ALJ

MATADORINVESTMENTS

ANN CAI • NIRAJ PAREKH • MATTHEW RINDELAUB • ANDREW SMITH

(NYSE: ALJ)

Investment Thesis

1. Undervaluation – Intrinsic & Relative Undervaluation

2. Tax Advantage (MLP)

3. Strategic Placement

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Investment Strategy

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Time Horizon: One year

Buy at current market price: $11.49

Stop-Loss at 20%: $9.19

Exit on oil price or technicals

Company Overview

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Alon USA Energy, Inc.Alon USA Partners, LP

Master Limited Partnership (MLP)

• Tax Shield

• Lower cost of capital

OPERATIONS

Operations Divider Slide

Operational Divisions

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{As a percentage of 2012 revenue}

Refining (81.15%)

• Paramount, CA

• Long Beach, CA

• Bakersfield, CA

• Krotz Springs, LA

• Big Spring, TX

- Fuels marketed to 640 stations under Alon- 21 third-party distributions

Asphalt (7.53%)

• 2nd Largest Supplier for TX, CA

Retail and Branded Marketing (11.31%)

• Owns 298 locations

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Gross Margin

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Big Spring

60%

Krotz Springs

22%

California

1%

Asphalt

4%

Retail

13%Total Daily Production: 250,000 barrels/day

California

(combined):

70,000

Krotz Springs:

74,000

Big Spring:

70,000

Big Spring:53% Gasoline

32.5% Jet Fuel & Distillates5.9% Asphalt

STRATEGY

Strategy Divider Slide

Porter’s Five Forces

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Rivalry

Threat of Entrants

Buyer Bargaining

Power

Supplier Bargaining

Power

Threat of Substitutes

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Strategic Positioning

1. Big Spring Refinery

- Midland Locational Advantage

- Inexpensive Sour Crude Refining

Technology

2. Diversification

- C-Store Revenue Streams

- California Refineries

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Risks & Mitigation

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Volatility of Crude

Prices

Single Refinery = 60%

of Gross Margin

Largest Supplier &

Customer is J. Aron

• Continuing dominance of

crude over NG

• Large enough discount

margin

• Past performance

• Extensive maintenance

performed as recently as

2011

• J. Aron is fully owned by

Goldman Sachs

• Supply risk is alleviated by

Permian Basin expansion

FINANCIALS

Financials Divider Slide

Comparables

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0.0x

5.0x

10.0x

15.0x

20.0x

CVI HFC MRO VLO WNR ALJ

Market Cap/Levered FCF

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

3.0x

3.5x

CVI HFC MRO TSO VLO WNR ALJ

P/TangBV

0.0x

5.0x

10.0x

15.0x

20.0x

CVI HFC MRO TSO VLO WNR ALJ

P/E

0.0x

2.0x

4.0x

6.0x

8.0x

CVI HFC MRO TSO VLO WNR ALJ

TEV/EBIT

Comparables

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CVI HFC MRO VLO WNR ALJ

TEV/Unlevered FCF 6.1x 5.4x 19.2x 11.6x 5.3x 3.9x

Mkt Cap/Levered FCF 6.0x 5.9x 17.0x 10.5x 5.2x 2.6x

CVI HFC MRO TSO VLO WNR ALJ

TEV/Revenues 0.4x 0.4x 1.9x 0.3x 0.2x 0.3x 0.2x

TEV/EBITDA 2.7x 2.8x 3.1x 5.6x 3.8x 3.1x 2.4x

TEV/EBIT 3.0x 3.1x 4.7x 6.8x 4.7x 3.4x 3.2x

P/E 5.8x 5.5x 15.6x 9.9x 7.4x 7.7x 5.2x

P/TangBV 2.7x 2.3x 1.3x 1.5x 1.1x 3.0x 1.3x

Companies Ticker:

Alon USA Energy, Inc. ALJ

CVR Energy, Inc. CVI

HollyFrontier Corporation HFC

Marathon Oil Corporation MRO

Tesoro Corporation TSO

Valero Energy Corporation VLO

Western Refining, Inc. WNR

ALJ Median Implied Price

TEV/Revenues 0.20x 0.30x $ 17.24

TEV/EBITDA 2.40x 3.10x $ 14.84

TEV/EBIT 3.20x 3.40x $ 12.21

P/E 5.20x 7.40x $ 16.35

P/TangBV 1.30x 1.50x $ 13.26

TEV/Unlevered FCF 3.90x 5.75x $ 16.94

Mkt Cap/Levered FCF 2.60x 5.95x $ 26.29

Average Implied Price: $ 16.73

ALJ Current Price: $ 11.49

Discount: 46%

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Discounted Cash Flow

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Financial Analysis

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MATADORINVESTMENTSQUESTIONS