One question many investors ask is, "Can Alon USA Partners, LP (NYSE: ALDW) maintain this high distribution?" To answer this question we simply look at the profit from 2012, which was $494 million. There are 62 million shares outstanding and the earnings per unit were $7.96. By quarter that would be near $1.99 per unit share. The answer is yes. The bulk of income comes from Big Springs, Texas, refinery and this quarter the refinery has been steadily in production and with deliveries on time and schedule. There are no negatives that are affecting the bottom line.
One negative in the MLP family is that Brower-Piven announced the filing of a class action lawsuit against Linn Energy, LLC (LINE). The complaint accuses the defendants of violations of the Securities Exchange Act of 1934 by virtue of the defendants' failure to disclose during the Class Period that the company engaged in improper accounting for its hedging strategy, including the failure to properly treat certain hedging costs as expenses (and thus overstating its cash available for distribution to unit holders) and that the company's energy production was not increasing despite heavy capital expenditures.
This complaint does not involve Alon USA Partners, however, the markets have cooled with the concern that other MLPs with high dividends could reach similar challenges. With the stated profits per quarter and year, the distributions Alon USA Partners is within proper accounting procedures and this should not affect the profit or distributions in the future.
We anticipate an increased volume and price of unit shares being pushed higher leading up to the 2Q 2013 Earnings Conference Call on August 7, 2013, where the quarterly distribution will be announced. Alon USA Partners has declared the ex-date about a week after the quarterly results and the pay date for the distribution within a week after the ex-date. We anticipate the run up two weeks prior will increase the price up $3.00 to $5.00 per unit share. With a current price of $20.56 at open on July 23, 2013, by August 7, we could expect a price near $24.00. If the distribution is over $1.00, I would expect the increase to near $25.00 per share.
If the distribution is similar to last quarter ($1.48 per unit share) and the price is near our expected $25.00 that would be near 23% annualized return. We are encouraged when we find returns over 10% and this return is worth buying in anywhere below $25.00 per unit share.
Alon USA Partners owns a crude oil refinery in Texas, with an aggregate crude oil throughput capacity of approximately 70,000 barrels per day. Alon USA is a leading producer of asphalt, which it markets through its asphalt terminals in the Western United States. The crude oil pipelines the company utilizes consist of the Amdel, White Oil, Mesa Interconnect, Centurion and Centurion Interconnect. Its Big Spring refinery produces ultra-low sulfur gasoline, ultra-low sulfur diesel, jet fuel, petrochemicals, petrochemical feed stocks, asphalt and other petroleum products. Alon USA Partners is the largest 7-Eleven licensee in the United States and operates approximately 300 convenience stores in Texas, and New Mexico.
Alon USA Energy, Inc., (Alon USA Energy is the Parent Company to Alon USA Partners) with headquarters in Dallas, Texas, owns 100% of the general partner and approximately 82% of the limited partner interests in Alon USA Partners, LP. 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 USA Energy directly owns crude oil refineries in California, Louisiana, and Oregon, with an aggregate crude oil throughput capacity of approximately 144,000 barrels per day.
Alon USA Energy, Inc.'s Second Quarter 2013 Earnings Conference Call is scheduled on Wednesday, August 7, 2013 - 11:30 AM Eastern Time. Dial in at: 1-800-762-8779 or 480-629-9819, for international callers, and asking for the Alon USA Energy call at least 10 minutes prior to the start time. Investors may also listen to the conference live on the Alon corporate website, www.alonusa.com by logging on that site and clicking "Investors."
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 (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: Information for this article was collected through media reports and the company's website and press releases. We always recommend investors conduct their own risk analysis to determine if this or any investment is right for their portfolio.