Longhorn Experiences Marked Increase in Shipments of Product to Southwestern Markets

Longhorn Pipeline Inc., a wholly-owned subsidiary of Flying J Inc., reported that there has been a marked increase in recent shipment activity since Flying J secured a revolving DIP facility with Merrill Lynch on February 27. As part of this arrangement, Longhorn has been granted extended use of line fill inventory and cash collateral that was financed by Merrill Lynch prior to Longhorn’s chapter 11 filing in December 2008. These actions enable Longhorn to offer shippers product location exchange services, as well as traditional product shipment services which replenish line fill inventories once they are delivered through the pipeline.

This arrangement with Merrill Lynch is timely as Longhorn’s shippers, including the Company’s affiliate shipper, Flying J, are experiencing an increase in buyer interest for term supply as evidenced through formal buyer requests for supply proposals. As common practice, premier buyers in the Southwest market secure supply through ratable term supply agreements, which typically open for bid on an infrequent basis. The Company attributes this heightened interest to the product delivery flexibility afforded by the pipeline, which has become increasingly important to buyers under current market conditions of demand volatility. Pipeline demand is also strongly supported by the wide price differentials between Gulf Coast and Southwest markets.

Longhorn is currently receiving product shipments in the Gulf Coast and is supporting on-spec delivery of all product grades at its El Paso terminal. Supply operations at the Flying J-operated Crane terminal are anticipated to resume in the very near term.