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Executives

Jeff Beyersdorfer – SVP, Treasurer and Director, IR

Jeff Stevens – President and CEO

Paul Foster – Executive Chairman

Gary Dalke – CFO

Mark Smith – President, Refining and Marketing

Analysts

Ben Hur – Morgan Stanley

Jeff Dietert – Simmons & Company

Vance Shaw – Credit Suisse

Gary Stromberg – Barclays Capital

Kelly Krenger – Banc of America

Western Refining, Inc. (WNR) Q4 2009 Earnings Call March 4, 2010 9:00 AM ET

Operator

Good day, ladies and gentlemen and welcome to the fourth quarter 2009 Western Refining, Inc. earnings conference call. My name is Sharla and I will be your operator for today. At this time, all participants are in listen-only mode. We will conduct a question-and-answer towards the end of this conference.

(Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Jeff Beyersdorfer, Treasurer and Director of Investor Relations for Western Refining. Please proceed, sir.

Jeff Beyersdorfer

Thank you, Sharla and good afternoon. I would like to thank you for taking the time to listen in today. We appreciate your continued interest in Western Refining. Again, my name is Jeff Beyersdorfer, I am the company’s Treasurer and Director of IR.

Joining me for today’s call are Paul Foster, Executive Chairman; Jeff Stevens, CEO; Gary Dalke, CFO; Mark Smith, President Refining and Marketing and other members of our senior management team.

If you need a copy of the earnings release you may obtain one from the IR section of our website at wnr.com.

Before we proceed, I need to make the following Safe Harbor statement. Today’s presentation will contain forward-looking statements and I incorporate and refer you to the forward-looking statement section of our earnings release and most recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances.

In addition to reporting financial results in accordance with Generally Accepted Accounting Principles or GAAP, we report certain non-GAAP financial results. Investors are encouraged to review the reconciliation of these non-GAAP financial measures to the comparable GAAP results which can be found in the press release which is posted on the IR section of our website.

I’ll now turn over the call to Jeff Stevens.

Jeff Stevens

Thank you, Jeff. Welcome to everyone on the call. We appreciate your interest in Western Refining. As you are aware, our industry continues to operate in a very challenging margin environment. On today’s call we will discuss how we are addressing these challenges in order to manage through an environment and be well positioned as the market conditions improve. After providing commentary on our operations and an update on our cost saving initiatives, I will turn the call over to Gary to review our earnings in more detail and provide operating guidance for the first quarter of 2010.

After Gary’s comment we will open the call for questions. First, however, let me turn the call over to Paul who has a few remarks.

Paul Foster

Thanks, Jeff. As you know, during the quarter we announced Jeff Stevens’ promotion to the position of CEO, and also announced that I would assume the role of Executive Chairman. This is the first conference call we've had since this announcement; I wanted to take the opportunity to reiterate my support for Jeff.

These changes are part of a succession plan that has in place for sometime at Western, and I believe this plan highlights the strength of our management team and the confidence that we have at Jeff’s leadership. I will continue to be involved and help him to shape the strategy of the company, and I’m looking forward to working to Western’s continued success.

I will turn the call back over to Jeff who will provide an update on our operations, market conditions and our strategic initiatives.

Jeff Stevens

Thanks Bob. We appreciate the support and confidence you have shown in me and the entire executive team. The leadership you have provided the company since its inception is a great example for all of us.

Turning to our results. As stated in our press release, we reported a net loss excluding special items of $51.1 million or $0.58 per diluted share for the quarter ended December 31, 2009. This compares to net earnings excluding special items of $33.6 million or $0.49 per diluted share for the same period of 2008.

The year-over-year decline primarily reflects margin declines across the industry. As you know, the refining marketplace was very challenging in the fourth quarter. Continued low US demand for diesel coupled with worldwide increases in refining capacity has led to very poor refinery margins. The Gulf Coast 3-2-1 benchmark crack in Q4 was more than $3 below the third quarter, and was only slightly higher than the fourth quarter of 2008, which was the lowest level in several years.

I would like to note, however, the margins did improve each month during Q4. Our Southwest refining businesses continued to capture margin significantly above these benchmarks, specifically fourth quarter gross margin at El Paso was $5.83 per throughput barrel, and our Gallup Refinery generated gross margin of $12.9 per throughput barrel. On the East Coast, the New York 2-1-1 crack spread was more than $4 lower than the fourth quarter of 2008 and $2 below Q3.

In addition to this margin environment, Yorktown’s profitability was impacted by the light heavy spreads, which during the quarter were approximately 50% below the fourth quarter of 2008, and continue to be very compressed compared to recent years. Although gross margins at Yorktown did improve somewhat during the end of the fourth quarter, the financial performance of the facility negatively impact the company’s overall results.

In the retail business, total gross profit for the quarter was $22.3 million and a record $96.5 million for the year, which was up 3.2% versus 2008. Merchandise profitability growth was a primary factor for this improvement. Although fuel volumes were down slightly in 2009, the overall financial performance of retail is encouraging when you consider the general economic environment in our key markets.

The economic slowdown continued to have a significant impact on our wholesale business in 2009, as reduced economic activity led to lower commercial fuel and lubricant sales. However, we believe the volumes and margins have stabilized and will improve when the economy improves.

Now I’d like to update you on our recent implemented strategic initiatives. We announced last quarter that we were consolidating our refinery operations in the four corners into our Gallup facility. I am pleased to report this consolidation effort is on schedule and we are seeing the benefits of the planned efficiencies for the business in the Four Corners.

Our management team and employees have been doing an outstanding job through difficult processes in a safe and orderly manner. As a result of the consolidation, we expect to realize annual operating expense savings of approximately $25 million, beginning in the first quarter of 2010. We are also pleased with the progress that Gallup has made in raising throughput rates and achieving our goal of running all available cost effective prudent area.

As we share with you last quarter, we identified $25 million in additional cost saving initiatives. We have successfully implemented these initiatives realizing a portion of these savings in the latter part of 2009 and are on track to achieve the full $25 million in 2010. We will continue to optimize our operations and identify additional efficiencies as we progress through 2010.

Turning to the first quarter of 2010. We have seen improved refinery margins relative to the fourth quarter. Through the end of February, both the Gulf Coast 3-2-1 and the New York 2-1-1 are more than $2.00 higher than the fourth quarter, primarily due to increased gasoline fracs as we approach the spring driving season.

Although, the margin environment in 2009 prevented us from delivering improved profitability, we have been proactive in addressing the components of our business we can control, specifically I am proud that the cost reduction initiatives that we have undertaken. These improvements have been identified, implemented by variety of our employees across the organization and while some of these changes have been difficult, I am encouraged by our performance in this area.

Lastly, I applaud our employees for continued focus and hard work on safety, environmental leadership [ph] and reliability.

Now, Gary will go through our financials in a little more detail and provide some 2010 operating guidance. Gary?

Gary Dalke

Thank you, Jeff. As Jeff mentioned we reported a net loss excluding special items of $51.1 million or $0.58 per diluted share for the quarter ended December 31, 2009. For the same period in 2008, the company had net earnings excluding special items of $33.6 million or $0.49 per diluted share. On a GAAP basis, the Company had a fourth quarter net loss of $97.5 million or $1.11 per diluted share compared to fourth quarter of 2008 net loss of $12.8 million or $0.19 per diluted share.

A reconciliation of our pretax income to our net income excluding special items is included in our press release. There were two special items in the fourth quarter, one being the non-cash impairment associated with the Four Corners consolidation which was $52.8 million pretax, and the other being the settlement of our losses with Statoil in which Western was a defendant. The settlement resulted in a pretax charge of $20 million which was recorded in the fourth quarter. $10 million of this settlement is payable now, and the remainder will be paid within the next three years. We are pleased to have this behind us and believe this is a constructive resolution for both parties.

For the full year, the Company reported a net loss excluding special items of $44.5 million or $0.56 per diluted share. This compares to full year 2008 net income excluding special items of $110.6 million or $1.62 per diluted share. On a GAAP basis, the company had a full year 2009 net loss of $350.6 million or $4.43 per diluted share compared to net earnings of $64.2 million or $0.94 per diluted share for the full year 2008. Again, please refer to the net income reconciliation in our press release, which details the 2008 and 2009 special item adjustments.

Gross margins at our refineries were at $5.35 per throughput barrel in the fourth quarter and $9.02 per throughput barrel for full year 2009. This compares to $8.26 per throughput barrel for the fourth quarter of last year and $9.51 for the full year of 2008.

Direct operating expenses at our refineries were $4.74 per barrel for the quarter and $4.77 per barrel for the full year. Refining OpEx in the quarter decreased by approximately $17.5 million compared to the fourth quarter of 2008, and for the year was $42.9 million for the full year of 2008. Energy savings made up $13.8 million of this $42.9 million year-over-year savings.

In 2009, cost savings in areas such as discretionary maintenance, insurance, contractor’s expense and property taxes made up a majority of non-energy related savings. Total SG&A cost for the company were $23.8 million for the quarter as compared to $25.9 million for the prior year quarter. For the full year 2009, SG&A cost were $109.7 million, a reduction of $6.2 million compared to 2008.

As Jeff mentioned, a majority of the cost initiatives that we have put in place will be again benefiting results starting in 2010. Our adjusted EBITDA for the fourth quarter of 2009 was a negative $24.7 million and a positive $191.4 million for the full year. This compares to an adjusted EBITDA of $129 million for the fourth quarter of 2008 and $405.9 million for the full year 2008. Please note excluding the lawsuit settlement charge, EBITDA would have been a negative $4.7 million for the quarter and a positive $211.4 million for the year.

Moving down the income statement, depreciation and amortization expense for the fourth quarter was $36.6 million, up from $31 million in the fourth quarter of 2008. Full year D&A was $146 million, which compares to $113.6 million in 2008. The increase in D&A is primarily due to the new gasoline hydrotreater in El Paso, which was placed in service in May of 2009.

Interest expense for the quarter was $33.3 million, modestly up compared to the fourth quarter of 2008. Our effective tax rate for Q4 was 36.3%. For the full year 2009, we generated cash flow from operations of $141 million. This is significantly below 2008 and is primarily due to reduced earnings and to a working capital increase resulting from higher crude prices, which ended the year approximately $35 per barrel above year end 2008.

Total capital expenditures for the quarter were $22.1 million and for the 12 months ended December 31, 2009 were $115.9 million. Total debt stood at $1.1 billion as of December 31, which included $50 million outstanding under our revolving credit facility.

Today, including cash on the balance sheet and availability under our revolver we have approximately $210 billion of liquidity. This liquidity level along with the financial transactions we’ve completed to improve our balance sheet, and the recent amendments to our financial covenants gives us greater financial flexibility and adequate room to continue to execute our business plan.

Turning to 2010, our guidance for the first quarter is as follows

We expect crude oil through-put in our three refineries to be approximately 170,000 to 180,000 barrels per day during the quarter. We expect total refinery through-put at our three refineries to be approximately 190,000 to 200,000 barrels per day. Both the crude and total through-put figures include the impacts of the planned turnaround which was completed in February at the El Paso refinery and the planned reformer regeneration work at the Gallup Refinery which is scheduled for early March.

In the quarter, we expect operating cost to be approximately $4.40 per barrel at the El Paso refinery, approximately $8.60 per barrel at the Gallup Refinery and approximately $5.55 per barrel at the Yorktown refinery.

We expect total SG&A in the first quarter to be approximately $26 million, interest expense will be about $37.5 million and depreciation and amortization will be approximately $33.7 million for the quarter. Capital expenditures for the full year 2010 will be approximately $100 million. About 80% of the spending will be for regulatory projects and the remaining for ongoing maintenance expenditures.

Thank you again for listening. We’ll now open up the call for questions. Sharla, we are ready for questions.

Question-and-Answer-Session

Operator

(Operator Instructions) Your first question comes from the line of Ben Hur from Morgan Stanley. Please proceed.

Ben Hur – Morgan Stanley

Good morning guys. Thanks for taking my call. I just had a couple – Hello, can you hear me?

Jeff Stevens

Yes, Ben we can hear you.

Ben Hur – Morgan Stanley

I just had a couple of questions here. First, just talking more about Yorktown, so obviously we see that we are getting some better Northeast margins here especially at the 2-1-1, looks like the differential on Savar [ph] has been increasing in the last few weeks. Do you see a lot more margin improvement in the first quarter for the facility?

Jeff Stevens

Yes, and this is Jeff Stevens. As we said, we have been seeing a trend both on the overall 2-1-1 crack and a slight improvement on the light heavy differentials. But, they are still way below – the light heavy differentials are still below what we saw in 2008. So, that’s still going to in the first quarter effect your accounts’ overall profitability.

Ben Hur – Morgan Stanley

What do you guys look for in that, refresh my memory on what that – the spread that you are looking for, for your account to become a little bit more profitable?

Gary Dalke

Historically that spread has been in the $6 to $8 range, and in this type of margin environment with $80 crude and being a coking refinery, it really needs to kind of be in that $5 to $7 range as what we are looking for at that facility.

Ben Hur – Morgan Stanley

Do you see any other places in your town where you can reduce spending in OpEx, is there anything else that hasn’t been done yet that you are looking at doing?

Jeff Stevens

Yeah, we are currently working with some of the utilities and some of the other suppliers to Yorktown, and so we continue to work it, but it's – we have achieved a quite a bit there, and really is a function of spreads going back to a more normal range for that facility to become profitable again.

Ben Hur – Morgan Stanley

When I look at El Paso, and you said that you captured better margin other than the Gulf Coast whether the 5-3-2 on the facility because, I guess, it's probably because of the Phoenix market on gasoline. Is that running in the first quarter, I mean first quarter has been somewhat weak. We started to see West Coast's margin start to pick up here in the last few weeks as well. What's the impact that's going to have on El Paso? I understand that you put in that high growth trigger, which gives you a little bit more room to increase the amount of gasoline that you could supply that market, what's your thoughts on that?

Gary Dalke

Yeah, I think the first part of the quarter what we saw was a little weakening in LA, like you said, but we've really seen throughout the quarter stronger racks in the southwest related to the Gulf Coast. As you look at it today, Phoenix is about $0.17 or $0.18 over the Gulf Coast. So, it's much stronger I’d say than the rest of the country.

Ben Hur – Morgan Stanley

I am on the subject of OpEx, and I look at – I just want to make sure I heard that right on the whole four quarters, it's solely by taking down Bloomfield, the total annual cost savings on OpEx is $25 million or is it $25 million in the first quarter? I kind of misread that I guess or maybe I heard that wrong, could you clarify that for me please?

Gary Dalke

Yeah, that 25 is on an annual basis.

Ben Hur – Morgan Stanley

It’s an annualized basis.

Gary Dalke

Correct.

Ben Hur – Morgan Stanley

And my last question probably more deals with your covenants and on the debt, I mean if – if we had something like 2009 – another year like 2009, obviously that doesn’t bode too well for the company. What types for things are you looking at to do to address the covenant issues if we had prolonged core margins again?

Jeff Stevens

Well, as Gary said, we did two really things to help out our balance sheet in 2008, we went out and change some of our debt and we also went out and lowered our debt. In the same time we also were able to get some amendment relief for 2010 that we think will help us through the market. Now obviously it's a very volatile market, but I believe that we’ll be able to continue to work with our banking group and our lenders to get through this, and I think we’re doing everything we can to make sure that that we stay within those covenants.

Ben Hur – Morgan Stanley

Is there any reasons for in your guidance that you just gave, you said interest expense you think should be like $37.5 million, I mean what’s the increase in interest expense from last quarter? It looks like around what $4 million, $4.5 million, can you explain that point please?

Jeff Stevens

Yes, Gary, why don’t you handle that?

Gary Dalke

Yes, I mean when we went through our covenant amendments, one is the – we had a pricing change to our term loan that went from 9.25% up to 10.75%. We also expect with crude prices rising a little bit more on Letter of Credit fees and a little bit more on potential revolvers as well. So that’s kind of what’s baked in, but the key driver is the increase in the rate on the term loan.

Ben Hur – Morgan Stanley

Okay. Great. Thanks, gentleman.

Jeff Stevens

Thanks Ben.

Operator

Your next question comes from the line of Jeff Dietert from Simmons. Please proceed.

Jeff Dietert – Simmons & Company

Good morning.

Jeff Stevens

Good morning, Jeff.

Jeff Dietert – Simmons & Company

Can you talk a little bit about Yorktown and your plan for operations in the fourth quarter, are you taking through-put back to normal rates, or is that going to run in at a little lower rate?

Jeff Stevens

Jeff, I assume you are talking about the first quarter of 2010?

Jeff Dietert – Simmons & Company

Yes, 1Q ’10.

Jeff Stevens

What we look at, Jeff, is as you know, we make a plan for the month and then we look at what the right rate is and the right balances of crude. As you’ve probably seen with the breadth widening now we have actually reduced some of the heavy crude to take advantage of the more cost effective sweeter crudes – we continue with that facility to look at it weekly and try to make changes. So, to answer your question, we are running really to the rate that’s the most profitable to that facility.

Jeff Dietert – Simmons & Company

And I guess that’s a meaningful improvement quarter-on-quarter with some of the maintenance out of the way, any more clarification you can make I guess two-thirds of the quarter are behind this at this point?

Jeff Stevens

I think we’ve said that if you look at the fourth quarter really October, November, it’s very poor margins the whole industry gets. We saw a slight improvement in December. We continue to see slight improvements, but as I said on the call that the light-heavy spreads are still far below where we would normally expect them to be and it’s impacting that facility.

Jeff Dietert – Simmons & Company

Could you talk about the bottom of the mineral products that your (inaudible) what the major products are and how that pricing behaved in 4Q compared to 1Q to date?

Jeff Stevens

Well, you are looking at petroleum focus really that’s the main driver of the bottom and what we saw in late 2009 or mid 2009 we saw significantly drop in those values. Now we started to see somewhat of a return in those values, but I would tell you they are still below what we experienced in 2008, but we are seeing every month a gradual improvement in the overall pricing on that coast.

Jeff Dietert – Simmons & Company

Thanks for your comments.

Jeff Stevens

Thank you, Jeff.

Operator

Your next question comes from the line of Vance Shaw from Credit Suisse. Please proceed.

Vance Shaw – Credit Suisse

Yes, good morning, guys. Good morning.

Jeff Stevens

Good morning.

Vance Shaw – Credit Suisse

Couple of questions, going back to your cost savings, I got that you have $25 million annualized savings on the combination of your New Mexico operations consolidation. That’s great. Now it sounded like there was another $25 million project as well?

Jeff Stevens

Yeah, we started to implement that in late Q4, and it's a combination of a variety of different initiatives that we have taken through salaries and staff reductions and benefit reductions, and I think we will see the full 25, we saw a little bit in Q4 in 2009 but I believe we’ll achieve the $25 million in the full year of 2010. So it's a total of $50 million annually in savings between those two initiatives.

Vance Shaw – Credit Suisse

Well, that’s good to hear. On liquidity it looked like your liquidity improved from the end of Q3 to Q4 by about – I think it's about $10 million or so. I guess that’s probably due to working capital issues, I think you had less throughput in the like, is that right, how did you guys managed to with negative EBITDA improve your liquidity situations, it's very hard?

Jeff Stevens

Yeah, I’ll have Jeff Beyersdorfer answer that question.

Jeff Beyersdorfer

Yeah, sure. With crude prices going up, our borrowing base actually increased a fair bit that resulted in the bulk of the increased liquidity from Q3 to Q4.

Vance Shaw – Credit Suisse

I got you, but your cash amount went up too, I think from $100 million?

Jeff Beyersdorfer

Cash went from around $65 million at the end of Q3 to about 75 at the end of the year.

Vance Shaw – Credit Suisse

Okay. And how did you guys managed to do that with the negative EBIDTA, I assume it came from working capital, your working capital now was lower by about $5 million from quarter-to-quarter?

Jeff Beyersdorfer

Yes, between working capital and some of the cost reductions we were able to maintain cash balances.

Vance Shaw – Credit Suisse

That’s great. And did you guys come out and tell us what your actual cash and liquidity situation is of today or more recent number than…?

Jeff Beyersdorfer

Today we are about $225 million of liquidity between the cash on balance sheet and availability under the credit facility.

Vance Shaw – Credit Suisse

Right, so that’s good because you are at 210 right at yearend?

Jeff Beyersdorfer

No, total availability was in excess of 350 at the end of the year.

Vance Shaw – Credit Suisse

Okay. So I heard on the call that there was 74.9 million in cash at yearend and total liquidity of 210, is that right or is it…?

Gary Dalke

The 210 was, as of a couple of days ago, we were trying to provide an updated number from the end of the year. And, yeah, basically I think what I said was as of today, but that was really as of a couple of days ago.

Vance Shaw – Credit Suisse

I got you. Have you guys filed your K, I don’t know?

Gary Dalke

No, it will be filed probably Wednesday of next week, Wednesday or Thursday of next week.

Vance Shaw – Credit Suisse

Okay, I got you, good. So I’ll wait for the balance sheet detail at that point. If I can just one more question then, just want to ask you guys, you talked a little bit about this in the call and I think in the first questioner sort of asked about sort of the tone of business in the West Coast with El Paso, I know your El Paso plant tends to see the Phoenix area and points westward at certain times and at other times sort of wheels perhaps to the east a little bit more. Can you just talk about current business conditions and supply-demand for various end products and how that’s working out for your El Paso plant and also for the Four Corners plant?

Jeff Stevens

Yes. I would characterize the first quarter and the kind of the current conditions as pretty good. I would say gasoline demand remains good. Diesel demand is still a little soft as I’ve characterized, but certainly in the markets that we serve in the Southwest between these two plants, the margin environment is much better than the rest of the country.

Vance Shaw – Credit Suisse

Got you. I am sorry, but if I can just throw in one more question which everybody is asking what’s your view on supply demand for refining on the East Coast? Obviously we have had some pretty well known companies shut down, large refineries on the East Coast, are we are going to see more of that or do you think the market sort of coming into balance and you are going to see a little bit better demand or less imports into the country or whatever that will sort of make the economics better without more shutdown, so do you see more shutdowns in the East Coast or not, I guess?

Jeff Stevens

Well, I can’t comment specifically about other companies, but the East Coast remains a challenge and it’s a well supplied market. It has improved from the fourth quarter, it continues to improve. So, I think we are just now seeing the effects of the other facilities that have shut down in covenants [ph] and we will see if it doesn’t continue to improve.

Vance Shaw – Credit Suisse

Okay. Thanks very much.

Jeff Stevens

Thank you.

Operator

Your next question comes from the line of Gary Stromberg from Barclays Capital. Please proceed.

Gary Stromberg – Barclays Capital

Hi, good morning, guys.

Jeff Stevens

Good morning, Gary.

Gary Stromberg – Barclays Capital

On the inventory front, can you just talk about – it looks like you reduced inventory a little bit in the quarter, talk about where you stand at the end of the quarter and do you see a need to rebuild that in 2010?

Jeff Stevens

No, I think we are…

Gary Dalke

Our goal right now in this type of market with volatility and the prices the way they are moving on, Gary our goal is to keep inventories that we would consider kind of minimum levels, and I characterize we will end up that way at the end of the – that’s our goals is to end up that way in the first quarter. So, we have turnaround in Q1 in El Paso, where we had half the plant shut down. So we are little bit out of whack on some feedstocks, but we expect to be working those down and be closer to where we want to be at the end of the quarter.

Gary Stromberg – Barclays Capital

Okay. And then just a drill down on the liquidity in either 210 million number or the 225 whichever you guys feel better about, can you just break that out between cash and revolver borrowings?

Jeff Stevens

Yes, Jeff can you answer that for him?

Jeff Beyersdorfer

Yes, at the end of the year again our borrowing base was around $660 million worth revolver borrowings around at 50 million and the LC outstandings were around $303 million. We have got little bit of timing issue with the decrease in liquidity between the end of the year and currently what with the El Paso turnaround where we built some inventory, and so we’ve got although less liquidity but that should reverse itself as we go into the spring.

Gary Stromberg – Barclays Capital

What is the current borrowing base NLCs and revolver drawn?

Gary Dalke

Yeah, the current availability we have is around 225 million, as I said.

Gary Stromberg – Barclays Capital

That’s with cash?

Gary Dalke

That’s with cash

Gary Stromberg – Barclays Capital

Okay. And will you disclose what’s drawn on the revolver currently in the 10-K when you file that next week?

Gary Dalke

Yes, we will.

Gary Stromberg – Barclays Capital

And the last question is just on the first quarter covenant, minimum $5 million EBITDA I think, were January and February positive on an EBITDA basis, is that tracking that way?

Gary Dalke

Well, we certainly haven’t closed out February but we believe that we’re tracking, that we’ll stay within our first quarter covenant.

Gary Stromberg – Barclays Capital

Okay, that’s great. Thank you, guys.

Gary Dalke

Thank you.

Operator

Your next question is a follow-up from the line of Ben Hur from Morgan Stanley. Please proceed.

Ben Hur – Morgan Stanley

A follow-up question, we talked El Paso and we started talking about you start to see improved margins out at the Phoenix market compared to Gulf Coast, do you have any type of update, are you looking at pipeline assets like Longhorn, do you see anything going on with that since these margins are getting better, do you think Houston, Texas City refineries are going to try to start pushing more product down that line?

Jeff Stevens

As you know these markets are pretty volatile, and anytime you’re transporting product, that kind of distance and timing and things can change. What we’ve seen out of Longhorn really isn’t a change from what we’ve seen in the last couple of years. We just feel like it’s just another competitor, and we haven’t seen any change or any market competition as far as our existing customers, and just like always feel good about our position, but no we haven’t seen significant volumes coming from that line.

Ben Hur – Morgan Stanley

Is there any – like there is rumors out there that they are trying to reduce their tolling and fare fees on that as well, I don’t know if you follow that as well, I mean, can you address that?

Jeff Stevens

Well, I mean, obviously if we felt the competition changing, we would certainly feel that from our existing customers, and we are just not seeing it in the environment today.

Ben Hur – Morgan Stanley

Okay, great. Thanks.

Jeff Stevens

Thank you.

Operator

Your next question comes from the line of Kelly Krenger from Banc of America. Please proceed.

Kelly Krenger – Banc of America

Good morning. Just couple of questions. One on operating cost for the fourth quarter, it seem like particularly at El Paso that the operating costs were lower, I guess, than what we had in the model and presumably in your guidance. In the fourth quarter I was going to see if there was any unusual items in there that help those?

Gary Dalke

I think we had a property tax we ended up in the fourth quarter, and then of course we had reductions in contract account reduction and such in discretionary and maintenance.

Kelly Krenger – Banc of America

Did you – if I remember correctly, is there a property tax rebate in the third quarter also?

Jeff Stevens

No, I don’t think that there was.

Gary Dalke

No.

Kelly Krenger – Banc of America

Okay. How much was that in the fourth quarter?

Gary Dalke

It was around $6 million.

Kelly Krenger – Banc of America

Okay. And then on your turnaround schedule for 2010, can you remind us or tell us about it?

Mark Smith

Sure, this is Mark Smith. We did a south side turnaround at El Paso that was completed a couple of weeks ago and the other turnaround that we have in the schedule is for Yorktown in the fall on the crude and coke and we are kind of in the middle of assessing that turnaround. So looking potentially to stretch that out. That’s it for the balance of 2010.

Kelly Krenger – Banc of America

What you currently have budgeted for the Yorktown turnaround right now, in terms of dollars?

Mark Smith

It’s approximately $20 million.

Kelly Krenger – Banc of America

Okay, and could you, sounds like you are looking at it from a standpoint of pushing it out, can you – how – how long, I guess conceptually or realistically could you push that out do you think?

Gary Dalke

We are looking potentially pushing it to a spring of ‘11.

Kelly Krenger – Banc of America

Okay.

Gary Dalke

And potentially reducing the scope significantly.

Kelly Krenger – Banc of America

Okay. Thank you.

Jeff Steven

Thanks, Kelly.

Operator

There are no questions at this time. Ladies and gentleman, that concludes the Q&A portion of today’s conference. I would now like to turn the call over to Mr. Stevens for closing remarks. Please proceed.

Jeff Stevens

Yes, in closing I would like to thank our employees for their hard work and dedication. Although the market place is challenging, our employees remain focused on business improvement, operational reliability and safety. And again, I thank all of you for your continued interest in Western Refining. We look forward to talking to you at the end of the next quarter. Thank you.

Operator

Ladies and gentlemen, that concludes today’s conference. Thank you for your participation. You may now disconnect. Have a great day.

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Source: Western Refining, Inc. Q4 2009 Earnings Call Transcript
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