SECTOR ENERGY SECTOR COMPANY WESTERN REFINING INC SR

SECTOR: ENERGY SECTOR COMPANY: WESTERN REFINING INC. SR. ANALYSTS: JORGE PIO JR. ANALYSTS: Edison Vo, Knut Kirchoff, nicholas Canova, Chris Sondej, Alex Mitrani, Raditya Purwahjo

Investment Recommendation Company Western Refining Inc Recommendation Buy Current Price 17. 53 1 yr Target Price 26. 36 % Upside 50. 4% § Key investment drivers § 1. Rising price of Gas § 2. Rising Consumption of Oil § 3. Unrest in the Middle East 2

Industry Snapshot § Industry Definition: The oil refining industry consists of companies that specialize in the refining of crude oil into gasoline, diesel Fuel and other oil products. The refining industry also includes the sale refined products at wholesale and retail locations. § Industry Size: $437 Billion 3

Company Snapshot § Key Financials: Revenue $8 Billion P/S TEV $2. 37 Billion TEV/EBITDA 9. 7 x Market Cap $1. 55 Beta 300% . 22 X . 56 1 Yr Return 250% 200% 150% S&P 100% WNR 50% 0% -50% 4

Company Snapshot Purchase Crude Oil • Crude oil is delivered to refineries via pipeline Refine crude Oil • The crude is refined into a combination of Gasoline, Diesel Fuel, and Jet Fuel Transport • End product is transported by pipeline and truck Retail/Wholesale • Sale of gas at retail and wholesale locations 5

MAP Primarily operates in: • • • West Texas New Mexico Arizona Utah Colorado Mid-Atlantic Region • Yorktown, Virginia - 70, 000 bpd (Temporarily Suspended Sept 2010) • Bloomfield, New Mexico 17, 000 bpd (Temporarily suspended Nov 2009) 3/18/2018 • El Paso, Texas - 128, 000 bpd • Gallup, New Mexico - 31, 000 bpd © Dyrect Investing, Ltd. 6

Trends: Crude Oil Source: EIA. gov Barrels of Oil (Billions) • Unrest in the Middle East has lead to the highest crude oil prices since 2008 and has increased the forecast of future 2011 price per barrel to $105 • World Crude oil and liquid fuel consumption grew by an estimated 2. 4 million bbl/d. • Expected consumption will grow 1. 5 million bbl/d in 2011 • In 2014 the global oil and gas refining and marketing sector is forecasted to have an 11. 4% increase from 2009 (CAGR 2. 2%) Data-monitor industry profile 56 54 Future Oil Barrel Volume 52 50 48 46 2009 2010 2011 2012 2013 2014 3/18/2018 © Dyrect Investing, Ltd. 7

Price of WTI • Increased production in Canada is creating a downward pressure on the WTI • WTI(West Texas Light) • Supply buildup at Cushing

Gasoline price and demand increase • EIA estimates a 28% increase in gasoline prices • API estimates a 4% demand increase for gasoline

Company Analysis • The company has announced a cost reduction effort of $50 million in order to improve margins in anticipation of higher crude oil prices • Has expanded its refining capacity through acquisitions of other independent refiners – 2007: Giant Inc. doubled their refinery capacity – Giant’s New Mexico and Virginia refineries with a $1. 5 billion loan.

Company Analysis • Longhorn pipeline-connects Gulf Coast refineries to the El Paso pipeline, which delivers oil to Phoenix and Albuquerque – Increased profit margins in those cities • El Paso-Phoenix pipeline expansion – Western refinery won exclusive rights to use this 3/18/2018 BU Finance & Investment Club 11

Valuation Year 2010(e) FCF 2011(e) $(67. 50) 2012(e) 2013(e) 2014(e) $121. 72 $ 137. 72 $ 145. 91 $ 135. 45 DCF Comparables WACC 7. 36% P/S (%w) 30% Growth Rate 3. 00% 1 yr Price 22. 24 DCF Value $3, 644 B TEV/EBITDA(%w) 30% 1 yr Price $29. 80 1 yr Price 25. 89 40% Weight 60% Weight 1 yr Target Price % Upside 12 50. 4%

Recommendation Company Western Refining Inc Recommendation Buy Current Price 17. 53 1 yr Target Price 26. 36 % Upside 50. 4% § Rising Gas Prices § Rising Consumption of Oil § Unrest in the Middle East 13