44,034 Non-controlling interest in income (loss) of subsidiaries (9,641) 1,241 2,758 1,682 Income tax expense (benefit) (90,512) 18,918 34,705 26,671 Interest expense 94,939 88,310 78, ,643 Depreciation and Amortization 102, ,730 93, ,684 Loss on Heating Oil Crack Spread Contracts 36,280 2,838 39,279 Gain on bargain purchase/ Unrealized losses on commodity swaps (17,480) 37,458 37,458 (Gain) loss on disposition of assets/ heating oil call option crack spread contracts (945) (729) 7,297 (44,525) Adjusted EBITDA (44,475) 300, , ,926 Note: Adjusted EBITDA per press release