-
Fourth quarter net earnings from continuing
operations of $78 million, or $0.66 per diluted share, consolidated
net earnings of $101 million and EBITDA of $468 million
-
Full year net earnings from continuing
operations of $724 million, or $6.04 per diluted share,
consolidated net earnings of $860 million and EBITDA of $2.4
billion
-
Full year Logistics operating income grew 24%
from last year to $487 million
-
Marketing operating income for 2016 was $830
million; total branded stations increased 4% during 2016 to
2,492
-
Returned $499 million to shareholders for the
year, including $63 million in the quarter
-
Announced acquisition of Western Refining, Inc.
on November 17, 2016
SAN ANTONIO -
February 6, 2017 - Tesoro Corporation (NYSE:TSO) today reported
fourth quarter net earnings from continuing operations attributable
to Tesoro of $78 million, or $0.66 per diluted share, compared to
$54 million, or $0.45 per diluted share a year ago. Consolidated
net earnings were $101 million for the fourth quarter 2016 compared
to $83 million for the same period last year. EBITDA for the fourth
quarter 2016 was $468 million compared to $388 million last year.
Fourth quarter operating income and EBITDA include a pre-tax
benefit of $123 million in 2016 and pre-tax loss of $276 million
related to a lower of cost or market (LCM) inventory adjustment in
2015.
|
Three Months
Ended December 31, |
|
Years
Ended
December 31, |
(Unaudited) ($ in millions, except per share
data) |
2016 |
|
2015 |
|
2016 |
|
2015 |
Operating Income |
|
|
|
|
|
|
|
Refining |
$ |
43 |
|
|
$ |
12 |
|
|
$ |
535 |
|
|
$ |
1,871 |
|
TLLP |
123 |
|
|
97 |
|
|
487 |
|
|
393 |
|
Marketing |
169 |
|
|
175 |
|
|
830 |
|
|
899 |
|
Total Segment Operating Income |
$ |
335 |
|
|
$ |
284 |
|
|
$ |
1,852 |
|
|
$ |
3,163 |
|
Net
Earnings From Continuing Operations Attributable to Tesoro |
$ |
78 |
|
|
$ |
54 |
|
|
$ |
724 |
|
|
$ |
1,544 |
|
|
|
|
|
|
|
|
|
Diluted EPS - Continuing Operations |
$ |
0.66 |
|
|
$ |
0.45 |
|
|
$ |
6.04 |
|
|
$ |
12.39 |
|
Diluted EPS - Discontinued Operations |
- |
|
|
- |
|
|
0.08 |
|
|
(0.03 |
) |
Total Diluted EPS |
$ |
0.66 |
|
|
$ |
0.45 |
|
|
$ |
6.12 |
|
|
$ |
12.36 |
|
"We made excellent progress in
2016 executing our growth and productivity improvement strategies.
This included achieving very strong safety and refining
availability, delivering annual improvements to operating income
and making strategic acquisitions that position the Company for
further growth. We returned approximately $500 million to
shareholders in the form of share repurchases and dividends and
invested in high-return capital projects. We achieved these results
despite a challenging market environment characterized by lower
refining margins and weaker crude oil differentials," said Greg
Goff, Chairman and CEO.
"Looking ahead to 2017, we are excited about the potential
opportunities that we see from an attractive refining market
environment, strong consumer demand for gasoline and numerous
strategic initiatives underway to continue to improve operating
income. Additionally, we are looking forward to continued growth of
Tesoro through our pending acquisition of Western Refining," added
Goff.
SEGMENT
RESULTS
REFINING. Refining operating income was $43
million for the fourth quarter 2016 compared to $12 million in 2015
and segment EBITDA was $205 million compared to $146 million in
2015. Fourth quarter 2016 operating income and segment EBITDA
include a pre-tax benefit of $123 million related to a LCM
inventory adjustment compared to a pre-tax loss of $276 million in
the fourth quarter 2015.
The Tesoro Index(a) was
$10.59 per barrel during the fourth quarter with a gross refining
margin of $9.45 per barrel. This compares to the Tesoro Index of
$15.60 per barrel with a gross refining margin of $9.05 per barrel
in the fourth quarter 2015. The year-over-year comparisons of
operating results and refining gross margins primarily reflect the
relatively strong market conditions in 2015 as well as LCM
impacts. Total refinery throughput for the quarter was 841
thousand barrels per day, or 94% utilization. Manufacturing costs
in the fourth quarter 2016 decreased by 3% per barrel over last
year to $5.43 per barrel primarily due to higher refinery
throughput in the fourth quarter 2016. Total refinery utilization
was 93% for 2016.
LOGISTICS.
Logistics operating income increased to $123 million in the fourth
quarter 2016 from $97 million a year ago and segment EBITDA
increased to $177 million from $146 million last year. The
performance of Tesoro Logistics LP (NYSE: TLLP) was driven by
year-over-year growth in crude oil gathering throughput,
terminalling and transportation throughput and contributions from
the acquisitions of the Alaska Storage and Terminalling Assets
completed during the third quarter 2016 and the Northern California
Terminalling and Storage Assets completed in November.
MARKETING.
Marketing operating income was $169 million, segment EBITDA was
$192 million and fuel margins were 11.4 cents per gallon in the
fourth quarter 2016. This compares to operating income of $175
million, segment EBITDA of $187 million and fuel margins of 11.7
cents per gallon last year. Consumer demand remained strong, with
year-over-year U.S. gasoline demand growth of approximately 1.6%
and California gasoline demand growth of approximately 2.1%,
through October. Additionally, U.S. vehicle miles traveled improved
by approximately 3.1% year-over-year through November. The Company
successfully executed its strategy of growing its branded station
network, increasing total branded stations by 95 to 2,492 at the
end of 2016.
CORPORATE AND
OTHER
Corporate and unallocated costs for the fourth quarter 2016 were
$111 million and include approximately $3 million of costs related
to the pending acquisition of Western Refining, Inc. (NYSE: WNR)
announced in November 2016. Net interest was $84 million in the
fourth quarter 2016, which includes $20 million of bridge financing
costs and $2 million of additional interest related related to the
pending acquisition of Western Refining. The effective tax rate was
39.2% for the quarter and 33.4% for the full year.
BALANCE SHEET AND
CASH FLOW
Tesoro ended the fourth quarter with $3.3 billion in cash and cash
equivalents, up from $942 million at the end of 2015. This was
primarily driven by proceeds from the $1.6 billion of senior notes
issued during the quarter related to the announced acquisition of
Western Refining and $672 million of higher cash and cash
equivalents at TLLP. Tesoro has $2.0 billion of availability under
its revolving credit facility and an additional $1.0 billion of
availability under its new revolving credit facility that is
contingent on the close of the Western Refining acquisition. As a
result of the senior notes issuance to fund the Western Refining
acquisition, total debt, net of unamortized issuance costs, was
$6.9 billion or 46% of total capitalization at the end of the
fourth quarter. Excluding TLLP debt and equity, total debt was $2.9
billion or 35% of total capitalization.
Capital spending for the fourth
quarter 2016 was $233 million for Tesoro and $91 million for TLLP.
Turnaround expenditures for the fourth quarter were $101 million.
Capital spending for the full year 2016 was $676 million for Tesoro
and $272 million for TLLP. Turnaround expenditures for the full
year were $334 million.
The Company paid cash dividends of
$63 million in the fourth quarter 2016. For the full year 2016,
Tesoro repurchased 3.2 million shares for $250 million and paid
cash dividends of $249 million. Additionally, Tesoro today
announced that its board of directors has declared a quarterly cash
dividend of $0.55 per share payable on March 15, 2017 to all
holders of record as of February 28, 2017. Tesoro continues to
maintain a strong balance sheet while investing in high-return
capital projects, pursuing strategic acquisitions and returning
cash to shareholders.
STRATEGIC
UPDATE
On November 17, 2016, Tesoro announced a definitive agreement
under which Tesoro will acquire Western Refining in a
primarily stock transaction. This transaction is an important step
for Tesoro in its ongoing commitment to creating significant value
for shareholders, employees and key community partners. The
acquisition is expected to create a premier, highly integrated and
geographically diversified refining, marketing and logistics
company and provide a strong platform for earnings growth and cash
flow generation. The transaction is expected to close in the first
half of 2017 and is subject to customary closing conditions,
including approval by the shareholders of both companies and the
receipt of regulatory approval.
Also, during the quarter, Tesoro
issued $1.6 billion in debt in the form of senior notes. The
Company intends to use a combination of the net proceeds from
senior notes, cash on hand and borrowings under its amended
revolving credit facility to fund the cash consideration and other
amounts related to Western Refining acquisition. Additional uses
may include the repayment and redemption of certain outstanding
indebtedness of Western Refining and its subsidiaries and the
payment of related fees and expenses.
Additionally during the quarter,
Tesoro sold the Northern California Terminalling and Storage Assets
to TLLP for a total consideration of $400 million, which included
cash proceeds of $360 million and the issuance of common and
general partner units to Tesoro, valued at approximately $40
million.
On January 1, 2017, TLLP
closed the previously announced acquisition of crude oil, natural
gas and produced water gathering systems and two natural gas
processing facilities for total consideration of approximately $700
million. The North Dakota Gathering and Processing Assets include
over 650 miles of crude oil, natural gas and produced water
gathering pipelines, 170 MMcf per day of natural gas processing
capacity and 18,700 barrels per day of fractionation capacity in
the Williston Basin in North Dakota.
The Company's expectations for
2016 were a Tesoro Index of $12 to $14 per barrel, Marketing
segment fuel margins of 11 to 14 cents per gallon and crude oil
differentials reflecting transportation costs. For the full year
2016, the Tesoro Index was at the low end of the range and
Marketing fuel margins were in line with expectations. Crude oil
differentials were significantly narrower than expectations and
resulted in lower year-over-year capture rates and refining
profitability. For the full year 2016, Tesoro delivered an
estimated $485 million of year-over-year improvements from higher
utilization and operational efficiencies versus our original
commitment of $500 to $600 million, which was revised to $400 to
$500 million in the second quarter of 2016.
Additionally, the Company also
committed to delivering $400 to $500 million of annual improvements
to operating income in 2016, consisting of $200 to $250 million in
Refining, $175 to $200 million in Logistics and $25 to $50 million
in Marketing. For the full year 2016, we estimate that Tesoro
delivered approximately $420 million of annual improvements to
operating income, including Refining improvements of approximately
$245 million, Logistics improvements of approximately $130 million
and Marketing improvements of approximately $45 million. Estimated
Logistics improvements were below the range primarily due to the
weak commodity price environment, which impacted crude oil and
natural gas volumes and organic growth.
2017
OUTLOOK
In November 2016, the Company issued its expectations for 2017,
which include a Tesoro Index of $12 to $14 per barrel and Marketing
segment fuel margins of 11 to 14 cents per gallon. In addition,
Tesoro committed to delivering an estimated $475 to $575
million of annual improvements in operating income in 2017,
excluding any expected synergies from the proposed Western Refining
acquisition, through the execution of its growth and productivity
plans. These improvements consist of $305 to $355 million in
Refining, $125 to $150 million in Logistics and $45 to $70 million
in Marketing. The Company expects total capital expenditures of
approximately $1.2 billion, consisting of $870 million at Tesoro
and $325 million at TLLP. Turnaround expenditures for the full year
2017 are expected to be $360 million.
PUBLIC INVITED TO
LISTEN TO ANALYST AND INVESTOR CONFERENCE CALL
At 7:30 a.m. CT tomorrow morning, Tesoro will live broadcast its
conference call with analysts regarding fourth quarter and full
year 2016 results and other business matters. Interested parties
may listen to the conference call by logging on to
http://www.tsocorp.com.
ABOUT TESORO
CORPORATION
Tesoro Corporation, a Fortune 100 company, is an independent
refiner and marketer of petroleum products. Tesoro, through its
subsidiaries, operates seven refineries in the western United
States with a combined capacity of over 895,000 barrels per day and
ownership in a logistics business, which includes an interest in
Tesoro Logistics LP (NYSE: TLLP) and ownership of its general
partner. Tesoro's retail-marketing system includes over 2,400
retail stations under the ARCO®, Shell®, Exxon®, Mobil®, USA
Gasoline(TM), Rebel(TM) and Tesoro® brands.
This earnings
release contains "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, including without limitation
statements concerning: our operational, financial and growth
strategies, including continued growth, maintaining a strong
balance sheet, investing in high-return capital projects, pursuing
acquisitions, and returning cash to our shareholders; our ability
to successfully effect those strategies and the expected timing and
results thereof; our financial and operational outlook, and ability
to fulfill that outlook; our financial position, liquidity and
capital resources; expectations regarding future economic and
market conditions and their effects on us; statements regarding the
pending acquisition of Western Refining, the expected benefits to
key stakeholders, and the expected timing and financing thereof;
and our 2017 outlook, including expectations relating to the Tesoro
Index, marketing segment fuel margins, annual improvements to
operating income and the drivers thereof, including expectations
with respect to each segment, total capital expenditures and the
allocation thereof, turnaround expenditures, and first quarter 2017
guidance. For more information concerning factors that could affect
these statements, see our annual report on Form 10-K, quarterly
reports on Form 10-Q, and other public filings and press releases,
available at www.tsocorp.com. We undertake no obligation to revise
or update any forward-looking statements as a result of new
information, future events or otherwise.
Contact:
Investors:
Sam Ramraj, Vice President, Investor Relations, (210) 626-4757
Media:
Tesoro Media Relations, media@tsocorp.com, (210) 626-7702
(a) As a performance
benchmark, we utilize crack spreads and the Tesoro Index to measure
the difference between market prices for crude oil and refined
products. Crack spreads are a commonly used proxy within the
industry to estimate or identify trends in gross refining margins,
while the Tesoro Index is more specifically designed around
Tesoro's assets. Crack spreads and the Tesoro Index can fluctuate
significantly over time as a result of market conditions and supply
and demand balances. For example, The West Coast 321 crack spread
is calculated using three barrels of Alaska North Slope crude oil
(ANS) producing two barrels of Los Angeles CARB gasoline and one
barrel of Los Angeles CARB diesel. In comparison the Tesoro Index
uses several crude oils and approximately 8 to 10 products to
provide a potentially closer representation of the trends in the
available margin. Our actual gross refining margins differ from
these crack spreads and the Tesoro Index based on the actual slate
of crude oil we run at our refineries and the products we produce
or yield.
TESORO
CORPORATION
FULL YEAR 2017 EXPECTED ANNUAL IMPROVEMENTS TO
OPERATING INCOME (Unaudited)
Expected Annual Improvements to Operating Income by Segment ($ in
millions) |
|
Refining |
$ 305 - 355 |
TLLP |
$ 125 - 150 |
Marketing |
$ 45 - 70 |
Total
Expected Annual Improvements to Operating Income |
$ 475 - 575 |
TESORO CORPORATION
FIRST QUARTER 2017 GUIDANCE (Unaudited)
Throughput (Mbpd) |
|
California |
490 - 515 |
Pacific Northwest |
175 - 185 |
Mid-Continent |
135 - 150 |
Consolidated |
800 - 850 |
|
|
Manufacturing Cost ($/throughput barrel) |
|
California |
$ 6.85 - 7.10 |
Pacific Northwest |
$ 4.15 - 4.40 |
Mid-Continent |
$ 4.35 - 4.60 |
Consolidated |
$ 5.85 - 6.10 |
|
|
Corporate/System ($ millions) |
|
Refining depreciation |
$ 146 |
TLLP
depreciation |
$ 55 |
Marketing depreciation |
$ 12 |
Corporate and other depreciation |
$ 7 |
Corporate expense (before depreciation) |
$ 95 - 100 |
Interest expense (before interest income) |
$ 92 |
Noncontrolling Interest |
$ 40 - 50 |
2017 CAPITAL
OUTLOOK (Unaudited) (in millions)
|
2017 Capital Expenditures
Outlook |
Capital Expenditures |
|
Tesoro
Corporation |
$ |
870 |
|
Tesoro
Logistics LP |
325 |
|
Total Capital Expenditures |
$ |
1,195 |
|
|
2017 Tesoro Capital Expenditures
Outlook |
Tesoro Capital Expenditures |
|
Income |
$ |
325 |
|
Regulatory |
90 |
|
Maintenance |
455 |
|
Total Tesoro Corporation Capital
Expenditures |
$ |
870 |
|
|
|
Turnaround Expenditures |
$ |
360 |
|
|
2017 TLLP Capital Expenditures
Outlook |
TLLP Capital Expenditures |
|
Growth |
$ |
230 |
|
Maintenance |
95 |
|
Total Tesoro Logistics LP Capital
Expenditures |
$ |
325 |
|
NON-GAAP
MEASURES
Our management uses certain
"non-GAAP" performance measures to analyze operating segment
performance and "non-GAAP" financial measures to evaluate past
performance and prospects for the future to supplement our GAAP
financial information presented in accordance with accounting
principles generally accepted in the United States of America
("U.S. GAAP"). These financial non-GAAP measures are important
factors in assessing our operating results and profitability and
include:
-
EBITDA-U.S. GAAP-based net earnings before
interest, income taxes, and depreciation and amortization
expenses
-
Segment EBITDA-a segment's U.S. GAAP operating
income before depreciation and amortization expenses plus equity in
earnings (loss) of equity method investments and other income
(expense), net
-
Debt to capitalization ratio excluding TLLP-the
ratio achieved by dividing the net result of our consolidated debt
less all debt owed by TLLP (both net of unamortized issuance costs)
by the sum of our consolidated debt less TLLP's total debt (both
net of unamortized issuance costs) and our total equity less
noncontrolling interest associated with the public ownership of
TLLP
We present these measures because
we believe they may help investors, analysts, lenders and ratings
agencies analyze our results of operations and liquidity in
conjunction with our U.S. GAAP results, including but not limited
to:
-
our operating performance as compared to other
publicly traded companies in the refining, logistics and marketing
industries, without regard to historical cost basis or financing
methods;
-
our ability to incur and service debt and fund
capital expenditures; and
-
the viability of acquisitions and other capital
expenditure projects and the returns on investment of various
investment opportunities.
Management also uses these
measures to assess internal performance, and we believe they may
provide meaningful supplemental information to the users of our
financial statements. Non-GAAP measures have important limitations
as analytical tools, because they exclude some, but not all, items
that affect net earnings and operating income. These measures
should not be considered substitutes for their most directly
comparable U.S. GAAP financial measures. See the tables below for
reconciliations between each non-GAAP financial measure and its
most directly comparable U.S. GAAP financial measure.
ITEMS IMPACTING
COMPARABILITY
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."
TESORO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In millions)
|
December
31, |
|
2016 |
|
2015 |
ASSETS |
|
|
|
Current Assets |
|
|
|
Cash
and cash equivalents (TLLP: $688 and $16, respectively) |
$ |
3,295 |
|
|
$ |
942 |
|
Receivables, net of allowance for doubtful accounts |
1,108 |
|
|
792 |
|
Inventories, net (b) |
2,640 |
|
|
2,302 |
|
Prepayments and other current assets |
371 |
|
|
271 |
|
Total
Current Assets |
7,414 |
|
|
4,307 |
|
Property, Plant and Equipment, Net (TLLP:
$3,444 and $3,681, respectively) |
9,976 |
|
|
9,541 |
|
Other Noncurrent Assets, Net (TLLP:
$1,446 and $1,198, respectively) |
3,008 |
|
|
2,484 |
|
Total Assets |
$ |
20,398 |
|
|
$ |
16,332 |
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
Current Liabilities |
|
|
|
Accounts payable |
$ |
2,032 |
|
|
$ |
1,568 |
|
Current maturities of debt |
465 |
|
|
6 |
|
Other
current liabilities |
1,057 |
|
|
956 |
|
Total Current Liabilities |
3,554 |
|
|
2,530 |
|
Deferred Income Taxes |
1,428 |
|
|
1,222 |
|
Debt,
Net of Unamortized Issuance Costs (TLLP: $4,053 and $2,844, respectively) |
6,468 |
|
|
4,067 |
|
Other
Noncurrent Liabilities |
821 |
|
|
773 |
|
Total
Equity |
8,127 |
|
|
7,740 |
|
Total Liabilities and Equity |
$ |
20,398 |
|
|
$ |
16,332 |
|
(b) The replacement
cost of our crude oil and refined product inventories exceeded
carrying value by approximately $107 million at
December 31, 2016. We recorded a lower of cost or market
("LCM") reserve of $359 million at December 31, 2015 to cost
of sales for our crude oil, refined products, oxygenates and
by-product inventories to adjust carrying value of our inventories
to reflect replacement cost.
TESORO CORPORATION
RESULTS OF CONSOLIDATED OPERATIONS (Unaudited) (In
millions, except per share amounts)
|
Three Months
Ended December 31, |
|
Years
Ended
December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
$ |
6,652 |
|
|
$ |
6,273 |
|
|
$ |
24,582 |
|
|
$ |
28,711 |
|
Costs and Expenses: |
|
|
|
|
|
|
|
Cost
of sales (excluding the lower of cost or market inventory valuation
adjustment) |
5,533 |
|
|
4,828 |
|
|
19,658 |
|
|
21,928 |
|
Lower
of cost or market inventory valuation adjustment (b) |
(123 |
) |
|
276 |
|
|
(359 |
) |
|
317 |
|
Operating expenses |
680 |
|
|
649 |
|
|
2,541 |
|
|
2,455 |
|
Selling, general and administrative expenses (c) |
118 |
|
|
101 |
|
|
401 |
|
|
386 |
|
Depreciation and amortization expenses |
218 |
|
|
203 |
|
|
851 |
|
|
756 |
|
Loss on asset disposals and impairments |
2 |
|
|
30 |
|
|
9 |
|
|
42 |
|
Operating Income |
224 |
|
|
186 |
|
|
1,481 |
|
|
2,827 |
|
Interest and financing costs, net |
(84 |
) |
|
(54 |
) |
|
(274 |
) |
|
(217 |
) |
Equity
in earnings (loss) of equity method investments |
1 |
|
|
(2 |
) |
|
13 |
|
|
7 |
|
Other income, net (d) |
25 |
|
|
1 |
|
|
57 |
|
|
13 |
|
Earnings Before Income Taxes |
166 |
|
|
131 |
|
|
1,277 |
|
|
2,630 |
|
Income tax expense |
65 |
|
|
48 |
|
|
427 |
|
|
936 |
|
Net Earnings From Continuing Operations |
101 |
|
|
83 |
|
|
850 |
|
|
1,694 |
|
Earnings (Loss) from discontinued operations, net of
tax |
- |
|
|
- |
|
|
10 |
|
|
(4 |
) |
Net Earnings |
101 |
|
|
83 |
|
|
860 |
|
|
1,690 |
|
Less: Net earnings (loss) from continuing operations
attributable to noncontrolling interest |
23 |
|
|
29 |
|
|
126 |
|
|
150 |
|
Net Earnings Attributable to Tesoro
Corporation |
$ |
78 |
|
|
$ |
54 |
|
|
$ |
734 |
|
|
$ |
1,540 |
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Attributable to Tesoro
Corporation |
|
|
|
|
|
|
|
Continuing operations |
$ |
78 |
|
|
$ |
54 |
|
|
$ |
724 |
|
|
$ |
1,544 |
|
Discontinued operations |
- |
|
|
- |
|
|
10 |
|
|
(4 |
) |
Total |
$ |
78 |
|
|
$ |
54 |
|
|
$ |
734 |
|
|
$ |
1,540 |
|
|
|
|
|
|
|
|
|
Net Earnings (Loss) Per Share - Basic: |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.67 |
|
|
$ |
0.46 |
|
|
$ |
6.11 |
|
|
$ |
12.53 |
|
Discontinued operations |
- |
|
|
- |
|
|
0.08 |
|
|
(0.03 |
) |
Total |
$ |
0.67 |
|
|
$ |
0.46 |
|
|
$ |
6.19 |
|
|
$ |
12.50 |
|
Weighted average common shares outstanding - Basic |
116.8 |
|
120.0 |
|
118.5 |
|
123.2 |
|
|
|
|
|
|
|
|
Net Earnings (Loss) Per Share - Diluted: |
|
|
|
|
|
|
|
Continuing operations |
$ |
0.66 |
|
|
$ |
0.45 |
|
|
$ |
6.04 |
|
|
$ |
12.39 |
|
Discontinued operations |
- |
|
|
- |
|
|
0.08 |
|
|
(0.03 |
) |
Total |
$ |
0.66 |
|
|
$ |
0.45 |
|
|
$ |
6.12 |
|
|
$ |
12.36 |
|
Weighted average common shares outstanding - Diluted |
118.2 |
|
121.4 |
|
119.9 |
|
124.6 |
(c) Includes
stock-based compensation expenses of $14 million and $18 million
for the three months ended December 31, 2016 and 2015,
respectively, and expense of $35 million and $75 million for the
years ended December 31, 2016 and 2015, respectively. The
significant impact to stock-based compensation expense is primarily
a result of changes in Tesoro's stock price.
(d) Other income, net included insurance proceeds
related to a shipment of contaminated crude oil that was received
in 2014 as well as a refund of certain tariff charges that were
disputed. Additionally, a gain recognized by TLLP on a settlement
of amounts disputed by one of its customers on the annual
calculation of the natural gas gathering rate is included for the
year ended December 31, 2016. During the year ended
December 31, 2015, we recorded a gain of $11 million 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 December 31, |
|
Years
Ended
December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Earnings Before Income Taxes |
|
|
|
|
|
|
|
Refining |
$ |
43 |
|
|
$ |
12 |
|
|
$ |
535 |
|
|
$ |
1,871 |
|
TLLP |
123 |
|
|
97 |
|
|
487 |
|
|
393 |
|
Marketing |
169 |
|
|
175 |
|
|
830 |
|
|
899 |
|
Total
Segment Operating Income |
335 |
|
|
284 |
|
|
1,852 |
|
|
3,163 |
|
Corporate and unallocated costs (c) |
(111 |
) |
|
(98 |
) |
|
(371 |
) |
|
(336 |
) |
Operating Income |
224 |
|
|
186 |
|
|
1,481 |
|
|
2,827 |
|
Interest and financing costs, net |
(84 |
) |
|
(54 |
) |
|
(274 |
) |
|
(217 |
) |
Equity
in earnings (loss) of equity method investments |
1 |
|
|
(2 |
) |
|
13 |
|
|
7 |
|
Other income, net (d) |
25 |
|
|
1 |
|
|
57 |
|
|
13 |
|
Earnings Before Income Taxes |
$ |
166 |
|
|
$ |
131 |
|
|
$ |
1,277 |
|
|
$ |
2,630 |
|
Depreciation and Amortization Expenses |
|
|
|
|
|
|
|
Refining |
$ |
148 |
|
|
$ |
137 |
|
|
$ |
588 |
|
|
$ |
504 |
|
TLLP |
51 |
|
|
48 |
|
|
190 |
|
|
187 |
|
Marketing |
13 |
|
|
12 |
|
|
49 |
|
|
46 |
|
Corporate |
6 |
|
|
6 |
|
|
24 |
|
|
19 |
|
Total Depreciation and Amortization Expenses |
$ |
218 |
|
|
$ |
203 |
|
|
$ |
851 |
|
|
$ |
756 |
|
Segment EBITDA |
|
|
|
|
|
|
|
Refining |
$ |
205 |
|
|
$ |
146 |
|
|
$ |
1,163 |
|
|
$ |
2,375 |
|
TLLP |
177 |
|
|
146 |
|
|
696 |
|
|
587 |
|
Marketing |
192 |
|
|
187 |
|
|
889 |
|
|
945 |
|
Total Segment EBITDA |
$ |
574 |
|
|
$ |
479 |
|
|
$ |
2,748 |
|
|
$ |
3,907 |
|
Capital Expenditures |
|
|
|
|
|
|
|
Refining |
$ |
166 |
|
|
$ |
110 |
|
|
$ |
519 |
|
|
$ |
530 |
|
TLLP |
91 |
|
|
86 |
|
|
272 |
|
|
386 |
|
Marketing |
12 |
|
|
14 |
|
|
34 |
|
|
34 |
|
Corporate |
55 |
|
|
40 |
|
|
123 |
|
|
56 |
|
Total Capital Expenditures |
$ |
324 |
|
|
$ |
250 |
|
|
$ |
948 |
|
|
$ |
1,006 |
|
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP
(Unaudited) (In millions)
|
Three Months
Ended December 31, |
|
Years
Ended
December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Reconciliation of Net Earnings to EBITDA |
|
|
|
|
|
|
|
Net earnings |
$ |
101 |
|
|
$ |
83 |
|
|
$ |
860 |
|
|
$ |
1,690 |
|
Depreciation and amortization expenses |
218 |
|
|
203 |
|
|
851 |
|
|
756 |
|
Interest and financing costs, net |
84 |
|
|
54 |
|
|
274 |
|
|
217 |
|
Income
tax expense |
65 |
|
|
48 |
|
|
427 |
|
|
936 |
|
EBITDA |
$ |
468 |
|
|
$ |
388 |
|
|
$ |
2,412 |
|
|
$ |
3,599 |
|
Reconciliation of Refining Operating Income to
Refining Segment EBITDA |
|
|
|
|
|
|
|
Refining Segment Operating Income |
$ |
43 |
|
|
$ |
12 |
|
|
$ |
535 |
|
|
$ |
1,871 |
|
Depreciation and amortization expenses |
148 |
|
|
137 |
|
|
588 |
|
|
504 |
|
Equity
in loss of equity method investments |
(2 |
) |
|
(3 |
) |
|
- |
|
|
- |
|
Other
income, net (d) |
16 |
|
|
- |
|
|
40 |
|
|
- |
|
Segment EBITDA |
$ |
205 |
|
|
$ |
146 |
|
|
$ |
1,163 |
|
|
$ |
2,375 |
|
|
|
|
|
|
|
|
|
Reconciliation of TLLP Operating Income to TLLP
Segment EBITDA |
|
|
|
|
|
|
|
TLLP Segment Operating Income |
$ |
123 |
|
|
$ |
97 |
|
|
$ |
487 |
|
|
$ |
393 |
|
Depreciation and amortization expenses |
51 |
|
|
48 |
|
|
190 |
|
|
187 |
|
Equity
in earnings of equity method investments |
3 |
|
|
1 |
|
|
13 |
|
|
7 |
|
Other
income, net (d) |
- |
|
|
- |
|
|
6 |
|
|
- |
|
Segment EBITDA |
$ |
177 |
|
|
$ |
146 |
|
|
$ |
696 |
|
|
$ |
587 |
|
|
|
|
|
|
|
|
|
Reconciliation of Marketing Operating Income to
Marketing Segment EBITDA |
|
|
|
|
|
|
|
Marketing Segment Operating Income |
$ |
169 |
|
|
$ |
175 |
|
|
$ |
830 |
|
|
$ |
899 |
|
Depreciation and amortization expenses |
13 |
|
|
12 |
|
|
49 |
|
|
46 |
|
Other income, net (d) |
10 |
|
|
- |
|
|
10 |
|
|
- |
|
Segment EBITDA |
$ |
192 |
|
|
$ |
187 |
|
|
$ |
889 |
|
|
$ |
945 |
|
TESORO
CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION (Unaudited)
(In millions)
|
Three Months
Ended
December 31, |
|
Years
Ended
December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Cash Flows From (Used in): |
|
|
|
|
|
|
|
Operating activities |
$ |
103 |
|
|
$ |
284 |
|
|
$ |
1,304 |
|
|
$ |
2,131 |
|
Investing activities |
(297 |
) |
|
(346 |
) |
|
(1,317 |
) |
|
(1,129 |
) |
Financing activities |
2,102 |
|
|
45 |
|
|
2,366 |
|
|
(1,060 |
) |
Increase (Decrease) in Cash and Cash Equivalents |
$ |
1,908 |
|
|
$ |
(17 |
) |
|
$ |
2,353 |
|
|
$ |
(58 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
December
31, |
|
|
|
|
|
2016 |
|
2015 |
Working capital (current assets less current liabilities) |
|
|
|
|
$ |
3,860 |
|
|
$ |
1,777 |
|
Total
market value of TLLP units held by Tesoro (e) |
|
|
|
|
$ |
1,730 |
|
|
$ |
1,633 |
|
|
Three Months
Ended
December 31, |
|
Years
Ended
December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Cash
distributions received from TLLP (f): |
|
|
|
|
|
|
|
For
common units held |
$ |
29 |
|
|
$ |
22 |
|
|
$ |
108 |
|
|
$ |
80 |
|
For
general partner units held |
42 |
|
|
20 |
|
|
137 |
|
|
68 |
|
Total Cash Distributions Received from TLLP |
$ |
71 |
|
|
$ |
42 |
|
|
$ |
245 |
|
|
$ |
148 |
|
TESORO
CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP
(Unaudited) (In millions, except percentages)
|
December
31, |
|
2016 |
|
2015 |
Tesoro
consolidated debt (g) |
$ |
6,933 |
|
|
$ |
4,073 |
|
TLLP
debt (g) |
4,053 |
|
|
2,844 |
|
Tesoro Debt Excluding TLLP (g) |
$ |
2,880 |
|
|
$ |
1,229 |
|
|
|
|
|
Total
equity |
$ |
8,127 |
|
|
$ |
7,740 |
|
Noncontrolling interest |
2,662 |
|
|
2,527 |
|
Tesoro Corporation Stockholders' Equity |
$ |
5,465 |
|
|
$ |
5,213 |
|
|
|
|
|
Tesoro
debt, net of unamortized issuance costs, to capitalization ratio
(g) |
46 |
% |
|
34 |
% |
Tesoro
debt, net of unamortized issuance costs, to capitalization ratio
excluding
TLLP and noncontrolling interest (g) |
35 |
% |
|
19 |
% |
(e) Represents market
value of the 34,055,042 and 32,445,115 common units held by Tesoro
at December 31, 2016, and 2015, respectively. The market
values were $50.81 and $50.32 per unit based on the closing unit
price at December 31, 2016, and 2015, respectively.
(f) Represents distributions received from TLLP
during the three months and years ended December 31, 2016 and
2015 on common units and general partner units held by
Tesoro.
(g) These amounts and calculations are shown net of
unamortized issuance costs.
TESORO
CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($
in millions, except per barrel amounts)
|
Three Months
Ended December 31, |
|
Years
Ended
December 31, |
REFINING SEGMENT |
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
|
|
|
|
|
|
|
Refined products (h) |
$ |
5,779 |
|
|
$ |
5,576 |
|
|
$ |
21,213 |
|
|
$ |
25,443 |
|
Crude
oil resales and other |
333 |
|
|
166 |
|
|
1,043 |
|
|
946 |
|
Refining Revenues |
6,112 |
|
|
5,742 |
|
|
22,256 |
|
|
26,389 |
|
Cost of Sales |
|
|
|
|
|
|
|
Cost
of sales (excluding lower of cost or market adjustments) (i) |
5,504 |
|
|
4,794 |
|
|
19,469 |
|
|
21,728 |
|
Lower
of cost or market adjustments (b) |
(123 |
) |
|
276 |
|
|
(359 |
) |
|
317 |
|
Refining cost of sales |
5,381 |
|
|
5,070 |
|
|
19,110 |
|
|
22,045 |
|
Gross
refining margin (j) |
731 |
|
|
672 |
|
|
3,146 |
|
|
4,344 |
|
Expenses |
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
Manufacturing costs |
419 |
|
|
417 |
|
|
1,591 |
|
|
1,594 |
|
Other
operating expenses (k) |
122 |
|
|
80 |
|
|
429 |
|
|
329 |
|
Selling, general and administrative expenses |
(2 |
) |
|
2 |
|
|
2 |
|
|
14 |
|
Depreciation and amortization expenses |
148 |
|
|
137 |
|
|
588 |
|
|
504 |
|
Other |
1 |
|
|
24 |
|
|
1 |
|
|
32 |
|
Segment Operating Income |
$ |
43 |
|
|
$ |
12 |
|
|
$ |
535 |
|
|
$ |
1,871 |
|
|
|
|
|
|
|
|
|
Gross
Refining Margin ($/throughput barrel) (j) (l) |
$ |
9.45 |
|
|
$ |
9.05 |
|
|
$ |
10.42 |
|
|
$ |
15.12 |
|
Manufacturing Cost before Depreciation and Amortization Expenses
($/throughput barrel) (l) |
$ |
5.43 |
|
|
$ |
5.62 |
|
|
$ |
5.27 |
|
|
$ |
5.55 |
|
|
|
|
|
|
|
|
|
Total Refining Segment |
|
|
|
|
|
|
|
Throughput (Mbpd) |
|
|
|
|
|
|
|
Heavy
crude |
178 |
|
|
156 |
|
|
176 |
|
|
151 |
|
Light
crude |
607 |
|
|
596 |
|
|
598 |
|
|
580 |
|
Other feedstocks |
56 |
|
|
55 |
|
|
51 |
|
|
56 |
|
Total Throughput |
841 |
|
|
807 |
|
|
825 |
|
|
787 |
|
Yield
(Mbpd) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
457 |
|
|
420 |
|
|
451 |
|
|
409 |
|
Diesel
fuel |
209 |
|
|
181 |
|
|
189 |
|
|
169 |
|
Jet
fuel |
124 |
|
|
117 |
|
|
118 |
|
|
119 |
|
Heavy fuel oils, residual products, internally produced
fuel and other |
108 |
|
|
136 |
|
|
122 |
|
|
139 |
|
Total Yield |
898 |
|
|
854 |
|
|
880 |
|
|
836 |
|
Refined Product Sales (Mbpd) (m) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
510 |
|
|
516 |
|
|
523 |
|
|
510 |
|
Diesel
fuel |
159 |
|
|
222 |
|
|
210 |
|
|
204 |
|
Jet
fuel |
228 |
|
|
151 |
|
|
149 |
|
|
152 |
|
Heavy fuel oils, residual products and other |
96 |
|
|
95 |
|
|
102 |
|
|
92 |
|
Total Refined Product Sales |
993 |
|
|
984 |
|
|
984 |
|
|
958 |
|
(h) Refined product
sales include intersegment sales to our marketing segment of $3.5
billion for both the three months ended December 31, 2016 and
2015 and $13.7 billion and $16.3 billion for the year ended
December 31, 2016 and 2015, respectively.
(i) Included in our refining segment's cost of
sales were TLLP segment revenues for services provided to our
refining segment of $194 million and $715 million for the three
months and year ended December 31, 2016, respectively, and
$161 million and $615 million for the three months and year ended
December 31, 2015, respectively. These amounts are eliminated
upon consolidation.
(j) Gross refining margin approximates total
refining throughput multiplied by the gross refining margin per
barrel. Consolidated gross refining margin combines gross refining
margin for each of our regions. Gross refining margin includes the
effect of intersegment sales to the marketing segment and services
provided by TLLP as well as the incremental expense or benefit
associated with the LCM adjustments for all periods
presented.
(k) Included in our refining segment's operating
expenses are $22 million and $45 million related to environmental
expenses for the three months and year ended December 31,
2016, respectively, and $15 million and $44 million for the three
months and year ended December 31, 2015,
respectively.
(l) Management uses various measures to evaluate
performance and efficiency and to compare profitability to other
companies in the industry, including gross refining margin per
barrel and manufacturing costs before depreciation and amortization
expenses ("Manufacturing Costs") per barrel. We calculate gross
refining margin per barrel by dividing gross refining margin
(revenues for manufactured refined products sold less costs of
feedstocks, purchased refined products, transportation and
distribution) by total refining throughput. We calculate
Manufacturing Costs per barrel by dividing Manufacturing Costs by
total refining throughput.
(m) Sources of total refined product sales include refined
products manufactured at our refineries and refined products
purchased from third parties.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($
in millions, except per barrel amounts)
|
Three Months
Ended December 31, |
|
Years
Ended
December 31, |
Refining By Region |
2016 |
|
2015 |
|
2016 |
|
2015 |
California (Martinez and Los
Angeles) |
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
Refined products (h) |
$ |
3,873 |
|
|
$ |
3,816 |
|
|
$ |
14,231 |
|
|
$ |
17,317 |
|
Crude
oil resales and other |
155 |
|
|
111 |
|
|
312 |
|
|
344 |
|
Regional Revenue |
4,028 |
|
|
3,927 |
|
|
14,543 |
|
|
17,661 |
|
Cost of Sales |
|
|
|
|
|
|
|
Cost
of sales (excluding LCM) |
3,595 |
|
|
3,226 |
|
|
12,671 |
|
|
14,522 |
|
LCM |
(82 |
) |
|
181 |
|
|
(236 |
) |
|
207 |
|
Regional Cost of Sales |
3,513 |
|
|
3,407 |
|
|
12,435 |
|
|
14,729 |
|
Gross
refining margin (j) |
515 |
|
|
520 |
|
|
2,108 |
|
|
2,932 |
|
Expenses |
|
|
|
|
|
|
|
Manufacturing costs |
295 |
|
|
293 |
|
|
1,118 |
|
|
1,144 |
|
Other
operating expenses |
69 |
|
|
52 |
|
|
210 |
|
|
206 |
|
Selling, general and administrative expenses |
(2 |
) |
|
2 |
|
|
1 |
|
|
13 |
|
Depreciation and amortization expenses |
95 |
|
|
93 |
|
|
375 |
|
|
336 |
|
Other |
- |
|
|
7 |
|
|
- |
|
|
10 |
|
Operating Income |
$ |
58 |
|
|
$ |
73 |
|
|
$ |
404 |
|
|
$ |
1,223 |
|
|
|
|
|
|
|
|
|
Gross
refining margin per throughput barrel (i) (j) |
$ |
10.74 |
|
|
$ |
11.54 |
|
|
$ |
11.36 |
|
|
$ |
16.29 |
|
Manufacturing costs per throughput barrel (j) |
$ |
6.17 |
|
|
$ |
6.51 |
|
|
$ |
6.02 |
|
|
$ |
6.37 |
|
Capital Expenditures |
$ |
98 |
|
|
$ |
65 |
|
|
$ |
286 |
|
|
$ |
200 |
|
|
|
|
|
|
|
|
|
Throughput (Mbpd) |
|
|
|
|
|
|
|
Heavy
crude |
172 |
|
|
152 |
|
|
170 |
|
|
146 |
|
Light
crude |
317 |
|
|
296 |
|
|
304 |
|
|
309 |
|
Other
feedstocks |
32 |
|
|
42 |
|
|
33 |
|
|
38 |
|
Total Throughput |
521 |
|
|
490 |
|
|
507 |
|
|
493 |
|
|
|
|
|
|
|
|
|
Yield
(Mbpd) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
300 |
|
|
262 |
|
|
294 |
|
|
264 |
|
Diesel
fuel |
131 |
|
|
105 |
|
|
113 |
|
|
100 |
|
Jet
fuel |
75 |
|
|
67 |
|
|
71 |
|
|
74 |
|
Heavy
fuel oils, residual products, internally produced fuel and
other |
61 |
|
|
92 |
|
|
74 |
|
|
93 |
|
Total Yield |
567 |
|
|
526 |
|
|
552 |
|
|
531 |
|
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($
in millions, except per barrel amounts)
|
Three Months
Ended December 31, |
|
Years
Ended
December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Pacific Northwest (Washington and
Alaska) |
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
Refined products (h) |
$ |
1,096 |
|
|
$ |
996 |
|
|
$ |
4,030 |
|
|
$ |
4,767 |
|
Crude
oil resales and other |
51 |
|
|
36 |
|
|
226 |
|
|
350 |
|
Regional Revenue |
1,147 |
|
|
1,032 |
|
|
4,256 |
|
|
5,117 |
|
Cost of Sales |
|
|
|
|
|
|
|
Cost
of sales (excluding LCM) |
1,047 |
|
|
927 |
|
|
3,825 |
|
|
4,361 |
|
LCM |
(24 |
) |
|
66 |
|
|
(84 |
) |
|
76 |
|
Regional Cost of Sales |
1,023 |
|
|
993 |
|
|
3,741 |
|
|
4,437 |
|
Gross
refining margin (j) |
124 |
|
|
39 |
|
|
515 |
|
|
680 |
|
Expenses |
|
|
|
|
|
|
|
Manufacturing costs |
68 |
|
|
75 |
|
|
258 |
|
|
256 |
|
Other
operating expenses |
22 |
|
|
16 |
|
|
65 |
|
|
64 |
|
Selling, general and administrative expenses |
- |
|
|
- |
|
|
1 |
|
|
- |
|
Depreciation and amortization expenses |
27 |
|
|
22 |
|
|
96 |
|
|
86 |
|
Other |
- |
|
|
5 |
|
|
- |
|
|
6 |
|
Operating Income (Loss) |
$ |
7 |
|
|
$ |
(79 |
) |
|
$ |
95 |
|
|
$ |
268 |
|
|
|
|
|
|
|
|
|
Gross
refining margin per throughput barrel (i) (j) |
$ |
7.13 |
|
|
$ |
2.39 |
|
|
$ |
7.77 |
|
|
$ |
10.96 |
|
Manufacturing costs per throughput barrel (j) |
$ |
3.97 |
|
|
$ |
4.61 |
|
|
$ |
3.90 |
|
|
$ |
4.14 |
|
Capital Expenditures |
$ |
29 |
|
|
$ |
26 |
|
|
$ |
125 |
|
|
$ |
113 |
|
|
|
|
|
|
|
|
|
Throughput (Mbpd) |
|
|
|
|
|
|
|
Heavy
crude |
6 |
|
|
4 |
|
|
6 |
|
|
5 |
|
Light
crude |
165 |
|
|
164 |
|
|
162 |
|
|
151 |
|
Other feedstocks |
18 |
|
|
9 |
|
|
13 |
|
|
14 |
|
Total Throughput |
189 |
|
|
177 |
|
|
181 |
|
|
170 |
|
|
|
|
|
|
|
|
|
Yield
(Mbpd) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
82 |
|
|
76 |
|
|
80 |
|
|
75 |
|
Diesel
fuel |
39 |
|
|
34 |
|
|
35 |
|
|
31 |
|
Jet
fuel |
37 |
|
|
36 |
|
|
35 |
|
|
34 |
|
Heavy fuel oils, residual products, internally produced
fuel and other |
37 |
|
|
37 |
|
|
37 |
|
|
36 |
|
Total Yield |
195 |
|
|
183 |
|
|
187 |
|
|
176 |
|
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($
in millions, except per barrel amounts)
|
Three Months
Ended December 31, |
|
Years
Ended
December 31, |
|
2016 |
|
2015 |
|
2016 |
|
2015 |
Mid-Continent (North Dakota and
Utah) |
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
Refined products (h) |
$ |
810 |
|
|
$ |
764 |
|
|
$ |
2,952 |
|
|
$ |
3,359 |
|
Crude oil resales and other |
127 |
|
|
19 |
|
|
505 |
|
|
252 |
|
Regional Revenue |
937 |
|
|
783 |
|
|
3,457 |
|
|
3,611 |
|
Cost of Sales |
|
|
|
|
|
|
|
Cost
of sales (excluding LCM) |
862 |
|
|
641 |
|
|
2,973 |
|
|
2,845 |
|
LCM |
(17 |
) |
|
29 |
|
|
(39 |
) |
|
34 |
|
Regional Cost of Sales |
845 |
|
|
670 |
|
|
2,934 |
|
|
2,879 |
|
Gross
refining margin (j) |
92 |
|
|
113 |
|
|
523 |
|
|
732 |
|
Expenses |
|
|
|
|
|
|
|
Manufacturing costs |
55 |
|
|
49 |
|
|
214 |
|
|
194 |
|
Other
operating expenses |
31 |
|
|
12 |
|
|
154 |
|
|
59 |
|
Selling, general and administrative expenses |
- |
|
|
- |
|
|
- |
|
|
1 |
|
Depreciation and amortization expenses |
26 |
|
|
22 |
|
|
117 |
|
|
82 |
|
Other |
1 |
|
|
12 |
|
|
1 |
|
|
16 |
|
Operating Income (Loss) |
$ |
(21 |
) |
|
$ |
18 |
|
|
$ |
37 |
|
|
$ |
380 |
|
|
|
|
|
|
|
|
|
Gross
refining margin per throughput barrel (i) (j) |
$ |
7.58 |
|
|
$ |
8.77 |
|
|
$ |
10.43 |
|
|
$ |
16.17 |
|
Manufacturing costs per throughput barrel (j) |
$ |
4.57 |
|
|
$ |
3.79 |
|
|
$ |
4.29 |
|
|
$ |
4.26 |
|
Capital Expenditures |
$ |
39 |
|
|
$ |
19 |
|
|
$ |
108 |
|
|
$ |
217 |
|
|
|
|
|
|
|
|
|
Throughput (Mbpd) |
|
|
|
|
|
|
|
Light
crude |
125 |
|
|
135 |
|
|
132 |
|
|
120 |
|
Other feedstocks |
6 |
|
|
5 |
|
|
5 |
|
|
4 |
|
Total Throughput |
131 |
|
|
140 |
|
|
137 |
|
|
124 |
|
|
|
|
|
|
|
|
|
Yield
(Mbpd) |
|
|
|
|
|
|
|
Gasoline and gasoline blendstocks |
75 |
|
|
82 |
|
|
77 |
|
|
70 |
|
Diesel
fuel |
39 |
|
|
42 |
|
|
41 |
|
|
38 |
|
Jet
fuel |
12 |
|
|
14 |
|
|
12 |
|
|
11 |
|
Heavy fuel oils, residual products, internally produced
fuel and other |
10 |
|
|
7 |
|
|
11 |
|
|
10 |
|
Total Yield |
136 |
|
|
145 |
|
|
141 |
|
|
129 |
|
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($
in millions, except per barrel amounts)
|
Three Months
Ended December 31, |
|
Years
Ended
December 31, |
TLLP SEGMENT |
2016 |
|
2015 |
|
2016 |
|
2015 |
Segment Operating Income |
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
Gathering |
|
|
|
|
|
|
|
Gas
gathering |
$ |
41 |
|
|
$ |
42 |
|
|
$ |
163 |
|
|
$ |
170 |
|
Crude
oil gathering pipeline |
33 |
|
|
35 |
|
|
133 |
|
|
123 |
|
Crude
oil trucking |
9 |
|
|
9 |
|
|
36 |
|
|
46 |
|
Other |
1 |
|
|
- |
|
|
7 |
|
|
- |
|
Processing |
|
|
|
|
|
|
|
NGLs
processing |
24 |
|
|
25 |
|
|
98 |
|
|
96 |
|
Fee-based processing |
26 |
|
|
26 |
|
|
106 |
|
|
107 |
|
Other
processing |
18 |
|
|
22 |
|
|
72 |
|
|
75 |
|
Terminalling and transportation |
|
|
|
|
|
|
|
Terminalling |
135 |
|
|
102 |
|
|
480 |
|
|
377 |
|
Pipeline transportation |
32 |
|
|
31 |
|
|
125 |
|
|
118 |
|
TLLP Revenues (i) |
319 |
|
|
292 |
|
|
1,220 |
|
|
1,112 |
|
Expenses |
|
|
|
|
|
|
|
Operating expenses (n) (o) |
120 |
|
|
124 |
|
|
444 |
|
|
428 |
|
General and administrative expenses (p) |
24 |
|
|
22 |
|
|
95 |
|
|
103 |
|
Depreciation and amortization expenses |
51 |
|
|
48 |
|
|
190 |
|
|
187 |
|
Gain
on asset disposals and impairments |
1 |
|
|
1 |
|
|
4 |
|
|
1 |
|
Segment Operating Income |
$ |
123 |
|
|
$ |
97 |
|
|
$ |
487 |
|
|
$ |
393 |
|
|
|
|
|
|
|
|
|
Gathering |
|
|
|
|
|
|
|
Gas
gathering throughput (thousands of MMBtu/day) (q) |
871 |
|
|
1,102 |
|
|
879 |
|
|
1,077 |
|
Average gas gathering revenue per MMBtu (q) |
$ |
0.51 |
|
|
$ |
0.42 |
|
|
$ |
0.51 |
|
|
$ |
0.43 |
|
Crude
oil gathering pipeline throughput (Mbpd) |
218 |
|
|
205 |
|
|
212 |
|
|
188 |
|
Average crude oil gathering pipeline revenue per barrel |
$ |
1.68 |
|
|
$ |
1.86 |
|
|
$ |
1.72 |
|
|
$ |
1.79 |
|
Crude
oil trucking volume (Mbpd) |
30 |
|
|
28 |
|
|
30 |
|
|
38 |
|
Average crude oil trucking revenue per barrel |
$ |
3.14 |
|
|
$ |
3.27 |
|
|
$ |
3.23 |
|
|
$ |
3.25 |
|
Processing |
|
|
|
|
|
|
|
NGLs
processing throughput (Mbpd) |
6.8 |
|
|
7.8 |
|
|
7.3 |
|
|
7.6 |
|
Average keep-whole fee per barrel of NGLs |
$ |
36.35 |
|
|
$ |
35.00 |
|
|
$ |
36.53 |
|
|
$ |
34.46 |
|
Fee-based processing throughput (thousands of MMBtu/day) |
611 |
|
|
748 |
|
|
639 |
|
|
743 |
|
Average fee-based processing revenue per MMBtu |
$ |
0.47 |
|
|
$ |
0.38 |
|
|
$ |
0.45 |
|
|
$ |
0.39 |
|
Terminalling and Transportation |
|
|
|
|
|
|
|
Terminalling throughput (Mbpd) |
992 |
|
|
949 |
|
|
984 |
|
|
955 |
|
Average terminalling revenue per barrel |
$ |
1.48 |
|
|
$ |
1.17 |
|
|
$ |
1.33 |
|
|
$ |
1.08 |
|
Pipeline transportation throughput (Mbpd) |
874 |
|
|
841 |
|
|
868 |
|
|
825 |
|
Average pipeline transportation revenue per barrel |
$ |
0.39 |
|
|
$ |
0.39 |
|
|
$ |
0.39 |
|
|
$ |
0.39 |
|
(n) TLLP segment
operating expenses include amounts billed by Tesoro for services
provided to TLLP under various operational contracts. Amounts
billed by Tesoro totaled $42 million and $166 million for the three
months and year ended December 31, 2016, respectively, and $32
million and $135 million for the three months and year ended
December 31, 2015, respectively. Operating expenses also
include imbalance gains and reimbursements pursuant to the Amended
Omnibus Agreement of $7 million and $24 million for the three
months and year ended December 31, 2016, respectively, and $11
million and $42 million for the three months and year ended
December 31, 2015, respectively. These amounts are eliminated
upon consolidation. TLLP segment third-party operating expenses
related to the transportation of crude oil and refined products
related to Tesoro's sale of those refined products during the
ordinary course of business are reclassified to cost of sales in
our statements of consolidated operations upon
consolidation.
(o) Included in our TLLP segment's operating expenses
are $10 million and $14 million related to environmental expenses
for the three months and year ended December 31, 2016,
respectively, and $23 million and $27 million for the three months
and year ended December 31, 2015, respectively.
(p) 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 $17 million and $69
million for the three months and year ended December 31, 2016,
respectively, and $21 million and $72 million for the three months
and year ended December 31, 2015, respectively, and are
eliminated upon consolidation. General and administrative expenses
are reclassified to cost of sales as it relates to Tesoro's sale of
refined products in our statements of consolidated operations upon
consolidation.
(q) Prior to the deconsolidation of Rendezvous Gas
Services L.L.C. ("RGS") as of January 1, 2016, fees paid by TLLP to
RGS were eliminated upon consolidation and third-party
transactions, including revenue and throughput volumes, were
included in TLLP's results of operations. Third party volumes
associated with RGS, included in gas gathering volume for the three
months and year ended December 31, 2015, were 132 thousand
MMBtu/d and 141 thousand MMBtu/d, respectively, and reduced our
average gas gathering revenue per MMBtu for both periods by
$0.05.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($
in millions, except cents per gallon)
|
Three Months
Ended December 31, |
|
Years
Ended
December 31, |
MARKETING SEGMENT |
2016 |
|
2015 |
|
2016 |
|
2015 |
Revenues |
|
|
|
|
|
|
|
Fuel |
$ |
3,912 |
|
|
$ |
3,938 |
|
|
$ |
15,405 |
|
|
$ |
18,081 |
|
Other
non-fuel |
20 |
|
|
15 |
|
|
85 |
|
|
63 |
|
Total Revenues |
3,932 |
|
|
3,953 |
|
|
15,490 |
|
|
18,144 |
|
Cost of Sales |
|
|
|
|
|
|
|
Fuel |
3,663 |
|
|
3,681 |
|
|
14,275 |
|
|
16,873 |
|
Other
non-fuel |
4 |
|
|
2 |
|
|
17 |
|
|
5 |
|
Total Cost of Sales |
3,667 |
|
|
3,683 |
|
|
14,292 |
|
|
16,878 |
|
Gross Margin |
|
|
|
|
|
|
|
Fuel
(r) |
249 |
|
|
257 |
|
|
1,130 |
|
|
1,208 |
|
Other non-fuel |
16 |
|
|
13 |
|
|
68 |
|
|
58 |
|
Total
Gross Margins |
265 |
|
|
270 |
|
|
1,198 |
|
|
1,266 |
|
Expenses |
|
|
|
|
|
|
|
Operating expenses (s) |
77 |
|
|
77 |
|
|
298 |
|
|
300 |
|
Selling, general and administrative expenses |
5 |
|
|
3 |
|
|
17 |
|
|
15 |
|
Depreciation and amortization expenses |
13 |
|
|
12 |
|
|
49 |
|
|
46 |
|
Loss
on asset disposals and impairments |
1 |
|
|
3 |
|
|
4 |
|
|
6 |
|
Segment Operating Income |
$ |
169 |
|
|
$ |
175 |
|
|
$ |
830 |
|
|
$ |
899 |
|
|
|
|
|
|
|
|
|
Fuel
Sales (millions of gallons) |
2,181 |
|
|
2,203 |
|
|
8,879 |
|
|
8,611 |
|
Fuel
Margin (¢/gallon) (r) |
11.4 |
¢ |
|
11.7 |
¢ |
|
12.7 |
¢ |
|
14.0 |
¢ |
|
|
|
|
|
|
|
|
Number of Branded Stations (at the end of the
period) |
|
|
|
|
|
|
|
MSO
operated |
|
|
|
|
594 |
|
|
592 |
|
Jobber/Dealer operated |
|
|
|
|
1,898 |
|
|
1,805 |
|
Total Stations |
|
|
|
|
2,492 |
|
|
2,397 |
|
(r) 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. Fuel margin and fuel
margin per gallon include the effect of intersegment purchases from
the refining segment.
(s) Included in our marketing segment's operating
expenses are $4 million and $10 million related to environmental
expenses for the three months and year ended December 31,
2016, respectively, and $5 million and $15 million for the three
months and year ended December 31, 2015, respectively.
TESORO
CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP
(Unaudited) (in millions)
|
TLLP 2017 Annual Expected Segment
EBITDA |
Reconciliation of Projected Operating Income to
Projected Annual Segment EBITDA: |
|
Projected operating income |
$ |
760 |
|
Add:
Depreciation and amortization expenses |
225 |
|
Add:
Equity in earnings of equity method investments |
15 |
|
Projected Annual Segment EBITDA |
$ |
1,000 |
|
FORWARD LOOKING
STATEMENTS
This communication contains
certain statements that are "forward-looking" statements within the
meaning of Section 27A of the Securities Act and Section 21E of the
Securities Exchange Act of 1934. Words such as "may," "will,"
"could," "anticipate," "estimate," "expect," "predict," "project,"
"future," "potential," "intend," "plan," "assume," "believe,"
"forecast," "look," "build," "focus," "create," "work" "continue"
or the negative of such terms or other variations thereof and words
and terms of similar substance used in connection with any discussion of future plans, actions, or events
identify forward-looking statements. These forward-looking
statements include, but are not limited to, statements regarding
the proposed Merger. There are a number of risks and uncertainties
that could cause actual results to differ materially from the
forward-looking statements included in this communication. For
example, the expected timing and likelihood of completion of the
proposed Merger, including the timing, receipt and terms and
conditions of any required governmental and regulatory approvals of
the proposed Merger that could reduce anticipated benefits or cause
the parties to abandon the transaction, the ability to successfully
integrate the businesses, the occurrence of any event, change or
other circumstances that could give rise to the termination of the
Merger Agreement, the possibility that stockholders of the Company
may not approve the issuance of new shares of common stock in the
Merger or that stockholders of Western may not approve the Merger
Agreement, the risk that the parties may not be able to satisfy the
conditions to the proposed transaction in a timely manner or at
all, risks related to disruption of management time from ongoing
business operations due to the proposed transaction, the risk that
any announcements relating to the proposed transaction could have
adverse effects on the market price of the Company's common stock
or Western's common stock, the risk that the proposed transaction
and its announcement could have an adverse effect on the ability of
the Company and Western to retain customers and retain and hire key
personnel and maintain relationships with their suppliers and
customers and on their operating results and businesses generally,
the risk that problems may arise in successfully integrating the
businesses of the companies, which may result in the combined
company not operating as effectively and efficiently as expected,
the risk that the combined company may be unable to achieve
cost-cutting synergies or it may take longer than expected to
achieve those synergies, the risk that the combined company may not
buy back shares, the risk of the amount of any future dividend the
Company may pay, and other factors. All such factors are difficult
to predict and are beyond the Company's control, including those
detailed in the Company's annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and registration
statement on Form S-4 filed with the SEC on December 14, 2016, as
amended (the "Form S-4") that are available on its website at
http://www.tsocorp.com and on the SEC's website at
http://www.sec.gov, and those detailed in Western's annual reports
on Form 10-K, quarterly reports on Form 10-Q and current reports on
Form 8-K that are available on Western's website at
http://www.wnr.com and on the SEC website at http://www.sec.gov.
The Company's and Western's forward-looking statements are based on
assumptions that the Company and Western believe to be reasonable
but that may not prove to be accurate. The Company and Western
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, except as required by applicable law or regulation.
Readers are cautioned not to place undue reliance on these
forward-looking statements that speak only as of the date
hereof.
Additional
Information and Where to Find It:
This communication may be deemed
to be solicitation material in respect of the proposed transaction
between the Company and Western. In connection with the proposed
transaction, the Company has filed the Form S-4, containing a
preliminary joint proxy statement/prospectus of the Company and
Western and Western and/or the Company may file one or more
additional proxy statements, registration statements, proxy
statement/prospectus or other documents with the SEC. This
communication is not a substitute for the proxy statement,
registration statement, proxy statement/prospectus or any other
documents that the Company or Western may file with the SEC or send
to stockholders in connection with the proposed transaction.
STOCKHOLDERS OF THE COMPANY AND WESTERN ARE URGED TO READ ALL
RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE FORM S-4 AND
ANY OTHER PROXY STATEMENT(S), REGISTRATION STATEMENT(S) AND/OR
PROXY STATEMENT/PROSPECTUS(ES), BECAUSE THEY WILL CONTAIN IMPORTANT
INFORMATION ABOUT THE PROPOSED TRANSACTION.
The Form S-4 has not yet become
effective. After the Form S-4 is declared effective by the SEC, the
Company and Western will each file with the SEC a definitive joint
proxy statement/prospectus, and each of the Company and Western
will file other documents with respect to the proposed transaction.
Any definitive proxy statement(s) (if and when available) will be
mailed to stockholders of Western and/or the Company, as
applicable. Investors and security holders will be able to obtain
copies of these documents, including the proxy
statement/prospectus, and other documents filed with the SEC (when
available) free of charge at the SEC's website, http://www.sec.gov.
Copies of documents filed with the SEC by the Company will be made
available free of charge on the Company's website at
http://www.tsocorp.com or by contacting the Company's Investor
Relations Department by phone at 210-626-6000. Copies of documents
filed with the SEC by Western will be made available free of charge
on Western's website at http://www.wnr.com or by contacting
Western's Investor Relations Department by phone at 602-286-1530 or
602-286-1533.
Participants in
the Solicitation:
The Company and its directors and
executive officers, and Western and its directors and executive
officers, may be deemed to be participants in the solicitation of
proxies from the holders of the Company's common stock and
Western's common stock in respect of the proposed transaction.
Information about the directors and executive officers of the
Company is set forth in the proxy statement for the Company's 2016
Annual Meeting of Stockholders, which was filed with the SEC on
March 22, 2016, and in the other documents filed after the date
thereof by the Company with the SEC. Information about the
directors and executive officers of Western is set forth in the
proxy statement for Western's 2016 Annual Meeting of Shareholders,
which was filed with the SEC on April 22, 2016, and in the other
documents filed after the date thereof by Western with the SEC.
Investors may obtain additional information regarding the interests
of such participants by reading the proxy statement/prospectus
regarding the proposed transaction when it becomes available. You
may obtain free copies of these documents as described in the
preceding paragraph.
This
announcement is distributed by Nasdaq Corporate Solutions on behalf
of Nasdaq 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
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