Alon USA Reports Most Profitable First Quarter Results in Company History; Declares Quarterly Cash Dividend

DALLAS, May 10 /PRNewswire-FirstCall/ -- Alon USA Energy, Inc. ("Alon") today reported record net income of $54.2 million for the first quarter 2006, compared to net income of $22.4 million for the first quarter 2005, an increase of $31.8 million. First quarter 2006 earnings per share were $1.16, compared to $0.64 for the first quarter 2005.

Net income for the first quarter 2006 included $34.3 million of after-tax gain recognized on disposition of assets ("after-tax gain") relating primarily to the sale of the Company's inactive Amdel and White Oil Crude Oil pipelines to an affiliate of Sunoco Logistics Partners L.P., and $4.2 million of after- tax interest expense resulting from the prepayment of Alon's $100.0 million term loan facility. Net income for the first quarter 2006, excluding the effects of the after-tax gains on disposition of assets and interest expense, would have been a $24.1 million, or $0.52 earnings per share as compared to $5.3 million of net income, or $0.15 earnings per share for the first quarter 2005 after exclusion of $17.1 million of after-tax gain recognized in connection with the contribution of certain pipeline and terminal assets to Holly Energy Partners, L.P. in the first quarter 2005.

The increase in net income for the first quarter 2006 over the first quarter 2005 was primarily attributable to stronger industry refining margins, wider WTI/WTS differentials and increased refinery production resulting from the refinery throughput expansion and major turnaround completed in the first quarter 2005. For the first quarter 2006, the Gulf Coast 3-2-1 crack spread increased to an average of $9.70 per barrel compared to an average of $6.62 per barrel for the first quarter 2005. WTI/WTS crude oil differentials increased to an average of $6.57 per barrel during the first quarter 2006, compared to an average of $5.08 per barrel during the first quarter 2005. Refinery production increased to an average of 69,603 barrels per day during the first quarter 2006, compared to an average of 47,060 barrels per day during the first quarter 2005.

Alon's cash, cash equivalents and short-term investments totaled $254.8 million at March 31, 2006 after the prepayment of Alon's $100.0 million term loan and the payment of $19.2 million of dividends in the first quarter 2006. Total debt was reduced by $100.5 million to $31.9 million at March 31, 2006, compared to $132.4 million at December 31, 2005. At March 31, 2006, Alon's cash, cash equivalents and short-term investments exceeded debt by $222.9 million.

Jeff Morris, Alon's President and CEO, commented, "We are very pleased with our first quarter 2006 results. Operations performed well and industry margins remained strong as expected. The positive surprise was the further widening of the WTI/WTS spread. In addition, the sale of our Amdel and White Oil pipelines provides us with greater resources for growth and expands our crude supply options.

"On May 1, 2006, we announced our intended acquisition of Paramount Petroleum Corporation and the assets of Edgington Oil Company. These two transactions will more than double our refining capacity, improve our risk profile as a single refiner and allow us to expand into higher value-added asphalt business. I cannot think of more logical transactions for Alon. These acquisitions allow us to create shareholder value using our proven capabilities in reliable refinery operations and our premium asphalt business. In addition, our previously announced pending acquisition of up to 55 Good Time Stores in El Paso, Texas will allow us to expand our retail segment presence in the El Paso market to over 100 stores, further enhancing our physically integrated system. We expect these acquisitions to be immediately accretive."

Alon also announced today that its Board of Directors has approved the regular quarter cash dividend of $0.04 per share. The dividend is payable on June 14, 2006 to shareholders of record as of June 1, 2006.

The Company has scheduled a conference call for tomorrow, May 11, 2006, at 10:00 a.m. EDT, to discuss the first quarter 2006 results. To access the call, please dial [phone], or [phone] for international callers, and ask for the Alon USA Energy call at least 10 minutes prior to the start time. Investors may also listen to the conference live on the Alon USA corporate website, http://www.alonusa.com/ , by logging onto that site and clicking "Investors." A telephonic replay of the conference call will be available through May 25, 2006 and may be accessed by calling [phone], or [phone] for international callers, and using passcode 11057082. A web cast archive will also be available at http://www.alonusa.com/ shortly after the call and will be accessible for approximately 90 days. For more information, please contact Donna Washburn at DRG&E at [phone] or email [e-mail] .

Alon USA Energy, Inc., headquartered in Dallas, Texas, is an independent refiner and marketer of petroleum products, operating primarily in the Southwestern and South Central regions of the United States. The Company owns and operates a sophisticated sour crude oil refinery in Big Spring, Texas, which has a crude oil throughput capacity of 70,000 barrels per day. Alon markets gasoline and diesel products under the FINA brand name and is a leading producer of asphalt in the State of Texas. The Company also operates convenience stores in West Texas and New Mexico under the 7-Eleven and FINA brand names and supplies motor fuels to these stores from its Big Spring refinery.

Any statements in this press release that are not statements of historical fact are forward-looking statements. Forward-looking statements reflect Alon's current expectations regarding future events, results or outcomes. 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, Alon's business and operations involve numerous risks and uncertainties, many of which are beyond Alon's control, which could result in Alon's expectations not being realized or otherwise materially affect Alon's financial condition, results of operation and cash flows. Additional information regarding these and other risks is contained in Alon's filings with the Securities and Exchange Commission.

Contacts: Claire A. Hart, Senior Vice President ALON USA Energy, Inc. 972-367-3649 Investors: Jack Lascar/Sheila Stuewe DRG&E / 713-529-6600 Media: Blake Lewis Lewis Public Relations 214-269-2093 ALON USA ENERGY, INC. AND SUBSIDIARIES CONSOLIDATED EARNINGS RELEASE RESULTS OF OPERATIONS - FINANCIAL DATA (ALL INFORMATION IN THIS PRESS RELEASE, EXCEPT FOR BALANCE SHEET DATA AS OF DECEMBER 31, 2005 IS UNAUDITED) For the Three Months Ended March 31, 2006 2005 CONSOLIDATED (dollars in thousands except, per share data) STATEMENT OF OPERATIONS DATA: Net sales (1) $584,701 $407,974 Operating costs and expenses: Cost of sales (1) 497,827 351,554 Direct operating expenses 23,271 18,336 Selling, general and administrative expenses (2) 17,453 16,665 Depreciation and amortization (3) 5,523 4,834 Total operating costs and expenses 544,074 391,389 Gain on disposition of assets (4) 55,386 27,693 Operating income 96,013 44,278 Interest expense (9,047) (5,007) Equity earnings in HEP 577 135 Other income, net 1,927 250 Income before income tax expense and minority interest in income of subsidiaries 89,470 39,656 Income tax expense 32,526 15,655 Income before minority interest in income of subsidiaries 56,944 24,001 Minority interest in income of subsidiaries 2,780 1,565 Net income $54,164 $22,436 Earnings per share, basic and diluted (5) $1.16 $.64 Earnings per share, basic and diluted, excluding after-tax gain on disposition of assets and interest expense related to the prepayment of debt (6) $.52 $.15 Weighted average shares outstanding (5) 46,731 35,001 CASH FLOW DATA: Net cash provided by (used in): Operating activities $(9,723) $(16,437) Investing activities (7) 129,387 93,803 Financing activities (8) (119,660) (31,734) OTHER DATA: Adjusted EBITDA (9) $48,654 $21,804 Capital expenditures (10) 4,638 11,098 Capital expenditures for turnarounds and catalysts 1,303 10,382 BALANCE SHEET DATA (end of period): March 31, December 31, 2006 2005 Cash, cash equivalents and short-term investments $254,824 $322,140 Working capital 251,141 275,996 Total assets 712,577 758,780 Total debt 31,922 132,390 Stockholders equity 314,604 279,493 RESULTS OF OPERATIONS - FINANCIAL DATA For the Three Months Ended March 31, 2006 2005 REFINING AND MARKETING SEGMENT (dollars in thousands, except for per barrel data and pricing statistics) STATEMENT OF OPERATIONS DATA: Net sales $543,476 $366,934 Operating costs and expenses: Cost of sales 470,250 323,514 Direct operating expenses 23,271 18,336 Selling, general and administrative expenses 4,876 4,678 Depreciation and amortization 3,845 3,311 Total operating costs and expenses 502,242 349,839 Gain on disposition of assets 55,386 27,693 Operating income $96,620 $44,788 KEY OPERATING STATISTICS AND OTHER DATA: Total sales volume (bpd) 85,370 72,253 Non-integrated marketing sales volume (bpd) (11) 19,347 20,061 Non-integrated marketing margin (barrel of sales volume) (11) $(.56) $(.93) Per barrel of throughput: Refinery operating margin (12) $11.69 $10.56 Refinery direct operating expenses (13) 3.67 4.29 Capital expenditures 4,396 9,945 Capital expenditures for turnarounds and catalysts 1,303 10,382 PRICING STATISTICS: Crack spreads (3/2/1) (per barrel): Gulf Coast (14) $9.70 $6.62 Group III (14) 9.66 7.94 WTI/WTS spread (15) 6.57 5.08 THROUGHPUT AND YIELD DATA: For the Three Months Ended March 31, 2006 2005 Bpd % Bpd % Refinery throughput: Sour crude 62,720 88.9 41,096 86.6 Sweet crude 3,191 4.5 2,829 6.0 Blendstocks 4,618 6.6 3,522 7.4 Total refinery throughput (16) 70,529 100.0 47,447 100.0 Refinery production: Gasoline 32,846 47.2 21,562 45.8 Diesel/jet 23,701 34.1 15,232 32.4 Asphalt 6,444 9.3 4,297 9.1 Petrochemicals 4,266 6.0 3,617 7.7 Other 2,346 3.4 2,352 5.0 Total refinery production (17) 69,603 100.0 47,060 100.0 Refinery utilization (18) 94.2% 88.9% RETAIL SEGMENT RESULTS OF OPERATIONS - FINANCIAL DATA For the Three Months Ended March 31, 2006 2005 RETAIL (dollars in thousands, except for per gallon data) STATEMENT OF OPERATIONS DATA: Net sales $72,615 $73,896 Operating costs and expenses: Cost of sales (19) 58,967 60,896 Selling, general and administrative expenses 12,450 11,859 Depreciation and amortization 1,154 1,052 Total operating costs and expenses 72,571 73,807 Operating income $44 $89 KEY OPERATING STATISTICS: Number of stores (end of period) 167 167 Fuel sales (thousands of gallons) 17,133 23,387 Fuel sales (thousands of gallons per site per month) 34 48 Fuel margin (cents per gallon) (20) 17.2 12.9 Fuel sales price (dollars per gallon) (21) $2.33 $1.88 Merchandise sales $32,414 $29,994 Merchandise sales (per site per month) 65 60 Merchandise margin (22) 33.2% 33.3% Capital expenditures $223 $1,009 (1) Our buy/sell arrangements involve linked purchases and sales related to refined product contracts entered into to address location or grade requirements. As of January 1, 2006, such buy/sell transactions are included on a net basis in sales in the consolidated statement of operations. Prior to January 1, 2006, the results of buy/sell transactions were recorded separately in sales and cost of sales in the consolidated statement of operations. (2) Includes corporate headquarters selling, general and administrative expenses of $127 and $128 for the three months ended March 31, 2006 and 2005, respectively. (3) Includes corporate depreciation and amortization of $524 and $471 for the three months ended March 31, 2006 and 2005, respectively. (4) Gain on disposition of assets reported in the three months ended March 31, 2006, reflects the $52.5 million pre-tax gain, recorded in connection with the Amdel and White Oil transaction and $2.9 million deferred gain related to the HEP transaction. Gain on disposition of assets for the first quarter 2005 reflects $27.7 million recognized in connection with the HEP transaction. (5) Weighted average common shares outstanding and earnings per common share amounts for the three months ended March 31, 2005 have been restated to reflect the effect of the 33,600-for-one split of our common stock which was effected on July 6, 2005. Weighted average common shares outstanding at March 31, 2006, reflects 11,730,000 shares issued in our initial public offering in July 2005. (6) The following table provides a reconciliation of net income under GAAP to net income utilized in determining earnings per common share, basic and diluted, excluding the after-tax gain on disposition of assets and the after-tax interest expense related to the prepayment of our $100.0 million term loan. Our management believes that the presentation of earnings per common share, basic and diluted, excluding these after-tax non-recurring items is useful to investors because it provides a more meaningful measurement of operating performance for evaluation of Alon's results and for comparison to other companies in our industry. For the Three Months Ended March 31, 2006 2005 (dollars in thousands, except per share data) Net income $54,164 $22,436 Plus: Interest expense related to the prepayment of debt, net of tax 4,240 --- Less: Gain on disposition of assets, net of tax (34,287) (17,144) Adjusted income $24,117 $5,292 Weighted average common shares outstanding 46,731 35,001 Earnings per share excluding after-tax gain on disposition of assets and interest expense related to prepayment of debt $.52 $.15 (7) 2006 cash provided by investing activities include $67.3 million sales of short-term investments and $68.0 million net proceeds received in the Amdel transaction. 2005 cash provided by investing activities include $118.0 million net proceeds received in the HEP transaction, partially offset by capital expenditures and turnaround costs. (8) Cash used in financing activities for three months ended March 31, 2006 reflects the prepayment of our $100.0 million term loan and the $19.2 million cash dividend paid to our shareholders. (9) EBITDA represents earnings before minority interest, income tax expense, interest expense, depreciation and amortization. Adjusted EBITDA represents EBITDA, exclusive of gain on disposition of assets. EBITDA and Adjusted EBITDA are not recognized measurements under GAAP; however, the amounts included in EBITDA and Adjusted EBITDA are derived from amounts included in our consolidated financial statements. 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 minority interests, interest expense, income taxes, gain on disposition of assets and the accounting effects of capital expenditures and acquisitions, items which may vary for different companies for reasons unrelated to overall operating performance. EBITDA is the basis for calculating selected financial ratios as required in the debt covenants in our revolving credit agreement. 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 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 the prior claim that minority stockholders have on the income generated by non-wholly-owned subsidiaries; * 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 EBITDA calculations of other companies in our industry, limiting its usefulness as a comparative measure.

Because of these limitations, EBITDA and 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 EBITDA and Adjusted EBITDA only supplementally.

The following table reconciles net income to Adjusted EBITDA for the three months ended March 31, 2006 and 2005, respectively:

For the Year Ended March 31, 2006 2005 (dollars in thousands) Net income $54,164 $22,436 Minority interest 2,780 1,565 Income tax expense 32,526 15,655 Interest expense 9,047 5,007 Depreciation and amortization 5,523 4,834 EBITDA 104,040 49,497 Gain on disposition of assets (55,386) (27,693) Adjusted EBITDA $48,654 $21,804 (10) Includes corporate capital expenditures of $19 and $144 for the three months ended March 31, 2006 and 2005, respectively, which are not included in the capital expenditures of our other two operating segments. (11) The non-integrated marketing sales volume represents refined products sales to our wholesale marketing customers located in our non-integrated region. The refined products we sell in this region are obtained from third-party suppliers. The non-integrated marketing margin represents the margin between the net sales and cost of sales attributable to our non-integrated refined products sales volume, expressed on a per barrel basis. (12) Refinery operating margin is a per barrel measurement calculated by dividing the margin between net sales and cost of sales attributable to our refining and marketing segment, exclusive of net sales and cost of sales relating to our non-integrated system, by our Big Spring refinery's throughput volumes. Industry-wide refining results are driven and measured by the margins between refined product prices and the prices for crude oil, which are referred to as crack spreads. We compare our refinery operating margin to these crack spreads to assess our operating performance relative to other participants in our industry. (13) Refinery direct operating expense is a per barrel measurement calculated by dividing direct operating expenses, exclusive of depreciation and amortization, by our Big Spring Refinery's total throughput volumes. (14) A 3/2/1 crack spread in a given region is calculated assuming that three barrels of crude oil are converted, or cracked, into two barrels of gasoline and one barrel of diesel. Alon calculates the Gulf Coast 3/2/1 crack spread using the market values of Gulf Coast conventional gasoline and low-sulfur diesel and the market value of WTI crude oil. Alon calculates the Group III 3/2/1 crack spread using the market values of Group III conventional gasoline and low sulfur diesel and the market value of WTI crude oil. (15) WTI/WTS or sweet/sour spread represents the differential between the average value per barrel of WTI crude oil and the average value per barrel of WTS crude oil. (16) Total refinery throughput represents the total of crude oil and blendstock inputs in the refinery production process. (17) Total refinery production represents the barrels per day of various finished products produced from processing crude and other refinery feedstocks through the crude units and other conversion units at our refinery. (18) Refinery utilization represents average daily crude oil throughput divided by crude capacity, excluding planned periods of downtime for maintenance and turnarounds. (19) Cost of sales includes intersegment purchases of motor fuels from our refining and marketing segment at prices which approximate market prices. These intersegment purchases are eliminated through consolidation of our financial statements. (20) Fuel margin represents the difference between motor fuel revenues and the net cost of purchased motor fuel, including transportation costs and associated motor fuel taxes, expressed on a cents per gallon basis. Motor fuel margins are frequently used in the retail industry to measure operating results related to motor fuel sales. (21) Fuel sales price per gallon represents the average sales price for motor fuels sold through our retail segment. (22) Merchandise margin represents the difference between merchandise sales revenues and the delivered cost of merchandise purchases, net of rebates and commissions, expressed as a percentage of merchandise sales revenues. Merchandise margins, also referred to as in-store margins, are commonly used in the retail industry to measure in store, or non-fuel, operating results.