Northern Tier Considers SuperAmerica Sale or Spinoff

TEMPE, Ariz. and EL PASO, Texas -- Northern Tier Energy LP (NTI) will "certainly consider" a spinoff or sale of its SuperAmerica convenience store division, new President and CEO Dave Lamp said during today's 2014 fiscal first-quarter earnings call.

One potential suitor for the retail division would be Western Refining Inc., operator of approximately 200 convenience stores and gas stations under the GIANT, Sundial, Howdy's and Mustang brand names. Western Refining already owns the general partner interest and approximately 39 percent of the limited partner interests of Northern Tier Energy.

"Retail is a potential synergy we could see with Western [Refining]," Lamp commented.

The chief executive stressed that no decision has been made regarding selling or spinning off the retail division and SuperAmerica remains an important part of NTI's business.

However, Lamp agreed when a Wall Street analyst stated during the earnings call that a retail sale would be tempting thanks to strong multiples seen in recent industry acquisitions, particularly Energy Transfer Partners LP's pending purchase of Susser Holdings Corp. announced last week.

Tempe, Ariz.-based Northern Tier Energy is a master limited partnership that operates 164 convenience stores and supports an additional 79 locations, primarily in Minnesota and Wisconsin under the SuperAmerica trademark. The company also owns SuperMom's commissary and bakery.

The SuperAmerica division achieved a net profit of $1.6 million in the first quarter ended March 31, compared to $600,000 in profits during the same period in 2013. Lamp credited stronger fuel margins -- which rose 3 cents per gallon to 19 cents per gallon -- for the improved earnings.

Fuel gallons sold at company-operated stores dipped 2 percent year over year to 73 million gallons.

Merchandise sales were a strong point, rising $2.7 million year over year to $78.5 million. However, merchandise margins dropped 1.6 percent to 25.9 percent.

Western Refining: Pleased With Its Investment

Just before Northern Tier Energy held its first-quarter earnings call today, Western Refining reported on its first-quarter performance during the company's own Q1 earnings call. The retail segment of Western Refining experienced a relatively flat quarter, but company executives said its investment in Northern Tier Energy helped performance and the remaining three quarters of the year should pick up.

The first quarter is "typically challenging for retail," said Western Refining President and CEO Jeff Stevens, adding that he expects the retail segment to see a good 2014.

The El Paso, Texas-based company reported first-quarter 2014 net income, excluding special items, of $40.3 million. This compares to first-quarter 2013 net income, excluding special items, of $98.8 million. Including special items, the company recorded first-quarter 2014 net income of $85.5 million, compared to net income of $83.7 million for the first quarter of 2013.

These results reflect the consolidation of financial results for both Northern Tier Energy and Western Refining Logistics LP, a fee-based master limited partnership of which Western Refining owns the general partner interest and approximately 65 percent of the limited partnership interests.

Stevens cited Western Refining's investment in Northern Tier Energy as helping the company turn in strong numbers during a quarter that saw its refineries go down at different times. "Diversification of assets helps when there is extended downtime, and it's one of the reasons for the investment in [Northern Tier Energy]," the CEO explained.

Overall, Stevens dubbed the first quarter "a good start" to the year, noting that the second quarter is "progressing well."