For Investors Only: Northern Tier Energy LP

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Any company, which has a capital payback period of just five years by way of its dividend, is certainly worth considering. A buy and hold case for such a company is strengthened further if the cash inflow is gradually improving amidst attractive valuations.

This investment note discusses a 22% dividend yielder, Northern Tier Energy LP, which is an independent downstream energy limited partnership with refining, retail and pipeline operations in the United States. The company operates its assets in two business segments: the refining business and the retail business.

The refining business:

As a result of a higher crack spread, the company's refinery gross product margin has improved from $9.36 per barrel in FY09 to $29.61 as of FY12. During the same period, the adjusted EBITDA has improved from $135.2 million to $739.7 million.

The LTM (March 2013) EBITDA is even higher at $814.8 million. The location advantage and the advantage of the price differential are clearly evident from the above numbers. The point can be visualized in the chart below, which gives the crude price differential and the NYMEX crack spread.

Fascinating read. Dovetails nice with RBN Energy analyses.

At the linked article, note the location of this refiner in relation to the Bakken and western Canadian oil.