Western Refining, Inc. (NYSE:WNR) today reported a net loss of $4.8 million, or $0.05 per diluted share, for the third quarter of 2009. The Company’s net income was $109.2 million, or $1.60 per diluted share, for the same period in 2008.

The year-over-year decline in net income was primarily due to lower refined product margins driven by weakness in finished product prices relative to crude and feedstock costs. In addition, heavy and sour crude differentials remained tight which negatively impacted margins at the Yorktown refinery and, to a lesser extent, at the El Paso refinery. Yorktown also experienced lower coking margins.

In the quarter, Western generated cash flow from operations of approximately $28.0 million, and year-to-date has generated cash flow from operations of $148.6 million. The Company had no cash borrowings outstanding under its revolving credit facility as of September 30, 2009.

Paul Foster, Western’s Chief Executive Officer, said, “Refining margins were depressed during the third quarter, historically a strong quarter for refiners, primarily due to the prolonged economic slowdown. Overall, margins declined substantially in the latter part of the quarter. However, we are pleased that fuel volumes and margins remained stable in our wholesale operations and that our retail unit had a strong quarter despite the challenging marketplace.”

After a thorough evaluation of its Four Corners assets, Western has decided to consolidate the operations of its two Four Corners refineries into one at the Gallup refinery. This consolidation will eliminate certain operating costs of approximately $25 million per year beginning in the first quarter of 2010 while maintaining the capability to process the same volumes of crude that have been recently processed at both Bloomfield and Gallup combined.

Western will continue to operate the Bloomfield products terminal and will supply the Four Corners with refined products by utilizing new pipeline connection and exchange supply agreements. The Company will also maintain its marketing assets, and through the long-term exchange agreement, will supply barrels to Bloomfield in exchange for barrels produced at the El Paso refinery. The Company is evaluating alternative uses for the Bloomfield refinery including the possibility of biofuels production.

As a result of the refinery consolidation, Western expects to take pre-tax charges against earnings in the fourth quarter of approximately $55-$65 million, the majority of which will be non-cash. These charges are primarily related to asset impairment and idling costs.

“The decision to idle the Bloomfield refinery was a difficult, but necessary decision to ensure that Western remains well positioned for the future, despite the weak industry dynamics. Western appreciates the dedication of our employees and is committed to treating them fairly and with respect as we work through this transition,” Foster continued.

In addition to the refinery consolidation, the Company has also identified a number of additional cost savings initiatives that will generate approximately $25 million in annualized savings. The majority of these actions are in the early stages of implementation and will be fully realized beginning in the first quarter of 2010.

In conclusion, Foster stated, “The market is certainly challenging, but we are continuing to take decisive actions to ensure we are running our operations in a reliable and cost effective manner which we believe will allow us to be profitable over the long run in a variety of market conditions.”

Conference Call Information

A conference call is scheduled for November 9, 2009, at 4:00 p.m. ET to discuss Western’s financial results. The call can be accessed at Western’s website, www.wnr.com. The call can also be heard by dialing (888) 679-8037, passcode: 80237517. The audio replay will be available through November 16, 2009, by dialing (888) 286-8010, passcode: 77731622.

A copy of this press release, together with the reconciliations of certain non-GAAP financial measures contained herein, can be accessed on the investor relations menu on Western’s website, www.wnr.com.

Non-GAAP Financial Measures

In a number of places in the press release, we have excluded the impact of the goodwill impairment loss on our results from operations for the second quarter of 2009. We have excluded this loss in order to analyze changes in our business from period to period, since the impairment loss is a non-recurring and non-cash loss.

About Western Refining

Western Refining, Inc. is an independent refining and marketing company headquartered in El Paso, Texas. Western has a refinery in El Paso, two refineries in the Four Corners region of northern New Mexico and a refinery in Yorktown, Virginia. Western’s asset portfolio also includes refined products terminals in Albuquerque, New Mexico and Flagstaff, Arizona, asphalt terminals in Phoenix and Tucson, Arizona, Albuquerque and El Paso, retail service stations and convenience stores in Arizona, Colorado and New Mexico, a fleet of crude oil and finished product truck transports, and wholesale petroleum products operations in Arizona, California, Colorado, Nevada, New Mexico, Texas and Utah. More information about the Company is available at www.wnr.com.

Cautionary Statement on Forward-Looking Statements

This press release contains forward-looking statements. The forward-looking statements contained herein include statements about, expected cost savings and pre-tax charges from operational initiatives the Company is pursuing in its Bloomfield refinery, other cost savings initiatives the Company is pursuing, and our expectations regarding its future profitability. These statements are subject to the general risks inherent in our business and reflect our current expectations regarding these matters. These expectations may or may not be realized. Some of these expectations may be based upon assumptions or judgments that prove to be incorrect. In addition, Western’s business and operations involve numerous risks and uncertainties, many of which are beyond Western’s control, which could result in Western’s expectations not being realized or otherwise materially affect Western’s financial condition, results of operations and cash flows. For additional information relating to the uncertainties affecting Western’s business you are referred to our filings with the Securities and Exchange Commission. The forward-looking statements are only as of the date made, and Western does not undertake any obligation to (and expressly disclaims any obligation to) update any forward looking statements to reflect events or circumstances after the date such statements were made, or to reflect the occurrence of unanticipated events.

Consolidated

The following tables set forth our summary of historical financial and operating data for the periods indicated:

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(1) Adjusted EBITDA represents earnings before interest expense, income tax expense, amortization of loan fees, depreciation, amortization, maintenance turnaround expense, LCM inventory reserve adjustment and goodwill impairment loss. However, Adjusted EBITDA is not a recognized measurement under GAAP. Our management believes that the presentation of Adjusted EBITDA is useful to investors because it is frequently used by securities analysts, investors and other interested parties in the evaluation of companies in our industry. In addition, our management believes that Adjusted EBITDA is useful in evaluating our operating performance compared to that of other companies in our industry because the calculation of Adjusted EBITDA generally eliminates the effects of financings, income taxes, the accounting effects of significant turnaround activities (which many of our competitors capitalize and thereby exclude from their measures of EBITDA), acquisitions, and certain non-cash charges, items that may vary for different companies for reasons unrelated to overall operating performance.

Adjusted EBITDA has limitations as an analytical tool, and you should not consider it in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Adjusted EBITDA does not reflect our cash expenditures or future requirements for significant turnaround activities, capital expenditures, or contractual commitments;
• Adjusted EBITDA does not reflect the interest expense or the cash requirements necessary to service interest or principal payments on our debt;
• Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; and
• our calculation of Adjusted EBITDA may differ from the Adjusted EBITDA calculations of other companies in our industry, thereby limiting its usefulness as a comparative measure.

Because of these limitations, Adjusted EBITDA should not be considered a measure of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally. The following table reconciles net income (loss) to Adjusted EBITDA for the periods presented:

Refining Segment

The following table presents the segment financial data for our refining group, including other revenues and expenses not specific to a particular refinery:

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(1) Includes a net change in the LCM reserve to value our Yorktown inventories to net realizable market values, which decreased cost of products sold and increased refinery gross margin by $11.7 million and $61.0 million, for the three and nine months ended September 30, 2009, respectively.

(2) Includes sales of refined products sourced from our refinery production as well as refined products purchased from third parties.

(3) Total refinery throughput includes crude oil, other feedstocks, and blendstocks.

(4) Refinery gross margin is a per barrel measurement calculated by dividing the difference between net sales and cost of products sold by our refineries’ total throughput volumes for the respective periods presented. We have experienced gains or losses from derivative activities that are not taken into account in calculating refinery gross margin. Cost of products sold does not include any depreciation or amortization. Refinery gross margin is a non-GAAP performance measure that we believe is important to investors in evaluating our refinery performance as a general indication of the amount above our cost of products that we are able to sell refined products. Each of the components used in this calculation (net sales and cost of products sold) can be reconciled directly to our statement of operations. Our calculation of refinery gross margin may differ from similar calculations of other companies in our industry, thereby limiting its usefulness as a comparative measure.

The following tables reconcile gross profit to refinery gross margin for the periods presented:

(5) Refinery direct operating expenses per throughput barrel is calculated by dividing direct operating expenses by total throughput volumes for the respective periods presented. Direct operating expenses do not include any depreciation or amortization.

The following tables set forth our summary refining throughput and production data for the periods presented below:

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(1) Includes a net change in the LCM reserve to value our Yorktown inventories to net realizable market values, which increased refinery gross margin by $1.97 and $3.38 per throughput barrel for the three and nine months ended September 30, 2009, respectively.

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(1) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales and cost of fuel sales for our retail segment by the number of gallons sold.

(2) Merchandise margin is a measurement calculated by dividing the difference between merchandise sales and merchandise cost of products sold by merchandise sales. Merchandise margin is a measure frequently used in the convenience store industry to measure operating results related to merchandise sales.

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(1) Fuel margin per gallon is a measurement calculated by dividing the difference between fuel sales and cost of fuel sales for our wholesale segment by the number of gallons sold.

(2) Lubricant margin is a measurement calculated by dividing the difference between lubricant sales and lubricant cost of products sold by lubricant sales. Lubricant margin is a measure frequently used in the petroleum products wholesale industry to measure operating results related to lubricant sales.