There is a lot of data here. However, to summarize:
•Estimated repairs costs are under $10M.
•The refinery outage is expected to take around 3 to 4 weeks. Northern Tier Energy noted that it will use this time to immediately start a turnaround of its fluid catalytic cracking, or FCC unit, which was originally planned to begin on October 1st.
•The company revised downwards its throughput guidance for Q3 2013 to 78,000 - 81,000 BPD, about 14% lower from its previous range of 90,000 - 95,000 BPD. Throughput guidance for Q4 will be announced during the Q3 2012 earnings call.
Overall, not too bad. Frankly, Northern Tier Energy appears to have dodged a bullet as this refinery fire seemed to be a very minor event. The estimate of $10M for repairs is peanuts compared to what the damage could have been.
By starting the FCC unit turnaround in Q3 2013, Northern Tier Energy is basically "turning lemons into lemonade". This will result in more refinery uptime during Q4 2013 than originally anticipated.
The only large negative I saw in this update was the revised throughput guidance. It appears as if the refinery was running at or near its maximum capacity when this fire occurred.
Estimating Northern Tier Energy's Q3 2013 Distribution
Estimating distributions for variable MLPs such as Northern Tier Energy is always tricky. There are many moving parts here such as crack spreads, operating expenses, turnaround cash reserves, taxes, interest expenses, etc.
However, we can make some educated guesses. As I have mentioned in previous articles, crack spreads have declined during Q3. Northern Tier Energy is specifically tied to the PADD II Group 3 3:2:1 crack spread. This is derived from Group 3 benchmark pricing for gasoline and distillates and WTI benchmark pricing for crude oil.
The company has noted that a $1.00 change in its realized crack spread has about a $6M impact on its quarterly cash available for distributions, (See full report on Seeking Alpha)
The article projects a distribution between 47 and 67 (which is a pretty wide range). 67 cents would be close to the last quarter so maybe the market would not react that badly, but if it's closer to 47, the market is likely to take this down.
One may ask want to ask themselves why they want to play this stock with so much uncertainty and a clear history of how the market reacts when disappointed.
Note to file, next time Wall Street rolls out another high-yield product, whether it is royalty trusts, variable distribution MLPs etc., make sure to buy some out of the money puts when the product starts to become overbought and hitting 70 RSI levels and when message boards start mentioning it.
I agree, Mark....thats why I sold it many months ago...too many other opportunities in the market to deal with NTI...it will get clobbered in any downturn...as will my SFL, CLMT, WLL...keep vigilant as we are entering the danger zone....Congress/Obamacare/Debit Ceiling...not a good mix for the market.