Alon USA Energy, Inc. (ALJ)

mikebrown81435 (< 20) Submitted: 9/16/08 9:59 PM : Start Price: $14.69 ALJ Score: 5.20

It looks like ALJ has had negative gross margin for 4Q07, 1Q08, and 2Q08. This is including the original Big Spring refinery as well as the California refineries. The Big Spring refinery was in full operation during 4Q07 and for 1/2 of 1Q08. I don't believe any of their peers had negative gross margin during these periods.

The California refineries apparently do not make money and will have difficulty doing so unless ALJ installs significant additional refinery equipment several years from now.

When they say they have positive asphalt margins, it looks like that is over and above an internal transfer price and that it is really a loss compared to the price they pay for the crude input.

The Krotz Springs refinery cannot meet the specifications for on road diesel and again significant additional refinery equipment would have to be installed over the next few years to enable it to make on road diesel fuel that meets the current U.S. specs.

ALJ has taken on significant debt in the last year at relatively high (junk bond type) rates.

It looks like ALJ will have to incur significant new debt over the next few years at a time when the capital and debt markets have been strained.

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