IPO Preview: CVR Refining, LP

| About: CVR Refining, (CVRR)

Based in Sugar Land, TX, CVR Refining, LP (NYSE:CVRR) scheduled a $500 million IPO with a market capitalization of $3.7 billion at a price range mid-point of $25, for Thursday, January 17, 2013.

Four other IPOs are scheduled for the week of January 14, 2013. The full IPO calendar is available here.

S-1 filed January 8, 2013.

Manager, Joint Managers: Credit Suisse; Citigroup.

Co Managers: Barclays; UBS; Jefferies; J.P. Morgan; Macquarie Capital; Simmons


CVRR is a limited partnership comparable to Alon Partners (NYSE:ALDW) that IPO'd November 19, 20122 at $16, down from a price range mid-point of $20. ALDW traded up to $25.33 and recently traded around $22.

Citigroup recently started coverage on shares of Alon USA Partners LP with a neutral rating and a $20.00 price target on the stock.

In both CVRR and ALDS limited partners receive no preference, unlike most energy limited partners.


CVRR estimated cash for distribution

March '13

June '13

Sept '13

Dec '13








per unit






% return at $25






ALDW estimated cash for distribution

Dec '12

March '13

June '13

Sept '13








per unit






% return at $20







CVRR is similar to ALDW, which actually has a higher payout ratio, although ALDW's only has one refinery. CVRR had two refineries and also a more extensive logistical support system.

Icahn Enterprises may buy $100 million (16%) of the IPO, which is a positive if it happens. However, IPOdesktop is neutral to positive on CVRR based on the ALDW comparison and because there is no visible growth plan for CVRR, other than to maximize the spread between cost of goods and top line revenue.


Following this offering, CVR Refining Holdings, LLC, an indirect wholly-owned subsidiary of CVR Energy, will own 100% of CVRR's general partner and 86.4% of the common units.

CVR Energy (NYSE:CVI), $4.26 billion market cap, indirectly owns the general partner and approximately 70% of the common units of CVR Partners (NYSE:UAN), $2 billion market cap, an independent producer and marketer of upgraded nitrogen fertilizers in the form of ammonia and urea ammonium nitrate.

Icahn Enterprises, L.P. (NYSE:IEP), $5.8 billion market cap, holds interests in operating subsidiaries engaged in various industries, is the holder of 82% of the common stock of CVR Energy.


Icahn Enterprises has indicated that it or its affiliates may purchase in this offering up to $100.0 million, or up to approximately 4,000,000 (based on the midpoint of the price range), of common units at the same price as the price to the public, in which case they would directly own, upon completion of the offering, approximately 2.7% of our common units.


CVRR is an independent downstream energy limited partnership with refining and related logistics assets that operates in the mid-continent region. CVRR owns two of only seven refineries in the underserved Group 3 of the PADD II region of the United States.

CVRR owns and operates a 115,000 barrels per day ("bpd") complex full coking medium-sour crude oil refinery in Coffeyville, Kansas and a 70,000 bpd medium complexity crude oil refinery in Wynnewood, Oklahoma capable of processing 20,000 bpd of light sour crude oils (within its 70,000 bpd capacity).

In addition, CVRR also controls and operates supporting logistics assets including approximately 350 miles of owned pipelines, over 125 owned crude oil transports, a network of strategically located crude oil gathering tank farms, and over 6.0 million barrels of owned and leased crude oil storage capacity.

The strategic location of the refineries, combined with supporting logistics assets, provide CVRR with a significant crude oil cost advantage relative to competitors, according to CVRR.

The Coffeyville and Wynnewood refineries are located 100 miles and 130 miles, respectively, from the crude oil hub at Cushing, Oklahoma, and have access to inland domestic and Canadian crude oils that are priced based on the price of West Texas Intermediate crude oil ("WTI"). In the nine months ended September 30, 2012, the crude oil consumed at the refineries was at a discount to the price of WTI of $2.81 per barrel.

CVRR's refineries' complexity allows the company to optimize yields (the percentage of refined product that is produced from crude oil and other feedstocks) of higher value transportation fuels (gasoline and diesel).


For the year ending December 2013 CVRR has budgeted $232 million, which CVRR expects to fund with borrowings under a new intercompany credit facility with Coffeyville Resources (a related company) and therefore the cash available for distribution for the year ending December 31, 2013 will not be impacted by these planned expenditures.

IPOdesktop note: that's borrowing from Peter (a related company) to pay Paul (including the public investors).


CVRR projects that major turnarounds at the refineries will occur once every four years with an estimated total cost per turnaround for both refineries of approximately $140.0 million.

The next major scheduled turnaround for the Coffeyville Refinery is expected to begin in the fourth quarter of 2015 and the next major scheduled turnaround for the Wynnewood refinery is expected to begin in the fourth quarter of 2016.

CVRR estimates reserving approximately $35.0 million of cash per year for scheduled turnaround expenses.


CVRR expects to net $469 million from the IPO. Proceeds are allocated as follows:

$255.0 million to repurchase the 10.875% of senior secured notes due 2017 issued by Coffeyville Resources and pay associated accrued interest;

$160.0 million to prefund certain maintenance and environmental capital expenditures through 2014; and

$54.0 million to fund the turnaround expenses of the Wynnewood refinery in the fourth quarter of 2012.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.