I've written about AlonUSA Energy (NYSE:ALJ) before, and I'm sticking to my position that these shares offer good value. Last fall, I dubbed Alon USA a company to watch because of experienced management, excellent growth prospects, and a strong balance sheet. In January, I highlighted the improving cash position on that balance sheet. Today, we look at the numbers the company reported on Tuesday for Q4 and FY 2005.

It's no surprise that 2005 was a great year in the refining business, especially for a refiner of sour (high-sulfur) crude like Alon USA. The crack spread -- the difference between crude and refined product prices -- for Alon USA's crude slate increased to $11.45 per barrel in 2005, compared to $6.77 per barrel in 2004. Excluding the sale of assets to Holly Energy Partners L.P., this led to earnings of $0.62 per share for the quarter and $2.01 per share for the year, both huge increases over 2004's comparable numbers. Free cash flow from operations for the year was $102.8 million, compared to $47.1 million in 2004.

Despite the good results, there are a couple of black clouds hanging over these shares. In the face of high inventories nationwide, the aforementioned crack spread has declined in early 2006. In addition, the Mesa Pipeline supplying the refinery may be shut down, requiring Alon USA to find another crude source.

No one knows where crack spreads are headed, but I'm guessing that they should stabilize in the coming months. Refining capacity this spring will be reduced, since many plants are engaged in major maintenance activity that was delayed after last year's hurricanes. This should return inventories to a more normal level before summertime. However, Alon USA investors should be aware that earnings estimates project a flat 2006 and a decline in 2007, most likely because crack spreads are expected to retreat from 2005's record levels.

During the conference call, Alon USA's President and CEO Jeff Morris outlined the company's efforts to ensure adequate crude supplies. Alon USA would prefer to keep the Mesa pipeline running, and it's offered to invest in the pipeline to ensure its continued operation. However, if it can't reach a deal on the pipeline, the company has other options, which are not expected to have a significant impact on operations.

I would argue that the black clouds create an opportunity. Alon USA's current market capitalization is slightly more than $937 million; it has $322 million in cash and short-term investments and $132 million in total debt. Start with the market cap, subtract the cash, add the debt, and we get an enterprise value of $747 million. As I pointed out in January, Valero Energy (NYSE:VLO) paid $8 billion to buy 790,000 barrels per day (bpd) of refining capacity in its purchase of Premcor -- just over $10,000 per bpd of capacity. Applying the $10,000 per bpd to Alon USA's 70,000 bpd Big Spring refinery would produce a sale price of $700 million. In short, Alon USA currently trades for just a little more than the value of its refinery, providing limited downside to the shares at their current price of $20.03.

The company also declared a dividend in February to share some of the wealth with its stockholders. In addition to the $0.04-per-share quarterly dividend, Alon USA included a special payment of $0.37 per share. While I certainly welcome the dividend, Alon USA will need to use its cash to generate growth in future quarters. Considering its aggressive pursuit of opportunities to date, its healthy cash position, and its experienced management, I doubt the company will be content to simply stand still.

Further highly refined Foolishness:

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Robert Aronen eats his own cooking and owns shares of Alon USA. Please feel free to share your comments with him. The Motley Fool has an ironclad disclosure policy.