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Western Refining Inc. (NYSE:WNR)

Q1 FY08 Earnings Call

May 13, 2008, 10:00 AM ET

Executives

Mark B. Cox - Sr. VP, Treasurer and Director of IR

Paul L. Foster - President and CEO

Jeff A. Stevens - EVP

Gary R. Dalke - CFO

Mark J. Smith - EVP - Refining

Analysts

Paul Sankey - Deutsche Bank Securities

Jeff Dietert - Simmons & Company International

Ann Kohler - Caris & Company

Operator

Good day ladies and gentlemen and welcome to the First Quarter 2008 Western Refining Earnings Conference Call. My name is Akea and I'll be your operator for today. At this time all participants are in a listen-only mode. We will conduct a question and answer towards the end of the conference. [Operator Instructions].

I would now like to turn the presentation over to your host for today's call Mr. Mark Cox, Treasurer and Director of Investor Relations. Please proceed Sir.

Mark B. Cox - Senior Vice President, Treasurer and Director of Investor Relations

Thank you Akea. Good morning everyone. I would like to thank you for listening in today and for your continued interests in Western Refining. Again, my name is Mark Cox, I'm the company's Treasurer and Director of Investor Relations. Today, we will be discussing our first quarter 2008 financial and operating results, the details of the results were published yesterday, May 12th.

Joining me for today's call are Paul Foster, our CEO; Gary Dalke, our CFO; Jeff Stevens, our COO; Mark Smith, our Executive Vice President Refining and other members of our senior management team. If you need a copy of the earnings release, you may obtain one from the Investor Relation section of our website at www.wnr.com.

I would like to remind everyone that many of the statements made during the course of this conference call may include forward-looking statements concerning management's current expectations. These statements are covered by the Safe Harbor provisions of the Securities and Exchange Act of 1934. I refer you to the forward-looking statements and risk factors sections of the company's reports that are filed periodically with the Securities and Exchange Commissions including our Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

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, and on our Investor Relations website.

At this time I would like to turn the call over to Paul.

Paul L. Foster - President and Chief Executive Officer

Thank you Mark. I'll begin today's call with the discussion of the current industry environment and how we at Western are being affected by the market trends. I'll also discuss our first quarter results and the actions we are taking to improve Western's operations and help offset these market trends. We will then open the call to questions.

As you know the refining market remains very challenging, in environments like this there are issues that lie outside of our control and Western is not been immune to these. Our financial performance in the first quarter of 2008 was adversely impacted by record crude prices throughout the quarter. While throughput at the Four Corners and Yorktown refineries continued to improve during the quarter. The benefit of this increase was more than offset by rising crude oil prices. This increase in feedstock cost coupled with softness in finished product prices, particularly in gasoline and lower valued products such as asphalt, fuel oil and petroleum coke, resulted in lower refining margins, compared to the same period last year.

Western's refinery throughput barrel was $5.60 for the quarter, compared to $12.43 for the same period in 2007. As we continue to manage through challenging market conditions, we are focused on the successful execution of our operational improvement initiatives. During the first quarter we made significant progress on these initiatives which led to improve performance at our refineries. Here in the first quarter alone, we achieved two very significant milestones. First, we executed the successful startup of the low sulfur gasoline unit in our Yorktown refinery. With this unit, we now have the ability to produce a low sulfur gasoline grades which we expect will result in financial benefits.

In particular, we expect this production capability will enable us to realize higher product revenues and lower transportation cost in the second quarter, through additional sales in the local markets near the Yorktown refinery. Furthermore, because the unit is oversized, we believe we will have the opportunity to purchase external high sulfur gasoline stocks which can be upgraded to higher value, low sulfur gasoline. The new unit also enables this increase throughput of heavier and cost advantaged crude at Yorktown. We expect this project to begin contributing approximately $2 million to $2.5 million per month of increased earnings in the second quarter of 2008.

Second the DuPont SAR project has been completed at the El Paso refinery. We begin processing acid gas at El Paso on the first quarter of 2008. This was followed by steady increase in our sour crude runs from approximately 10% to the current level of more than 20% of throughput at the refinery.

I am pleased to say there our progress to date puts us on track with the implementation of our previously announced operational enhancements and financial improvement initiatives. We are preceding on schedule with our plan initiatives for the remainder of 2008.

In particular, we will continue to work on the low sulfur gasoline project at the El Paso refinery and we expect to complete this project in the second quarter of 2009. Apart completion of this project, we will have the ability to raise sour crude runs up to 50% of crude oil throughput at the refinery. We will also continue work on a number of operational initiatives in all four of our refineries targeted at reducing processing cost and improving energy efficiency.

As a result of the operational improvement initiatives, we implemented both in 2007 and through the first quarter of 2008, our throughput levels continue to improve at Four Corners and Yorktown refineries, as I mentioned earlier.

The Yorktown refineries currently operating at approximately 67,000 barrels per day of throughput, which is an increase of approximately 6,000 barrels per day, or 9% above historical rates. We've also improved operations at the Four Corners refineries, as we are currently achieving crude oil throughput in excess of 36,000 barrels per day. For the first quarter, our total refinery throughput was 231,233 barrels per day which included 209,902 barrels per day of crude oil.

Now, let's take a look at our balance sheet. As of March 31st, we were in compliance with all financial covenants and we are evaluating a number of options, so that we can be in compliance in future quarters given the uncertainty of escalating crude oil prices and the overall market volatility. As most of you know, on April 14th we filed a shelf registration and our intent was to maintain for natural flexibility. In making the filings, we are taking a prudent step to ensure that we have options available to us. We are currently considering rising additional funds through public or private equity or debt financings in order to increase our cash balances, and or to reduce or refinance a portion of our existing debt.

We've also been pleased with the support we have received from our lenders and we expect this to continue in the future. In February, our bank group increased the borrowing capacity of our revolving credit line from $500 million to $800 million which demonstrates their confidence in Western and in our management team.

Enhancing the financial flexibility of the company is a priority for us, and given the options available and a support of our lenders, we are confident that we will continue to successfully to execute on this priority as we have on others.

Looking ahead, we begun to see some improvement in gasoline margins as result of inventory draws and continued low refinery utilization rates, as we begin the spring and summer driving seasons. Distillate margins also continue to be very strong despite pressure from high crude oil cost.

With regard to our guidance for the second quarter of 2008, we expect crude throughput and at our four refineries to be approximately 222,000 barrels per day. We expect total refinery throughput to be approximately 242,000 barrels per day. We expect operating cost to be approximately 375 per barrel at the El Paso refinery, 730 per barrel at Four Corners refinery and approximately 475 per barrel at the Yorktown refinery.

We expect SG&A expenses to be approximately $25 million, and we expect about $20 million of interest expense and $27 million of depreciation and amortization. Our tax rate will be approximately 34%. We believe that capital expenditures for the remainder of '08 will be approximately $126 million for a total of $197 million for the full year of '08. Just a little bit of portion of this spending will be for the low sulfur gasoline unit in El Paso.

In closing, I'd like to thank our employees throughout the company for their hard work and their dedication to safety. We have number of projects underway at all of our refineries and safe, reliable operations along with environmental stewardship continue to be our top priorities.

I thank you again for listening, and will now open the call for questions. Akea, we are now ready for questions.

Question And Answer

Operator

[Operator Instructions]. Your first question is from the line of Paul Sankey of Deutsche Bank. Please proceed.

Paul Sankey - Deutsche Bank Securities

Hi, good morning gentlemen.

Paul L. Foster - President and Chief Executive Officer

Good morning

Paul Sankey - Deutsche Bank Securities

Paul, you mentioned in your notes and you said that you're pleased that you got the support from your lenders, was that a preemptive support if you were to miss covenants in Q2, or is there going to have to be further negotiation on the potential for covenants to be missed in this quarter?

Paul L. Foster - President and Chief Executive Officer

Well, we can't really speculate as to how we are going to come out for the quarter Paul, but the way that our prolonged [ph] covenants and our debt covenants work is it's a quarterly test at the end of each quarter. And we are looking at a number of different alternatives and options to make sure that that we continue to be in compliance with everything and that we're well positioned for the future.

Paul Sankey - Deutsche Bank Securities

But I guess it's going to be quite clear to you relatively early this quarter, whether or not you going to make it given the roll off of this very strong 2Q of last year and towards so much weaker environment, would it be assumed that you are going to act preemptively before the end of the quarter, if need be?

Paul L. Foster - President and Chief Executive Officer

Well, I don't know if I would word it that way but yes, you can assume that we're taking steps to do everything we need to do to make sure that, that we don't have any issues

Paul Sankey - Deutsche Bank Securities

Okay, and if you could just briefly outline your relative preference. I mean you've mentioned in the Q quite clearly the potential either for more borrowing, or I guess equity, or perhaps even you guess the White Nile, I just wondered if you could to the extent and I understand that it is difficult to answer these questions, but to the extent you could, if you could just go through those options, how you see them, thanks?

Paul L. Foster - President and Chief Executive Officer

Yes, our focus really Paul is on reaching a solution that enhances our overall flexibility for the long term and we're not just looking at the short term and so we're looking at a number of different alternatives and trying to look at what the best structure and the best position is for us to be long term as we move forward.

Paul Sankey - Deutsche Bank Securities

But, I guess your commentary indicates that you are pretty confident that you are going to come through this as Western Refining and the fact that you have... you are talking about long term suggest that you can pull this one off?

Paul L. Foster - President and Chief Executive Officer

Yes, I mean we don't have a specific timeline but, we are comfortable with the position we are in and we will continue to steer the company in a direction that's in the best interest of shareholders.

Paul Sankey - Deutsche Bank Securities

Okay, I will better let other people have a guess. Thanks Paul.

Paul L. Foster - President and Chief Executive Officer

Thank you.

Operator

And your next question is from the line of Jeff Dietert of Simmons. Please proceed.

Jeff Dietert - Simmons & Company International

Good morning, congratulations on your sulfur programs at Yorktown and at El Paso.

Paul L. Foster - President and Chief Executive Officer

Thank you.

Jeff Dietert - Simmons & Company International

When we look at the outlook for the second quarter, we get kind of trailing with our projected second quarter EBITDA trailing... four quarter EBITDA of $180 million, $190 million over the trailing 12 month period which would put your total debt to EBITDA in seven times range, clearly above the four times in your covenant requirement. It seems like there would be an immediate need or something within this quarter to balance that and then probably a second phase where potentially cutting CapEx or cutting operating expenses, selling assets maybe option so, is there not options that you mentioned at least in the part of the key that I focused on. Could you talk about how you are thinking about that is it, is it a two phase, or is it something that you expect to do in one phase [ph]?

Paul L. Foster - President and Chief Executive Officer

I think it's you know, first part I am not going to speculate on where we going to come out in the second quarter. But we are evaluating a number of different opportunities and we do have a number of opportunities available to us. And I don't know whether it's one solution or a number of different things, but my guess is it will be a very comprehensive package of number of different options that are available to us.

Jeff Dietert - Simmons & Company International

And you are committed to the capital plan the 197 is consistent in with what you talked about previously. There has been no creep in that number despite the lot of creeping across some of the industry, but you have shown confidence in the level of CapEx and I assume that includes the same progress on the projects the way you have discussed it previously, am I interpreting that correctly?

Paul L. Foster - President and Chief Executive Officer

You are, we have not seen a lot of creeping in these numbers. Most of this is regulatory in nature and so there is not a lot of flexibility. We obviously spend a lot of time, not just this quarter, but every quarter, making sure that we are being diligent in our efforts and prudent. We are looking at every project that's on the book, to make sure that it's this is what we need to be doing, but we are still confident that this is the proper CapEx schedule.

Jeff Dietert - Simmons & Company International

Alright, you mentioned that you had expanded your revolver in February from 500 to 800 a lot of the challenges in the industry were evident at that time is the, your understanding that you will be able to draw up to 800 on the revolver, if need be given the agreement just occurred in February?

Paul L. Foster - President and Chief Executive Officer

Yes, yes that entire 800 is available to us.

Jeff Dietert - Simmons & Company International

Very good, thanks for your comment.

Paul L. Foster - President and Chief Executive Officer

Thank you.

Operator

[Operator Instructions]. And your next question comes from the line of Ann Kohler of Caris. Please proceed.

Ann Kohler - Caris & Company

Yes, good morning. I like to follow up on I think the Jeff, alluded to. You know, certainly in February you did increase the size of the revolver obviously cognizant of the increase in the price of crude oil and the difficulties that the industry was facing. Certainly the fourth quarter was not and an outstanding quarter for you either. I'd just like a little bit of understanding, I mean certainly at the moment your stock here is down 15%, kind of, if you could walk us through, I mean certainly there has been other companies that have been at the same point that you are that unfortunately had a severe market, negative market reaction as they were getting close to breaching their debt covenants. Could you sort of walk us through your thought process in certainly you filed the S1, and you increased your covenants, but yet it seems as though you haven't gone the rest of the way to address that issue. What have been your views regarding the industry certainly you've had many of your peers come out and recognize that the industry has, is severely profitability is severely hampered, most recently Tuso indicated that they were, severely cutting back on their capital spending and looking to cut cost. If you could walk us through sort of management's thought process on how you look at the industry and how you've approached your financials over the last quarter? I would appreciate that.

Unidentified Company Representative

Okay. First of all in terms of cost cutting. I don't really have a lot of specifics for you, but I can tell you that we're looking at every dollar that we spend. And I think we're being as prudent with our dollars and with our capital as we can possibly be. In terms of CapEx, as I stated most of our spending is regulatory in nature, there is very little discretionary capital being spent obviously, any thing related to safety and environmental is at the top of our list, in terms of priorities. In terms of timing there we spent a lot of time looking at pushing things here and there just to make sure that the cash flow works for us. I can't remember really the rest of...

Ann Kohler - Caris & Company

I am basically looking to have an understanding of management's thought process as you've looked at the industry and sort of how you view the industry and obviously you view the industry negatively or the implications for crude oil prices negatively in December and January to go ahead with your banks and have your credit facility up to $800 million. I would also assume that, you viewed that the conditions for the industry continue to be challenging when you filed the shelf in April. So here we sit in March, but I mean, I am sorry in May, and sort of what is your thought processes and I guess, given that it's been a challenging environment for, a good six months. Yes, we sit here, your stock is down to 16%. I would have all said [ph] management given, what is going on with the industry and previous experiences by other companies would have recognized that you were going to be in a position. So, could you just walk me through, why we haven't... why we are further align in with additional debt covenants or rising equity or selling assets to prevent the point that we were at?

Paul L. Foster - President and Chief Executive Officer

Okay. Well, first of all in terms of the industry trends, obviously even in February, when crude was $100 we didn't necessarily know that it was going to be in $125 in May. The trend if it... if you believe some of the predictions that crude oil is going to go to $150 or $200. We feel like that we need to position ourselves to weather the store and that's a lot of what we are trying to do. We're sitting down, we're looking at all the different alternatives available to us and we are not trying to find a band aid here, we are not trying to do a short term fix. We are trying to come up with the best strategy for very long term solution and I believe that we will do that as... in terms of the timing. I am confident that we will put something together for this and we are comfortable with that timeframe. We do expect to have decisions made shortly, but I don't have a specific time line for you.

Ann Kohler - Caris & Company

Alright, thank you.

Paul L. Foster - President and Chief Executive Officer

Thank you.

Operator

And your next question is from the line of Paul Sankey of Deutsche Bank.

Paul Sankey - Deutsche Bank Securities

In terms of the shortly, you have mentioned that your use the of the revolver tends have increased towards the 20th of the month I guess, you quite clearly outlined that that's going to be, I guess the same day this month in terms of how tight things get.

Paul L. Foster - President and Chief Executive Officer

The way that we pay for crude oil at both El-Paso and at the Four Corners is typically we pay for the crude for the prior month on the 20th of the current month and so, our typical cash cycle and revolver usage tends to go up and down around that that 20th May.

Paul Sankey - Deutsche Bank Securities

Right, so I guess if we hit the 20th can be considered to be the moments of most tightness in any given month.

Paul L. Foster - President and Chief Executive Officer

Yes, I think that's fair to say.

Paul Sankey - Deutsche Bank Securities

The... just one more from me. The force majeure with Statoil, what are the... I mean you've given guidance here for the... to your throughput obviously, but what are the physical implications of that legal problem. I guess you've got a legal dispute, you've got with Statoil, could you just run us through the extent you can on what's going on there? Thanks.

Paul L. Foster - President and Chief Executive Officer

The physical implications you're talking about with respect to the refinery itself that...

Paul Sankey - Deutsche Bank Securities

Yes, but my understanding from the Q is that you declared force majeure on what is a contract to buy crude from Statoil and that's become a legal dispute?

Paul L. Foster - President and Chief Executive Officer

Right,the reason that we declared force majeure is because the crude oil that we were processing, we felt after doing a very significant inspection at the refinery it was damaging our refinery and we thought that it was not only prudent, but absolutely required for us to virtually stop running that crude oil. Since that time, we have started running a lower acid crude oil and we feel like that we did catch it in time. We feel like that by declaring force majeure and stopping those deliveries that we mitigated, the damage and our next turnaround is due late this year, late 2009, and so that's when we will actually open up the unit and see inside, but we feel pretty good about it right now.

Paul Sankey - Deutsche Bank Securities

Got you Paul. Now in terms of the, quite a few the risks that you stated to do with the integration of Giant. Does that imply that in terms of the options you've got in front of you, you... are you keen to keep this asset base together, or would you be considering individual refineries sales. For example, as to the potential we are getting through this.

Paul L. Foster - President and Chief Executive Officer

Paul, first of all, I want to say that we are happy with the assets that we acquired, we like them, we think that we have made a lot of progress and achieved most of our objectives in getting them up to our standards and in operating them efficiently. But that being said, as I said before, we are looking at every option available to us and honestly, you know, we are going to put together strategy that's best for the company overall, and I don't think anything is off the table. That does mean that anything is for sale or either, it just means that we are looking at every alternative.

Paul Sankey - Deutsche Bank Securities

But I guess ultimately, Paul what you said is that we should expect this solution and use flow relatively quickly, I mean within the matter of weeks I guess in terms how we are going to work this through?

Paul L. Foster - President and Chief Executive Officer

I believe so, yes.

Unidentified Analyst

Thank you, Paul.

Operator

Your next question is a follow up from the line of Jeff Dietert of Simmons. Please proceed.

Jeff Dietert - Simmons & Company International

Yes, it looks like you are going to get some feedstock benefit both at Yorktown and at El Paso, can you talk through the changes in feedstock first quarter '08 to second quarter of '08 for both those two facilities?

Jeff A. Stevens - Executive Vice President

Yes, Jeff, this is Jeff Stevens. In El Paso, we have increased our sour capabilities and we've been running as much as 25,000 barrels a day, where historically, we had been running about 12,000 or 13,000 barrels a day. Once we get the low sulfur gasoline project up and running in early Q2 of '09, we believe we will able to ramp that up in excess of 50,000 barrels a day. As far as Yorktown, we've been able to process more of the sour crudes up there and have backed out some of the lights suite crudes, the more expensive crudes, so we are definitely benefiting with the, with the low sulfur gas project that's come on board there.

Jeff Dietert - Simmons & Company International

And did that... what when did the low sulfur gasoline unit come on at Yorktown, what was the day roughly?

Jeff A. Stevens - Executive Vice President

Yes, it was at the end of March.

Jeff Dietert - Simmons & Company International

End of March, okay so that's pretty much appeared 2Q benefit.

Jeff A. Stevens - Executive Vice President

Correct.

Paul L. Foster - President and Chief Executive Officer

And in addition to that Jeff we also, it's an oversized unit, and so we think we are in a position to start trying to purchase some high sulfur feedstocks, high sulfur gasoline from other refineries, and actually process more than just from our crude production.

Jeff Dietert - Simmons & Company International

Very good and that's included in your 242 at of total throughput guidance for second quarter?

Paul L. Foster - President and Chief Executive Officer

It has, we don't have much of that in there, but yes.

Jeff Dietert - Simmons & Company International

Okay, all right, thank you.

Operator

Your next question is from the line of Mark Rossnagel [ph] of William [ph] Investment Management. Please proceed.

Unidentified Analyst

Yes two questions. You gave some guidance in terms of your expense structure at today's crack spreads, are you profitable or unprofitable on a net income basis, let's say where they are today? And the second question is in Q2 and Q3, what's your expected proportion, or production of products? Do you have any flexibility to shift production from gasoline into distillates, which have had better crack spreads?

Paul L. Foster - President and Chief Executive Officer

In terms of profitability, we don't report mostly earnings I can tell you that in the month of April, we were profitable. We haven't actually finished closing the month of April, but the trend is good. March was better than February and April was better than March and I believe May is going to be better than April. So, from that standpoint I think the trend is what we want to see. In terms of proportional production there are few things that we can do to shift from gasoline to distillate and we do that everyday. We sit down and we look at models and we... it all goes into what type of crude we run and how severely we run the various units. But there are in a huge amount of flexibility, if we could wave a magic wand and switch 40% of our gasoline for diesel right now, we'd probably do it, but that's not an option that's available to us.

Unidentified Analyst

Just to be clear, I am asking profitability on a net income basis, after interest expense and everything?

Paul L. Foster - President and Chief Executive Officer

Yes, that's what I was responding to.

Unidentified Analyst

Thank you.

Operator

Your next question is from the line of Edward [indiscernible]. Please proceed.

Paul L. Foster - President and Chief Executive Officer

Good morning Edward. Akea I am afraid we lost him.

Unidentified Analyst

Hi can you hear me?

Paul L. Foster - President and Chief Executive Officer

Yes, now I can.

Unidentified Analyst

My first question was a follow up to the prior question. What percent of your total kind finished product inventory did you guys put out is diesel right now?

Paul L. Foster - President and Chief Executive Officer

In Yorktown, we make about 50% diesel, at El Paso we approached 50% diesel and in the Four Corners were closer to 30%, 35%.

Unidentified Analyst

30% percent of your total volume that you produced?

Paul L. Foster - President and Chief Executive Officer

Yes.

Unidentified Analyst

Okay. Thank you. Second question would be, out of the total throughput that you forecast for Q2 of 242,000 barrels per day, what percentage from sour crude?

Paul L. Foster - President and Chief Executive Officer

Our sour crude once in El Paso for Q2 are going to be about 24,000 to 25,000 barrels per day.

Unidentified Analyst

So, that's a little...

Paul L. Foster - President and Chief Executive Officer

It's round about 25%

Unidentified Company Representative

Yes, and Yorktown is about 65% to 68% and in the Four Corners we don't process any sour crude.

Unidentified Analyst

So, just to make... so you would be clear 20%, 25% out of total throughput in El Paso that's basically sour crude and then 60% to 65% in Yorktown.

Unidentified Company Representative

Right.

Paul L. Foster - President and Chief Executive Officer

Right.

Unidentified Analyst

That comes from sour crude.

Paul L. Foster - President and Chief Executive Officer

That's correct.

Unidentified Analyst

Okay. And last question, kind of just housekeeping, did you guys have any shutdowns from Q1?

Paul L. Foster - President and Chief Executive Officer

We had a reform or regeneration in the Gallup refinery that will straddle at the end of Q1 and the beginning of Q2.

Unidentified Analyst

Okay.

Paul L. Foster - President and Chief Executive Officer

We also had a cat cracker, an unplanned cat cracker average at Gallup that was about eight days in February.

Unidentified Analyst

Okay, thanks for that. That is all.

Paul L. Foster - President and Chief Executive Officer

Okay thank you.

Operator

Your next question is from the line of Ann Kohler of Caris. Please proceed.

Ann Kohler - Caris & Company

Great, yes just a follow up on that question. So basically for the lower crude throughput, is that basically as a result of for the second quarter, is that the result of the continuation of reform regeneration into the second quarter?

Paul L. Foster - President and Chief Executive Officer

Yes, are you talking about the crude throughput, versus what our guidance was?

Ann Kohler - Caris & Company

No, this is a crude throughput, the guidance for this quarter versus the crude throughput for the first quarter.

Paul L. Foster - President and Chief Executive Officer

Crude throughput is up Ann in the second quarter relative to the first about 12,000 barrels a day.

Ann Kohler - Caris & Company

Okay, I am sorry, okay, great, thank you.

Operator

Please standby for your next question. Your next question is from the line of Rahul Agarwal [ph]. Please proceed, sir.

Unidentified Analyst

My question and I apologize, if it's been answered already. I just wanted to ask you what is the current availability on the revolver right now post the L.C.s outstanding and how much more do you need till the 20th of the month?

Paul L. Foster - President and Chief Executive Officer

I will ask Mark Cox to address that. I don't have the numbers at my fingertips.

Mark B. Cox - Senior Vice President, Treasurer and Director of Investor Relations

Yes, an our numbers of course, they move regularly especially on the Letter of Credit line, as Paul mentioned earlier as we're closer to 20th we sometimes see that number move up a little bit and then it will be reduced after the 20th. Today, we have no borrowings outstanding on the revolver. I think we disclosed in the queue that on the 9th we had $524 million of Letters of Credit and $15 million borrow that we since pay that borrowing off. So, we still have about the same LC number but no borrowings on the revolver. As far as what we need on the 20th, we don't have the specifics of that yet, we're working through crude cost and crude purchase in the month, but we're working towards that number looking at the 20th at this point.

Unidentified Analyst

Is there any chance that could exceed $800 million?

Mark B. Cox - Senior Vice President, Treasurer and Director of Investor Relations

I don't think I'm in position to answer that for you at this point, because I still don't know what the final crude cost would be for the months going to be.

Unidentified Analyst

Okay, thank you.

Mark B. Cox - Senior Vice President, Treasurer and Director of Investor Relations

Thank you.

Operator

Your next question is from the line of Tony Suisse [ph] of Wachovia Securities. Please proceed.

Unidentified Analyst

Thank you. Two questions gentlemen, you had a...you indicated a $40 million cash or cash equivalent on your unaudited March 31 financials. What is that position today? Second question if oil were to go to $135 a barrel, what does it do to your refining capability and profitability?

Gary R. Dalke - Chief Financial Officer

Our cash balance as of today, this Gary Dalke, it is approximately $60 million. As Mark mentioned we are not drawn under revolver, if crude goes up I mean a lot of what we are trying to do is position ourselves in the event the crude goes up. So we have the flexibility to handle the needs on our financial side to handle crude at those higher levels.

Unidentified Analyst

okay, thank you.

Paul L. Foster - President and Chief Executive Officer

Thank you.

Operator

Your next question is from the line of Mark Reifel [ph] of Millennium Partners, please proceed?

Unidentified Analyst

Hi, good morning. Just a few clarification questions, The Yorktown price that just came on my mind, you guys are saying $2 million to $2.50 million a month, are those economic based on the current margin environment or just a sort of historical margins?

Paul L. Foster - President and Chief Executive Officer

No, really what that has to do with is we were limited on the amount of local gasoline we could sell because of it's specification and now we have that project going we're selling a considerable amount of our gasoline across our rack in the local Yorktown market in the surrounding area, we're in the past because we had small refinery gas, we were having to transport that to further distances and now that that's just basically a freight savings that we have and really it doesn't have anything to do with the margin environment.

Unidentified Analyst

Got you, and then a quick debt covenant follow up. Now you guys are saying that you had support from the lenders, on my calculation it's look like you guys actually would have reached this quarter if you hadn't pay down a revolver, was that sort of preemptive move your part or is it ... was it forced by your lenders, because I saw at year end your $290 million and then in first quarter, you paid it down to $53 million.

Paul L. Foster - President and Chief Executive Officer

Well I mean, the way the revolver works, we pay it down every week and we don't ever have borrowings outstanding when we have cash available just because we don't want to pay extra interest, but that revolver moves up and down everyday and there's... it is not been anything that I am aware of that the banks have asked us or forced us to do. It's just, it's purely in the normal course of our business.

Unidentified Analyst

Got you. Okay, great, thank you.

Operator

And your next question is from the line of [indiscernible] Capital. Please proceed.

Unidentified Analyst

On capital expenditures line item, you're projecting about $190 million for the year and as of Q1 you had about $70 million. So should we kind of expect that to taper off in the next three quarters? So your kind of total CapEx going to equal $190 million or do you expect to exceed that plan?

Paul L. Foster - President and Chief Executive Officer

The total I guess, Mark you're probably in better position to answer to that scenario.

Mark J. Smith - Executive Vice President - Refining

Right. Total that we project for the year is $197 million, our spending in Q1 was a little higher finishing up the project at Yorktown, and at the same time we were ramping up the spending on El Paso on our low sulfur gasoline projects and our projection for the balance of the year is $126 million and we we're comfortable with that forecast.

Unidentified Analyst

So, and is that kind of the original taking the $197 million, minus $71 million, gets you obviously to $126 million, that's obviously kind of original forecast. Now, you still expect to be within that range?

Mark J. Smith - Executive Vice President - Refining

Yes, that's our current forecast.

Unidentified Analyst

Okay.

Mark J. Smith - Executive Vice President - Refining

And we expect that to be relatively writable through the rest of the year.

Unidentified Analyst

Okay. Thank you.

Operator

And your last question is from the line of Andrew Brown [ph] of Corning [ph] Asset Management. Please proceed.

Unidentified Analyst

Thank you. I just have a quick follow up on the covenant question. Could you say where the ratios that you calculated are for the debt to EBITDA and interest coverage or at least debt at the end of March?

Unidentified Company Representative

Do you have that Gary?

Gary R. Dalke - Chief Financial Officer

Yes. I think all we can say at this time because we don't generally disclose that publicly, we were within the compliance on March 31st and that's probably that answer I can give you right now.

Unidentified Analyst

Okay, thank you very much.

Paul L. Foster - President and Chief Executive Officer

Thank you.

Operator

And there are no more questions at this time. I would now like to turn the call back over to management for closing remarks.

Mark B. Cox - Senior Vice President, Treasurer and Director of Investor Relations

Thank you Akea. I want to thank everybody for listening and again I want to thank all of our employees for their hard work and dedication and look forward to talking to you next quarter. Thank you.

Operator

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect and have a great day.

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Source: Western Refining, Inc. Q1 2008 Earnings Call Transcript
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