Oil refiner and marketer Western Refining Inc. (WNR) intends to make a private offering of senior notes worth $350 million. These notes will be due for redemption in 2021. Simultaneously, Western Refining also announced commencement of a tender offer to purchase its outstanding 11.250% senior secured notes due 2017, worth $325 million.
Western Refining plans to use the proceeds from notes offering, together with available cash in hand, to buyback its outstanding 11.250% senior secured notes due 2017 in the tender offer. The takings will also be utilized to pay solicitation fees, related expenses, tender premiums and accrued interest on the existing secured notes.
Western Refining is one of the largest independent oil refiners in the U.S. with a combined crude oil processing capacity of approximately 151,000 Bbl/d. A major advantage for the company is its proprietary access to pipelines, which inhibits lower-cost competitors from supplying Western Refining's key markets.
The company currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next 1 to 3 months.
Late last month, the company reported better-than-expected fourth quarter profits due to higher refining margins and strong product values in Southwest U.S. Western Refining’s earnings per share (excluding special items) of $1.45 were much higher than prior-year quarter’s earnings of 50 cents. Earnings were also above the Zacks Consensus Estimate of $1.37 per share.
However, the inherent volatility of the refining business reduces the accuracy and reliability of long-term earnings and revenue estimates. Additionally, results are exposed to unplanned shutdowns that may have a lingering impact.
There are other oil refiners in the energy sector that offer value and are worth buying now. These include Phillips 66 (PSX), Marathon Petroleum Corporation (MPC) and Valero Energy Corporation (VLO). All of these stocks sport a Zacks Rank #2 (Buy).
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