Tesoro
Corporation Reports Record 2015 Third Quarter Results
-
Record net earnings from continuing operations
of $759 million, or $6.13 per diluted share
-
Adjusted earnings were $802 million, or $6.48
per diluted share, excluding special items
-
Returned $287 million to shareholders and paid
down $398 million of secured debt
-
S&P places both Tesoro and Tesoro Logistics
on positive outlook
-
Board approves new $1.0 billion share repurchase
program
-
Delivered over $500 million of business
improvements year-to-date and on track to deliver $670 million for
full year 2015
SAN ANTONIO -
October 28, 2015 - Tesoro Corporation (NYSE:TSO) today reported
third quarter net earnings of $759 million, or $6.13 per diluted
share compared to net earnings of $396 million, or $3.05 per
diluted share for the third quarter of 2014. Results in the third
quarter include an inventory charge due to the lower of cost or
market valuation of $0.41 per diluted share and a gain of $0.06 per
diluted share related to an insurance settlement. Excluding these
adjustments, net earnings from continuing operations were $802
million, or $6.48 per diluted share. Adjusted EBITDA for the third
quarter was $1.6 billion compared to $858 million last year.
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
($ in millions, except per share data) |
2015 |
|
2014 |
|
2015 |
|
2014 |
Operating Income |
|
|
|
|
|
|
|
Refining |
$ |
895 |
|
|
$ |
536 |
|
|
$ |
1,831 |
|
|
$ |
1,074 |
|
TLLP |
112 |
|
|
61 |
|
|
329 |
|
|
169 |
|
Marketing |
379 |
|
|
180 |
|
|
724 |
|
|
292 |
|
Total
Segment Operating Income |
$ |
1,386 |
|
|
$ |
777 |
|
|
$ |
2,884 |
|
|
$ |
1,535 |
|
Net Earnings From Continuing Operations
Attributable
to Tesoro |
$ |
759 |
|
|
$ |
397 |
|
|
$ |
1,490 |
|
|
$ |
700 |
|
|
|
|
|
|
|
|
|
Diluted EPS - Continuing Operations |
$ |
6.13 |
|
|
$ |
3.06 |
|
|
$ |
11.85 |
|
|
$ |
5.32 |
|
Diluted EPS - Discontinued Operations |
- |
|
|
(0.01 |
) |
|
(0.03 |
) |
|
(0.02 |
) |
Total Diluted EPS |
$ |
6.13 |
|
|
$ |
3.05 |
|
|
$ |
11.82 |
|
|
$ |
5.30 |
|
Adjusted Diluted EPS - Continuing Operations |
$ |
6.48 |
|
|
$ |
3.09 |
|
|
$ |
12.02 |
|
|
$ |
5.48 |
|
"We reported very strong results
for the third quarter, with an all-time record for EBITDA and
earnings per share, driven by a favorable market environment and
strong performance across all business segments," said Greg Goff,
Chairman and CEO. "We returned $287 million to shareholders in the
quarter and also paid down $398 million of secured debt. In
addition, we continue to leverage our strong cash position and
reinvest capital towards our growth initiatives and business
improvement plans."
For the third quarter 2015, the
Company recorded segment operating income of $1.4 billion compared
to segment operating income of $777 million in the third quarter of
2014. The increase was primarily due to high utilization at our
refineries, strong marketing sales and execution of our business
improvement plans.
The refining segment's operating
income was $895 million for the quarter, compared to $536 million
in the third quarter of 2014. This is primarily attributable to a
favorable margin environment, high operational reliability, and
lower operating expenses.
Total refinery throughput for the
quarter was 861 thousand barrels per day, or 101% utilization.
Manufacturing costs in the third quarter of 2015 decreased
$0.58/bbl over last year to $4.84/bbl, primarily attributable to
lower energy prices.
The Tesoro Index was $23.09/bbl
for the third quarter of 2015 with a realized gross refining margin
of $20.49/bbl or 89% of the Tesoro Index, compared to a realized
gross refining margin of $14.92 or 121% of the Tesoro Index last
year. Capture rates in the quarter were impacted by the combination
of weaker crude oil differentials and refinery maintenance.
The logistics segment's operating
income was $112 million in the third quarter of 2015 compared to
$61 million in the third quarter of 2014. This growth was driven by
contributions from the Rockies natural gas business, executing our
organic growth plans and the additional crude oil volumes from the
Connolly Gathering system in North Dakota.
The marketing segment's operating
income was $379 million, up from $180 million in the third quarter
of last year. The improvement was due to higher volumes driven by
growth in consumer demand and a favorable market environment.
Corporate and unallocated costs
for the third quarter 2015 were $94 million, including $5 million
of corporate depreciation and variable stock-based compensation
expense of $22 million.
Capital Spending
and Liquidity
Capital spending for the third quarter 2015 was $167 million for
Tesoro Corporation and $92 million for TLLP. The Company estimates
full year 2015 capital spending, excluding TLLP, of $745 million.
TLLP capital spending is estimated to be approximately $345
million. Turnaround expenditures for the third quarter were $66
million. For the full year 2015, the Company expects to spend $280
million for turnarounds and $50 million for retail branding.
The Company ended the third
quarter of 2015 with approximately $1.0 billion in cash and $2.9
billion of availability under the Company's revolving credit
facility with no current borrowings. Excluding TLLP debt and
equity, total debt, net of unamortized issuance costs, was $1.2
billion or 19% of total capitalization at the end of the third
quarter of 2015. On a consolidated basis total outstanding debt,
net of unamortized issuance costs, was $3.8 billion. TLLP ended the
third quarter with $280 million in borrowings under its separate
revolving credit facility. In the third quarter of 2015, Tesoro
also repaid $398 million of its outstanding term loan and currently
has no outstanding secured debt. On September 30th, S&P
reaffirmed the credit ratings on both Tesoro and Tesoro Logistics
while placing both entities on positive outlook.
Returning Cash to
Shareholders
During the third quarter of 2015, Tesoro returned $287 million to
shareholders through the purchase of nearly 2.4 million of the
Company's shares for $225 million and quarterly dividends of $62
million. In addition to the remaining authorization of $506 million
for share repurchases, the board of directors has approved a new
$1.0 billion share repurchase program.
Strategic
Update
The Company is on track to achieve its 2015 plan to deliver
approximately $670 million of business improvements. During the
first nine months of 2015, we estimate that we delivered $505
million of business improvement, including approximately $130
million related to West Coast improvements, approximately $120
million related to capturing margin improvements, and approximately
$255 million from growing our logistics operations.
Through the first three quarters
of 2015, the Rockies natural gas business delivered approximately
$213 million of adjusted EBITDA, including $20 million of
synergies. For the nine months of 2015, natural gas gathering
volumes were up approximately 10%, fee-based processing volumes
were up approximately 14% and natural gas liquids processing
throughput was up approximately 24%.
Tesoro is in the final stages of
offering Tesoro Logistics the opportunity to acquire crude oil and
refined product storage and pipeline assets in Los Angeles. Tesoro
expects these assets to deliver an annual EBITDA of $50 to $75
million to TLLP. This transaction is expected to close by the end
of the year.
We expect the Washington State's
Energy Facility Site Evaluation Council ("EFSEC") to release the
Draft Environmental Impact Statement at the end of November and the
Company expects that EFSEC will submit its recommendation to the
governor of Washington once it completes the adjudicative phase. In
addition, the Company is currently in the permitting phase of the
Los Angeles Integration and Compliance Project at its Los Angeles,
California refinery and the Clean Products Upgrade Project at its
Anacortes, Washington refinery.
Analyst and
Investor Presentation
Tesoro Corporation will be hosting its Analyst and Investor
Presentation at Le Parker Meridian Hotel in New York City on
December 9, 2015 at 9:00 a.m. ET. Because space is limited,
reservations will be required to attend and accepted on a
first-come, first-serve basis. Interested parties should
contact the Investor Relations department via email at
investorday@tsocorp.com. Interested parties may also access
the presentation over the Internet by logging on to
http://www.tsocorp.com.
Public Invited to
Listen to Analyst and Investor Conference Call
At 7:30 a.m. CT tomorrow morning, Tesoro will broadcast, live, its
conference call with analysts regarding third quarter 2015 results
and other business matters. Interested parties may listen to the
live conference call over the Internet by logging on to
http://www.tsocorp.com.
Tesoro Corporation, a Fortune 100
company, is an independent refiner and marketer of petroleum
products. Tesoro, through its subsidiaries, operates six refineries
in the western United States with a combined capacity of over
850,000 barrels per day and ownership in a logistics business,
which includes a 33% interest in Tesoro Logistics LP (NYSE: TLLP)
and ownership of its general partner. Tesoro's retail-marketing
system includes over 2,200 retail stations under the
ARCO®,
Shell®,
Exxon®,
Mobil®, USA
Gasoline(TM) and Tesoro® brands.
This earnings
release contains certain statements that are "forward-looking"
statements within the meaning of Section 27A of the Securities Act
of 1933 and Section 21E of the Securities Exchange Act of 1934
concerning expectations for achievement of targeted business
improvement objectives for 2015; plans to continue leveraging our
strong cash position and reinvest capital towards our growth
initiatives and business improvement plans; expectations about
capital spending, turnaround expenditures and branding costs; plans
to offer crude oil and refined product storage and pipeline assets
to TLLP, the related EBITDA to be generated by such assets, and the
timing for completion of such a transaction; timing of the
permitting and approval process for the Vancouver Energy project;
and expectations for throughput, manufacturing costs, depreciation,
corporate expense and interest expense in the fourth quarter of
2015. For more information concerning factors that could affect
these statements see our annual report on Form 10-K and quarterly
reports on Form 10-Q, filed with the Securities and Exchange
Commission. We undertake no obligation to publicly release the
result of any revisions to any such forward-looking statements that
may be made to reflect events or circumstances that occur, or which
we become aware of, after the date hereof.
Contact:
Investors:
Sam Ramraj, Vice President, Investor Relations, (210) 626-4757
Media:
Tesoro Media Relations, media@tsocorp.com, (210) 626-7702
TESORO
CORPORATION
FOURTH QUARTER 2015 GUIDANCE
(Unaudited)
Throughput (Mbpd) |
|
California |
500-525 |
Pacific Northwest |
160-170 |
Mid-Continent |
120-130 |
Consolidated |
780-825 |
|
|
Manufacturing Cost ($/throughput barrel) |
|
California |
$ 5.65 - 5.90 |
Pacific Northwest |
$ 4.55 - 4.80 |
Mid-Continent |
$ 3.80 - 4.05 |
Consolidated |
$ 5.10 - 5.35 |
|
|
Corporate/System ($ millions) |
|
Refining depreciation |
$ |
120 |
|
TLLP
depreciation |
$ |
45 |
|
Corporate expense (before depreciation) |
$ |
75 |
|
Interest expense (before interest income) |
$ |
55 |
|
Non-GAAP Measures
Our management uses a variety of
financial and operating metrics to analyze operating segment
performance. To supplement our financial information presented in
accordance with accounting principles generally accepted in the
United States of America ("U.S. GAAP"), our management uses
additional metrics that are known as "non-GAAP" financial metrics
in its evaluation of past performance and prospects for the future.
These metrics are significant factors in assessing our operating
results and profitability and include earnings before interest,
income taxes, depreciation and amortization expenses ("EBITDA"). We
define EBITDA as consolidated earnings, including earnings
attributable to noncontrolling interest, excluding net earnings
(loss) from discontinued operations, before depreciation and
amortization expense, net interest and financing costs, income
taxes and interest income. We define Adjusted EBITDA as EBITDA plus
or minus amounts determined to be "special items" by our management
based on their unusual nature and relative significance to earnings
(loss) in a certain period. We provide complete reconciliation and
discussion of items identified as special items with our
presentation of adjusted EBITDA. We define Free Cash Flow as cash
flow from operations less sustaining capital expenses comprised of
maintenance and regulatory capital expenditures and the return of
excess cash flows to shareholders through dividends and
distributions to noncontrolling interest.
We present EBITDA and adjusted
EBITDA because we believe some investors and analysts use EBITDA
and adjusted EBITDA to help analyze our cash flows including our
ability to satisfy principal and interest obligations with respect
to our indebtedness and use cash for other purposes, including
capital expenditures. EBITDA and adjusted EBITDA are also used by
some investors and analysts to analyze and compare companies on the
basis of operating performance and by management for internal
analysis. EBITDA and adjusted EBITDA should not be considered as
alternatives to U.S. GAAP net earnings or net cash from operating
activities. EBITDA and adjusted EBITDA have important limitations
as analytical tools, because they exclude some, but not all, items
that affect net earnings and net cash from operating
activities.
We present net earnings from
continuing operations adjusted for special items ("Adjusted
Earnings") and net earnings per diluted share from continuing
operations adjusted for special items ("Adjusted Diluted EPS") as
management believes that the impact of these items on net earnings
from continuing operations and diluted earnings per share from
continuing operations is important information for an investor's
understanding of the operations of our business and the financial
information presented. Adjusted Earnings and Adjusted Diluted EPS
should not be considered as an alternative to net earnings,
earnings per diluted share or any other measure of financial
performance presented in accordance with U.S. GAAP. Adjusted
Earnings and Adjusted Diluted EPS may not be comparable to
similarly titled measures used by other entities.
Items Impacting
Comparability
Our branded operations represented
the assets and operations that were previously shown as the retail
segment. In previous periods, a portion of our marketing business
related to sales in unbranded or wholesale channels that were
presented within our refining operating segment. Upon considering
the changes in our business, including the transition from
company-owned retail operations to multi-site operator model, we
assessed how our chief operating decision maker evaluates the
business, assesses performance and allocates resources. From this
analysis, we believed the presentation of a marketing segment
inclusive of both unbranded and branded marketing operations was
appropriate. As of the second quarter 2015, we revised our
operating segments to include refining, TLLP and a realigned
marketing segment. Comparable prior period information has been
recast to reflect our revised segment presentation. No other
changes were deemed necessary to our refining and TLLP
segments.
The TLLP financial and operational
data presented include the historical results of all assets
acquired from Tesoro prior to the acquisition dates. The
acquisitions from Tesoro were transfers between entities under
common control. Accordingly, the financial information of TLLP
contained herein has been retrospectively adjusted to include the
historical results of the assets acquired in the acquisitions from
Tesoro prior to the effective date of each acquisition for all
periods presented.
TLLP acquired assets related to,
and entities engaged in, natural gas gathering, transportation and
processing in Wyoming, Colorado, Utah, and North Dakota (the
"Rockies Natural Gas Business") through its acquisition of QEP
Field Services, LLC ("QEPFS") from QEP Resources, Inc. on
December 2, 2014. At the acquisition date, QEPFS held an
approximate 56% limited partner interest in QEP Midstream Partners,
LP ("QEPM") and 100% of QEPM's general partner, QEP Midstream
Partners GP, LLC, which itself held a 2% general partner interest
and all of the incentive distribution rights in QEPM. All
intercompany transactions with TLLP and QEPM are eliminated upon
consolidation.
Certain 2014 period EBITDA
financial information has been revised to conform with EBITDA and
Adjusted EBITDA presentation disclosed by TLLP on a standalone
basis.
TESORO
CORPORATION
CONDENSED CONSOLIDATING BALANCE
SHEETS
(Unaudited)
(In millions, except share data)
|
September 30,
2015 |
|
December 31,
2014 |
ASSETS |
Current Assets |
|
|
|
Cash and cash equivalents (TLLP:
$11 and $19, respectively) |
$ |
959 |
|
|
$ |
1,000 |
|
Receivables, net of allowance for doubtful accounts |
1,016 |
|
|
1,435 |
|
Inventories (a) |
2,507 |
|
|
2,439 |
|
Prepayments and other current assets |
176 |
|
|
200 |
|
Total Current Assets |
4,658 |
|
|
5,074 |
|
Net
Property, Plant and Equipment (TLLP: $3,432 and
$3,306, respectively) |
9,427 |
|
|
9,045 |
|
Other Noncurrent Assets |
2,516 |
|
|
2,372 |
|
Total
Assets |
$ |
16,601 |
|
|
$ |
16,491 |
|
|
|
|
|
LIABILITIES
AND EQUITY |
Current Liabilities |
|
|
|
Accounts payable |
$ |
1,789 |
|
|
$ |
2,470 |
|
Other current liabilities |
1,063 |
|
|
996 |
|
Total
Current Liabilities |
2,852 |
|
|
3,466 |
|
Other Noncurrent Liabilities |
2,099 |
|
|
1,888 |
|
Debt,
Net of Unamortized Issuance Costs (TLLP: $2,569
and $2,544, respectively) |
3,791 |
|
|
4,161 |
|
Equity |
7,859 |
|
|
6,976 |
|
Total
Liabilities and Equity |
$ |
16,601 |
|
|
$ |
16,491 |
|
___________________
(a) Due to a lower crude oil and refined product
pricing environment experienced since the end of 2014, we recorded
a lower of cost or market adjustment to cost of sales of $83
million ($50 million after-tax) at September 30, 2015 for our
crude oil, refined products, oxygenates and by-product inventories.
At December 31, 2014, we recorded a $42 million lower of cost
or market adjustment for the same type of inventories, which was
reversed in the first quarter of 2015 as the inventories associated
with the adjustment at the end of 2014 were sold or used during the
first quarter of 2015. The net effect of the lower of cost or
market inventory adjustment recognized during the nine months ended
September 30, 2015 was $41 million ($25 million
after-tax).
TESORO
CORPORATION
RESULTS OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions, except per share amounts)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Revenues |
$ |
7,743 |
|
|
$ |
11,151 |
|
|
$ |
22,438 |
|
|
$ |
32,188 |
|
Costs and Expenses: |
|
|
|
|
|
|
|
Cost of sales (a) |
5,571 |
|
|
9,594 |
|
|
17,309 |
|
|
28,409 |
|
Operating expenses |
589 |
|
|
624 |
|
|
1,676 |
|
|
1,813 |
|
Selling, general and administrative expenses
(b) |
95 |
|
|
86 |
|
|
247 |
|
|
209 |
|
Depreciation and amortization expense |
192 |
|
|
144 |
|
|
553 |
|
|
409 |
|
(Gain) loss on asset disposals and impairments
(c) |
4 |
|
|
1 |
|
|
12 |
|
|
(2 |
) |
Operating Income |
1,292 |
|
|
702 |
|
|
2,641 |
|
|
1,350 |
|
Interest and financing costs, net (d) |
(54 |
) |
|
(50 |
) |
|
(163 |
) |
|
(168 |
) |
Other
income, net (e) |
19 |
|
|
11 |
|
|
21 |
|
|
13 |
|
Earnings Before Income
Taxes |
1,257 |
|
|
663 |
|
|
2,499 |
|
|
1,195 |
|
Income
tax expense |
458 |
|
|
249 |
|
|
888 |
|
|
437 |
|
Net Earnings From Continuing
Operations |
799 |
|
|
414 |
|
|
1,611 |
|
|
758 |
|
Loss
from discontinued operations, net of tax |
- |
|
|
(1 |
) |
|
(4 |
) |
|
(2 |
) |
Net Earnings |
799 |
|
|
413 |
|
|
1,607 |
|
|
756 |
|
Less:
Net earnings from continuing operations attributable to
noncontrolling interest |
40 |
|
|
17 |
|
|
121 |
|
|
58 |
|
Net Earnings Attributable to
Tesoro Corporation |
$ |
759 |
|
|
$ |
396 |
|
|
$ |
1,486 |
|
|
$ |
698 |
|
Net Earnings (Loss) Attributable to Tesoro
Corporation |
|
|
|
|
|
|
|
Continuing operations |
$ |
759 |
|
|
$ |
397 |
|
|
$ |
1,490 |
|
|
$ |
700 |
|
Discontinued operations |
- |
|
|
(1 |
) |
|
(4 |
) |
|
(2 |
) |
Total |
$ |
759 |
|
|
$ |
396 |
|
|
$ |
1,486 |
|
|
$ |
698 |
|
Net Earnings (Loss) Per Share - Basic: |
|
|
|
|
|
|
|
Continuing operations |
$ |
6.19 |
|
|
$ |
3.11 |
|
|
$ |
11.98 |
|
|
$ |
5.41 |
|
Discontinued operations |
- |
|
|
(0.01 |
) |
|
(0.03 |
) |
|
(0.02 |
) |
Total |
$ |
6.19 |
|
|
$ |
3.10 |
|
|
$ |
11.95 |
|
|
$ |
5.39 |
|
Weighted average common shares outstanding - Basic |
122.5 |
|
|
127.9 |
|
|
124.3 |
|
|
129.5 |
|
Net Earnings (Loss) Per Share -
Diluted: |
|
|
|
|
|
|
|
Continuing operations |
$ |
6.13 |
|
|
$ |
3.06 |
|
|
$ |
11.85 |
|
|
$ |
5.32 |
|
Discontinued operations |
- |
|
|
(0.01 |
) |
|
(0.03 |
) |
|
(0.02 |
) |
Total |
$ |
6.13 |
|
|
$ |
3.05 |
|
|
$ |
11.82 |
|
|
$ |
5.30 |
|
Weighted average common shares outstanding -
Diluted |
123.8 |
|
|
129.7 |
|
|
125.7 |
|
|
131.7 |
|
_________________________
(b) Includes stock-based compensation expense of $22
million and $12 million for the three months ended
September 30, 2015 and 2014, respectively, and expense of $57
million and $20 million for the nine months ended
September 30, 2015 and 2014, respectively. The significant
impact to stock-based compensation expense is primarily a result of
changes in Tesoro's stock price during the three and nine months
ended September 30, 2015 as compared to the three and nine
months ended September 30, 2014.
(c) Includes a gain of $5 million ($2 million to
Tesoro, after-tax) for the nine months ended September 30,
2014 resulting from TLLP's sale of its Boise Terminal.
(d) Includes charges totaling $10 million ($4 million
to Tesoro, after-tax) and $41 million ($23 million to Tesoro,
after-tax) for premiums and unamortized debt issuance costs
associated with the redemption of TLLP's 2019 Notes and 2020 Notes
during the three and nine months ended September 30, 2014,
respectively.
(e) Includes equity in earnings of equity method
investments of $2 million and $6 million for the three and nine
months ended September 30, 2015, respectively, for TLLP
related to its investments in Three Rivers Gathering and Uinta
Basin Field Services. Also includes equity in earnings of equity
method investments of $5 million and $3 million for the three and
nine months ended September 30, 2015, respectively, and $9
million and $10 million for the three and nine months ended
September 30, 2014, respectively, for our refining segment
related to its investments in Watson Cogen Company and Vancouver
Energy. During the three and nine months ended September 30,
2015, we recorded a gain of $11 million ($7 million after-tax) as
other income for insurance proceeds related to the settlement of
claims associated with the Washington Refinery Fire.
TESORO
CORPORATION
SELECTED SEGMENT OPERATING DATA
(Unaudited) (In millions)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Earnings Before Income Taxes |
|
|
|
|
|
|
|
Refining (a) (f) |
$ |
895 |
|
|
$ |
536 |
|
|
$ |
1,831 |
|
|
$ |
1,074 |
|
TLLP
(c) |
112 |
|
|
61 |
|
|
329 |
|
|
169 |
|
Marketing (f) |
379 |
|
|
180 |
|
|
724 |
|
|
292 |
|
Total
Segment Operating Income |
1,386 |
|
|
777 |
|
|
2,884 |
|
|
1,535 |
|
Corporate and unallocated costs (b) |
(94 |
) |
|
(75 |
) |
|
(243 |
) |
|
(185 |
) |
Operating Income |
1,292 |
|
|
702 |
|
|
2,641 |
|
|
1,350 |
|
Interest and financing costs, net (d) |
(54 |
) |
|
(50 |
) |
|
(163 |
) |
|
(168 |
) |
Other
income, net (e) |
19 |
|
|
11 |
|
|
21 |
|
|
13 |
|
Earnings Before Income Taxes |
$ |
1,257 |
|
|
$ |
663 |
|
|
$ |
2,499 |
|
|
$ |
1,195 |
|
Depreciation and Amortization Expense |
|
|
|
|
|
|
|
Refining |
$ |
132 |
|
|
$ |
112 |
|
|
$ |
373 |
|
|
$ |
317 |
|
TLLP |
44 |
|
|
18 |
|
|
132 |
|
|
51 |
|
Marketing |
11 |
|
|
10 |
|
|
34 |
|
|
30 |
|
Corporate |
5 |
|
|
4 |
|
|
14 |
|
|
11 |
|
Total Depreciation and Amortization Expense |
$ |
192 |
|
|
$ |
144 |
|
|
$ |
553 |
|
|
$ |
409 |
|
Special Items, Before Taxes (g) |
|
|
|
|
|
|
|
Refining |
$ |
83 |
|
|
$ |
- |
|
|
$ |
41 |
|
|
$ |
- |
|
TLLP |
- |
|
|
1 |
|
|
14 |
|
|
1 |
|
Corporate |
(11 |
) |
|
- |
|
|
(11 |
) |
|
- |
|
Total
Special Items |
$ |
72 |
|
|
$ |
1 |
|
|
$ |
44 |
|
|
$ |
1 |
|
Adjusted EBITDA |
|
|
|
|
|
|
|
Refining (e) |
$ |
1,115 |
|
|
$ |
657 |
|
|
$ |
2,248 |
|
|
$ |
1,398 |
|
TLLP (e) |
158 |
|
|
80 |
|
|
481 |
|
|
224 |
|
Marketing |
390 |
|
|
190 |
|
|
758 |
|
|
322 |
|
Corporate |
(88 |
) |
|
(69 |
) |
|
(228 |
) |
|
(171 |
) |
Total
Adjusted EBITDA |
$ |
1,575 |
|
|
$ |
858 |
|
|
$ |
3,259 |
|
|
$ |
1,773 |
|
Capital Expenditures |
|
|
|
|
|
|
|
Refining |
$ |
153 |
|
|
$ |
118 |
|
|
$ |
485 |
|
|
$ |
280 |
|
TLLP |
92 |
|
|
63 |
|
|
235 |
|
|
137 |
|
Marketing |
8 |
|
|
9 |
|
|
20 |
|
|
27 |
|
Corporate |
6 |
|
|
4 |
|
|
16 |
|
|
20 |
|
Total
Capital Expenditures |
$ |
259 |
|
|
$ |
194 |
|
|
$ |
756 |
|
|
$ |
464 |
|
___________________
(f) Our refining segment uses RINs to satisfy its
obligations under the Renewable Fuels Standard, in addition to
physically blending required biofuels. Effective April 1, 2013, we
changed our intersegment pricing methodology and no longer reduced
the amount marketing pays for the biofuels by the market value of
the RINs due to significant volatility in the value of RINs. At the
end of 2014, given the price of RINs has become more transparent in
the price of biofuels, we determined our intersegment pricing
methodology should include the market value of RINs as a reduction
to the price our marketing segment pays to our refining
segment. We made this change effective January 1, 2015. We
have not adjusted financial information presented for our refining
and marketing segments for the three and nine months ended
September 30, 2014. Had we made this change effective January
1, 2014, operating income in our refining segment would have been
reduced by $35 million and $94 million for the three and nine
months ended September 30, 2014, respectively, with a
corresponding increase to operating income in our marketing
segment.
(g) The effects of
special items on net earnings before income taxes by segment
include:
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
|
(in
millions) |
Refining |
|
|
|
|
|
|
|
Inventory valuation adjustment (a) |
$ |
83 |
|
|
$ |
- |
|
|
$ |
41 |
|
|
$ |
- |
|
TLLP |
|
|
|
|
|
|
|
Throughput deficiency receivables (h) |
- |
|
|
- |
|
|
13 |
|
|
- |
|
Gain
on sale of Boise Terminal (c) |
- |
|
|
- |
|
|
- |
|
|
(5 |
) |
Acquisition costs included in general and
administrative expenses (i) |
- |
|
|
1 |
|
|
1 |
|
|
1 |
|
Inspection and maintenance expenses associated with the Northwest
Products System (j) |
- |
|
|
- |
|
|
- |
|
|
5 |
|
Corporate |
|
|
|
|
|
|
|
Insurance settlement gain (e) |
(11 |
) |
|
- |
|
|
(11 |
) |
|
- |
|
(h) During the nine
months ended September 30, 2015, TLLP invoiced QEPFS customers
for deficiency payments. TLLP did not recognize $13 million ($4
million to Tesoro, after-tax) of revenue related to the billing
period as it represented opening balance sheet assets for the
acquisition of the Rockies Natural Gas Business; however, TLLP is
entitled to the cash receipt from such billings.
(i) Reflects acquisition costs included in
general and administrative expenses primarily related to the merger
of QEPM into TLLP.
(j) Includes costs for detailed inspection and
maintenance program on the Northwest Products System Pipeline. The
purchase price of the Northwest Products System was reduced to
compensate TLLP for assuming responsibilities to perform this
work.
TESORO
CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION
(Unaudited) (Dollars in millions)
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
Cash Flows From (Used in): |
|
|
|
Operating activities |
$ |
1,847 |
|
|
$ |
1,047 |
|
Investing activities |
(783 |
) |
|
(483 |
) |
Financing activities |
(1,105 |
) |
|
(272 |
) |
Increase (Decrease) in Cash and Cash Equivalents |
$ |
(41 |
) |
|
$ |
292 |
|
|
September 30,
2015 |
|
December 31,
2014 |
Total debt, net of unamortized
issuance costs, to capitalization ratio |
33 |
% |
|
37 |
% |
Total debt, net of unamortized issuance costs, to
capitalization ratio excluding
TLLP debt (k) |
19 |
% |
|
27 |
% |
Working capital (current assets
less current liabilities) |
$ |
1,806 |
|
|
$ |
1,608 |
|
Total market value of TLLP units held by Tesoro
(l) |
$ |
1,268 |
|
|
$ |
1,658 |
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Cash distributions received from TLLP
(m): |
|
|
|
|
|
|
|
For common/subordinated units held |
$ |
20 |
|
|
$ |
12 |
|
|
$ |
58 |
|
|
$ |
34 |
|
For
general partner units held |
18 |
|
|
8 |
|
|
48 |
|
|
21 |
|
Total Cash Distributions Received from TLLP |
$ |
38 |
|
|
$ |
20 |
|
|
$ |
106 |
|
|
$ |
55 |
|
_______________________
(k) Excludes TLLP's total debt, net of unamortized
issuance costs, and capital leases of $2.6 billion and $2.5 billion
at September 30, 2015 and December 31, 2014,
respectively, which are non-recourse to Tesoro, except for Tesoro
Logistics GP, LLC, and noncontrolling interest of $2.5 billion at
both September 30, 2015 and December 31, 2014.
(l) Represents market value of the 28,181,748
common units held by Tesoro at both September 30, 2015 and
December 31, 2014. The market values were $45.00 and $58.85
per unit based on the closing unit price at September 30, 2015
and December 31, 2014, respectively.
(m) Represents distributions received from TLLP during the
three and nine months ended September 30, 2015 and 2014 on
common or subordinated units and general partner units held by
Tesoro.
TESORO
CORPORATION
SELECTED CONSOLIDATED OPERATING DATA AND
RESULTS
(Unaudited)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Refined Product Sales (Mbpd) (n) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
530 |
|
|
516 |
|
|
510 |
|
|
511 |
|
Diesel fuel |
213 |
|
|
223 |
|
|
198 |
|
|
208 |
|
Jet
fuel |
148 |
|
|
146 |
|
|
153 |
|
|
146 |
|
Heavy fuel oils, residual products and other |
101 |
|
|
87 |
|
|
91 |
|
|
85 |
|
Total
Refined Product Sales |
992 |
|
|
972 |
|
|
952 |
|
|
950 |
|
|
|
|
|
|
|
|
|
Refined Product Sales Margin ($/barrel) (n) (o) |
|
|
|
|
|
|
|
Average sales price |
$ |
81.92 |
|
|
$ |
118.75 |
|
|
$ |
81.84 |
|
|
$ |
119.04 |
|
Average costs of sales |
66.35 |
|
|
106.93 |
|
|
67.92 |
|
|
107.77 |
|
Refined Product Sales Margin |
$ |
15.57 |
|
|
$ |
11.82 |
|
|
$ |
13.92 |
|
|
$ |
11.27 |
|
___________________
(n) Sources of total refined product sales include
refined products manufactured at our refineries and refined
products purchased from third parties. Total refined product sales
margins include margins on sales of manufactured and purchased
refined products.
(o) We calculate refined product sales margin per
barrel by dividing refined product sales margin by total refined
product sales (in barrels). Refined product sales margin represents
refined product sales less refined product cost of sales. Average
refined product sales price include all sales through our marketing
segment as well as in bulk markets and exports through our refining
segment. Average costs of sales and related sales margins include
amounts recognized for the sale of refined products manufactured at
our refineries along with the sale of refined products purchased
from third parties to help fulfill supply commitments. Investors
and analysts use these financial measures to help analyze and
compare companies in the industry on the basis of operating
performance. These financial measures should not be considered
alternatives to segment operating income, revenues, costs of sales
and operating expenses or any other measure of financial
performance presented in accordance with U.S. GAAP.
TESORO
CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
REFINING SEGMENT |
2015 |
|
2014 |
|
2015 |
|
2014 |
Total Refining Segment |
|
|
|
|
|
|
|
Throughput (Mbpd) |
|
|
|
|
|
|
|
Heavy crude (p) |
178 |
|
|
157 |
|
|
150 |
|
|
163 |
|
Light
crude |
635 |
|
|
641 |
|
|
575 |
|
|
614 |
|
Other feedstocks |
48 |
|
|
60 |
|
|
56 |
|
|
54 |
|
Total
Throughput |
861 |
|
|
858 |
|
|
781 |
|
|
831 |
|
Yield (Mbpd) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
438 |
|
|
445 |
|
|
405 |
|
|
430 |
|
Diesel fuel |
195 |
|
|
199 |
|
|
166 |
|
|
196 |
|
Jet
fuel |
122 |
|
|
130 |
|
|
119 |
|
|
126 |
|
Heavy fuel oils, residual products, internally
produced fuel
and other |
158 |
|
|
141 |
|
|
140 |
|
|
135 |
|
Total
Yield |
913 |
|
|
915 |
|
|
830 |
|
|
887 |
|
Segment Operating Income ($ millions) |
|
|
|
|
|
|
|
Gross
refining margin (q) (f) |
$ |
1,540 |
|
|
$ |
1,177 |
|
|
$ |
3,672 |
|
|
$ |
2,939 |
|
Expenses |
|
|
|
|
|
|
|
Manufacturing costs |
384 |
|
|
428 |
|
|
1,178 |
|
|
1,280 |
|
Other operating expenses |
124 |
|
|
96 |
|
|
275 |
|
|
258 |
|
Selling, general and administrative expenses |
3 |
|
|
4 |
|
|
7 |
|
|
9 |
|
Depreciation and amortization expense |
132 |
|
|
112 |
|
|
373 |
|
|
317 |
|
Loss
on asset disposal and impairments |
2 |
|
|
1 |
|
|
8 |
|
|
1 |
|
Segment Operating Income (f) |
$ |
895 |
|
|
$ |
536 |
|
|
$ |
1,831 |
|
|
$ |
1,074 |
|
Gross
Refining Margin ($/throughput barrel) (r) (s) |
$ |
20.49 |
|
|
$ |
14.92 |
|
|
$ |
17.42 |
|
|
$ |
12.96 |
|
Manufacturing Cost before Depreciation and
Amortization
Expense ($/throughput barrel) (r) |
$ |
4.84 |
|
|
$ |
5.42 |
|
|
$ |
5.53 |
|
|
$ |
5.65 |
|
___________________
(p) We define heavy crude oil as crude oil with an
American Petroleum Institute gravity of 24 degrees or
less.
(q) Consolidated gross refining margin combines gross
refining margin for each of our regions adjusted for other amounts
not directly attributable to a specific region. Other amounts
included $1 million for the three months ended September 30,
2015 and $3 million and $4 million for the nine months ended
September 30, 2015 and 2014, respectively. There were no
amounts for the three months ended September 30, 2014. Gross
refining margin includes the effect of intersegment sales to the
marketing segment and services provided by TLLP. Gross refining
margin approximates total refining throughput multiplied by the
gross refining margin per barrel.
(r) Management uses various measures to evaluate
performance and efficiency and to compare profitability to other
companies in the industry, including gross refining margin per
barrel, manufacturing costs before depreciation and amortization
expense ("Manufacturing Costs") per barrel and refined product
sales margin per barrel. We calculate gross refining margin per
barrel by dividing gross refining margin (revenues for manufactured
refined products sold less costs of feedstocks, purchased refined
products, transportation and distribution) by total refining
throughput. We calculate Manufacturing Costs per barrel by dividing
Manufacturing Costs by total refining throughput. Investors and
analysts use these financial measures to help analyze and compare
companies in the industry on the basis of operating performance.
These financial measures should not be considered alternatives to
segment operating income, revenues, costs of sales and operating
expenses or any other measure of financial performance presented in
accordance with U.S. GAAP.
(s) At September 30, 2015, we recorded an
$83 million charge for a lower of cost or market adjustment to our
inventories. On a regional basis, gross refining margin reflects
charges of $56 million, $18 million and $9 million for California,
Pacific Northwest and Mid-Continent, respectively. The gross
refining margin per throughput barrel on a consolidated and
regional basis do not include this charge. In addition, the gross
refining margin per throughput barrel for the nine months ended
September 30, 2015 excludes the impact of the $42 million
benefit recognized during the first quarter of 2015 from a lower of
cost or market inventory valuation adjustment recorded in the
fourth quarter of 2014 in the computation of the rate at a
consolidated or regional level.
TESORO
CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
Refining By Region |
2015 |
|
2014 |
|
2015 |
|
2014 |
California (Martinez and Los Angeles) |
|
|
|
|
|
|
|
Throughput (Mbpd) |
|
|
|
|
|
|
|
Heavy crude (p) |
172 |
|
|
153 |
|
|
144 |
|
|
158 |
|
Light
crude |
328 |
|
|
342 |
|
|
313 |
|
|
334 |
|
Other feedstocks |
34 |
|
|
43 |
|
|
37 |
|
|
36 |
|
Total
Throughput |
534 |
|
|
538 |
|
|
494 |
|
|
528 |
|
|
|
|
|
|
|
|
|
Yield
(Mbpd) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
279 |
|
|
292 |
|
|
265 |
|
|
284 |
|
Diesel
fuel |
111 |
|
|
119 |
|
|
98 |
|
|
123 |
|
Jet fuel |
76 |
|
|
84 |
|
|
76 |
|
|
81 |
|
Heavy
fuel oils, residual products, internally produced fuel
and other |
109 |
|
|
90 |
|
|
94 |
|
|
86 |
|
Total Yield |
575 |
|
|
585 |
|
|
533 |
|
|
574 |
|
|
|
|
|
|
|
|
|
Gross Refining Margin ($ millions) |
$ |
1,015 |
|
|
$ |
637 |
|
|
$ |
2,408 |
|
|
$ |
1,616 |
|
Gross
Refining Margin ($/throughput barrel) (r) (s) |
$ |
21.82 |
|
|
$ |
12.87 |
|
|
$ |
18.07 |
|
|
$ |
11.22 |
|
Manufacturing Cost before Depreciation and
Amortization
Expense ($/throughput barrel) (r) |
$ |
5.79 |
|
|
$ |
6.26 |
|
|
$ |
6.32 |
|
|
$ |
6.46 |
|
Capital Expenditures ($ millions) |
$ |
86 |
|
|
$ |
36 |
|
|
$ |
200 |
|
|
$ |
100 |
|
|
|
|
|
|
|
|
|
Pacific Northwest (Alaska &
Washington) |
|
|
|
|
|
|
|
Throughput (Mbpd) |
|
|
|
|
|
|
|
Heavy
crude (p) |
6 |
|
|
4 |
|
|
6 |
|
|
5 |
|
Light crude |
177 |
|
|
171 |
|
|
147 |
|
|
154 |
|
Other
feedstocks |
9 |
|
|
12 |
|
|
15 |
|
|
13 |
|
Total Throughput |
192 |
|
|
187 |
|
|
168 |
|
|
172 |
|
|
|
|
|
|
|
|
|
Yield (Mbpd) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
84 |
|
|
80 |
|
|
74 |
|
|
74 |
|
Diesel fuel |
41 |
|
|
38 |
|
|
31 |
|
|
33 |
|
Jet
fuel |
36 |
|
|
36 |
|
|
33 |
|
|
32 |
|
Heavy fuel oils, residual products, internally
produced fuel
and other |
38 |
|
|
39 |
|
|
36 |
|
|
38 |
|
Total
Yield |
199 |
|
|
193 |
|
|
174 |
|
|
177 |
|
|
|
|
|
|
|
|
|
Gross
Refining Margin ($ millions) |
$ |
238 |
|
|
$ |
248 |
|
|
$ |
641 |
|
|
$ |
506 |
|
Gross Refining Margin ($/throughput barrel) (r)
(s) |
$ |
14.49 |
|
|
$ |
14.38 |
|
|
$ |
14.20 |
|
|
$ |
10.80 |
|
Manufacturing Cost before Depreciation and Amortization
Expense ($/throughput barrel) (r) |
$ |
3.35 |
|
|
$ |
4.00 |
|
|
$ |
3.97 |
|
|
$ |
4.33 |
|
Capital Expenditures ($ millions) |
$ |
32 |
|
|
$ |
18 |
|
|
$ |
87 |
|
|
$ |
31 |
|
TESORO
CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Mid-Continent (North Dakota and Utah) |
|
|
|
|
|
|
|
Throughput (Mbpd) |
|
|
|
|
|
|
|
Light crude |
130 |
|
|
128 |
|
|
115 |
|
|
126 |
|
Other
feedstocks |
5 |
|
|
5 |
|
|
4 |
|
|
5 |
|
Total Throughput |
135 |
|
|
133 |
|
|
119 |
|
|
131 |
|
|
|
|
|
|
|
|
|
Yield (Mbpd) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
75 |
|
|
73 |
|
|
66 |
|
|
72 |
|
Diesel fuel |
43 |
|
|
42 |
|
|
37 |
|
|
40 |
|
Jet
fuel |
10 |
|
|
10 |
|
|
10 |
|
|
13 |
|
Heavy fuel oils, residual products, internally
produced fuel
and other |
11 |
|
|
12 |
|
|
10 |
|
|
11 |
|
Total
Yield |
139 |
|
|
137 |
|
|
123 |
|
|
136 |
|
|
|
|
|
|
|
|
|
Gross
Refining Margin ($ millions) |
$ |
286 |
|
|
$ |
292 |
|
|
$ |
620 |
|
|
$ |
813 |
|
Gross Refining Margin ($/throughput barrel) (r)
(s) |
$ |
23.66 |
|
|
$ |
23.91 |
|
|
$ |
19.22 |
|
|
$ |
22.69 |
|
Manufacturing Cost before Depreciation and Amortization
Expense ($/throughput barrel) (r) |
$ |
3.19 |
|
|
$ |
4.02 |
|
|
$ |
4.45 |
|
|
$ |
4.08 |
|
Capital Expenditures ($ millions) |
$ |
35 |
|
|
$ |
64 |
|
|
$ |
198 |
|
|
$ |
149 |
|
TESORO
CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
TLLP SEGMENT |
2015 |
|
2014 |
|
2015 |
|
2014 |
Gathering |
|
|
|
|
|
|
|
Crude oil gathering pipeline throughput (Mbpd) |
199 |
|
|
136 |
|
|
182 |
|
|
114 |
|
Average crude oil gathering pipeline revenue per barrel (t) |
$ |
1.71 |
|
|
$ |
1.38 |
|
|
$ |
1.77 |
|
|
$ |
1.35 |
|
Crude oil gathering trucking volume (Mbpd) |
34 |
|
|
51 |
|
|
42 |
|
|
47 |
|
Average crude oil gathering trucking revenue per barrel (t) |
$ |
3.14 |
|
|
$ |
3.30 |
|
|
$ |
3.24 |
|
|
$ |
3.24 |
|
Gas gathering throughput (thousands of MMBtu/day)
(u) |
1,115 |
|
|
- |
|
|
1,069 |
|
|
- |
|
Average gas gathering revenue per MMBtu (t) (u) |
$ |
0.45 |
|
|
$ |
- |
|
|
$ |
0.44 |
|
|
$ |
- |
|
Processing (u) |
|
|
|
|
|
|
|
NGL
processing throughput (Mbpd) |
8 |
|
|
- |
|
|
8 |
|
|
- |
|
Average keep-whole fee per barrel of NGL (t) |
$ |
35.75 |
|
|
$ |
- |
|
|
$ |
34.26 |
|
|
$ |
- |
|
Fee-based processing throughput (thousands of MMBtu/day) |
767 |
|
|
- |
|
|
742 |
|
|
- |
|
Average fee-based processing revenue per MMBtu
(t) |
$ |
0.39 |
|
|
$ |
- |
|
|
$ |
0.40 |
|
|
$ |
- |
|
Terminalling and Transportation |
|
|
|
|
|
|
|
Terminalling throughput (Mbpd) |
964 |
|
|
943 |
|
|
932 |
|
|
919 |
|
Average terminalling revenue per barrel (t) |
$ |
1.05 |
|
|
$ |
1.03 |
|
|
$ |
1.08 |
|
|
$ |
0.97 |
|
Pipeline transportation throughput (Mbpd) |
838 |
|
|
843 |
|
|
819 |
|
|
824 |
|
Average pipeline transportation revenue per barrel (t) |
$ |
0.40 |
|
|
$ |
0.36 |
|
|
$ |
0.39 |
|
|
$ |
0.36 |
|
|
|
|
|
|
|
|
|
Segment Operating Income ($ millions) |
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
Gathering |
$ |
87 |
|
|
$ |
32 |
|
|
$ |
253 |
|
|
$ |
84 |
|
Processing |
71 |
|
|
- |
|
|
205 |
|
|
- |
|
Terminalling and transportation |
124 |
|
|
118 |
|
|
362 |
|
|
326 |
|
Total Revenues (v) |
282 |
|
|
150 |
|
|
820 |
|
|
410 |
|
Expenses |
|
|
|
|
|
|
|
Operating expenses (w) |
98 |
|
|
55 |
|
|
278 |
|
|
155 |
|
General and administrative expenses (x) |
28 |
|
|
16 |
|
|
81 |
|
|
39 |
|
Depreciation and amortization expense |
44 |
|
|
18 |
|
|
132 |
|
|
51 |
|
Gain
on asset disposals and impairments |
- |
|
|
- |
|
|
- |
|
|
(4 |
) |
Segment Operating Income |
$ |
112 |
|
|
$ |
61 |
|
|
$ |
329 |
|
|
$ |
169 |
|
___________________________
(t) Management uses average revenue per barrel
and average revenue per MMBtu to evaluate performance and compare
profitability to other companies in the industry. We calculate
average revenue per barrel as revenue divided by total throughput
or keep-whole processing volumes. We calculate average revenue per
MMBtu as revenue divided by gas gathering and fee-based processing
volume. Investors and analysts use these financial measures to help
analyze and compare companies in the industry on the basis of
operating performance. These financial measures should not be
considered as an alternative to segment operating income, revenues
and operating expenses or any other measure of financial
performance presented in accordance with U.S. GAAP.
(u) TLLP commenced natural gas gathering and processing
operations with the acquisition of the Rockies Natural Gas Business
on December 2, 2014.
(v) TLLP segment revenues from services provided to our
refining segment were $152 million and $130 million for the three
months ended September 30, 2015 and 2014, respectively, and
$454 million and $358 million for the nine months ended
September 30, 2015 and 2014, respectively. These amounts are
eliminated upon consolidation.
(w) TLLP segment operating expenses include amounts billed by
Tesoro for services provided to TLLP under various operational
contracts. Amounts billed by Tesoro totaled $30 million and $18
million for the three months ended September 30, 2015 and
2014, respectively, and $79 million and $56 million for the nine
months ended September 30, 2015 and 2014, respectively.
Operating expenses also include imbalance gains and reimbursements
pursuant to the Amended Omnibus Agreement of $12 million and $17
million for the three months ended September 30, 2015 and
2014, respectively, and $31 million and $32 million for the nine
months ended September 30, 2015 and 2014, respectively. These
amounts are eliminated upon consolidation. TLLP segment third-party
operating expenses related to the transportation of crude oil and
refined products are reclassified to cost of sales in our condensed
statements of consolidated operations upon consolidation.
(x) TLLP segment
general and administrative expenses include amounts charged by
Tesoro for general and administrative services provided to TLLP
under various operational and administrative contracts. These
amounts totaled $16 million and $11 million for the three months
ended September 30, 2015 and 2014, respectively, and $51
million and $28 million for the nine months ended
September 30, 2015 and 2014, respectively, and are eliminated
upon consolidation. General and administrative expenses are also
reclassified to cost of sales.
TESORO
CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
MARKETING SEGMENT |
2015 |
|
2014 |
|
2015 |
|
2014 |
Average Number of Branded Stations (during the period) |
|
|
|
|
|
|
|
Company/MSO-operated (y) |
580 |
|
|
586 |
|
|
582 |
|
|
580 |
|
Jobber/Dealer operated |
1,695 |
|
|
1,693 |
|
|
1,684 |
|
|
1,694 |
|
Total Average Branded Stations |
2,275 |
|
|
2,279 |
|
|
2,266 |
|
|
2,274 |
|
|
|
|
|
|
|
|
|
Branded and Unbranded Fuel Sales (millions of
gallons) |
2,249 |
|
|
2,155 |
|
|
6,408 |
|
|
6,175 |
|
|
|
|
|
|
|
|
|
Branded and Unbranded Fuel Margin ($/gallon)
(z) |
$ |
0.20 |
|
|
$ |
0.12 |
|
|
$ |
0.15 |
|
|
$ |
0.08 |
|
|
|
|
|
|
|
|
|
Segment Operating Income ($ millions) |
|
|
|
|
|
|
|
Gross
Margins |
|
|
|
|
|
|
|
Fuel (z) (f) |
$ |
459 |
|
|
$ |
259 |
|
|
$ |
951 |
|
|
$ |
514 |
|
Other
non-fuel (y) (aa) |
16 |
|
|
33 |
|
|
45 |
|
|
92 |
|
Total Gross Margins |
475 |
|
|
292 |
|
|
996 |
|
|
606 |
|
Expenses |
|
|
|
|
|
|
|
Operating expenses |
81 |
|
|
97 |
|
|
223 |
|
|
271 |
|
Selling, general and administrative expenses |
3 |
|
|
5 |
|
|
12 |
|
|
11 |
|
Depreciation and amortization expense |
11 |
|
|
10 |
|
|
34 |
|
|
30 |
|
Loss
on asset disposals and impairments |
1 |
|
|
- |
|
|
3 |
|
|
2 |
|
Segment Operating Income (f) |
$ |
379 |
|
|
$ |
180 |
|
|
$ |
724 |
|
|
$ |
292 |
|
___________________
(y) During the fourth quarter 2014, we converted our
company-operated locations to multi-site operators ("MSO")
retaining the transportation fuel sales. All employees and
merchandise inventory were transferred to the MSOs.
(z) Management uses fuel margin per gallon to
compare fuel results to other companies in the industry. There are
a variety of ways to calculate fuel margin per gallon and different
companies may calculate it in different ways. We calculate fuel
margin per gallon by dividing fuel gross margin by fuel sales
volumes. Investors and analysts may use fuel margin per gallon to
help analyze and compare companies in the industry on the basis of
operating performance. This financial measure should not be
considered an alternative to revenues, segment operating income or
any other measure of financial performance presented in accordance
with U.S. GAAP. Fuel margin and fuel margin per gallon include the
effect of intersegment purchases from the refining
segment.
(aa) Primarily includes rental income for the three and nine
months ended September 30, 2015 and primarily merchandise
revenue for the three and nine months ended September 30,
2014.
TESORO
CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S.
GAAP
(Unaudited) (In millions)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Reconciliation of Net Earnings to EBITDA and
Adjusted
EBITDA |
|
|
|
|
|
|
|
Net earnings |
$ |
799 |
|
|
$ |
413 |
|
|
$ |
1,607 |
|
|
$ |
756 |
|
Loss
from discontinued operations, net of tax |
- |
|
|
1 |
|
|
4 |
|
|
2 |
|
Depreciation and amortization expense |
192 |
|
|
144 |
|
|
553 |
|
|
409 |
|
Income
tax expense |
458 |
|
|
249 |
|
|
888 |
|
|
437 |
|
Interest and financing costs, net |
54 |
|
|
50 |
|
|
163 |
|
|
168 |
|
EBITDA |
1,503 |
|
|
857 |
|
|
3,215 |
|
|
1,772 |
|
Special items (g) |
72 |
|
|
1 |
|
|
44 |
|
|
1 |
|
Adjusted EBITDA |
$ |
1,575 |
|
|
$ |
858 |
|
|
$ |
3,259 |
|
|
$ |
1,773 |
|
|
|
|
|
|
|
|
|
Reconciliation of Cash Flows from
Operating
Activities to EBITDA and Adjusted
EBITDA |
|
|
|
|
|
|
|
Net cash from operating
activities |
$ |
940 |
|
|
$ |
671 |
|
|
$ |
1,847 |
|
|
$ |
1,047 |
|
Net
cash used in discontinued operations |
2 |
|
|
1 |
|
|
2 |
|
|
2 |
|
Debt redemption charges |
(1 |
) |
|
(10 |
) |
|
(1 |
) |
|
(41 |
) |
Turnaround and marketing branding charges |
81 |
|
|
40 |
|
|
248 |
|
|
119 |
|
Changes in current assets and current
liabilities |
26 |
|
|
25 |
|
|
247 |
|
|
228 |
|
Income
tax expense |
458 |
|
|
249 |
|
|
888 |
|
|
437 |
|
Stock-based compensation expense |
(22 |
) |
|
(12 |
) |
|
(57 |
) |
|
(20 |
) |
Interest and financing costs, net |
54 |
|
|
50 |
|
|
163 |
|
|
168 |
|
Deferred income tax expense |
(111 |
) |
|
(203 |
) |
|
(157 |
) |
|
(227 |
) |
Other |
76 |
|
|
46 |
|
|
35 |
|
|
59 |
|
EBITDA |
1,503 |
|
|
857 |
|
|
3,215 |
|
|
1,772 |
|
Special items (g) |
72 |
|
|
1 |
|
|
44 |
|
|
1 |
|
Adjusted EBITDA |
$ |
1,575 |
|
|
$ |
858 |
|
|
$ |
3,259 |
|
|
$ |
1,773 |
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Reconciliation of Refining Operating Income to
Refining EBITDA and Adjusted EBITDA |
|
|
|
|
|
|
|
Operating income |
$ |
895 |
|
|
$ |
536 |
|
|
$ |
1,831 |
|
|
$ |
1,074 |
|
Impact
related to TLLP Predecessor presentation (ab) |
- |
|
|
- |
|
|
- |
|
|
(3 |
) |
Depreciation and amortization expense |
132 |
|
|
112 |
|
|
373 |
|
|
317 |
|
Other
income, net (e) |
5 |
|
|
9 |
|
|
3 |
|
|
10 |
|
EBITDA |
1,032 |
|
|
657 |
|
|
2,207 |
|
|
1,398 |
|
Special items (g) |
83 |
|
|
- |
|
|
41 |
|
|
- |
|
Adjusted EBITDA |
$ |
1,115 |
|
|
$ |
657 |
|
|
$ |
2,248 |
|
|
$ |
1,398 |
|
|
|
|
|
|
|
|
|
Reconciliation of TLLP Operating
Income to TLLP EBITDA and Adjusted EBITDA |
|
|
|
|
|
|
|
Operating income |
$ |
112 |
|
|
$ |
61 |
|
|
$ |
329 |
|
|
$ |
169 |
|
Loss attributable to Predecessor (ab) |
- |
|
|
- |
|
|
- |
|
|
3 |
|
Depreciation and amortization expense |
44 |
|
|
18 |
|
|
132 |
|
|
51 |
|
Other income, net (e) |
2 |
|
|
- |
|
|
6 |
|
|
- |
|
EBITDA |
158 |
|
|
79 |
|
|
467 |
|
|
223 |
|
Special items (g) |
- |
|
|
1 |
|
|
14 |
|
|
1 |
|
Adjusted EBITDA |
$ |
158 |
|
|
$ |
80 |
|
|
$ |
481 |
|
|
$ |
224 |
|
|
|
|
|
|
|
|
|
Reconciliation of Marketing Operating Income to
Marketing
EBITDA and Adjusted EBITDA |
|
|
|
|
|
|
|
Operating income |
$ |
379 |
|
|
$ |
180 |
|
|
$ |
724 |
|
|
$ |
292 |
|
Depreciation and amortization expense |
11 |
|
|
10 |
|
|
34 |
|
|
30 |
|
EBITDA and Adjusted
EBITDA |
$ |
390 |
|
|
$ |
190 |
|
|
$ |
758 |
|
|
$ |
322 |
|
|
|
|
|
|
|
|
|
Reconciliation of Corporate and
Other Operating Loss to
Corporate and Other EBITDA and Adjusted
EBITDA |
|
|
|
|
|
|
|
Operating loss |
$ |
(94 |
) |
|
$ |
(75 |
) |
|
$ |
(243 |
) |
|
$ |
(185 |
) |
Depreciation and amortization expense |
5 |
|
|
4 |
|
|
14 |
|
|
11 |
|
Other
income, net (e) |
12 |
|
|
2 |
|
|
12 |
|
|
3 |
|
EBITDA |
(77 |
) |
|
(69 |
) |
|
(217 |
) |
|
(171 |
) |
Special items (g) |
(11 |
) |
|
- |
|
|
(11 |
) |
|
- |
|
Adjusted EBITDA |
$ |
(88 |
) |
|
$ |
(69 |
) |
|
$ |
(228 |
) |
|
$ |
(171 |
) |
___________________
(ab) The TLLP financial and operational data presented
include the historical results of all assets acquired from Tesoro
prior to the acquisition dates. The acquisitions from Tesoro were
transfers between entities under common control. Accordingly, the
financial information of TLLP contained herein has been
retrospectively adjusted to include the historical results of the
assets acquired in the acquisitions from Tesoro prior to the
effective date of each acquisition for all periods presented. The
TLLP financial data is derived from the combined financial results
of the TLLP predecessor (the "TLLP Predecessor"). We refer to the
TLLP Predecessor and, prior to each acquisition date, the
acquisitions from Tesoro collectively, as "TLLP's
Predecessors."
|
Rockies Natural Gas Business |
|
Three Months Ended September 30,
2015 |
|
Nine Months Ended September 30,
2015 |
Reconciliation of Operating Income to EBITDA and
Adjusted EBITDA |
|
|
|
Operating income |
$ |
47 |
|
|
$ |
128 |
|
Depreciation and amortization expense |
25 |
|
|
72 |
|
EBITDA |
72 |
|
|
200 |
|
Throughput deficiency receivables (h) |
- |
|
|
13 |
|
Adjusted EBITDA |
$ |
72 |
|
|
$ |
213 |
|
|
Rockies Natural Gas Business 2015
Projected Annual EBITDA attributable to TLLP |
Reconciliation of Projected Net Earnings to
Projected Annual EBITDA |
|
Projected net earnings |
$ |
93 |
|
Depreciation and amortization expense |
96 |
|
Interest and financing costs, net |
86 |
|
Projected Adjusted EBITDA |
$ |
275 |
|
|
TLLP Projected Annual EBITDA Contribution
from Drop Down |
Reconciliation of TLLP Projected Net Earnings to
Projected Annual EBITDA |
|
Projected net earnings |
$
41 - 66 |
Depreciation and amortization expense |
2 |
|
Interest and financing costs, net |
7 |
|
Projected Annual EBITDA |
$ 50 -
75 |
|
TLLP 2015 Projected Annual
EBITDA |
|
TLLP 2017 Projected Annual
EBITDA |
Reconciliation of TLLP Projected Net Earnings to
Projected Annual EBITDA |
|
|
|
Projected net earnings |
$
295 - 315 |
|
$ |
555 |
|
Depreciation and amortization expense |
205 |
|
|
240 |
|
Interest and financing costs, net |
150 |
|
|
205 |
|
Projected Annual EBITDA |
$ 650 - 670 |
|
$ |
1,000 |
|
|
Nine Months Ended September 30,
2015 |
Estimated Free Cash Flow Reconciliation |
|
Net cash flow from operating
activities |
$ |
1,847 |
|
Less:
Sustaining (Maintenance and Regulatory) capital |
(313 |
) |
Less: Dividend payments |
(169 |
) |
Less:
Distributions to noncontrolling interest |
(135 |
) |
Free Cash Flow |
$ |
1,230 |
|
TESORO
CORPORATION
NET EARNINGS ADJUSTED FOR SPECIAL
ITEMS
(Unaudited) (In millions except per share
amounts)
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
|
2015 |
|
2014 |
|
2015 |
|
2014 |
Net Earnings Attributable to
Tesoro Corporation from Continuing Operations - U.S. GAAP |
$ |
759 |
|
|
$ |
397 |
|
|
$ |
1,490 |
|
|
$ |
700 |
|
Special Items, After-tax: (ac) |
|
|
|
|
|
|
|
Inventory valuation adjustment (a) |
50 |
|
|
- |
|
|
25 |
|
|
- |
|
Throughput deficiency receivables (h) |
- |
|
|
- |
|
|
4 |
|
|
- |
|
Insurance settlement gain (e) |
(7 |
) |
|
- |
|
|
(7 |
) |
|
- |
|
Debt
redemption charges (d) |
- |
|
|
4 |
|
|
- |
|
|
23 |
|
Gain on sale of Boise Terminal (c) |
- |
|
|
- |
|
|
- |
|
|
(2 |
) |
Adjusted Earnings |
$ |
802 |
|
|
$ |
401 |
|
|
$ |
1,512 |
|
|
$ |
721 |
|
|
|
|
|
|
|
|
|
Diluted Net Earnings per Share from Continuing
Operations Attributable to Tesoro Corporation - U.S. GAAP |
$ |
6.13 |
|
|
$ |
3.06 |
|
|
$ |
11.85 |
|
|
$ |
5.32 |
|
Special Items Per Share, After-tax: (ac) |
|
|
|
|
|
|
|
Inventory valuation adjustment (a) |
0.41 |
|
|
- |
|
|
0.20 |
|
|
- |
|
Throughput deficiency receivables (h) |
- |
|
|
- |
|
|
0.03 |
|
|
- |
|
Insurance settlement gain (e) |
(0.06 |
) |
|
- |
|
|
(0.06 |
) |
|
- |
|
Debt redemption charges (d) |
- |
|
|
0.03 |
|
|
- |
|
|
0.18 |
|
Gain
on sale of Boise Terminal (c) |
- |
|
|
- |
|
|
- |
|
|
(0.02 |
) |
Adjusted Diluted EPS |
$ |
6.48 |
|
|
$ |
3.09 |
|
|
$ |
12.02 |
|
|
$ |
5.48 |
|
___________________
(ac) For the purpose of reconciling net earnings, special
items have been adjusted pre-tax to reflect our limited and general
partner interests in TLLP including amounts attributable to our
incentive distribution rights.
This
announcement is distributed by NASDAQ OMX Corporate Solutions on
behalf of NASDAQ OMX Corporate Solutions clients.
The issuer of this announcement warrants that they are solely
responsible for the content, accuracy and originality of the
information contained therein.
Source: Tesoro Corporation via Globenewswire
HUG#1962254
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