Alon Sees Better Times Ahead in Permian Basin

DALLAS — Challenges in the Permian Basin region of Texas were a common theme for Alon USA Energy Inc. in 2016, but the year's end brought a glimpse of optimism.

"Our retail marketing business faced seasonal headwinds in the fourth quarter of 2016, as well as some continued weakness in the Permian Basin. However, we did see some improvement over the course of the quarter," Alan Moret, CEO of Alon USA Energy, reported during the company's fourth-quarter earnings call on Feb. 24.

Located in the Midland/Odessa region of the state, the Permian Basin has long been one of the most important oil and gas-producing areas of the United States.

According to Moret, compared to the same quarter a year ago, same-store fuel sales volumes were up 2.9 percent across Alon's system, including a slight increase at its Permian Basin stores. Those trends and same-store fuel sales continued into January, he added.

Merchandise same-store sales were down 2.2 percent in the fourth quarter of 2016 relative to the same quarter the previous year. However, excluding the Permian Basin convenience stores, same-store merchandise sales were up 4 percent. 

"Looking forward, we are encouraged by the increase in the Permian rig count, which has more than doubled since May 2016, and we believe our retail stores are well-positioned to benefit as the local economy improves," the chief executive said.

During the Q4 earnings call, Moret also shared that the previously announced agreement for Delek US to acquire the outstanding shares of Alon common stocks that Delek does not already own is on pace to close in the first half of this year. The transaction is subject to customary closing conditions, including regulatory approvals and approval by Delek US shareholders and Alon shareholders. 

"We believe the economies of scale, financial strength and synergies generated by this merger create the opportunity to drive long-term value for shareholders," Moret said.

Dallas-based Alon USA Energy is an independent refiner and marketer of petroleum products, operating primarily in the South Central, Southwestern and Western regions of the United States. Alon is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores that also market motor fuels in Central and West Texas and New Mexico.