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.

CONTACT: Investor and Analyst Contact:
Jeffrey S. Beyersdorfer
(602) 286-1530

Michelle Clemente
(602) 286-1533

Retail Investors Contact:
Alpha IR Group
Dylan Schweitzer
Chris Hodges
(312) 445-2870
[email protected]

Media Contact:
Gary W. Hanson
(602) 286-1777