Western Refining is an independent petroleum refiner and marketer headquartered in El Paso, Texas. It operates two refineries with a total throughput capacity of 151,000 barrels per day. In 2014, Western Refining saw a 50% increase in net sales to $15.2 billion and a 92% increase in operating income. Net income increased to $559.9 million from $276.0 million in 2013. The company's cash flows from operating activities increased 67% in 2014. While Western Refining's balance sheet and cash flows strengthened in 2014, its P/E ratio of 8.40 does not fall within the lowest 10% of the industry universe.

1. Western Refining Corp
Ticker: WNR
Exchange: NYSE
Industry: Petroleum Refining and Marketing
SIC Code: 2911
52 - Week Range: $31.38 - $51.31
Current Price: $43.31
I. Company Description
Western Refining is an independent refiner and marketer headquartered in El Paso, Texas.
Western’s asset portfolio also includes refined products terminals in Albuquerque and
Bloomfield, New Mexico and Yorktown, Virginia, asphalt terminals in Phoenix and Tucson,
Arizona, Albuquerque, and El Paso, retail service stations and convenience stores in Arizona,
Colorado, New Mexico, a fleet of crude oil and finished product truck transports, and wholesale
petroleum products operations in Arizona, California, Colorado, Nevada, New Mexico, Texas,
Utah, Virginia and Maryland. Western Refining operates two refineries — one located in the far
west Texas city of El Paso and the other near Gallup in the Four Corners region of northwest
New Mexico — which have a combined total throughput capacity of 151,000 barrels per day and
are staffed by over 500 highly skilled personnel.
The refinery in El Paso was originally two separate refineries, but merged together in 1993, and
continues to operate as a single entity today. It sits on 555 acres of land, has storage capacity of
4.3 million barrels, and has been upgraded over the course of its lifetime to process a variety of
types of crude oil. The Gallup refinery, located in New Mexico, is the only refinery in the four
corners area, and primarily processes sweet crude from the local area.1
Overview of Refining Industry
WNR primarily operates in the United States and for this reason we classified them within the
U.S petroleum refining and marketing industry. In order to shed light upon this industry and its
primary activities, first this report will discuss the U.S refining industry as a whole. The
following industry analysis and outlook was based off information and facts from IBISWorld
database as well as the Energy Information Administration.
Industry operators refine crude oil into petroleum products. Petroleum refining involves one or
more of the following activities: fractionation, straight distillation of crude oil and cracking. This
industry does not include companies that extract crude oil or retail gasoline. The main activity of
this industry is the production of gasoline, kerosene, distillate fuel (diesel), aviation fuel, residual
fuel, lubricant, and aliphatic and aromatic chemicals.2
1
WNR.com
2
http://clients1.ibisworld.com

2. Operators in the Petroleum Refining industry have recovered strongly from the recession. Rising
crude oil prices have powered revenue growth as refiners have passed costs down the distribution
line. Furthermore, low domestic crude oil prices, as compared with international crude oil, have
bolstered the competitiveness of US petroleum exports. Consequently, in 2011, the United States
became a net exporter of refined petroleum products for the first time since 1949, and this
continued through 2012. However, since 2013, crude oil prices have declined due to slowing
international demand and rapid production growth. IBISWorld anticipates industry revenue to
increase at an annualized rate of 7.6% in the five years to 2014.3
Weak demand during the recession made it difficult for refiners to pass down crude oil costs to
customers, hurting industry profitability. Since then, profit has steadily recovered in line with
improving demand, while low domestic oil prices increased margins. Similar to revenue, exports
have grown substantially following the recession, driven by robust demand from emerging
economies. In the five years after 2014, IBISWorld anticipates exports to increase an average of
18.6% per year to $146.0 billion.4 Industry operators have particularly benefited from low
domestic crude oil prices, which have lowered refining and production costs. Therefore,
domestic refineries have been able to charge competitive prices on international markets.
This industry is anticipated to slowly expand during the next five years as fuel prices begin to
rise after this oil slump recovers and consumption increases. Improving global economic
conditions will sustain demand for petroleum products. Capacity upgrades will lead the way as
industry players invest in infrastructure that can handle more crude oil. However, environmental
regulations over the use of renewable fuels will pose a challenge to operators.
Now that the overall business and industry of U.S refiners has been analyzed, we will look
deeper into WNR as to why they hold so much value in which has not been realized by the
market. First, comparable firms were chosen to evaluate WNR’s true potential.
II. Comparable Firms
Comparable firms were chosen on a basis of 5 important factor in which pertain to the refining
and marketing business. These five factors will be explained in detail in order to understand why
they were used in the screening process for WNR comparable firms.
1. Market Capitalization – Comparability issues arise when comparing companies with
substantial deviations in the size of their business, and for this reason market cap was the
first screening criteria when analyzing WNR.
2. Refining Throughput - Average amount of oil processed by a company’s refineries
worldwide. This number is in thousands of barrels per day. This applies to companies that
are exclusively refiners. This is an important screening factor because large differences in
a company's output can end up distorting valuation when valuing by multiples.5
3
IBISworld.com
4
IBISWorld.com
5
Bloomberg Terminal

3. 3. Refining Margin Per Barrel - This represents the profit per barrel of refined products
in US dollars per barrel.6 This number was used in order to find companies with similar
profit margins so that a companies differing location will affect valuation less.
4. Gasoline Production - Gasoline produced by the company’s refineries in thousands of
barrels per day. This is an important screening factor because large deviations in this
number can represent large differentiations in a company's business focus of production.
This could lead to misevaluation as well if the numbers are not similar.
5. Debt to Equity - Similar debt to equities were chosen since this number could
substantially affect future company profits.
MKT CAP Refining
Throughput
Refining
Margin
Per Barrel
Gasoline
Production
Debt/Equity
CVI 3.52 B 207.83 11.38 102.28 40.29 %
HFC 7.35 B 425.01 14.01 66.22 17.29 %
ALJ 1.1 B 136.38 24.6 65.86 83.66 %
PBF 2.58 B 453.10 12.11 212.06 73.96 %
Range 1 - 7 B 136 - 453 11 -24 65 - 212 17 - 84 %
WNR 4.08 B 155.02 23.31 79.28 54.57 %
The firms in which were chosen to compare with Western Refining (WNR) included CVR
Energy INC (CVI), Hollyfrontier Corp (HFC), Alon USA Energy INC (ALJ), and PBF
ENERGY INC (PBF). These firms were chosen on the given criteria mentioned above.
WNR is relatively in the middle in terms of market capitalization so the comparable firms
should have similar characteristics in terms of the overall industry activities and operations
associated with the refining business.
The companies also have similar gasoline production. This is very important considering
how large differentiations in the gasoline production numbers could lead to misvaluations
when comparing industry specific ratios. WNR has a production of 79.28 thousand barrels
per day, which when compared to similar firms this level is closely related.
The refining margin per barrel for WNR is also toward the high end based on the range.
WNR is the second largest. This is important since the higher the margin, the more
potential a company has in regards to increased profit margins. The firm only has a 54
percent debt to equity ratio, which is in the middle of the range of comparable companies.
This is an important factor to analyze considering the how debt to equity ratios can affect a
6
Bloomberg Terminal

4. company's leverage.
Comparable Firms Overview
● CVR Energy INC (CVI) – CVR Energy, Inc., through its subsidiaries, engages in
petroleum refining and nitrogen fertilizer manufacturing activities in the United States.
The company operates through two segments, Petroleum and Nitrogen Fertilizer. The
Petroleum segment refines and markets transportation fuels, such as gasoline, diesel
fuel, pet coke, natural gas liquids, propane, butane, slurry, sulfur, gas oil, asphalt, jet
fuel, and other products. This segment owns and operates a coking medium-sour crude
oil refinery in Coffeyville, Kansas and a crude oil refinery in Wynnewood, Oklahoma;
and a crude oil gathering system serving Kansas, Nebraska, Oklahoma, Missouri, and
Texas. It also owns a proprietary pipeline system that transports crude oil from Caney,
Kansas to its refinery; and supplies products through tanker trucks directly to
customers located in Coffeyville, Kansas and Wynnewood, Oklahoma.7
● Hollyfrontier Corp (HFC) – HollyFrontier Corporation operates as an independent
petroleum refiner in the United States. The company operates in two segments,
Refining and HEP. It produces high-value refined products, such as gasoline, diesel
fuel, jet fuel, specialty lubricant products, liquid petroleum gas, fuel oil, and
specialty and modified asphalt. The company offers its products to other refiners,
convenience store chains, independent marketers, retailers, truck stop chains,
wholesalers, railroads, governmental entities, paving contractors or manufacturers,
and commercial and specialty markets, as well as for commercial airline use. It owns
and operates five refineries with a combined crude oil processing capacity of
approximately 443,000 barrels per day in El Dorado, Kansas; Tulsa, Oklahoma;
Artesia, New Mexico; Cheyenne, Wyoming; and Woods Cross, Utah, as well as
owns and operates asphalt terminals in Arizona, New Mexico, and Oklahoma; and
vacuum distillation and other facilities in Lovington, New Mexico.8
● Alon USA Energy INC (ALJ) – Alon USA Energy, Inc. engages in refining and
marketing petroleum products, primarily in the South Central, Southwestern, and
Western regions of the United States. It operates in three segments: Refining and
Marketing, Asphalt, and Retail. The Refining and Marketing segment operates sour
crude oil refinery located in Big Spring, Texas; light sweet crude oil refinery located in
Krotz Springs, Louisiana; and heavy crude oil refineries located in Paramount,
Bakersfield and Long Beach, California with a crude oil throughput capacity of
approximately 217,000 barrels per day.
● PBF Energy INC (PBF) – PBF Energy Inc., together with its subsidiaries, engages in
the refining and supply of petroleum products. It produces gasoline, ultra-low-sulfur
diesel, heating oil, jet fuel, lubricants, petrochemicals, and asphalt, as well as
unbranded transportation fuels, heating oil, petrochemical feedstocks, and other
petroleum products. The company sells its products in Northeast and Midwest of the
7
CVRenergy.com
8
HollyFrontier.com

5. United States, as well as in other regions of the United States and Canada. PBF Energy
Inc. is based in Parsippany, New Jersey
III. Financial Statement Analysis
Balance Sheet
Beginning with the first part of the balance sheet, assets, Western Refining has current assets of
$1,768 million and total assets of $5,683 million. The Company’s current assets experienced an
increase in inventories and a decrease in prepaid expenses. The increase in inventories was
primarily due to the termination of a crude oil intermediation agreement with JPM CCC and the
purchase of the related crude oil inventories at NTI and the 21% decrease in their prepaid
expenses was due primarily to the timing of prepayments for crude oil to select suppliers. One
number that really sticks out is their restricted cash account, which increased from $0 to $167
million in 2014. Although this increase relates to net proceeds from the sale of Western
wholesale assets to WNRL, the cash is restricted through October 14, 2015 and must be used to
either fund capital projects or to repay amounts outstanding under the Western 2020 Term Loan
Credit Facility.9 Ultimately, WNR’s total assets have increased by approximately 3% over the
past year, meaning the asset side of the balance sheet is heading in the right direction.
The second part of Western’s balance sheet, liabilities, is headed in a promising direction as
well. The Company’s total current liabilities and total liabilities decreased by approximately
28% and 2% from FY 2013 to FY 2014. Within the current liabilities, the accounts that
experienced the greatest volatilities were current portion long-term debt (97% decrease) and
income taxes payable (93% increase). Both accounts payable and accrued liabilities
experienced decreases too. The changes in these accounts resulted from a matter of timing,
primarily due to accruals related to the El Paso refinery turnaround during the first quarter of
2014. Within the long-term liabilities, there was an 18% increase in deferred income taxes,
which resulted primarily from the change in WNR’s net unrealized hedging activity between
periods.
The final part of the balance sheet, stockholder's equity, was greatly affected by WNR’s 43%
increase in retained earnings, caused by the year-to-year increase in net income. As a result,
total Western shareholder’s equity increased by 25% and total liabilities and shareholder’s
equity increased by 3% in 2014.
Statement of Operations
Western Refining statement of operations starts off strong with their first value, net sales,
having experienced a 50% increase from approximately $10.1 billion in 2013 to $15.2 billion in
2014. Next, WNR demonstrated an increase in their operating efficiency with a 2% decrease in
their total operating costs and expenses as a percent of net sales, resulting in a 92% increase in
operating income.
Finally, net income attributable to Western was $559.9 million, or $5.61 per diluted share for
9
WNR 10k Report

6. the year ended December 31, 2014 compared to $276.0 million, or $2.79 per diluted share for
the year ended December 31, 2013. The increase was primarily due to the inclusion of a full
year of financial results from NTI, which generated net income of $88.8 million for the year
ended December 31, 2014 compared to $13.6 million representing the period from November
12, 2013 through December 31, 2013. Also contributing to the increase in 2014 net income are
the insignificant losses on extinguishment of debt which resulted from the Company's long-
term debt redemptions throughout the year, and the Company's consolidated realized and
unrealized net gains on commodity hedging activities compared to the small net loss in the
prior year.
Statement of Cash Flows
The first section of Western Refining’s statement of cash flows, cash flows from operating
activities, reported an impressive 67% increase. This increase in net cash from operating
activities from 2013 to 2014 resulted primarily from WNR's increase in net income and the
results of their commodity hedging activity, offset by changes in their working capital.
Cash flows from investing activities also made improvements which resulted in a 57% decrease
in net cash used in investing activities. The changes primarily resulted from the cash used to
purchase Northern Tier Energy in 2013 and the increase in restricted cash from proceeds from
the sale of Western wholesale assets to WNRL.
For the final section, cash flows from financing activities, WNR did a complete 180. In 2013
the Company had around $469 million in net cash provided by financing, but in 2014, they used
around $394 million in cash for financing activities. This large decrease of 184% resulted in
part from a 460% increase in amount of dividends paid, a 100% decrease in proceeds from
WNRL common units, and a 508% increase in distribution to non-controlling interest holders.
The 100% decrease in proceeds from WNRL common units occurred on October 15, 2014,
when Western sold all of the outstanding limited liability company interests of WNR to
WNRL, in exchange for $320 million and 1,160,092 WNRL common partnership units in
connection with the Contribution Agreement. Another financing account that underwent a large
change was “borrowings on revolving credit facility.” WNR had a 100% increase in this
account as a result of their $269 million, WNRL Revolving Credit Facility draw to partially
fund the purchase of certain assets from Western.
Overall, Western Refining’s cash flow statement shows that the company's underlying business
produces a lot of cash. The Company experienced a 67% increase in cash flows from operations
this year, which they utilized to pay dividends, fund distribution to non-controlling interest
holders, purchase treasury stock, and redeem convertible debt.
IV. Financial Statements Tests
Five Tests for Value
1. Earnings yield is at least twice the yield on long-term AAA bonds.
Earnings Yield = 11.91% > 6.62% (2 X 3.31%) [PASS]

7. 2. The P/E ratio falls among the lowest 10 percent of P/Es in the universe.
WNR’s P/E Ratio = 8.40 [FAIL]
3. Dividend yield is at least two-thirds the yield on long-term AAA bonds.
Dividend Yield = 8.15%
20yr AAA corporate bond = 3.31%
Must be at least 2.21% (2⁄3 X 3.3%). [PASS]
4. Stock price is less than two-thirds of tangible book value per share.
TBV per share = -2.66
Stock Price = $37.78
2/3 of TBV per share = -1.77
Therefore…Stock Price must be less than -1.77 to pass. [FAIL]
5. Stock price is less than two-thirds of net current assets (current assets-current liabilities).
Current Assets = $1,768,500,000
Current Liabilities = $1,013,700,000
Net Current Assets = $754,800,000 (2/3) = $503,200,000
$37.78 < $503,200,000 [PASS]
Five Tests for Safety
1. Debt-to-equity ratio is less than 100%.
FY 2014 D/E ratio =54.57%
54.57%<100% [PASS]
2. Current assets are at least twice current liabilities.
Current Assets =$1,768,500,000
Current Liabilities = $1,013,700,000 * 2 = $2,027,400,000
Current Assets must be at least $2,027,400,000, but they aren’t. [FAIL]
3. Total debt is less than twice net current assets.
Net Current Assets = $754,800,000 (2) = $1,509,600,000
Total Debt = $1,521,100,000
Very close, but [FAIL]
4. Annual earnings growth is at least 7 percent over the previous decade.
Annual Earnings Growth = 5.54% over the last decade.
Therefore… their earnings growth doesn’t meet the minimum requirement of 7%. [FAIL]
5. No more than 2 year-to-year earnings declines of more than 5% during the previous
decade.
WNR experienced 3 of these. [FAIL]

8. V. Management and Corporate Governance
Paul L. Foster – Mr. Foster is the Chairman and Co-Founder of WNR. He has served as its
chairman of the board since September 2005. Mr. Foster served as Western Refining’s chief
executive officer from September 2005 to January 2010, its president from September 2005 to
February 2009, and as president of one of its affiliates since 1997. Mr. Foster also serves as
chairman of the board of the general partner of Western Refining Logistics, LP, a publicly-
traded master limited partnership; as chairman of the University of Texas System Board of
Regents; as a director of WestStar Bank, an El Paso-based bank; as a director of Vomaris
Innovations, Inc., a privately held medical device company; as a member of the board of
managers of Jordan Foster Construction, LLC, a Texas based privately owned construction
firm; and on various other civic and professional organizations. Mr. Foster has spent virtually
his entire career working in the refined product production and marketing industry.10
Jeff A. Stevens – Mr. Stevens is the President, CEO, and board member of WNR. He serves
as CEO since 1/2010. He has served Western Refining since 2005. He served as Executive
Vice President from 9/2005 to 4/2008, and then served as Chief Operating Officer of WNR
from 4/2008 to 2/2009. In 2/2009, he became the president of WNR, and became the CEO a
year later. Before he severed in WNR, he served as Senior VP in Giant Industries Inc. from
1997 to 2000. Between 1993 to 1997, he served as VP in Phoenix Fuel Co Ina.
Mark J. Smith – Mr. Smith serves as the President of Refining and Marketing in WNR. He
has worked for Western Refining since 2006, and served as Executive VP on Refining until he
became the President in 2009.
Gary R. Dalke – Mr. Dalke has served as the Chief Financial Officer of Western Refining
since August 2005. In his past he served as Treasurer and Chief Financial Officer of Western
Refining Yorktown, Inc, as well as being the Chief Financial Officer of Western Refining
Logistics Gp, Llc from July 2013 to December 1, 2014. He has over 20 years of oil industry
experience.11
The management team of Western Refining consists of 8 people. There are four other
executive officers in addition to the four listed above.
Lowry Barfield – Senior Vice President-Legal, General Counsel and Secretary
Jeffrey S. Beyersdorfer – Senior Vice President-Treasurer, Director of Investor Relations
William R. Jewell – Chief Accounting Officer
Scott D. Weaver – Vice President, Assistant Treasurer and Assistant Secretary.
10
Investors.ntenergy.com
11
BloombergBusiness

9. Board of Directors
The board consists of nine members, three of whom are executive officers: Paul Foster, Jeff
Stevens and Scott Weaver. Western Refining’s Board of Directors has standing Audit,
Compensation, and Nominating & Corporate Governance Committees that are solely
composed of independent, non-employee directors. Below is a summary of Western
Refining’s Board of Directors’ committee structure and membership information.12
Compensation
Jeff A. Stevens - CEO (total 3,648,467)
Gary R. Dalke - CFO (total 2,151,578)
Mark J. Smith - Refining and Marketing (Total 2,747,226)
Ownerships
The institutional holdings are 70.06%, and the non-institutional takes the remaining 29.94%.
The top 5 holders and their percentage of ownership are shown below:
12
www.WNR.com

10. Institutional Number of shares percent
VANGUARD GROUP INC. 4,869,899 7.28%
D.E. SHAW&CO.,INC. 4,827,100 7.22%
OPPENHEIMER FUNDS INC. 4,231,232 6.33%
BLACKROCK FUND ADVISORS 3,050,732 4.56%
ALLIANZ ASSET MANAGEMENT
AG
3,035,719 4.54%
The chart below shows the total ownership summary, as well as the active positions the
shareholders of WNR possesses.
13
VI. Risk Factors
One obvious risk factor for refinery companies is the demand for oil and gas. Demand for
products from refineries, such as gasoline, diesel, jet fuel and propane, is lowest when prices are
high. However if prices are high, low demand does not hurt refineries as much because they are
able to sell less of their product at a higher price. The inverse is true as well; as gasoline prices
decrease, consumer demand increases because customers expect the prices will rise again later,
so they attempt to take advantage of the temporarily lower prices. WNR is able to minimize
their sales risk by selling to a very diverse customer base, with no more than 10% of net sales
13
Nasdaq.com

11. coming from any single customer.14
The refining industry is subject to many governmental regulations, primarily focused on
promoting a healthy economy. Environmentalists are consistently pushing for more regulations
on refineries to reduce their C02 emissions, as well as ensuring waste is properly disposed of.
There are also regulations to reduce certain chemicals depending on the times of the year, when
those chemicals most dramatically affect the environment. Currently, WNR has no pending
litigations that would lead to a material effect on financial statements.
For WNR, they have their refineries near the Permian basin. This results in a steep discount in
transportation costs. This gives them a strong advantage over their competitors that have to pay
for the crude to be transported further, but also adds in an element of risk. If more pipelines are
put into play, it will reduce Western Refining advantages, because other refineries will get to
transport their oil at a cheaper rate. Currently, their biggest competitors are companies
transporting oil through the Longhorn Pipeline, allowing Gulf Coast energy companies to
transport their crude oil more easily to the southwestern United States.
VII. Competitive Advantages
WNR has many competitive advantages over the lower-mid cap refining companies. Their retail
segment operates about 230 convenience stores, under brands such as Giant, Mustang, Sundial
and Howdy’s. These stores are located in Texas, New Mexico, Colorado and Arizona. This is not
a huge part of their revenues, but it gives them the potential to expand it if they so choose.
They also have a 65% limited partner interest in Western Refining Logistics (WNRL), a
company they formed in 2013. This is basically a pipeline company, with over 300 miles of
pipeline and 7.9 million barrels of active storage capacity. WNRL’s primary purpose is
receiving, storing and distributing crude oil for WNR refineries. This is a strong benefit for
WNR, since they have their own company that will transport and store oil for them.
With refineries in Texas and New Mexico, WNR is able to take advantage of crude oil from the
Permian basin that is very close to their refineries, resulting in a discount in their transportation
costs. Nearly 2 million boe are produced from here per day, with an estimated 45 billion boe
remaining. It is the largest basin in the United States, and WNR is able to greatly benefit from
this by having two refineries nearby to maximize their throughput capacity.
While the Permian basin has been highly beneficial to WNR, they also own a 38.7% interest in
Northern Tier Energy, which is a refinery operating in Minnesota. This allows them to be
profitable from regions outside of the southwestern United States. This refinery is able to process
many different kinds of crude, and receives most of their supply from the Bakken Shale in North
Dakota.
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WNR 10k Annual Report

12. VIII. Valuation
Since we found firms that were very similar to WNR, we decided to intrinsically value the firm
using the relative multiples valuation approach. Current price was used in the numerator during
the calculations of our multiples. Although WNR was higher than the median price to book, it
was even in terms of price to sales ratio, and very low when comparing the median price to cash
flows and price to earnings ratio.
After calculating the median of the multiples for our comparable firms, we then multiplied this
number by the base specific number per share for WNR. After all of our calculations, we evenly
weighted each intrinsic value and got a value of 70.92 per share. WNR is currently trading at
43.31, so this gave us a margin of safety of 39 percent.
Ticker P/B P/S P/CF P/E
CVI 3.53 .38 10.62 20.1
HFC 1.35 .38 11.61 26.7
ALJ 1.73 .16 6.75 28.8
PBF 1.89 .12 16.11 8.2
Median 1.81 .27 11.12 20.95
WNR 3.72 .27 5.47 7.7
Relative Valuation by Multiples
WNR Base Median Multiple Intrinsic value
P/B 11.64 1.81 21.06
P/S 160.40 .27 43.31
P/CF 7.91 11.12 88.05
P/E 5.61 20.95 131.27
Intrinsic Value
Equally
Weighted
IV
Current Market Value Difference Margin of
Safety
$70.92 $43.31 $27.61 39%

13. EPV Valuation
The second valuation technique used was
Greenswald’s earnings power value calculation in
order to intrinsically value WNR. We began with an
average EBIT of 793.43 million. We averaged this
over the past 5 years because EBIT needed to be
normalized to eliminate the effects on profitability of
valuing the firm at different points in the business
cycle.24 Then we subtracted out our tax rate, which
we decided to use a conservative statutory rate of 35
percent. After this, we added back depreciation and
amortization while also subtracting out a
conservative maintenance cap ex which was 95
million. This 95 million was 50 percent of the total
capex and was found using the PPE over sales ratio,
however theoretically for refineries this 50 percent of
capex for maintenance expenditures is considerably
overestimated, however we decided to leave it this
way for a conservative measure.
This left us with an adjusted EBITDA after tax of
609.6 million. We then discounted this number by dividing it by our weighted average cost of
capital. We arrived at an earnings power value number of 7,023 prior to cash-debt
adjustments. According to Bloomberg, 8.86% was WNR’s WACC, which was very steady
over the past 5 years. After our net cash/debt adjustment of 1,089.9 we arrived at an intrinsic
value of 62.45 per share with a margin of safety of 31 percent.
Next, we performed a sensitivity test. We started by changing our WACC by 1 percentage
and recalculating the final intrinsic value. This left us with a range of values from 6.296 to
7.936 depending on the WACC used. The margin of safety range was between 22 to 40
percent. This provides a reasonable level of safety that supports WNR and its
undervaluation.
WACC EPV Net Cash/Debt
Adjustment
EPV/Share Margin Of Safety
7.68% 7.936 B 6.848 B 72.08 40 %
8.68% 7.023 B 5.933 B 62.45 31 %
9.68% 6.296 B 5.207 B 54.82 22 %
5 Year Average EBIT
793.43 M
(Tax Rate) 35 %
(278.751)
Depreciation and
Amortization 190.6
(Maintenance Cap
Ex) (95.14)
Adjusted EBITDA
After Tax 609.6
/ WACC (8.68%)
/(.0868)
EPV
7,023
Net Cash/Debt
Adjustment (1089.9)

14. IX. Recommendation
We recommendpurchasing 430 sharesof WNR stock at $46.51 pershare witha limitsell price at
$66.20 per share

16. WESTERN REFINING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)