Full Description

Alon USA Energy, Inc. is an independent refiner and marketer of petroleum products operating primarily in the South Central, Southwestern and Western regions of the United States. The Company’s crude oil refineries are located in Texas, California, Oregon and Louisiana, and have a combined throughput capacity of approximately 250,000 barrels per day (bpd). Its refineries produce petroleum products, including various grades of gasoline, diesel fuel, jet fuel, petrochemicals, petrochemical feed stocks, asphalt and other petroleum-based products. The Company operates through three business segments: refining and unbranded marketing, asphalt, and retail and branded marketing.

Refining and Unbranded Marketing

The Company’s refining and unbranded marketing segment includes sour and heavy crude oil refineries that are located in Big Spring, Texas, and Paramount and Long Beach, California, and a light sweet crude oil refinery located in Krotz Springs, Louisiana. It refers to the Long Beach and Paramount refineries together as its California refineries. These refineries have a combined throughput capacity of approximately 240,000 bpd. At these refineries, the Company refines crude oil into petroleum products, including gasoline, diesel fuel, jet fuel, petrochemicals, petrochemical feed stocks and asphalts, which are marketed primarily in the South Central, Southwestern and Western United States.

Alon USA Energy, Inc.’s Big Spring refinery has a crude oil throughput capacity of 70,000 bpd and is located on 1,306 acres in the Permian Basin in West Texas. The Big Spring refinery is characterized as a cracking refinery, which generally refers to a refinery utilizing vacuum distillation and catalytic cracking processes in addition to basic distillation, naphtha reforming and hydrotreating processes, to produce higher light product yields through the conversion of heavier fuel oils into gasoline, light distillates and intermediate products. Major processing units at its Big Spring refinery include fluid catalytic cracking (FCC), naphtha reforming, vacuum distillation, hydrotreating and alkylation units. The Big Spring refinery has the capability to process substantial volumes of high-sulfur or sour crude oils to produce refined products. Typically, sour crude oil has accounted for approximately 90% of the Big Spring refinery’s crude oil input. The Company’s Big Spring refinery produces gasoline, ultra low-sulfur diesel, jet fuel, petrochemicals, petrochemical feed stocks, asphalt and other petroleum products. This refinery typically converts approximately 90% of its feedstock into finished products, such as gasoline, diesel, jet fuel and petrochemicals, with the remaining 10% primarily converted to asphalt and liquefied petroleum gas.

During the year ended December 31, 2008, gasoline accounted for approximately 38.4% of the Company’s Big Spring refinery’s production. It produces various grades of gasoline, ranging from 84 sub-octane regular unleaded to 93 octane premium unleaded, and uses a computerized component blending system to optimize gasoline blending. In 2008, diesel and jet fuel accounted for approximately 28.2% of its Big Spring refinery’s production. Asphalt accounted for approximately 13.1% of its Big Spring refinery’s production in 2008. The Company produces propane, propylene, certain aromatics, specialty solvents and benzene for use as petrochemical feed stocks, along with other by-products, such as sulfur and carbon black oil.

The Company’s refining and unbranded marketing segment sales include sales of refined products from its Big Spring refinery in both the wholesale rack and bulk markets. Its marketing of transportation fuels produced at its Big Spring refinery is focused on four states in the Southwestern and South Central regions of the United States through its physically integrated system. The Company markets transportation fuels produced at its Big Spring refinery in West and Central Texas, Oklahoma, New Mexico and Arizona. It sells a majority of the diesel fuel and approximately 16.7% of the gasoline produced at its Big Spring refinery on an unbranded basis. During 2008, the Company sold over 6,851 bpd of its Big Spring refinery’s diesel fuel and gasoline production as unbranded fuels, which were sold through its physically integrated system. An additional 4,000 bpd was sold on a purchase for resale basis. It markets substantially all the jet fuel produced at its Big Spring refinery as JP-8 grade to the Defense Energy Supply Center (DESC).

The Company’s Paramount refinery has a crude oil throughput capacity of 54,000 bpd and is located on 63 acres in Paramount, California. The Paramount refinery is characterized as a hydroskimming refinery. It refers to the Paramount and Long Beach refineries together as its California refineries. Its California refineries have the capability to process substantial volumes of sour crude oils. In 2008, at the California refineries, sour crude oil accounted for approximately 26.2% of crude oil input and heavy crude oil accounted for 73.8%. Asphalt is the only finished product produced at the Long Beach refinery. Its California refineries produce CARBOB gasoline, CARB diesel, jet fuel, asphalt and other petroleum products.

On July 3, 2008, the Company completed the acquisition of the refinery and related assets located in Krotz Springs, Louisiana, through the purchase of all of the capital stock of Valero Refining Company – Louisiana from Valero Energy Corporation (Valero). The Krotz Springs refinery, with a crude oil capacity of approximately 83,100 bpd, supplies multiple demand centers in the southeastern and northeastern United States markets through a pipeline operated by the Colonial Pipeline Company. The Company’s Krotz Springs refinery produces gasoline, high-sulfur diesel, jet fuel, kerosene, petrochemicals, petrochemical feeds tocks and other petroleum products. This refinery typically converts approximately 96% of its feedstock into finished products, such as gasoline, diesel, jet fuel and petrochemicals, with the remaining 4% primarily converted to liquefied petroleum gas.

Asphalt

The Company’s California, Big Spring and Oregon refineries have the capability to process heavy and sour crude oils. The asphalt segment markets asphalt products produced at its Big Spring and California refineries, and at its Willbridge, Oregon refinery. The Willbridge refinery is an asphalt topping refinery located on 42 acres in the industrial section of Portland and has a crude oil throughput capacity of 12,000 bpd. Alternatively, the asphalt terminal at Willbridge can be supplied with asphalt produced at the California refineries or purchased from third parties by marine vessel or by rail cars. Heavy crude oil is delivered to the Willbridge refinery through access to an adjacent dock leased by the Company from Chevron Corporation. The Willbridge refinery processes primarily heavy crude oil with approximately 70% of its production being asphalt products. The unfinished products produced by the Willbridge refinery include yields of approximately 5% naphtha and approximately 25% gas oils. Asphalt produced at the Willbridge refinery is sold through the Company’s terminal at the Willbridge refinery or delivered by truck and railcar to terminals for further processing and resale. Gas oils and naphtha are sold to local refiners and other third parties and are primarily delivered by barge or rail cars.

The asphalt segment includes 11 refinery/terminal locations in Texas (Big Spring), California (Paramount, Long Beach, Elk Grove, Bakersfield and Mojave), Washington (Richmond Beach), Arizona (Phoenix, Flagstaff and Fredonia), Nevada (Fernley) (50% interest) and a 50% interest in Wright. In 2008, through its asphalt segment, the Company sold the asphalt that was produced at its refineries in Texas and California, primarily as either paving asphalt to road and materials manufacturers and highway construction/maintenance contractors, or as roofing asphalt to either roofing shingle manufacturers or to other industrial users.

Retail and Branded Marketing

The Company is a 7-Eleven licensee in the United States, and it is sole licensee of the FINA brand for motor fuels in the South Central and Southwestern United States. Through its 7-Eleven licensing agreement, the Company has the exclusive right to operate 7-Eleven convenience stores in substantially all of its existing retail markets and many surrounding areas. It markets gasoline and diesel fuel under the FINA brand name, and provides brand support and payment services to distributors supplying over 780 locations, including all 295 of its owned stores that sell motor fuel. In markets, where the Company chooses not to supply fuel products, it also sub-licenses the FINA brand and provides the same brand support and payment services to distributors supplying approximately 240 additional locations in these regions.

As of December 31, 2008, the Company operated 306 owned and leased convenience store sites operating primarily in Central and West Texas and New Mexico. Its convenience stores typically offer various grades of gasoline, diesel fuel, food products, tobacco products, non-alcoholic and alcoholic beverages and general merchandise to the public, primarily under the 7-Eleven and FINA brand names. The merchandise requirements of its convenience stores are serviced at least weekly by over 100 direct store delivery (DSD) vendors.

Approximately 64% of the Company’s branded fuel sales are in West Texas and Central Texas. It sells motor fuel through various terminals to supply approximately 780 locations, including approximately 90% of its retail locations and other FINA-branded independent locations. During 2008, the Company sold 339.1 million gallons of branded motor fuel for distribution to its retail convenience stores and other retail distribution outlets. The Company’s branded wholesale motor fuel is sold under the FINA brand, and it has an exclusive license through 2012, to use the FINA trademark in the wholesale distribution of motor fuel within Texas, Oklahoma, New Mexico, Arizona, Arkansas, Louisiana, Colorado and Utah. It sells motor fuel to its retail locations and to approximately 48 third-party distributors, who then supply and resell to other retail outlets. It offers payment card processing services to its distributors and FINA-brand sublicensees through a third-party provider, which acts as a clearinghouse with MasterCard, VISA, American Express, Discover and debit card issuers.

The Company competes with Valero, Chevron, ExxonMobil, Shell, ConocoPhillips, Tesoro, U.S. Oil, Western, San Joaquin Refining, Ergon, Holly, SEM Materials, Susser, Allsups, Western Refining, Albertson’s and Wal-Mart.,