Attached files
| file | filename |
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| 8-K - FORM8-K - ANDEAVOR | form8_k.htm |
Howard Weil Energy Conference
Monday, March 28, 2011
Greg Goff
President and CEO, Tesoro Corporation
Forward Looking Statements
This Presentation includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements relate to, among other things,
projections of refining margins, debt reduction, cash flows and capital expenditures. We
have used the words "anticipate", "believe", "could", "estimate", "expect", "intend", "may",
"plan", "predict", "project", “should”, "will" and similar terms and phrases to identify
forward-looking statements in this Presentation.
Securities Litigation Reform Act of 1995. These statements relate to, among other things,
projections of refining margins, debt reduction, cash flows and capital expenditures. We
have used the words "anticipate", "believe", "could", "estimate", "expect", "intend", "may",
"plan", "predict", "project", “should”, "will" and similar terms and phrases to identify
forward-looking statements in this Presentation.
Although we believe the assumptions upon which these forward-looking statements are
based are reasonable, any of these assumptions could prove to be inaccurate and the
forward-looking statements based on these assumptions could be incorrect. Our operations
involve risks and uncertainties, many of which are outside our control, and any one of which,
or a combination of which, could materially affect our results of operations and whether the
forward-looking statements ultimately prove to be correct.
based are reasonable, any of these assumptions could prove to be inaccurate and the
forward-looking statements based on these assumptions could be incorrect. Our operations
involve risks and uncertainties, many of which are outside our control, and any one of which,
or a combination of which, could materially affect our results of operations and whether the
forward-looking statements ultimately prove to be correct.
Actual results and trends in the future may differ materially from those suggested or implied
by the forward-looking statements depending on a variety of factors which are described in
greater detail in our filings with the SEC. All future written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly qualified in their
entirety by the previous statements. We undertake no obligation to update any information
contained herein or to publicly release the results of any revisions to any forward-looking
statements that may be made to reflect events or circumstances that occur, or that we
become aware of, after the date of this Presentation.
by the forward-looking statements depending on a variety of factors which are described in
greater detail in our filings with the SEC. All future written and oral forward-looking
statements attributable to us or persons acting on our behalf are expressly qualified in their
entirety by the previous statements. We undertake no obligation to update any information
contained herein or to publicly release the results of any revisions to any forward-looking
statements that may be made to reflect events or circumstances that occur, or that we
become aware of, after the date of this Presentation.
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• Focused in the western United States
– 7 Refineries
– 665,000 barrels per day capacity
– Nearly 1,200 retail stations branded
Tesoro®, Shell® and USA Gasoline™
Tesoro®, Shell® and USA Gasoline™
• Operate in higher margin markets
• Refining-marketing integration in key
areas
areas
• Logistics assets offer growth platform
• Access to growing Pacific Rim
About Tesoro
Kenai, AK
Mandan, ND
Salt Lake City, UT
Anacortes, WA
Martinez, CA
Wilmington, CA
Kapolei, HI
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4
Execution Delivers Improvement
• 2010 EBITDA up 50%, despite
– Flat margin environment
– Throughput down 12%
• 2011 consensus EBITDA up 90%
– Anacortes at planned rates
– Delivery of 2011 improvement plan
– Rebound in margin environment
Delivery of internal improvements driving results
EBITDA ($ in millions)
(1) 2011E EBITDA based on consensus First Call estimates, as of March 24, 2011
(1)
• Cautiously optimistic about improving
market conditions
market conditions
• Opportunity to drive significant value from
existing assets, despite margins
existing assets, despite margins
• Our strategic priorities are clear, our plan is
focused and the organization is aligned
focused and the organization is aligned
• Delivery will drive financial strength and
position Tesoro as an industry leader
position Tesoro as an industry leader
• Enthusiastic about our future
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Key Messages
6
Market Outlook
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Key Drivers
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Tesoro’s View
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Economy
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Slow U.S. recovery
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World Oil Demand Growth
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Gasoline ~1% and Diesel ~2% per year
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U.S. Demand Growth
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Gasoline ~0.3% and Diesel ~2% per year
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Crude Oil Supply
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Trending slightly lighter
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Global Refining Capacity
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Continues to exceed demand
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Alternative Fuels, CAFE
Standards |
Driving lower US gasoline demand
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Regulatory Environment
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Continues to be a challenge
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Source: Purvin & Gertz, PIRA, Tesoro
• Operational efficiency and effectiveness
– Safety and reliability
– System improvements
– Cost leadership
• Commercial excellence
• Financial discipline
• Value-driven growth
Strategic Priorities
• About 300 projects
• Average payback of less than 2 years
• Average project is about $1 million
• Focused on:
– Improving yields
– Reducing feedstock costs
– Reducing operating costs
– Expanding logistical infrastructure
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Income Capital
$ in millions
EBITDA
$ in millions
Operational Efficiency & Effectiveness
High-Return Capital Investments
High-Return Capital Investments
Integration
and Logistics
and Logistics
Yields/
Reliability
Costs
• Expand system supply and trading
activities around existing assets
activities around existing assets
• Drive regional and system
optimization
optimization
• Capture lower feedstock costs
• Capture higher product values
• Capture arbitrage, freight and
storage opportunities at Tesoro
Panama
storage opportunities at Tesoro
Panama
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Commercial Excellence
• Exercise capital discipline
• Reduce total debt to total capitalization
• Strengthen the balance sheet
• Drive towards investment-grade credit rating
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Financial Discipline
Value-Driven Growth
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Financial strength facilitates focused strategic growth
• Base business improvements are key
to drive additional free cash flow
to drive additional free cash flow
• Near-term growth focused on:
– Logistics
– Refining and marketing integration
• Strategic opportunities that are
accretive and create shareholder
value will be pursued
accretive and create shareholder
value will be pursued
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in $ millions
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Low
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High
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Operating Cost Reductions
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70
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80
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Income Capital EBITDA
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60
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70
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Improvement Initiatives
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60
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90
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Overhead Cost Reductions
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40
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50
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Commercial Excellence
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30
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45
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Targeted EBITDA Growth
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260
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335
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Higher Energy Costs
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(25)
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(20)
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RINS Purchases
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(55)
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(45)
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Targeted EBITDA Growth, net
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180
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270
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2011 is year one of a multi-year improvement plan
Summary of 2011 Improvements
• Income capital is 25% of total
• Optimize regulatory spending,
maintain compliance
maintain compliance
• Improved maintenance work
selection practices
selection practices
Capital and Turnaround Summary
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Total Capital
$ in millions
Turnaround
$ in millions
• Enhanced turnaround planning
allows us to optimize downtime
and cost
allows us to optimize downtime
and cost
• Lower material and labor prices
287
380
390
350
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2009A
Note: Peer companies represented are Valero, Sunoco, Holly and Frontier. Based on SEC filings and company research.
Tesoro’s Advantage versus Peers
Execution positions Tesoro as an industry leader
• Targeting over $225 million of improvements in 2011
• Capital spending reduced $700 million over 4 years versus
2009 plan
2009 plan
• Focused on driving operating efficiency and effectiveness
• Improvements deliver significant free cash flow
• Our strategic priorities are clear, our plan is focused and the
organization is aligned
organization is aligned
15
Becoming an Industry Leader
We are committed to driving shareholder value