Agenda Market Fundamentals Key 2009 Year-Over-Year Improvement Factors Capital Program Conclusion 3
While the Business Is Cyclical Its Also Rational /bbl 20 10 NYMEX 3-2-1 0 90 95 00 05 08 19 19 20 20 20 We didnt preach the Golden Age and arent praying because of the Dark(er) Age…
Rationality At Work US Consumer Actions Refiner Reactions I demand 6% less petroleum 2% less crude inputs products I demand 3% less gasoline 5% less gasoline production, and exports up 40% I demand 6% less distillate, 4%…
Rationality At Work PADD 4 Gasoline Production 2% Gasoline Imports n/a Gasoline Stocks 9% PADD 1 Gasoline Production -5% PADD 2 Gasoline Imports -5% PADD 5 Gasoline Production -3% Gasoline Stocks 10% Gasoline Production -1%…
Rationality At Work PADD 5 Days of Supply Variances US Days of Supply Variances 25% 13% 15% 10% 5% 7% 4% -5% 1% -15% -2% -25% -5% b p g r t b p c v n g r t ay ar c v n n l…
Rationality At Work 500 Mid-Feb End of Mar Gasoline RVP spec changes 400 300 2009 Avg 236,000 bpd 200 2008 Avg 136,000 bpd 100 0 1-Jan 26-Jan 20-Feb 16-Mar 10-Apr 5-May 30-May 2009 Crude Turnarounds 2009 Upgrading…
Rationality At Work 9.5% 9.3% at Dec 2008 8.5% Although 7.5% CA Unemployment unemployment 6.5% Rate is rising 5.5% 4.50 WC Retail Gasoline (/gal) with falling 3.40 prices 3.25 1.85 at Dec 2008 5% 0% -5% drivers are WC…
West Coast Crack Spreads Up +16/bbl since Dec.1 /bbl hurricanes 30 25 20 15 10 5 - Sept 2008 Jan 2009 USWC 321 USGC 321 NYH 211 Tight supply creates margin upside if unplanned events occur Source: Platts (through Jan…
Strong Start To 2009 Tesoro Index, /bbl 15.00 6.00 Actual - Jan 2009 Budget - Jan 2009 While the improvement in West Coast margins is encouraging Our strategic thrust is unchanged control costs and capital and protect…
Contents Current Market Fundamentals Key 2009 Year-Over-Year Improvement Factors 12
2009 Improvement Platform We have prepared a business plan that anticipates margin moderation from early year strength: Tesoro Index, /bbl 15.25 2009 To Date 15.00 10.20 9.00 2007 2008e 2009e 13
2009 Improvement Platform Tesoros Goals For Continued Improvement: Lower breakeven cost of 10.50/bbl, primarily from sustainable and substantial improvements in capture rate 14
Margin Capture Improvements: Crude and Feedstocks Goal: Lower crude costs through benefits of Prior years capital program Operational improvements to increase crude flexibility across the system Leverage logistics and asset…
Margin Capture Improvements: Product Realizations / Optimization Goal: Improve cost of feedstock and product purchases Match production to demand Examples: Optimize channels of trade Optimize system turnarounds, logistics and…
Margin Capture Improvements: Transportation Savings Goal: Match existing logistics assets to current market environment Derive benefit from new distribution cost analysis system Examples: Rationalize use of barge and Jones Act ship…
Margin Capture Improvements: Production and Yields Goal: Optimize refinery operations around max distillate mode Optimize coker utilization and fuel oil options Examples: Increase stream day run rates for Golden Eagle and Los…
Capital Program Benefits in millions Project Golden Eagle Coker 65 Increased Diesel Yield 10 Reduced Heavy Product Yields 7 Miscellaneous Small Yield Projects 6 Improved LPG Recovery at LAR 4 Wilmington Truck Rack Expansion 3…
2009 Improvement Platform in millions Non-Capital Improvements Crude and Feedstocks 110 Product Realizations / Optimization 40 Transportation Savings 60 Production and Yields 55 Capital Full Year Benefit of 2008 Capital Program…
Higher Realizations In A Lower Market Environment /bbl Capture Rate 15 se 120% ra t e increa pture 22% ca 100% 10 80% 60% 5 40% 0 20% 2007 2008e 2009e Tesoro Index Gross Margin Capture Rate Planned increased capture…
2009 Improvement Platform Tesoros Goals For Continued Improvement: Lower breakeven cost of 10.50/bbl, primarily from sustainable and substantial improvements in capture rate Expense reduction 22
2009 Expense Reduction Focus Areas: Energy Consumption Maintenance Processes 40 million in savings* 25 million in savings* Goal: Improve energy efficiency and flexibility by improving light-end recovery Focus resources on…
Result Of Expected 2009 Improvements /bbl 10.50 1.60 0.20 0.10 2008 Cash Margin Capture Energy Maintenance Breakeven Improvements Improvements See appendix for assumptions 24
Contents Current Market Fundamentals Key 2009 Year-Over-Year Improvement Factors Capital Program 25
2009 Improvement Platform Tesoros Goals For Continued Improvement: Lower break-even cost of 10.50/bbl, primarily from sustainable and substantial improvements in capture rate Expense reduction Lower year-over-year capital budget…
Result Of Expected 2009 Improvements /bbl 10.50 1.60 0.20 0.10 0.65 7.95 2008 Cash Margin Capture Energy Maintenance Reduced Capital Cash Breakeven Breakeven Improvements Improvements Program Index After Improvements…
2009 Improvement Platform Tesoros Goals For Continued Improvement: Lower break-even cost of 10.50/bbl, primarily from sustainable and substantial improvements in capture rate Expense reduction Lower year-over-year capital budget…
Conclusions The recent strength in West Coast margins is a result of refiners response to the market Lower breakeven costs allow for gross margin growth over 2008 despite expectations of a lower market environment in 2009…
2009 Capital Program in millions CI&L, 20 Admin., 45 Income Imp., 30 Mid-Pacific, 30 Maintenance, 120 Mid-Continent, 70 Pacific Northwest, 90 Turnaround, 140 California, 365 Regulatory, 290 By Category By Region 2009…
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