Western Refining Announces Second Quarter 2016 Results

EPS of $0.70 per diluted share; EPS, excluding special items, of $0.72 per diluted share
Strong demand drove same store Southwest retail fuel volumes up 7% compared to Q2 2015
Completed the acquisition of Northern Tier

EL PASO, Texas, Aug. 02, 2016 (GLOBE NEWSWIRE) -- Western Refining, Inc. (NYSE:WNR) today reported second quarter 2016 net income attributable to Western of $65.4 million, or $0.70 per diluted share, as compared to net income attributable to Western of $133.9 million, or $1.40 per diluted share for the second quarter of 2015. Net income attributable to Western, excluding special items, was $66.5 million, or $0.72 per diluted share. This compares to second quarter 2015 net income, excluding special items, of $138.0 million, or $1.44 per diluted share. A reconciliation of reported earnings and description of special items can be found in the accompanying financial tables.

Jeff Stevens, Western's Chief Executive Officer, said, "This was a milestone quarter as we completed the Northern Tier transaction and began operating our combined assets as one team. All three refineries ran well during the quarter, retail fuel volumes were strong compared to Q2 2015 and we did a good job managing our expenses. Also, through our integrated retail and wholesale marketing supply system, we were able to mitigate our RIN expenses during a time that RINs increased in cost."

Western paid a dividend of $0.38 per share of common stock to shareholders in the second quarter. In July, Western's Board of Directors also approved a $0.38 per share dividend for the third quarter. Including the third quarter dividend, Western will have returned approximately $186 million to shareholders through dividends and share repurchases in 2016.

Looking forward, Stevens said, "The third quarter has started off well as gasoline demand remains good. Canadian and Bakken crude oil differentials are normalizing following the Fort McMurray wildfires. Asphalt volumes and margins remain good. Over the near term, we will focus on debt reduction from cash flow from operations, the sale of assets to WNRL, and distributions received from WNRL, while continuing to return cash to shareholders."

Conference Call Information

A conference call is scheduled for Tuesday, August 2, 2016, at 11:00 am ET to discuss Western's financial results for the second quarter ended June 30, 2016. A slide presentation, which includes our quarterly guidance, will be available for reference during the conference call. The call, press release and slide presentation can be accessed on the Investor Relations section on Western's website, www.wnr.com. The call can also be heard by dialing (866) 566-8590 or (702) 224-9819, passcode: 35667046. The audio replay will be available two hours after the end of the call through August 16, 2016, by dialing (800) 585-8367 or (404) 537-3406, passcode: 35667046.

Non-GAAP Financial Measures

In a number of places in the press release and related tables, we have excluded certain income and expense items from GAAP measures. The excluded items are generally non-cash in nature such as unrealized net gains and losses from commodity hedging activities or losses on disposal of assets; however, other items that have a cash impact, such as gains on disposal of assets are also excluded. We believe it is useful for investors and financial analysts to understand our financial performance excluding such items so that they can see the operating trends underlying our business. Readers of this press release should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that we report in accordance with GAAP.

About Western Refining
Western Refining, Inc. is an independent refining and marketing company headquartered in El Paso, Texas. The Company operates refineries in El Paso, Gallup, New Mexico and St. Paul Park, Minnesota. The Company’s retail operations includes retail service stations and convenience stores in Arizona, Colorado, Minnesota, New Mexico, Texas, and Wisconsin, operating primarily through the Giant, Howdy’s, and SuperAmerica brands.

Western Refining, Inc. also owns the general partner and approximately 61% of the limited partnership interest of Western Refining Logistics, LP (NYSE:WNRL).

More information about Western Refining is available at www.wnr.com.

Cautionary Statement on Forward-Looking Statements

This press release contains forward-looking statements which are protected by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements reflect Western’s current expectations regarding future events, results or outcomes. The forward-looking statements contained herein include statements about: the amount of cash Western has returned to shareholders in 2016 and its near term focus on continuing to return cash to shareholders; gasoline demand; Canadian and Bakken crude oil differentials; asphalt volumes and margins; and Western's focus on debt reduction from cash flow from operations, the sale of assets to WNRL, and distributions received from WNRL. These statements are subject to the general risks inherent in Western’s business. These expectations may or may not be realized. Some of these 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 its control, which could result in Western’s expectations not being realized, or otherwise materially affect Western’s financial condition, results of operations, and cash flows. Additional information relating to the uncertainties affecting Western's business is contained in its filings with the Securities and Exchange Commission to which you are referred. The forward-looking statements are only as of the date made. Except as required by law, Western does not undertake any obligation to (and 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.

Consolidated Financial Data

We report our operating results in four business segments: refining, NTI, WNRL and retail.

Our refining segment owns and operates two refineries in the Southwest that process crude oil and other feedstocks primarily into gasoline, diesel fuel, jet fuel and asphalt. We market refined products to a diverse customer base including wholesale distributors and retail chains. The refining segment also sells refined products in the Mid-Atlantic region and Mexico.
The NTI segment operates refining and transportation assets and operates and supports retail convenience stores primarily in the Upper Great Plains region of the United States.
WNRL owns and operates terminal, storage, transportation and wholesale assets consisting of a fleet of crude oil and refined product truck transports and wholesale petroleum product operations in the Southwest region. WNRL's primary customer is our refineries in the Southwest. WNRL purchases its wholesale product supply from the refining segment and third-party suppliers.
Our retail segment operates retail convenience stores and unmanned commercial fleet fueling ("cardlock") locations located in the Southwest. The retail convenience stores sell gasoline, diesel fuel and convenience store merchandise.

The following tables set forth our unaudited summary historical financial and operating data for the periods indicated below:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Unaudited)
	(In thousands, except per share data)
Statements of Operations Data
Net sales (1)	$	2,107,308		$	2,828,892		$	3,562,812		$	5,147,622
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization) (1)	1,602,628			2,177,887			2,649,989			3,919,197
Direct operating expenses (exclusive of depreciation and amortization)	231,169			224,723			454,754			440,034
Selling, general and administrative expenses	56,052			59,540			109,337			115,343
Gain on disposal of assets, net	(772		)	(387		)	(902		)	(105		)
Maintenance turnaround expense	400			593			525			698
Depreciation and amortization	54,359			51,143			107,010			101,069
Total operating costs and expenses	1,943,836			2,513,499			3,320,713			4,576,236
Operating income	163,472			315,393			242,099			571,386
Other income (expense):
Interest income	131			201			295			364
Interest and debt expense	(26,928		)	(27,316		)	(53,609		)	(52,273		)
Other, net	4,341			4,024			10,445			7,230
Income before income taxes	141,016			292,302			199,230			526,707
Provision for income taxes	(38,152		)	(78,435		)	(56,781		)	(137,872		)
Net income	102,864			213,867			142,449			388,835
Less net income attributable to non-controlling interests (2)	37,449			79,948			46,496			148,927
Net income attributable to Western Refining, Inc.	$	65,415		$	133,919		$	95,953		$	239,908

Basic earnings per share	$	0.70		$	1.40		$	1.04		$	2.51
Diluted earnings per share	0.70			1.40			1.04			2.51

Dividends declared per common share	0.38			0.34			0.76			0.64

Weighted average basic shares outstanding	92,786			95,539			92,432			95,553
Weighted average dilutive shares outstanding (3)	92,847			95,626			92,495			95,654

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Unaudited)
	(In thousands)
Economic Hedging Activities Recognized Within Cost of Products Sold
Realized hedging gain, net	$	550		$	7,823		$	18,353		$	25,376
Unrealized hedging loss, net	(14,598		)	(22,287		)	(27,082		)	(42,344		)
Total hedging loss, net	$	(14,048	)	$	(14,464	)	$	(8,729	)	$	(16,968	)

Cash Flow Data
Net cash provided by (used in):
Operating activities	$	115,754		$	187,066		$	116,858		$	292,044
Investing activities	(41,374		)	(4,962		)	(87,861		)	(14,133		)
Financing activities	(469,197		)	(101,242		)	(603,215		)	(165,134		)
Capital expenditures	$	77,731		$	66,350		$	156,760		$	119,545
Cash distributions received by Western from:
NTI	$	6,412		$	38,472		$	19,949		$	55,927
WNRL	13,555			10,901			26,947			21,215
Other Data
Adjusted EBITDA (4)	$	200,910		$	355,050		$	299,201		$	669,060
Balance Sheet Data (at end of period)
Cash and cash equivalents							$	198,284		$	543,936
Restricted cash							1,284			68,275
Working capital							730,608			1,105,559
Total assets							5,538,529			5,910,062
Total debt and lease financing obligation							2,068,681			1,554,150
Total equity							2,082,143			2,997,586

(1) Excludes $777.3 million, $1,404.8 million, $895.5 million and $1,632.0 million of intercompany sales and $777.3 million, $1,404.8 million, $895.5 million and $1,632.0 million of intercompany cost of products sold for three and six months ended June 30, 2016 and 2015, respectively.

(2) Net income attributable to non-controlling interests for the three and six months ended June 30, 2016, consisted of income from NTI and WNRL in the amount of $31.0 million, $35.3 million, $6.5 million and $11.2 million, respectively. Net income attributable to non-controlling interests for the three and six months ended June 30, 2015, consisted of income from NTI and WNRL in the amount of $74.6 million, $138.4 million, $5.4 million and $10.6 million, respectively.

(3) Our computation of diluted earnings per share includes unvested restricted shares units. If determined to be dilutive to period earnings, these securities are included in the denominator of our diluted earnings per share calculation. For purposes of the diluted earnings per share calculation, we assumed issuance of 0.1 million restricted share units for both the three and six months ended June 30, 2016 and 2015.

(4) Adjusted EBITDA represents earnings before interest and debt expense, 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 U.S. 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, may differ from the Adjusted 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.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Unaudited)
	(In thousands)
Net income attributable to Western Refining, Inc.	$	65,415		$	133,919		$	95,953		$	239,908
Net income attributable to non-controlling interests	37,449			79,948			46,496			148,927
Interest and debt expense	26,928			27,316			53,609			52,273
Provision for income taxes	38,152			78,435			56,781			137,872
Gain on disposal of assets, net	(772		)	(387		)	(902		)	(105		)
Depreciation and amortization	54,359			51,143			107,010			101,069
Maintenance turnaround expense	400			593			525			698
Net change in lower of cost or market inventory reserve	(35,619		)	(38,204		)	(87,353		)	(53,926		)
Unrealized loss on commodity hedging transactions	14,598			22,287			27,082			42,344
Adjusted EBITDA	$	200,910		$	355,050		$	299,201		$	669,060

EBITDA by Reporting Entity
Western Adjusted EBITDA	$	122,184		$	217,860		$	173,660		$	389,143
NTI Adjusted EBITDA	47,698			110,302			66,148			228,885
WNRL EBITDA	31,028			26,888			59,393			51,032
Consolidated Adjusted EBITDA	$	200,910		$	355,050		$	299,201		$	669,060

	Three Months Ended
	June 30,
	2016
	Western		NTI			WNRL
	(Unaudited)
	(In thousands)
Net income attributable to Western Refining, Inc.	$	21,400	$	32,611		$	11,404
Net income attributable to non-controlling interest	—		30,979			6,470
Interest and debt expense	14,930		5,584			6,414
Provision for income taxes	37,935		—			217
Loss (gain) on disposal of assets, net	35		(5		)	(802		)
Depreciation and amortization	26,796		20,238			7,325
Maintenance turnaround expense	400		—			—
Net change in lower of cost or market inventory reserve	—		(35,619		)	—
Unrealized loss (gain) on commodity hedging transactions	20,688		(6,090		)	—
Adjusted EBITDA	$	122,184	$	47,698		$	31,028

	Six Months Ended
	June 30,
	2016
	Western			NTI			WNRL
	(Unaudited)
	(In thousands)
Net income attributable to Western Refining, Inc.	$	39,410		$	35,835		$	20,708
Net income attributable to non-controlling interests	—			35,323			11,173
Interest and debt expense	28,809			11,334			13,466
Provision for income taxes	56,303			—			478
Loss (gain) on disposal of assets, net	9			(10		)	(901		)
Depreciation and amortization	52,334			40,207			14,469
Maintenance turnaround expense	525			—			—
Net change in lower of cost or market inventory reserve	(40,689		)	(46,664		)	—
Unrealized loss (gain) on commodity hedging transactions	36,959			(9,877		)	—
Adjusted EBITDA	$	173,660		$	66,148		$	59,393

	Three Months Ended
	June 30,
	2015
	Western		NTI			WNRL
	(Unaudited)
	(In thousands)
Net income attributable to Western Refining, Inc.	$	74,904	$	48,490		$	10,525
Net income attributable to non-controlling interest	—		74,558			5,390
Interest and debt expense	14,321		6,747			6,248
Provision for income taxes	78,287		—			148
Loss (gain) on disposal of assets, net	69		(296		)	(160		)
Depreciation and amortization	26,891		19,515			4,737
Maintenance turnaround expense	593		—			—
Net change in lower of cost or market inventory reserve	—		(38,204		)	—
Unrealized loss (gain) on commodity hedging transactions	22,795		(508		)	—
Adjusted EBITDA	$	217,860	$	110,302		$	26,888

	Six Months Ended
	June 30,
	2015
	Western			NTI			WNRL
	(Unaudited)
	(In thousands)
Net income attributable to Western Refining, Inc.	$	130,115		$	89,128		$	20,665
Net income attributable to non-controlling interests	—			138,354			10,573
Interest and debt expense	28,551			13,510			10,212
Provision for income taxes	137,521			—			351
Loss (gain) on disposal of assets, net	450			(311		)	(244		)
Depreciation and amortization	52,714			38,880			9,475
Maintenance turnaround expense	698			—			—
Net change in lower of cost or market inventory reserve	(4,883		)	(49,043		)	—
Unrealized loss (gain) on commodity hedging transactions	43,977			(1,633		)	—
Adjusted EBITDA	$	389,143		$	228,885		$	51,032

Consolidating Financial Data

The following tables set forth our consolidating historical financial data for the periods presented below.

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016			2015
	(Unaudited)
	(In thousands)
Operating Income
Western, excluding NTI and WNRL	$	74,138	$	167,965	$	123,212		$	296,498
NTI	64,843		125,135		72,958			233,122
WNRL	24,491		22,293		45,929			41,766
Operating income	$	163,472	$	315,393	$	242,099		$	571,386
Depreciation and Amortization
Western, excluding NTI and WNRL	$	26,796	$	26,891	$	52,334		$	52,714
NTI	20,238		19,515		40,207			38,880
WNRL	7,325		4,737		14,469			9,475
Depreciation and amortization expense	$	54,359	$	51,143	$	107,010		$	101,069
Capital Expenditures
Western, excluding NTI and WNRL	$	43,172	$	47,345	$	87,970		$	85,953
NTI	26,471		11,155		54,461			17,828
WNRL	8,088		7,850		14,329			15,764
Capital expenditures	$	77,731	$	66,350	$	156,760		$	119,545
Balance Sheet Data (at end of period)
Cash and cash equivalents
Western, excluding NTI and WNRL					$	156,085		$	337,462
NTI					24,637			127,924
WNRL					17,562			78,550
Cash and cash equivalents					$	198,284		$	543,936
Total debt
Western, excluding NTI and WNRL					$	1,340,678		$	861,406
NTI					358,044			351,572
WNRL					313,152			291,775
Total debt					$	2,011,874		$	1,504,753
Total working capital
Western, excluding NTI and WNRL					$	569,311		$	736,521
NTI					166,130			302,256
WNRL					(4,833		)	66,782
Total working capital					$	730,608		$	1,105,559

Refining Segment

El Paso and Gallup Refineries and Related Operations

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
	(In thousands, except per barrel data)
Statement of Operations Data (Unaudited):
Net sales (including intersegment sales) (1)	$	1,315,609	$	1,817,629	$	2,201,929	$	3,309,070
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization) (2)	1,117,071		1,527,952		1,839,085		2,763,408
Direct operating expenses (exclusive of depreciation and amortization)	79,338		76,676		152,826		153,474
Selling, general and administrative expenses	7,384		7,133		14,654		16,702
Loss on disposal of assets, net	35		78		35		495
Maintenance turnaround expense	400		593		525		698
Depreciation and amortization	22,386		19,951		43,671		40,435
Total operating costs and expenses	1,226,614		1,632,383		2,050,796		2,975,212
Operating income	$	88,995	$	185,246	$	151,133	$	333,858
Key Operating Statistics
Total sales volume (bpd) (1) (3)	218,791		233,653		204,866		233,564
Total refinery production (bpd)	157,981		160,266		160,574		162,539
Total refinery throughput (bpd) (4)	159,778		162,001		162,573		164,635
Per barrel of refinery throughput:
Refinery gross margin (2) (5) (6)	$	13.55	$	19.62	$	12.15	$	18.21
Direct operating expenses (7)	5.46		5.20		5.17		5.15
Mid-Atlantic sales volume (bbls)	1,971		2,513		3,702		4,453
Mid-Atlantic margin per barrel	$	0.76	$	0.32	$	0.94	$	0.75

The following tables set forth our summary refining throughput and production data for the periods and refineries presented:

El Paso and Gallup Refineries

	Three Months Ended		Six Months Ended
	June 30,		June 30,
	2016	2015	2016	2015
Key Operating Statistics
Refinery product yields (bpd):
Gasoline	88,058	86,034	89,035	87,607
Diesel and jet fuel	60,687	63,188	62,414	64,143
Residuum	2,479	5,140	2,849	5,039
Other	6,757	5,904	6,276	5,750
Total refinery production (bpd)	157,981	160,266	160,574	162,539
Refinery throughput (bpd):
Sweet crude oil	128,024	132,230	125,988	131,709
Sour crude oil	22,703	22,068	25,601	22,649
Other feedstocks and blendstocks	9,051	7,703	10,984	10,277
Total refinery throughput (bpd) (4)	159,778	162,001	162,573	164,635

El Paso Refinery

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Key Operating Statistics
Refinery product yields (bpd):
Gasoline	70,740		68,289		72,990		69,981
Diesel and jet fuel	52,746		55,032		55,515		55,874
Residuum	2,479		5,140		2,849		5,039
Other	5,261		4,504		4,939		4,244
Total refinery production (bpd)	131,226		132,965		136,293		135,138
Refinery throughput (bpd):
Sweet crude oil	102,647		106,601		103,767		106,481
Sour crude oil	22,703		22,068		25,601		22,649
Other feedstocks and blendstocks	7,292		5,646		8,481		7,665
Total refinery throughput (bpd) (4)	132,642		134,315		137,849		136,795
Total sales volume (bpd) (3)	149,784		149,561		145,773		150,680
Per barrel of refinery throughput:
Refinery gross margin (2) (5)	$	14.14	$	20.01	$	10.65	$	18.72
Direct operating expenses (7)	4.26		4.17		3.86		4.13

Gallup Refinery

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
Key Operating Statistics
Refinery product yields (bpd):
Gasoline	17,318		17,745		16,045		17,626
Diesel and jet fuel	7,941		8,156		6,899		8,269
Other	1,496		1,400		1,337		1,506
Total refinery production (bpd)	26,755		27,301		24,281		27,401
Refinery throughput (bpd):
Sweet crude oil	25,377		25,629		22,221		25,228
Other feedstocks and blendstocks	1,759		2,057		2,503		2,612
Total refinery throughput (bpd) (4)	27,136		27,686		24,724		27,840
Total sales volume (bpd) (3)	37,443		33,637		34,028		33,263
Per barrel of refinery throughput:
Refinery gross margin (2) (5)	$	13.50	$	22.64	$	11.61	$	18.34
Direct operating expenses (7)	8.28		7.81		9.08		7.93

(1) Refining net sales for the three and six months ended June 30, 2016 and 2015 include $130.1 million, $186.3 million, $259.0 million and $474.5 million, respectively, representing a period average of 31,564 bpd, 25,065 bpd, 50,455 bpd and 49,621 bpd, respectively, in crude oil sales to third-parties.

(2) Cost of products sold for the combined refining segment includes the net realized and net non-cash unrealized hedging activity shown in the table below. The hedging gains and losses are also included in the combined gross profit and refinery gross margin but are not included in those measures for our individual refineries.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Unaudited)
	(In thousands)
Realized hedging gain, net	$	8,873		$	10,686		$	31,142		$	28,141
Unrealized hedging loss, net	(20,688		)	(22,795		)	(36,959		)	(43,977		)
Total hedging loss, net	$	(11,815	)	$	(12,109	)	$	(5,817	)	$	(15,836	)

(3) Sales volume includes sales of refined products sourced primarily from our refinery production as well as refined products purchased from third parties. We purchase additional refined products from third parties to supplement supply to our customers. These products are similar to the products that we currently manufacture and represented 8.4%, 8.4%, 10.7% and 10.0% of our total consolidated sales volumes for the three and six months ended June 30, 2016 and 2015, respectively. The majority of the purchased refined products are distributed through our refined product sales activities in the Mid-Atlantic region where we satisfy our refined product customer sales requirements through a third-party supply agreement.

(4) Total refinery throughput includes crude oil, other feedstocks and blendstocks.

(5) Refinery gross margin is a per barrel measurement calculated by dividing the difference between net sales and cost of products sold by our refineries’ total throughput volumes for the respective periods presented. Net realized and net non-cash unrealized economic hedging gains and losses included in the combined refining segment gross margin are not allocated to the individual refineries. Cost of products sold does not include any depreciation or amortization. Refinery gross margin is a non-GAAP performance measure that we believe is important to investors in evaluating our refinery performance as a general indication of the amount above our cost of products that we are able to sell refined products. Each of the components used in this calculation (net sales and cost of products sold) can be reconciled directly to our statement of operations. Our calculation of refinery gross margin may differ from similar calculations of other companies in our industry, thereby limiting its usefulness as a comparative measure.

Our calculation of refinery gross margin excludes the sales and costs related to our Mid-Atlantic business that we report within the refining segment. The following table reconciles the sales and cost of sales used to calculate refinery gross margin with the total sales and cost of sales reported in the refining statement of operations data above:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
	(Unaudited)
	(In thousands)
Refinery net sales (including intersegment sales)	$	1,190,042	$	1,611,573	$	1,990,960	$	2,967,092
Mid-Atlantic sales	125,567		206,056		210,969		341,978
Net sales (including intersegment sales)	$	1,315,609	$	1,817,629	$	2,201,929	$	3,309,070

Refinery cost of products sold (exclusive of depreciation and amortization)	$	992,994	$	1,322,364	$	1,631,582	$	2,424,458
Mid-Atlantic cost of products sold	124,077		205,588		207,503		338,950
Cost of products sold (exclusive of depreciation and amortization)	$	1,117,071	$	1,527,952	$	1,839,085	$	2,763,408

The following table reconciles combined gross profit for our refineries to combined gross margin for our refineries for the periods presented:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
	(Unaudited)
	(In thousands, except per barrel data)
Refinery net sales (including intersegment sales)	$	1,190,042	$	1,611,573	$	1,990,960	$	2,967,092
Refinery cost of products sold (exclusive of depreciation and amortization)	992,994		1,322,364		1,631,582		2,424,458
Depreciation and amortization	22,386		19,951		43,671		40,435
Gross profit	174,662		269,258		315,707		502,199
Plus depreciation and amortization	22,386		19,951		43,671		40,435
Refinery gross margin	$	197,048	$	289,209	$	359,378	$	542,634
Refinery gross margin per throughput barrel	$	13.55	$	19.62	$	12.15	$	18.21
Gross profit per throughput barrel	$	12.01	$	18.26	$	10.67	$	16.85

(6) Cost of products sold for the combined refining segment includes changes in the lower of cost or market inventory reserve shown in the table below. The changes in this reserve are included in the combined refinery gross margin but are not included in those measures for the individual refineries. The following table calculates the combined refinery gross margin per throughput barrel excluding changes in the lower of cost or market inventory reserve that we believe is useful in evaluating our refinery performance exclusive of the impact of fluctuations in inventory values:

	Three Months Ended				Six Months Ended
	March 31,				June 30,
	2016		2015		2016			2015
	(Unaudited)
	(In thousands, except per barrel data)
Refinery gross margin	$	197,048	$	289,209	$	359,378		$	542,634
Net change in lower of cost or market inventory reserve	—		—		(40,689		)	(4,883		)
Refinery gross margin, excluding LCM adjustment	$	197,048	$	289,209	$	318,689		$	537,751
Refinery gross margin, excluding LCM adjustment, per refinery throughput barrel	$	13.55	$	19.62	$	10.77		$	18.05

(7) Refinery direct operating expenses per throughput barrel is calculated by dividing direct operating expenses by total throughput volumes for the respective periods presented. Direct operating expenses do not include any depreciation or amortization.

NTI

The following table sets forth the summary operating results for NTI.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Unaudited)
	(In thousands, except per barrel data)
Net sales	$	700,351		$	852,820		$	1,197,824		$	1,550,596
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization) (1)	512,734			608,799			880,505			1,089,262
Direct operating expenses (exclusive of depreciation and amortization)	79,995			76,348			158,139			146,053
Selling, general and administrative expenses	22,546			23,319			46,025			43,590
Gain on disposal of assets, net	(5		)	(296		)	(10		)	(311		)
Depreciation and amortization	20,238			19,515			40,207			38,880
Total operating costs and expenses	635,508			727,685			1,124,866			1,317,474
Operating income	$	64,843		$	125,135		$	72,958		$	233,122

Key Operating Statistics
Total sales volume (bpd)	113,304			103,778			106,199			101,144
Total refinery production (bpd)	99,243			98,722			100,018			96,529
Total refinery throughput (bpd) (2)	99,149			98,954			99,878			96,544
Per barrel of throughput:
Refinery gross margin (1) (3)	$	11.67		$	18.00		$	9.87		$	18.66
Direct operating expenses (4)	4.64			4.68			4.71			4.64

Refinery product yields (bpd):
Gasoline	48,573			46,605			49,312			45,786
Distillate (7)	32,341			34,744			32,818			34,005
Residuum	12,254			12,040			11,958			11,072
Other (8)	6,075			5,333			5,930			5,666
Total refinery production (bpd)	99,243			98,722			100,018			96,529
Refinery throughput (bpd):
Crude oil	97,324			97,027			96,836			94,299
Other feedstocks (9)	1,825			1,927			3,042			2,245
Total refinery throughput (bpd) (2)	99,149			98,954			99,878			96,544

Retail fuel gallons sold (in thousands)	78,458			77,398			151,548			149,259
Retail fuel margin per gallon (5)	$	0.23		$	0.22		$	0.23		$	0.21
Merchandise sales	96,235			95,799			180,428			178,413
Merchandise margin (6)	26.1		%	25.9		%	26.1		%	25.9		%
Company-operated retail outlets at period end							170			165
Franchised retail outlets at period end							114			99

(1) Cost of products sold for NTI includes the net realized and net non-cash unrealized hedging activity shown in the table below, along with the effect of non-cash recoveries of $35.6 million, $46.7 million, $38.2 million and $49.0 million, for the three and six months, respectively, ended June 30, 2016 and 2015, respectively, in order to state segment inventory values at market prices. Hedging gains and losses and inventory market price adjustments are not included in our calculations of refinery gross profit and refinery gross margin.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Unaudited)
	(In thousands)
Realized hedging loss, net	$	(8,323	)	$	(2,863	)	$	(12,789	)	$	(2,765	)
Unrealized hedging gain, net	6,090			508			9,877			1,633
Total hedging loss, net	$	(2,233	)	$	(2,355	)	$	(2,912	)	$	(1,132	)

(2) Total refinery throughput includes crude oil, other feedstocks and blendstocks.

(3) Refinery gross margin is a per barrel measurement calculated by dividing the difference between net sales and cost of products sold by the refinery's total throughput volumes for the respective periods presented. Refinery net sales include $3.2 million, $6.7 million, $37.2 million and $59.0 million related to crude oil sales during the three and six months ended June 30, 2016 and 2015, respectively. Refinery gross margin is a non-GAAP performance measure that we believe is useful in evaluating refinery performance as a general indication of the excess of the refined product sales amount over the related cost of products sold. Each of the components used in this calculation (net sales and cost of products sold) can be reconciled to corresponding amounts included in the statement of operations. Our calculation of refinery gross margin may differ from similar calculations of other companies in our industry, thereby limiting its usefulness as a comparative measure. NTI's refinery cost of products sold for the three and six months ended June 30, 2016 and 2015 excludes non-cash lower of cost or market adjustments to state refining inventory values at the lower of cost or market prices.

The following table reconciles gross profit to gross margin for the St. Paul Park refinery for the periods presented:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
	(Unaudited)
	(In thousands, except per barrel data)
Net refinery sales (including intersegment sales)	$	693,589	$	839,876	$	1,188,865	$	1,529,406
Refinery cost of products sold (exclusive of depreciation and amortization)	588,280		677,819		1,009,446		1,203,313
Refinery depreciation and amortization	17,674		17,255		35,083		34,368
Gross profit	87,635		144,802		144,336		291,725
Plus depreciation and amortization	17,674		17,255		35,083		34,368
Refinery gross margin	$	105,309	$	162,057	$	179,419	$	326,093
Refinery gross margin per refinery throughput barrel	$	11.67	$	18.00	$	9.87	$	18.66
Gross profit per refinery throughput barrel	$	9.71	$	16.08	$	7.94	$	16.69

(4) NTI's direct operating expenses per throughput barrel are calculated by dividing refining direct operating expenses by total throughput volumes for the respective periods presented. Direct operating expenses do not include any depreciation or amortization.

(5) Retail fuel margin per gallon is a measurement calculated by dividing the difference between retail fuel sales and retail fuel cost of products sold by the number of gallons sold. Retail fuel margin per gallon is a measure frequently used in the retail industry to measure operating results related to fuel sales.

(6) Merchandise margin is a measurement calculated by dividing the difference between merchandise sales and merchandise cost of products sold by merchandise sales. Merchandise margin is a measure frequently used in the retail industry to measure operating results related to merchandise sales.

(7) Distillate includes diesel, jet fuel, light cycle oil and kerosene.

(8) Other refinery products include propane, propylene, liquid sulfur and No. 6 fuel oil, among others. None of these products, by itself, contributes significantly to overall refinery product yields.

(9) Other feedstocks include gas oil, natural gasoline, normal butane and isobutane, among others. None of these feedstocks, by itself, contributes significantly to overall refinery throughput.

WNRL

WNRL's financial and operational data presented includes the historical results of all assets acquired from Western in the TexNew Mex Pipeline Transaction. This transaction was a transfer of assets between entities under common control. We have retrospectively adjusted historical financial and operational data of WNRL, for all periods presented, to reflect the purchase and consolidation of the TexNew Mex Pipeline System into WNRL.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Unaudited)
	(In thousands)
Statement of Operations Data:
Net sales	$	578,602		$	735,904		$	1,046,641		$	1,343,300
Operating costs and expenses:
Cost of products sold	504,256			664,026			899,846			1,205,727
Direct operating expenses	37,574			38,058			76,475			74,429
Selling, general and administrative expenses	5,758			6,279			10,823			12,234
Gain on disposal of assets, net	(802		)	(160		)	(901		)	(244		)
Depreciation and amortization	7,325			6,670			14,469			12,562
Total operating costs and expenses	554,111			714,873			1,000,712			1,304,708
Operating income	$	24,491		$	21,031		$	45,929		$	38,592

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
	(Unaudited)
	(In thousands, except key operating statistics)
Key Operating Statistics
Pipeline and gathering (bpd):
Mainline movements:
Permian/Delaware Basin system	55,953		43,873		52,719		40,213
Four Corners system (1)	58,047		51,486		55,257		48,679
TexNew Mex system	10,375		3,398		11,460		1,708
Gathering (truck offloading):
Permian/Delaware Basin system	17,823		24,019		19,178		23,316
Four Corners system	11,133		12,950		11,947		11,812
Terminalling, transportation and storage (bpd):
Shipments into and out of storage (includes asphalt)	393,037		389,220		390,647		390,263
Wholesale:
Fuel gallons sold (in thousands)	311,486		310,811		626,429		614,242
Fuel gallons sold to retail (included in fuel gallons sold above) (in thousands)	83,721		79,023		163,562		154,286
Fuel margin per gallon (2)	$	0.025	$	0.037	$	0.027	$	0.032
Lubricant gallons sold (in thousands)	1,846		3,014		4,047		5,971
Lubricant margin per gallon (3)	$	0.89	$	0.78	$	0.78	$	0.72
Asphalt trucking volume (tons)	4,876		—		3,875		—
Crude oil trucking volume (bpd)	42,092		48,992		38,801		46,037
Average crude oil revenue per barrel	$	2.17	$	2.51	$	2.20	$	2.63

(1) Some barrels of crude oil in route to Western's Gallup refinery and Permian/Delaware Basin are transported on more than one mainline. Mainline movements for the Four Corners and Delaware Basin systems include each barrel transported on each mainline.

(2) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales, net of transportation charges, and cost of fuel sales for our wholesale business by the number of gallons sold. Fuel margin per gallon is a measure frequently used in the petroleum products wholesale industry to measure operating results related to fuel sales.

(3) Lubricant margin per gallon is a measurement calculated by dividing the difference between lubricant sales, net of transportation charges, and lubricant cost of products sold by the number of gallons sold. Lubricant margin is a measure frequently used in the petroleum products wholesale industry to measure operating results related to lubricant sales.

Retail Segment

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
	(Unaudited)
	(In thousands, except per gallon data)
Statement of Operations Data
Net sales (including intersegment sales)	$	290,068		$	318,072		$	521,254		$	576,674
Operating costs and expenses:
Cost of products sold (exclusive of depreciation and amortization)	245,889			272,643			435,389			492,818
Direct operating expenses (exclusive of depreciation and amortization)	34,262			33,641			67,314			65,995
Selling, general and administrative expenses	3,016			3,109			5,914			6,373
Gain on disposal of assets, net	—			(9		)	(26		)	(45		)
Depreciation and amortization	3,882			4,031			7,212			7,317
Total operating costs and expenses	287,049			313,415			515,803			572,458
Operating income (loss)	$	3,019		$	4,657		$	5,451		$	4,216
Key Operating Statistics
Retail fuel gallons sold	98,550			90,339			190,019			174,163
Average retail fuel sales price per gallon, net of excise taxes	$	1.76		$	2.20		$	1.60		$	2.02
Average retail fuel cost per gallon, net of excise taxes)	1.61			2.03			1.45			1.86
Retail fuel margin per gallon (1)	0.14			0.17			0.15			0.16
Merchandise sales	$	85,069		$	79,981		161,036			150,868
Merchandise margin (2)	29.2		%	29.9		%	29.4		%	29.6		%
Operating retail outlets at period end							259			262
Cardlock fuel gallons sold	16,515			16,903			31,768			33,023
Cardlock fuel margin per gallon	$	0.118		$	0.160		$	0.123		$	0.173
Operating cardlocks at period end							52			52

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2016		2015		2016		2015
	(Unaudited)
	(In thousands, except per gallon data)
Net Sales
Retail fuel sales, net of excise taxes	$	173,258	$	199,166	$	304,083	$	351,711
Merchandise sales	85,069		79,981		161,036		150,868
Cardlock sales	28,527		35,782		49,260		67,776
Other sales	3,214		3,143		6,875		6,319
Net sales	$	290,068	$	318,072	$	521,254	$	576,674
Cost of Products Sold
Retail fuel cost of products sold, net of excise taxes	$	159,096	$	183,471	$	276,316	$	324,593
Merchandise cost of products sold	60,227		56,104		113,746		106,169
Cardlock cost of products sold	26,480		33,004		45,181		61,936
Other cost of products sold	86		64		146		120
Cost of products sold	$	245,889	$	272,643	$	435,389	$	492,818
Retail fuel margin per gallon (1)	$	0.14	$	0.17	$	0.15	$	0.16

(1) Retail fuel margin per gallon is a measurement calculated by dividing the difference between retail fuel sales and cost of retail fuel sales for our retail segment by the number of gallons sold. Retail fuel margin per gallon is a measure frequently used in the convenience store industry to measure operating results related to retail fuel sales.

(2) Merchandise margin is a measurement calculated by dividing the difference between merchandise sales and merchandise cost of products sold by merchandise sales. Merchandise margin is a measure frequently used in the convenience store industry to measure operating results related to merchandise sales.

Reconciliation of Special Items

We present certain additional financial measures below that are non-GAAP measures within the meaning of Regulation G under the Securities Exchange Act of 1934.

We present these non-GAAP measures to provide investors with additional information to analyze our performance from period to period. We believe it is useful for investors to understand our financial performance excluding these special items so that investors can see the operating trends underlying our business. Investors should not consider these non-GAAP measures in isolation from, or as a substitute for, the financial information that we report in accordance with GAAP. These non-GAAP measures reflect subjective determinations by management and may differ from similarly titled non-GAAP measures presented by other companies.

	Three Months Ended
	June 30,
	2016			2015
	(Unaudited)
	(In thousands, except per share data)
Reported diluted earnings per share	$	0.70		$	1.40
Income before income taxes	$	141,016		$	292,302
Special items:
Unrealized loss on commodity hedging transactions, net (1)	14,598			22,287
Gain on disposal of assets, net	(772		)	(387		)
Net change in lower of cost or market inventory reserve (2)	(35,619		)	(38,204		)
Earnings before income taxes excluding special items	119,223			275,998
Recomputed income taxes excluding special items (3)	(38,805		)	(80,847		)
Net income excluding special items	80,418			195,151
Net income attributable to non-controlling interests	13,888			57,138
Net income attributable to Western excluding special items	$	66,530		$	138,013
Diluted earnings per share excluding special items	$	0.72		$	1.44

(1) Unrealized loss from commodity hedging transactions, net, includes $20.7 million in unrealized losses and $6.1 million in unrealized gains for Western and NTI, respectively, for the three months ended June 30, 2016 and $22.8 million in unrealized losses and $0.5 million in unrealized gains for Western and NTI, respectively, for the three months ended June 30, 2015.

(2) Net change in lower of cost or market inventory reserve includes NTI adjustments of $35.6 million and $38.2 million, respectively, for the three months ended June 30, 2016 and June 30, 2015.

(3) We recompute income taxes after deducting special items and earnings attributable to non-controlling interests.

Western Refining Announces Second Quarter 2016 Results

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