April 2014 Investor Presenta4on
All statements contained in or made in connec/on with this presenta/on that are not statements of historical fact are forward-‐looking statements intended to be covered by the safe harbor provisions of the Securi/es Act of 1933 or the Securi/es Exchange Act of 1934. The words “believe”, “intend”, “plan”, “expect”, “should”, “es/mate”, “an/cipate”, “poten/al”, “future”, “will” and similar terms and phrases iden/fy forward-‐looking statements. Forward-‐looking statements reflect the current expecta/ons of the management of Alon USA Energy, Inc. (“Alon”) regarding future events, results or outcomes. These expecta/ons may or may not be realized and actual results could differ materially from those projected in forward-‐looking statements. Alon’s businesses and opera/ons involve numerous risks and uncertain/es, many of which are beyond our control, which could result in the expecta/ons reflected in forward-‐looking statements not being realized or which may otherwise affect Alon’s financial condi/on, results of opera/ons and cash flows. These risks and uncertain/es 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 condi/ons; ac/ons by governments, compe/tors, suppliers and customers; opera/ng hazards, natural disasters or other disrup/ons at our or third-‐party facili/es; and the costs and effects of compliance with current and future state and federal regula/ons. For more informa/on concerning factors that could cause actual results to differ from those expressed in forward-‐looking statements, see Alon’s Form 10-‐K for the year ended December 31, 2013 which has been filed with the Securi/es and Exchange Commission and is available on the company’s web site at hXp://www.alonusa.com. Alon undertakes no obliga/on 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, a[er the date of this presenta/on or to reflect the occurrence of unan/cipated events.
Forward-‐Looking Statements
2
Alon USA Energy -‐ Overview
» $6.1 Billion of Revenue in 2013 » $271 Million of Adjusted EBITDA in 20131
» $162 Million Opera/ng Cash Flow in 2013
» $388 Million in Net Debt as of December 31, 2013 » ~720 branded independent and company-‐owned Alon retail loca/ons
» Largest licensee of 7-‐Eleven in the U.S., opera/ng nearly 300 convenience stores
» Largest asphalt supplier in California and second largest asphalt supplier in Texas
Alon is an independent refiner and marketer of petroleum products focused on growth and innova/on to meet both the energy and environmental needs of today, opera/ng primarily in the western and south-‐central regions of the U.S.
1 See page 32 for a reconcilia/on of Adjusted EBITDA to Net Income under GAAP. 3
The Energy to Innovate
Refining capacity of nearly 214,000 barrels per day, producing grades of clean-‐burning gasoline, ultra-‐low-‐sulfur diesel, jet fuel, specialty chemicals and advanced-‐performance asphalt products for road construc4on.
One of the largest suppliers of high-‐performance asphalt products in the country, opera4ng an integrated network of asphalt facili4es from Texas to the West Coast.
Alon supplies motor fuels or provides services to more than 900 independent and company-‐owned retail loca4ons. Alon is also the largest licensee of 7-‐Eleven in the U.S., opera4ng nearly 300 convenience stores in Central and West Texas and New Mexico.
4
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
Richmond Beach
Elk Grove
Flagstaff
Mojave
Fernley
Tulsa
Corpus Christi
Houston
Krotz Springs
Lubbock
DFW
Phoenix
Orla
South Marsh Island Loop
Empire
Refinery
Capacity (bpd)
Nelson Complexity
Big Spring 70,000 10.5
Krotz Springs 74,000 8.3
California 70,000 TBD
Strategically Located Assets
5
Third-‐Party Terminal
Asphalt Terminal
Refinery
Key Retail Ci/es
Exchange Terminal
Alon Pipelines
Third Party Pipelines
Alon USA Terminal
What We Have Accomplished So Far
» Strengthening Balance Sheet › Reduced net debt to $388 million at year-‐end 2013 from over $1 billion at
year-‐end 2008
» Capitalizing on crude slate flexibility at refineries › Krotz Springs rail rack added; pipeline-‐to-‐barge access to 30,000 barrels
per day of WTI Midland crude
› Big Spring processing up to 40,000 barrels per day of sweet crude
» Restructuring West Coast business
› West Coast assets (California refining and asphalt) generated $(80) million in EBITDA in 2012; goal for West Coast to become breakeven in 2014
› Laid groundwork for growing West Coast logis/cs business
› Sold Willbridge, Oregon terminal in January 2014 for $40 million in cash; asset had been unprofitable as an asphalt terminal
6
Where We Are Heading
» Refocusing cash flow to investments that enhance gross margin
» Transforming California assets from a drag on earnings to an earnings contributor by leveraging exis/ng assets in growing logis/cs business
» Growing retail business through new builds and/or acquisi/ons
» Improving asphalt by focusing on reducing costs and growing market share
7
Big Spring Refinery Texas -‐ Permian Basin
Krotz Springs Refinery Louisiana
California Refineries Paramount, Long Beach and Bakersfield
Refining Assets
8
WTI-‐based crudes and light sweet Gulf Coast crudes, such as LLS, are expected to trade at a discount to interna/onal benchmarks (Brent) over the next few years, providing a sustainable feedstock advantage for Mid-‐Con/nent refineries like Big Spring and for Gulf Coast refineries like Krotz Springs. The U.S. exports refined products, compe/ng directly with global refineries whose feedstock costs (crude purchase prices) are based on Brent crude.
Brent-‐WTI Spread Analyst Forecasts 1
1 Source: Goldman Sachs Global Investment Research (Equity Research), Barclays. Es/mates as of April 1, 2014 2 From 2009 through 2012, LLS traded at a ~$1.50 premium to Brent. Note: We believe analysts’ forecasts are a beXer indica/on of crude spreads in out years than forward curves due to the lower liquidity in out-‐year contracts and other factors that can skew the forward curves.
Sustainable Feedstock Advantage
9
$10.00 $10.00 $10.00 $10.00
$14.25 $13.25 $12.50
$8.00 $9.00
$-‐
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
$14.00
$16.00
2014 2015 2016 2017 2018Goldman Sachs Barclays
$/bb
l
Brent-‐LLS Spread Analyst Forecasts 2
$5.00 $5.00 $5.00 $5.00
$10.75
$8.00
$5.00
$3.00 $3.00
$-‐
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
2014 2015 2016 2017 2018Goldman Sachs Barclays
$/bb
l
7%
22%
38%35%
34%
33%
40%
30%
25%
18% 14%3%
0%
20%
40%
60%
80%
100%
2011 2012 2013
WTI Midland WTS Gulf Coast Sweet Other
42%56%
71%
25%
Advantaged Crude Slate
Alon’s Consolidated Crude Slate 1
1Other includes heavy crude, medium sour crude, and blendstocks. Chart includes California refining opera/ons, which were suspended in Nov. 2012.
» Alon’s crude slate has shi[ed increasingly towards WTI-‐linked crudes to take advantage of discounted Mid-‐Con/nent crude oil pricing since 2011
» Processed 71% WTI-‐linked crudes in 2013, up from 42% in 2011, reducing exposure to more expensive crudes
» With LLS becoming advantaged, Alon’s crude slate is 100% advantaged, including 3% related to discounted blendstocks
10
Now discounted
» 518 ac/ve rigs in the Permian in March 2014 vs. the average of less than 300 rigs in 2010 » Analysts expect Permian produc/on to grow over 200 Mbpd annually in 2014 and 20151
» Raymond James expects Permian produc/on to exceed ~3,000 Mbpd by 2020
» Big Spring is located in Howard County, where 27 rigs were opera/ng as of March 28, 20142
» Local WTI supplied into Big Spring increased by 40% in 2013 vs. 2012
¹ Source: Raymond James & Associates, Simmons & Company 2 Source: Baker Hughes, RigData; Rig informa/on as of March 28, 2014
Permian Basin Ac4vity Overview 2
Oil Rig
Big Spring: In the Heart of the Permian Basin
11
Lubbock
Big Spring
Alon USA Partners, LP Overview
» On November 20, 2012 Alon USA Partners, LP (“ALDW”) completed an ini/al public offering as a variable distribu/on MLP
› Issued 11.5 million of limited partner units raising gross proceeds of $184 million (The public owns 18.4% of the limited partner units)
» ALDW’s assets include the Big Spring, Texas refinery and the integrated wholesale fuels marke/ng business
» Big Spring refinery: › 70,000 bpd (~26 MMbbl/year) sour crude cracking refinery
› 10.5 Nelson Complexity
» Integrated wholesale fuels marke/ng business supplies 640 branded sites, including substan/ally all of Alon’s retail sites
› In 2013, ~60% of the gasoline and ~28% of the diesel produced at Big Spring was transferred to our branded marke/ng business
» Closest refinery to robust West Texas crude oil produc/on (Permian Basin), which provides a significant crude cost advantage
» Flexible refinery with the ability to process 100% WTS or 100% WTI » Benefirng from processing ~70% WTS, which traded at an average discount to WTI of $3.72/bbl in 2013
» Entered into a supply and osake agreement in March 2011
Refinery Opera4ng Margin
Refinery Throughput (bpd)
Refinery Product Yield
12
49% 50% 50%
32% 32% 33%
7% 6% 5% 12% 11% 11%
99.8% 99.8% 99.8%
0%
20%
40%
60%
80%
100%
2011 2012 2013
Gasoline Diesel/jet Asphalt Other
80% 76%65%
16% 21%31%
4%3% 4%
63,61468,946 67,103
-
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
2011 2012 2013
WTS crude WTI crude Blendstocks
$20.89 $23.50
$14.59
$23.37
$27.43
$19.16
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
2011 2012 2013
Big Spring Operating Margin Gulf Coast 321 Crack Spread
How Big Spring Makes Money
¹ Refining Margin represents liquid recovery of 99.79%. Graph is based on 2013. Some numbers may not add due to rounding. “Wholesale & Other” includes costs rela/ng to pipeline fees, supply related costs and other raw materials purchased at the refinery.
Product Yields Crude / Blendstocks Refining Opera4ng Margin¹
13
Other 10.7%
Asphalt 5.4%
Diesel 28.6%
Jet 4.9%
Gasoline50.4%
$122.34
$112.95
$125.19
$59.42
$111.88
$93.17
Per bbl
Blendstocks4.0%
Sweet Crude30.9%
Sour Crude 65.1%
$94.72
Per bbl
Wholesale & Other $(1.36)
Asphalt $(35.10)
Diesel $30.66
Jet $27.82
Gasoline $18.43
$(1.91)
$9.28
$1.35
$8.76
$14.59
-‐$2.89
Per bbl
Organic Growth Opportuni4es at Big Spring
Short-‐term low cost projects will drive meaningful returns at Big Spring
14
Ini4a4ve Cost Incremental EBITDA Implementa4on
Increase dis/llate produc/on by 2,000 bpd; enhance energy efficiency and ability to process lighter shale crude; increase crude throughput by 3 Mbpd
$25 million $19 million1 During 2Q14 turnaround
Selling aroma/cs due to conversion from conven/onal gasoline to CBOB
produc/on $0 $14 million
Ongoing, expect to achieve ratable benefit
by end of 2014
Totals $25 million $33 million
» Evalua/ng poten/al to expand Big Spring’s capacity » Evalua/ng low-‐risk projects with payback periods of less than two years to enhance the refinery’s gross margin, focused on:
› LPG recovery › Increased aroma/cs recovery
› Producing chemical-‐grade propylene
¹$19 million annual EBITDA upli[ based on $10/bbl spread between diesel and gasoline, natural gas price of $3.80/MMBtu, and a Gulf Coast WTI-‐Based 3-‐2-‐1 benchmark crack spread of $16.90/bbl.
Krotz Springs Refinery Overview
» 74,000 bpd sweet crude residual cracking refinery
» 8.3 Nelson Complexity
» Historically processed a mix of LLS and HLS type crudes
» Access to 30,000 bpd of WTI Midland priced crude through the AMDEL pipeline
» Current rail rack capacity of 9,000 bpd expandable to 14,000 bpd
» High liquid recovery of over 101%
» One of the newest refineries in the U.S. (1980)¹ with industry low opera/ng costs
» High dis/llate yield capability of over 40%
¹ Source: US Energy Informa/on Administra/on.
Refinery Opera4ng Margin
Refinery Throughput (bpd)
Refinery Product Yield
15
$3.05
$8.30
$6.16
$7.00
$11.29
$7.89
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
2011 2012 2013Krotz Springs Operating Margin Gulf Coast 221 (LLS) Crack Spread
42% 43% 45%
46% 42% 41%
13% 16% 16%
100.6% 101.2% 102.0%
0%
20%
40%
60%
80%
100%
2011 2012 2013
Gasoline Diesel/Jet Other
30%46%
99%
69% 51%
1%1% 3%59,720
67,877 64,705
0
20,000
40,000
60,000
80,000
2011 2012 2013WTI crude Gulf Coast sweet crude Blendstocks
How Krotz Springs Makes Money
Product Yields Crude / Blendstocks Refining Opera4ng Margin¹
¹ Refining Margin represents liquid recovery of 101.96%. Graph is based on 2013. Some numbers may not add due to rounding. “Other” includes costs rela/ng to pipeline fees, supply related costs and other raw materials purchased at the refinery. 16
Other 15.2%
Diesel 23.8%
Jet16.4%
Gasoline44.6%
$122.01
$110.87
$120.67
$88.40
$110.58
$81.60
Per bbl
Blendstocks2.9%
Sweet Crude51.4%
WTI45.7%
$105.53
Per bbl
Other $(25.99)
Diesel $13.08
Jet $14.42
Gasoline $3.28 $1.46
$2.36
$3.11
$6.16
$(0.77)
Per bbl
Organic Growth Opportuni4es at Krotz Springs
Terminal and Logis4cs Ini4a4ves:
» Completed work to place crude oil rail rack into service in June 2013 » Received over 140,000 bbls of railed crude in 2013, including Niobrara as a new crude » The current capacity of the rail rack is 9,000 bpd, expandable to 14,000 bpd, but ini/ally restricted to 3,000 bpd due to railroad opera/ons and tank car availability » Increasing the amount of crude delivered by truck to the refinery from 10,000 bpd currently » Ability to access significant quan//es of LLS-‐type crudes, which are now discounted to Brent
Opera4onal Ini4a4ves:
» Benefi/ng from efforts to improve dis/llate recovery and reduce FCC catalyst costs » Evalua/ng low-‐cost projects with payback periods of less than two years to enhance the refinery’s gross margin, focused on: › Increasing LPG value (Example: Polyisobutane project-‐ $2.5 million cost, $5.5 million benefit) › Improving dis/llate recovery › Increasing gasoline values by producing RBOB gasoline
Short-‐term low cost projects will drive meaningful returns at Krotz Springs
17
California Refining Overview
» In 4Q 2012, ceased refining opera/ons for interim period
» Focused on reducing opera/ng expenses; leveraging logis/cs assets
» SubmiXed permit applica/ons for rail unloading facility at Bakersfield capable of unloading two unit trains per day
› Will allow shipments of light Mid-‐Con/nent crudes or other crudes to replace heavy West Coast crudes, providing improved product slate (less asphalt) for refining assets
› Expect to receive permits in the coming months
» Long-‐term, the California system is expected to benefit from Monterey shale produc/on
18
Terminal Permibed Rail Capacity Status
Long Beach 12,000 bpd Providing services to third party
Paramount 14,000 bpd In discussions with third par/es
Bakersfield 13,000 bpd In discussions with third par/es
Note: Refinery direct expense is a per barrel measurement calculated by dividing direct opera/ng expenses by total throughput volume. (1) CVRR costs include major turnaround expense; (2) WNR 2Q 2013 opera/ng expenses normalized for property tax refund benefit; costs include WNRL expenses (3) HFC Mid-‐Con/nent region includes the El Dorado and Tulsa Refineries. HFC Southwest region includes the Navajo refinery; (4) VLO Gulf Coast region includes the Corpus Chris/ , Port Arthur, St. Charles, Texas City, Houston, Three Rivers and Meraux Refineries.
Mid-‐Con4nent Peer Group Gulf Coast Peer Group
Flexible Refineries with Low Opera4ng Expenses
2013 Refinery Opera4ng Expenses ($/bbl) – Mid-‐Con4nent and Gulf Coast Groups
19
Source: Derived from public company filings with SEC.
$4.53 $4.81
$5.23 $5.28 $5.57
$5.66
$3.66 $4.09
$4.36
ALJ Big Spring,TX
DK Tyler, TX NTI St. Paul, MN CVRR (1) WNR (2) HFC Mid-‐Con &Southwestregions (3)
VLO Gulf Coast(4)
ALJ KrotzSprings, LA
DK El Dorado, AR
¹ Source: Internal Alon Asphalt marke/ng analysis and market studies.
Note: The Mojave and Flagstaff asphalt terminals are not currently opera/ng.
» Operate 10 asphalt terminals in the western U.S. Opera/ons include:
› 50% ownership in Paramount Nevada Asphalt Company – the largest Polymer Modified Asphalt (PMA) plant in Nevada
› 50% ownership in Wright Asphalt Products Company, which brings exclusive rights to Neste’s GTR technology
» Largest supplier of asphalt in California and second largest asphalt supplier in Texas
» Largest manufacturer of PMA and GTR asphalt in the U.S.
› PMA and GTR increasingly specified by government agencies for use in highway projects in Texas and California
› California and Texas are the largest asphalt consuming states in the U.S.
› States focused on extending the life of roads, increasing PMA demand
Krotz Springs
Paramount
Among U.S. Refiners¹: » #7 asphalt supplier in U.S. » #2 asphalt supplier West of Mississippi
» #1 asphalt supplier in PADD V states » #1 terminally blended /re rubber asphalt
marketer in U.S.
Houston
Tulsa Phoenix
Flagstaff
Elk Grove (Sacramento)
Bakersfield Mojave
Fernley (Reno)
Paramount / Long Beach
Big Spring
Corpus Christi
Richmond Beach (Seattle)
Refineries Asphalt terminals
Legend
Leading Asphalt Supplier
20
Physically Integrated Retail Network
» Largest 7-‐Eleven licensee in the U.S. with 296 stores (~50% fee owned) in Central/West Texas and New Mexico
» Completed re-‐branding to ALON brand
» Remodel program con/nues to progress
» Expanding store count through new builds and/or acquisi/ons
» Record fuel sales achieved in 2013, represen/ng a 10% increase from 2012
» In 2013, retail gasoline and diesel sales represented 28% and 9%, respec/vely, of Big Spring’s gasoline and diesel produc/on
Loca4ons in High Growth Markets
Loca4on Total
Big Spring, Texas 8
Wichita Falls, Texas 11
Waco, Texas 10
Midland, Texas 17
Lubbock, Texas 21
Albuquerque, New Mexico 23
Odessa, Texas 35
Abilene, Texas 41
El Paso, Texas 82
Other loca/ons in Central and West Texas 48
Total Stores 296
21 Note: Store count as of March 2014.
Retail Fuel Volumes & In-‐Store Sales
Retail: 4th Quarter Fuel Sales in Gallons
Retail: Annual Fuel Sales in Gallons
Retail: 4th Quarter In-‐Store Sales
Retail: Annual In-‐Store Sales
22
142.2156.7
170.8
188.5
2010 2011 2012 2013
(# in millions)
$281.7
$298.2
$315.1 $316.4
2010 2011 2012 2013
(# in millions)
37.3
40.7
44.0
47.2
4Q 2010 4Q 2011 4Q 2012 4Q 2013
(# in millions)
$70.0 $72.4
$77.0 $76.2
4Q 2010 4Q 2011 4Q 2012 4Q 2013
(# in millions)
Financial Summary
23
Key Financial Metrics
Adjusted EBITDA 1
Net Income
(in $ millions)
1 See page 32 for a reconcilia/on of Adjusted EBITDA to Net Income under GAAP. 24
$ 268
$ 434
$ 271
2011 2012 2013
$ 43
$ 79
$ 23
2011 2012 2013
Key Financial Metrics
Capital Expenditures & Turnarounds
Net Leverage (Net Debt/Adjusted EBITDA)1
(in $ millions)
1 See page 32 for a reconcilia/on of Adjusted EBITDA to Net Income under GAAP. Some numbers may not add due to rounding. 25
$ 893
$ 471 $ 388
3.3 x
1.1 x1.4 x
2011 2012 2013Net Debt Net Leverage
$36 $53 $49 $48$10
$11 $9$33
$77 $41$20
$68
2011 2012 2013 2014 BudgetSustaining & Regulatory Turnaround & Catalyst Growth
$ 122 $ 105
$ 77
$ 149
Debt Reduc4on
» Reduced net debt by $422 million in 2012
» Reduced net debt by over $500 million since the start of 2012
» Completed $150 million 3.00% conver/ble debt offering in September 2013 and redeemed $140 million of the 13.5% Krotz Springs senior secured notes in October 2013
» The balance of the Krotz notes expected to be paid off with cash on hand; $40 million of the ~$75 million remaining will be redeemed in May 2014
(in $ millions)
26
$-‐
$200
$400
$600
$800
$1,000
1Q-‐12 2Q-‐12 3Q-‐12 4Q-‐12 1Q-‐13 2Q-‐13 3Q-‐13 4Q-‐13
Net Debt
(in $ millions) 2008 2009 2010 2011 2012 2013
Net Debt 1,085 897 845 893 471 388
Alon’s Strategic Advantages
» Strategically located refineries with advantageous sources of crude » Physically integrated refining and marke/ng system (cap/ve wholesale and retail network) at Big Spring
» Diversified opera/ons provide stability » High quality assets with low opera/ng costs » Leading blended and modified asphalt producer
» Strong liquidity posi/on and flexibility provided by supply & osake agreements at each refinery
» Experienced management team
27
Growth Opportuni4es
» Evalua/ng poten/al to increase throughput at Big Spring
» Opportuni/es to implement low-‐risk projects at Big Spring and Krotz Springs with high returns
» Growing West Coast logis/cs business
› Developing West Coast logis/cs business capable of genera/ng $40-‐60 million in EBITDA in the next few years, allowing eventual drop down to logis/cs MLP1
» Opportuni/es to expand retail store count through new builds or acquisi/ons
» Significant earnings poten/al in asphalt business as fundamentals improve
28 1 EBITDA es/mates exclude Willbridge terminal, which was sold in January 2014.
Investment Highlights
» Expanding crude sources to enhance flexibility and margins
» Increasing high margin dis/llate produc/on
» Evalua/ng several low-‐risk refining projects with payback periods of less than two years
» Opportunity to grow terminal and logis/cs business
» Genera/ng RINs internally
» Genera/ng returns from retail marke/ng remodeling program
» Increasing volumes in wholesale marke/ng business
29
Stacey Hudson, CFA Investor RelaCons Manager
972-‐367-‐3808 [email protected]
Investor Rela4ons Contact
30
Appendix
31
Adjusted EBITDA Reconcilia4on
Note: Adjusted EBITDA above excludes unrealized gains (losses) on commodity swaps of $(31,936) for the year ended December 31, 2012. Adjusted EBITDA also excludes a loss on hea/ng oil call op/on crack spread contracts of $7,297 for the year ended December 31, 2012. Adjusted EBITDA including the impact of these items would be $394,291 for the year ended December 31, 2012.
32
(in $ 000's) 2011 2012 2013
Net Income 42,507 79,134 22,986 Non-‐controlling interest in income (loss) of subsidiaries 1,241 11,463 25,129
Income tax expense (benefit) 18,918 49,884 12,151
Interest expense 88,310 129,572 94,694
Depreciation and Amortization 113,730 121,929 125,494
(Gain) loss on disposition of assets (729) 2,309 (9,558)
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 268,321 433,524 270,896
33
» Big Spring’s value highlighted by ALDW; other segments underappreciated
» Krotz Springs’ earnings poten/al enhanced by discount in LLS rela/ve to Brent crude › Assuming 60% LLS crude slate and 95% u/liza/on, each $1/bbl move in Brent-‐LLS represents ~$15.4 million in EBITDA at Krotz Springs on an annual basis
› Combining historical LLS premium to Brent with analysts’ forecasts of a $5 -‐ 10.75/bbl discount in LLS for 2014, poten/al incremental EBITDA totals $100 -‐ 189 million1
› Low-‐risk, high-‐return projects to increase gross margin
» Losses in California have been mi/gated; building growing logis/cs business capable of genera/ng $40 -‐ 60 million in EBITDA2
» Retail business has seen consistent growth in fuel volumes and merchandise sales; generates strong fuel and merchandise margins
› The apprecia/on in C-‐Store mul/ples not realized in our retail segment
» Significant earnings poten/al in asphalt business as fundamentals improve
› Asphalt generated $100 million in EBITDA in 2008
› Lackluster industry demand in recent years, likely resul/ng in pent-‐up demand ¹ From 2009 through 2012, LLS traded at a ~$1.50 premium to Brent . The $6.50/bbl swing in prices implied by a $5 /bbl discount in LLS results in $100 million in incremental EBITDA. The $12.25/bbl swing in prices implied by a $10.75/bbl discount in LLS results in $189 million in incremental EBITDA. 2 EBITDA es/mates exclude Willbridge terminal, which was sold in January 2014.
Value Above and Beyond Big Spring
Guidance and Hedging Informa4on
34
» Throughput at Big Spring is expected to average 73,000 bpd in 1Q 2014, 46,000 bpd in 2Q 2014 as a result of the turnaround and 67,000 bpd for full-‐year 2014
» Throughput at Krotz Springs is expected to average 64,000 bpd in 1Q 2014 and 71,000 bpd for full-‐year 2014; Krotz Springs is expected to process 30,000 bpd of Midland-‐priced crudes throughout 2014
» Full-‐year 2014 RINs cost expected to be approximately $35 million total based on a weighted average RINs price of $0.54/RIN, including ~$12 million for the Big Spring refinery
» Alon has entered into swaps to hedge crude-‐product cracks. As of mid-‐March 2014, these amounted to:
Year Volume Crack Spread Strike Price
2014 6 Mbpd Gulf Coast Jet vs. LLS $19.43
2015 10 Mbpd Gulf Coast Jet vs. LLS $22.58
Natural Gas Sensi4vity
» Big Spring › For $1/MMBTU change in natural gas prices, opera/ng expenses change by $0.28/bbl based on 2014 throughput guidance of 67,000 bpd
» Krotz Springs › For $1/MMBTU change in natural gas prices, opera/ng expenses change by $0.15/bbl based on 2014 throughput guidance of 71,000 bpd
» Higher natural gas prices increase LPG values, resul/ng in an increase in gross margin that is expected to more than offset higher opera/ng expenses at both refineries
35
Mi4ga4ng RINs Exposure
» The Renewable Fuel Standard (“RFS”) requires refiners to blend a certain amount of renewable fuels into gasoline and diesel. Compliance with the RFS is monitored through Renewable Iden/fica/on Numbers (“RINs”)
» RINs prices increased in 2013 as the “blend wall” approached – the point where refiners are required to blend more renewable fuels than is supported by demand for E-‐10 and E-‐85 gasoline
» Alon’s increasing branded and unbranded sales contributes to the ability to generate RINs internally
› Branded sales were up 13% in 2013 rela/ve to 2012
» Full-‐year 2013 RINs cost was $14.9 million at Big Spring; Krotz Springs received a one-‐year exemp/on from the calendar year 2013 requirements of RFS
» Full-‐year 2014 RINs cost expected to be approximately $35 million total based on a weighted average RINs price of $0.54/RIN, including ~$12 million for the Big Spring refinery
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Business Focus
Refining¹
» Primary focus: safety & reliability » Run Big Spring at maximum capacity » Run Krotz Springs capacity (using 30,000+ bpd of WTI Midland) leveraging capital improvements
» Improve crude flexibility in CA refineries by receiving advantaged crude by rail
» Achieve opera/ng expense leadership » Leverage West Coast assets in growing logis/cs business
» Op/mize crude slate to take advantage of regional pricing disloca/ons
» Op/mize refined product slate to take advantage of dis/llate produc/on capacity and strong margin environment
» Maintain capital discipline and con/nued investments in high return growth projects
» Enhance branded wholesale business
Asphalt
» Op/mize asphalt produc/on and 3rd party purchases
» Leverage exis/ng distribu/on network
» Maintain leading market share in premium, specialty asphalt products (emulsions, polymer modified asphalt and ground /re rubber blends)
» Op/mize zero-‐pen shipments to West Coast
Retail
» Con/nue Clean TEAM efforts to improve opera/ons: remodel interior/exterior retail sites; selec/vely grow store count
» Increase fuels sold under ALON brand » Grow high margin food sales and inventory turns
» Expand and grow the retail loca/ons in target markets through new builds and/or acquisi/ons
» Op/mize pricing and maintain high merchandise margin
Commercial Focus
1 Refining includes Big Spring and Wholesale Fuels Marke/ng, Krotz Springs and the California complex.
Opera4onal Focus
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Crude Prices & Crack Spread Trends
38 ¹ 5 Year Average of 2008 to 2012 ² As reported in annual 10K filing
West Texas Sour ("WTS")
West Texas Intermediate
("WTI")Brent
Louisiana Light Sweet ("LLS")
LLS -‐ WTI 5 Year Average -‐-‐$7.25
2013 -‐-‐-‐$11.06 1Q 2014 -‐-‐-‐$6.00
WTI 5 Year Average¹-‐-‐$86.00
2013² -‐-‐-‐$97.97 1Q 2014-‐-‐-‐$98.65
WTI -‐ WTS 5 Year Average -‐-‐$2.99
2013 -‐-‐-‐$3.72 1Q 2014 -‐-‐-‐$3.67
GC321 5 Year Average -‐-‐$15.35
2013 -‐-‐-‐$19.16 1Q 2014-‐-‐-‐$16.81
GC 211 (HSD/LLS) 5 Year Average -‐-‐$8.08
2013 -‐-‐-‐$7.89 1Q 2014 -‐-‐-‐$10.75
Brent -‐ WTI 5 Year Average -‐-‐$6.51
2013 -‐-‐-‐$11.63 1Q 2014 -‐-‐-‐$10.45
GC321(Brent) 5 Year Average -‐-‐$8.84
2013 -‐-‐-‐$7.53 1Q 2014-‐-‐-‐$6.35
March trade-‐month differen/als (impact April gross margin): WTI Cushing – WTS: $7.67/bbl WTI Cushing – WTI Midland: $8.68/bbl