Filed by Western Refining, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Northern Tier Energy LP
Commission File No.: 001-35612
On January 5, 2016, Western Refining, Inc. made available on its website the following presentation, which it will present later that day at the Wolfe Research 2016 Oil and Gas Refiners 1x1 Conference. This same presentation will be presented by Western Refining, Inc. at the Goldman Sachs Global Energy Conference 2016 on January 7, 2016.
Filed by Western Refining, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Company: Northern Tier Energy LP
Commission File No.: 001-35612
On January 5, 2015, Western Refining, Inc. made the following presentation, which it presented
later that day at the Wolfe Research Conference, available on its website.
Wolfe Research
2016 Oil and Gas Refiners
1 x 1 Conference
January 5, 2016
Cautionary Statements
This presentation includes “forward-looking statements” by Western Refining, Inc. (“Western” or “WNR”) which are protected as forward-looking statements under the Private Securities Litigation Reform Act of 1995. The forward-looking statements reflect Western’s current expectations regarding future events, results or outcomes. Words such as “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “position,” “potential,” “predict,” “project,” “strategy,” “will,” “future” and similar terms and phrases are used to identify forward-looking statements. The forward-looking statements contained herein include statements related to, among other things, Western’s and Northern Tier Energy LP’s (“NTI”) plans and expectations with respect to the merger, including the anticipated closing date, financing of the merger, the likelihood of completion of the merger including the satisfaction of closing conditions, the expiration or termination of all waiting periods and approval of the merger at a special meeting of the NTI unitholders; the anticipated effect of the merger on Western’s financial and operational results including the merger resulting in a simplified organizational structure, diversified asset base with pipeline access to advantaged crude oil combined with strong refined product regions, financial and operational synergies, easier-to-understand financial reporting and valuation of equity, flexibility for NTI logistics assets drop-downs to Western Refining Logistics, LP (“WNRL”), lower cost of capital and more competitive acquisition currency, and accretion to Western’s earnings per share; the future financial and operating performance of the merged company; growth opportunities; gross margin improvement at the El Paso refinery including the crude oil substitution process and its expected additional gross margin, the ability of this process to result in better economics and improved gas/diesel yield, and the ability of Four Corners crude oil to provide further economics and mitigate exposure to the Midland/Cushing crude oil differential; the El Paso refinery crude oil slate; St. Paul Park organic projects such as the replacement of the crude unit desalters, modification to the crude unit/hydrotreater and solvent deasphalter and the anticipated capital expenditure and estimated EBITDA for such projects; expansion of the El Paso refinery including its anticipated timing, expected increase to throughput capacity and the drivers for such project; proposed pipeline from Wink, Texas to Crane, Texas including its anticipated mileage, capacity, cost for 2016 through 2017 and its ability to provide an outlet to move West Texas/New Mexico crude oil to the U.S. Gulf Coast; potential WNR and NTI logistics asset sales to WNRL including the estimated annual EBITDA from such sales which may include economics associated with crude oil throughput on the TexNew Mex pipeline above 13,000 bpd, Bobcat crude oil pipeline, proposed pipeline from Wink, Texas to Crane, Texas, Jal/Wingate/Clearbrook crude oil and liquefied petroleum gas (“LPG”) storage and rail logistics; WNR’s ability to continue to grow dividends and return cash to shareholders; and WNR’s capital allocation discipline. These statements are subject to the risk that the merger is not consummated at all, including due to the inability of Western or NTI to obtain all approvals necessary or the failure of other closing conditions, as well as to the general risks inherent in Western’s and NTI’s businesses and the merged company’s ability to compete in a highly competitive industry. Such expectations may or may not be realized and some expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, Western’s business and operations involve numerous risks and uncertainties, many of which are beyond Western’s control, which could materially affect its financial condition, results of operations and cash flows and those of the merged company. Additional information relating to the uncertainties affecting Western’s businesses is contained in its filings with the Securities and Exchange Commission (the “SEC”). The forward-looking statements are only as of the date made, and Western does not undertake any obligation to (and each expressly disclaims any obligation to) update any forward-looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events.
Important Notice to Investors
This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval in any jurisdiction where such an offer or solicitation is unlawful. Any such offer will be made only by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, pursuant to a registration statement filed with the SEC. The proposed acquisition will be submitted to NTI’s unitholders for their consideration. Western will file a registration statement on Form S-4 with the SEC that will include a prospectus of Western and a proxy statement of NTI. Western and NTI will also file other documents with the SEC regarding the proposed transaction. INVESTORS AND SECURITY HOLDERS OF NTI ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders may obtain free copies of the proxy statement/prospectus and other documents containing important information about Western and NTI once such documents are filed with the SEC through the website maintained by the SEC at www.sec.gov. Copies of the documents filed with the SEC by Western will be available free of charge on Western’s website at www.wnr.com under the “Investor Relations” section or by contacting Western’s Investor Relations Department at (602) 286-1530. Copies of the documents filed with the SEC by NTI will be available free of charge on NTI’s website at www.northerntier.com under the “Investors” section or by contacting NTI’s Investor Relations Department at (651) 769-6700.
Participants in Solicitation Relating to the Merger
Western, NTI and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from the unitholders of NTI in connection with the proposed transaction. Information about the directors and executive officers of Western is set forth in the Proxy Statement on Schedule 14A for Western’s 2015 annual meeting of shareholders, which was filed with the SEC on April 22, 2015. Information about the directors and executive officers of the general partner of NTI is set forth in the 2014 Annual Report on Form 10-K for NTI, which was filed with the SEC on February 27, 2015. These documents can be obtained free of charge from the sources indicated above. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.
2
Investment Considerations
Pipeline access to advantaged crude oil production
Permian, Four Corners, Bakken and western Canada
Historically strong refined product regions
Attractive
Geographies
Fully integrated crude oil pipeline system to serve refineries
Refined product distribution to wholesale end-user
Integrated
Distribution
Extensive retail network
Network
Two platforms: Refining and Logistics
growth Enhance refining profitability
Expand logistics footprint
Growth
Opportunities
Reinvest in business to grow EBITDA/ cash flow
Shareholder friendly
Dividends/ special dividends
Share repurchase program
Capital
Allocation
Discipline
Efficient capital structure
3
WNR/NTI Strong Strategic Combination
On December 21, 2015, WNR and NTI announced a merger on the following terms:
Consideration
20-day 18-Dec
WNR Price
Undisturbed VWAP Closing Price
WNR Shares per NTI Unit 0.2986 0.2986
WNR Price $ 44.68 $ 37.04
Equity Value per NTI Unit $ 13.34 $ 11.06
Cash per NTI Unit $ 15.00 $ 15.00
Implied Consideration $ 28.34 $ 26.06
Premium to NTI Closing Price (12/18) 18% 9%
Premium to NTI 20-day Undisturbed VWAP Price 18% 8%
Key benefits of the combination:
Diversified asset base with pipeline access to advantaged crude oil combined with strong
refined product regions
$10+ million in identified potential financial/operational synergies
Facilitates easier-to-understand financial reporting and valuation of equity
Provides more flexibility around pace of NTI logistic asset drop?downs to WNRL
Expected lower cost of capital and more competitive acquisition currency
Transaction expected to close in 1H 2016
4
Simplified Organizational Structure
ProForma
Public
WNR
Public
WNR
NTI ElPaso Gallup WNR Retail WNRL
St.Paul NTI
Retail Logistics
NTI to become a wholly-owned subsidiary of WNR
NTI will cease to be a publicly-traded entity
NTI Revolver ($500 million) and 7.125% Senior Secured Notes ($350 million) are expected to remain in place
5
Diversified Asset Base
Clearbrook
Bakken
Formation
St.Paul
Park
San Juan
Basin
Los Angeles
Gallup
Phoenix
Permian
Basin
Wink
ElPaso
Mason
Station Crane
WNR/WNRL/NTI Pipelines2
WNR/ Combined
WNRL with NTI
Refineries 2 3
Capacity(bpd) 156,000 253,800
Basin Permian, Bakken,Canada,
Four Permian,Four
Exposure Corners Corners
Retail Stores1 261 528
Pipelines 725 1,025
(miles)2
Storage
(mmbbls) 8.2 12.0
1 Includes 102 NTI franchised SuperAmerica Stores.
2 NTI has a 17% interest in the Minnesota Pipeline.
6
Attractive Refined Product Locations
Williams
LasVegas Colorado Springs
Los Angeles
Bloomfield
Area
Gallup
(6) Flagstaff
Colton
Albuquerque (2)
San Diego Phoenix Amarillo
Lubbock Wichita
Tuscon
Falls
El Paso Artesia
Midland Dallas
Juarez Abilene
Odessa
Chihuahua Austin (28)
Houston Gulf Coast
Mexico
Cadereyta
Magellan Pipeline System
St.Paul
Park Chicago Area
WNR/NTI Refinery Third party Product Pipeline Third-Party Refinery
7
Top Quartile Refineries
Source: Company Filings
Western and NTI have three top quartile refineries
8 |
|
Growth Opportunities
El Paso Gross Margin Improvement
El Paso refinery historically processed “common stream” barrel
El Paso Refinery Gross Margin/Bbl vs Crude Differentials
$30.00
$35.00
$40.00
Over past 2-3 years, Delaware Basin
crude oil has partially replaced
common stream barrel
Better economics $5.00
$10.00
$15.00
$20.00
$25.00
$/bbl
Improved gas/diesel yield
Four Corners crude oil provides
further economics for El Paso
El Paso Refinery Crude Oil Slate
$(5.00)
$-
Q110
Q210
Q310
Q410
Q111
Q211
Q311
Q411
Q112
Q212
Q312
Q412
Q113
Q213
Q313
Q413
Q114
Q214
Q314
Q414
Q115
Q215
Q315
El Paso Refinery Gross Margin per Barrel Brent-WTI Diff Cushing-Midland Diff
Mitigates exposure to Midland/
Cushing crude oil differential
Crude oil substitution process
expected to add $20-$25 million in annual El Paso refinery gross margin by Q1 2017 compared to Q2 2015
1 Assumes $45 crude oil price
9
Growth Opportunities
Refinery Investments
St. Paul Park Organic Projects
Historic Incremental Crude Margins
Syncrude & North Dakota Light
Capital Est EBITDA
Project($ mm)($ mm)
Replace Crude Unit
Desalters $ 30 $ 22
CrudeUnit/Hydrotreater
Modification 19 10
Solvent Deasphalter 63 27
$ 112 $ 59
$/bbl
35
30
25
20
15
10
5
0
-5
Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16
Syncrude North Dakota Light
Avg Syncrude Avg North Dakota Light
10
El Paso Expansion
Concurrent with 2017 planned maintenance turnaround
Increase capacity by 10,000 – 15,000 barrels per day
Driven by access to advantaged shale crude oil and increasing Mexico import demand
Growth Opportunities
Logistics Projects
Proposed Wink to Crane Crude Oil Pipeline
~ 60 mile crude oil pipeline connecting Wink to Crane
200,000 bpd capacity
Total cost $110 million (2016 – 2017)
Provides outlet for West Texas/New Mexico crude oil to US Gulf Coast
Permian
Basin
Snyder
Delaware
Basin
El Paso
Colorado City
Wink
Midland
Mason Station
Crane
McCamey
WNR Refineries
WNRL Pipelines
Bobcat Pipeline (WNR)
Proposed Pipeline (WNR)
Third-Party Pipelines
11
Growth Opportunities
WNR/NTI Potential Logistics Sales to WNRL
Project
Description
TexNew Mex
Crude Oil Pipeline
(WNR)
Economics associated with crude oil throughput on TexNew Mex pipeline above 13,000 bpd (TexNew Mex Units)
Bobcat Crude Oil
Pipeline
(WNR)
40 mile crude oil pipeline flowing from Mason Station, TX to Wink, TX
plus two crude oil terminals
Wink to Crane
Crude Oil Pipeline
(WNR)
Proposed ~60 mile crude oil pipeline connecting Wink Jackrabbit
Station to Crane, TX
Jal / Wingate / Clearbrook (WNR)
Crude oil and LPG storage; rail logistics
Northern Tier (Traditional Logistics)
Storage tanks / Terminals / Pipelines / Trucking
$100 - $125 mm annual EBITDA potential
12
Capital Allocation Discipline
WNR ? Strong Dividend Growth
$0 38
$0.40 $40,000
$0.26
$0.30
$0.34
0.38
$30,000
$35,000
$0.30
$0.35
Divid
(t
Share
$
$0.18
$0.22
$15,000
$20,000
$25,000
$0.15
$0.20
$0.25
dend Amount
thousands)
Dividend per S
$0.04
$0.08
0.12
$5,000
$10,000
$0.05
$0.10
$? $?
Q1
‘12
Q2
‘12
Q3
‘12
Q4
‘12
Q1
‘13
Q2
‘13
Q3
‘13
Q4
‘13
Q1
‘14
Q2
‘14
Q3
‘14
Q4
‘14
Q1
‘15
Q2
‘15
Q3
‘15
Q4
‘15
Dividend per Share Dividend Amount (thousands)
13
Note: Excludes one?time special dividends
Capital Allocation Discipline
WNR ? Return of Cash to Shareholders
17.2%
82 8%
FY 2013
55.2% 44.8%
FY 2015
17.6%
46.9%
FY 2014
82.8%
35.5%
$305 million $ 553 million $ 234 million
Share Repurchases Quarterly Dividends Special Dividends
$1.1 billion returned to shareholders since 2013
14
Note: FY 2015 includes Q4 2015 dividend paid in November 2015
Investment Considerations
Attractive
Geographies
Integrated
Distribution
Network
Growth
Opportunities
Capital
Allocation
Discipline
Pipeline access to advantaged crude oil production
Permian, Four Corners, Bakken and western Canada
Historically strong refined product regions
Fully integrated crude oil pipeline system to serve refineries Refined product distribution to wholesale end-user Extensive retail network
Two growth platforms: Refining and Logistics Enhance refining profitability Expand logistics footprint Reinvest in business to grow EBITDA/ cash flow Shareholder friendly
Dividends/ special dividends Share repurchase program
Efficient capital structure
15
Appendix
WNR Consolidated Adjusted EBITDA Reconciliation
($ in thousands)
Dec 2014 Mar 2015 Jun 2015 Sep 2015 LTM
Net income attributable to Western Refining, Inc. $130,935 $105,989 $133,919 $153,303 $524,146
Net earnings attributable to non-controlling interest 13,516 68,979 79,948 64,795 227,238
Last Twelve Months - WNR Consolidated
Three Months Ended
Interest expense and other financing costs 22,054 24,957 27,316 26,896 101,223
Provision for income taxes 69,285 59,437 78,435 92,117 299,274
Depreciation and amortization 49,398 49,926 51,143 51,377 201,844
Maintenance turnaround expense 140 105 593 490 1,328
Loss on extinguishment of debt — — — — —
Gain (loss) on disposal of assets 7,591 282 (387) (52) 7,434
Net change in lower of cost or market inventory reserve 78,554 (15,722) (38,204) 36,795 61,423
Unrealized (gain) loss on commodity hedging transactions (58,052) 20,057 22,287 (271) (15,979)
Adjusted EBITDA $313,421 $314,010 $355,050 $425,450 $1,407,931
17
WNR Standalone Adjusted EBITDA Reconciliation
($ in thousands)
Dec 2014 Mar 2015 Jun 2015 Sep 2015 LTM
Net income attributable to Western Refining, Inc. $111,475 $55,211 $74,904 $102,279 $343,869
Net earnings attributable to non-controlling interest
Last Twelve Months - Western Standalone
Three Months Ended
Interest expense and other financing costs 13,985 14,230 14,321 13,960 56,496
Provision for income taxes 69,165 59,234 78,287 92,114 298,800
Depreciation and amortization 25,205 25,823 26,891 26,648 104,567
Maintenance turnaround expense 140 105 593 490 1,328
Loss on extinguishment of debt — — — — —
Gain (loss) on disposal of assets 7,359 381 69 (6) 7,803
Net change in lower of cost or market inventory reserve 4,883 (4,883) — — —
Unrealized (gain) loss on commodity hedging transactions (61,977) 21,182 22,795 (1,531) (19,531)
Adjusted EBITDA $170,235 $171,283 $217,860 $233,954 $793,332
18
WNRL Standalone EBITDA Reconciliation
($ in thousands)
Dec 2014 Mar 2015 Jun 2015 Sep 2015 LTM
Net income attributable to Western Refining, Inc. $ 12,458 $ 10,140 $ 10,525 $ 10,907 $ 44,030
Last Twelve Months - WNRL
Three Months Ended
Net earnings attributable to non-controlling interest 6,361 5,183 5,390 5,586 22,520
Interest expense and other financing costs 1,286 3,964 6,248 6,204 17,702
Provision for income taxes 120 203 148 3 474
Depreciation and amortization 4,478 4,738 4,737 4,983 18,936
Maintenance turnaround expense — — — — —
Loss on extinguishment of debt — — — — —
Gain (loss) on disposal of assets 223 (84) (160) (13) (34)
Net change in lower of cost or market inventory reserve — — — — —
Unrealized (gain) loss on commodity hedging transactions — — — — —
Adjusted EBITDA $ 24,926 $ 24,144 $ 26,888 $ 27,670 $ 103,628
19
NTI Standalone Adjusted EBITDA Reconciliation
($ in thousands)
Last Twelve Months - NTI
Three Months Ended
Dec 2014 Mar 2015 Jun 2015 Sep 2015 LTM
Net income attributable to Western Refining, Inc. $ 7,002 $ 40,638 $ 48,490 $ 40,117 $ 136,247
Net earnings attributable to non-controlling interest 7,155 63,796 74,558 59,209 204,718
Interest expense and other financing costs 6,783 6,763 6,747 6,732 27,025
Provision for income taxes
Depreciation and amortization 19,715 19,365 19,515 19,746 78,341
Maintenance turnaround expense
Loss on extinguishment of debt
Gain (loss) on disposal of assets 9 (15) (296) (33) (335)
Net change in lower of cost or market inventory reserve 73,671 (10,839) (38,204) 36,795 61,423
Unrealized (gain) loss on commodity hedging transactions 3,925 (1,125) (508) 1,260 3,552
Adjusted EBITDA $ 118,260 $ 118,583 $ 110,302 $ 163,826 $ 510,971
20
WNR/NTI Adjusted EBITDA
The tables on the previous pages reconcile net income to Adjusted EBITDA for the periods presented.
Adjusted EBITDA represents earnings before interest expense and other financing costs, provision for income taxes, depreciation, amortization, maintenance turnaround expense, and certain other non-cash income and expense items. However, Adjusted EBITDA is not a recognized measurement under United States generally accepted accounting principles (“GAAP”). Our management believes that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. In addition, our management believes that Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of Adjusted EBITDA generally eliminates the effects of financings, income taxes, the accounting effects of significant turnaround activities (that many of our competitors capitalize and thereby exclude from their measures of EBITDA), and certain non-cash charges that are items that may vary for different companies for reasons unrelated to overall operating performance.
Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
Adjusted EBITDA does not reflect our cash expenditures or future requirements for significant turnaround activities, capital expenditures, or contractual commitments;
Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and
Adjusted EBITDA, as we calculate it, differs from the WNRL EBITDA calculation and may differ from the Adjusted EBITDA or EBITDA calculations of other companies in our industry, thereby limiting its usefulness as a comparative measure.
Because of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.
21
WNRL EBITDA
We define WNRL EBITDA as earnings before interest expense and other financing costs, provision for income taxes and depreciation and amortization.
EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:
EBITDA does not reflect our cash expenditures or future requirements for capital expenditures or contractual commitments;
EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and
EBITDA, as we calculate it, may differ from the EBITDA calculations of our affiliates or other companies in our industry, thereby limiting its usefulness as a comparative measure.
EBITDA is used as supplemental financial measures by management and by external users of our financial statements, such as investors and commercial banks, to assess:
our operating performance as compared to those of other companies in the midstream energy industry, without regard to financial methods, historical cost basis or capital structure;
the ability of our assets to generate sufficient cash to make distributions to our unitholders;
our ability to incur and service debt and fund capital expenditures; and
the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
We believe that the presentation of this non-GAAP measure provides useful information to investors in assessing our financial condition and results of operations. The GAAP measure most directly comparable to EBITDA is net income attributable to limited partners. This non-GAAP measure should not be considered as an alternative to net income or any other measure of financial performance presented in accordance with GAAP. EBITDA excludes some, but not all, items that affect net income attributable to limited partners. This non-GAAP measure may vary from those of other companies. As a result, EBITDA as presented herein may not be comparable to similarly titled measures of other companies.
22