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Deutsche Bank Energy Conference – Tesoro Corporation

Tesoro Corporation · Jan 9, 2014 · 37 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. Deutsche Bank Energy Conference – Tesoro Corporation – slide 1
    Deutsche Bank Energy Conference January 9, 2014
  2. Deutsche Bank Energy Conference – Tesoro Corporation – slide 2
    Strategic Priorities Operational efficiency and effectiveness Safety and reliability Cost leadership System improvements Commercial excellence Financial discipline Value-driven growth High performing culture Enduring…
  3. Deutsche Bank Energy Conference – Tesoro Corporation – slide 3
    2011 2013 Transformation Salt Lake waxy crude oil and Increased supply of capacity/yield project advantaged crude oil Mandan capacity and yield Anacortes unloading facility projects Transformational Los Angeles acquisition,…
  4. Deutsche Bank Energy Conference – Tesoro Corporation – slide 4
    Tesoro Key Metrics 2010 2013 Enterprise Value ( billions) 3.5 10.5 Kenai, AK Market Cap ( billions) 2.0 7.8 72 MBD Refining Capacity (MBD) 665 850 Anacortes, WA Refining Complexity 9.8 11.5 120 MBD Branded Retail Stations 880…
  5. Deutsche Bank Energy Conference – Tesoro Corporation – slide 5
    Performance Objectives Deliver California synergies Enhance gross margin Improve the base Grow logistics Maintain financial discipline Transformation through Distinctive Performance 6
  6. Deutsche Bank Energy Conference – Tesoro Corporation – slide 6
    Market Outlook - Overview Key Drivers Tesoros View Global Economic Outlook Moderate growth U.S. Economic Outlook 2 2.5% GDP growth Global Refining Capacity Capacity exceeds demand U.S. Refining Utilization High due to low…
  7. Deutsche Bank Energy Conference – Tesoro Corporation – slide 7
    PADD V Fundamentals Gasoline demand expected to 1,600 grow 0 to 0.5% annually through PADD V Gasoline Demand MBD 2016 1,550 Diesel demand expected to grow 1,500 1.0% annually 1,450 Net clean product exports 2008 2010 2012 2014F…
  8. Deutsche Bank Energy Conference – Tesoro Corporation – slide 8
    Distinctive Performance Objectives Distinctive Performance Objectives million 2014 2015 Deliver California Synergies 160 180 260 300 Enhance gross margin 140 160 250 290 Improve the base 70 90 80 120 Annual EBITDA Improvement1 370…
  9. Deutsche Bank Energy Conference – Tesoro Corporation – slide 9
    California Synergy EBITDA 430-490 Annual EBITDA millions 375-415 295-335 195-215 225 250 175 35-40 110 30 2013E 2014E 2015E 2016E 2017E Acquistion Model Current View Feedstock Advantage Production Optimization…
  10. Deutsche Bank Energy Conference – Tesoro Corporation – slide 10
    California Synergy Capital Expenditures Los Angeles Refinery Integration Project Optimizes processing capability Provides 30-40 MBD product flexibility Net Capital millions Reduces CO2 emission 500,000 tons 180 160 per year…
  11. Deutsche Bank Energy Conference – Tesoro Corporation – slide 11
    Keys to Distinction on the West Coast Operating cost advantage Flexible yield structure Access to cost-advantaged crude oil Integrated logistics infrastructure Secure and ratable refinery off-take Cost-advantaged regulatory…
  12. Deutsche Bank Energy Conference – Tesoro Corporation – slide 12
    California Regulatory Environment Stationary source emissions Low cost impact Tesoro California CO2 Emissions Millions of Metric Tons Annually 9.5 Fuels under the cap 8.2 7.7 Cost passed to consumers Low Carbon Fuel Standard…
  13. Deutsche Bank Energy Conference – Tesoro Corporation – slide 13
    Rail Costs to Clear Bakken Bakken Bakken Crude Oil Supply and Logistics MBD 2013 2014E 2015E Crude Oil Production1 865 1,000 1,200 Pipeline Export Capacity 635 685 685 Rail Export Capacity 865 1,015 1,015 West Coast…
  14. Deutsche Bank Energy Conference – Tesoro Corporation – slide 14
    Crude Oil Production Growth Key Tesoro Markets Canadian 5,300 Cook Inlet 2,750 3,675 MBD 25 13 15 2008 2013E 2020E 2008 2013E 2020E Bakken 1,250 900 180 2008 2013E 2020E Niobrara/Uinta Total in Key 225 Markets 65…
  15. Deutsche Bank Energy Conference – Tesoro Corporation – slide 15
    Anacortes Yield Comparison Crude Oil Yields ANS Bakken 27% 34% Gasoline 26% 34% Distillate 47% Gas Oil and Residual Oil 32% Bakken crude oil yields 14% to 16% more gasoline and distillate than ANS 16
  16. Deutsche Bank Energy Conference – Tesoro Corporation – slide 16
    Tesoros Advantaged Feedstock Opportunity Opportunities by Refinery Kenai Currently up to 25% Cook Inlet 72 MBD Potentially up to 67% Cook Inlet and Bakken Martinez 120 MBD Currently up to 45% California Heavy and 70% advantaged…
  17. Deutsche Bank Energy Conference – Tesoro Corporation – slide 17
    Port of Vancouver Up to 300 MBD Rail-to-Marine Terminal Joint venture with Savage Companies Port of Vancouver advantages Flexibility to deliver to all West Coast refineries Competitive with direct rail cost to California Existing…
  18. Deutsche Bank Energy Conference – Tesoro Corporation – slide 18
    West Coast Transportation Advantages Tesoro enjoys advantaged waterborne logistics capabilities Access to domestic and foreign cost advantaged crude oil Feedstock optimization across 720 MBD of PADD V refining capacity Flexibility…
  19. Deutsche Bank Energy Conference – Tesoro Corporation – slide 19
    West Coast Refining System Opportunity Tesoro Consolidated Tesoro Crude Oil Throughput West Coast Index 11% Foreign Heavy 12% 19% 22% Foreign Light 30% ANS 59% 12% 17% California 19% 17% WTI1 21% 38% 15% 8% 3Q…
  20. Deutsche Bank Energy Conference – Tesoro Corporation – slide 20
    Marketing Brands Deploy a premium and value branding strategy within each region New brands allow for site optimization and conversion Leverage Shell, Exxon and Mobil premium brand value to improve marketing channels Leverage…
  21. Deutsche Bank Energy Conference – Tesoro Corporation – slide 21
    Solomon Based Cost Reductions Total Operating Expense Gap (Non-energy)1 /bbl 2010 2011 2012 California 1.70 1.10 0.85 Pacific Northwest NA 0.05 0.30 Mid-Continent 0.30 0.15 1.10 Weighted Average 1.15 0.55 0.75 Captured cost…
  22. Deutsche Bank Energy Conference – Tesoro Corporation – slide 22
    Tesoro Logistics LP Key Metrics Kenai Enterprise Value ( billions) 3.6 Anacortes Market Cap ( billions) 2.8 Crude Oil and Refined 1,570 miles Product Pipelines Mandan High Plains Pipeline 90+ MBD Throughput Salt Lake City High…
  23. Deutsche Bank Energy Conference – Tesoro Corporation – slide 23
    TLLP Organic Growth Opportunities Bakken Crude Oil Gathering Expand High Plains System interconnection points Aggregate volumes for Port of Vancouver Develop major Bakken storage hub Expand pipeline gathering network Terminalling,…
  24. Deutsche Bank Energy Conference – Tesoro Corporation – slide 24
    TLLP Future Logistics Opportunities Tesoro Legacy Assets Kenai Marine Logistics Kenai Pipeline & Products System Anacortes Marine and Products Terminals Martinez Marine Products Terminal Martinez Products Terminal Assets Under…
  25. Deutsche Bank Energy Conference – Tesoro Corporation – slide 25
    TLLP Capital Spending TLLP plans to spend about Tesoro Logistics Capital Spend 100 million per year on millions income projects 160 160 Typical project return of 140 15-25% Pursing opportunities to 80 Income expand gathering…
  26. Deutsche Bank Energy Conference – Tesoro Corporation – slide 26
    TLLP Value Proposition to Tesoro millions TLLP EBITDA Tesoros Implied Value of TLLP Ownership1 366 2,275 GP 1,250 Holdings 163 750 78 LP Units 2012 2013E 2 2015E 2 2012 2013E 2 2015E 2 Implied value per 5.50 9.25…
  27. Deutsche Bank Energy Conference – Tesoro Corporation – slide 27
    Financial Priorities Maintain a minimum cash balance of 600 to 800 million Target TSO debt to capitalization1 below 30% Solid Operating Results Target TLLP debt at 3x to 4x EBITDA Strategic Strong Growth Return Excess Cash…
  28. Deutsche Bank Energy Conference – Tesoro Corporation – slide 28
    Los Angeles Acquisition Summary Los Angeles Acquisition Summary billions Property, Plant and Equipment 1.0 Logistics Asset Sales to TLLP (1.3) Net Investment in R&M Assets (0.3) Working Capital 1.3 Working Capital Reductions…
  29. Deutsche Bank Energy Conference – Tesoro Corporation – slide 29
    Appropriate Leverage for Growth millions TSO1 TLLP2 Consolidated Total Debt 1,666 1,159 2,825 Total Equity 4,415 1,1854 5,600 Debt to Total Capitalization 27% 49% 34% Total Debt to EBITDA3 0.8x 3.9x 1.4x Tesoro leverage in…
  30. Deutsche Bank Energy Conference – Tesoro Corporation – slide 30
    Summary Capital Spending Tesoro Capital Spending1 in millions 790 770 Summary Capital Expenditures 670 millions 2013E 2014E 2015E 2016E Income Maintenance 195 220 245 255 505 Synergy Regulatory 90 190 245 200 Synergy2 15 65…
  31. Deutsche Bank Energy Conference – Tesoro Corporation – slide 31
    Delivering Free Cash Flow Expect to generate approximately Free Cash Flow 1 3.0 billion in free cash flow over in billions next three years 1.1 1.0 0.9 Before potential 1.5 billion of further logistics asset sales to TLLP…
  32. Deutsche Bank Energy Conference – Tesoro Corporation – slide 32
    Delivering Shareholder Value California Synergies Maintain Financial Enhance Gross Margin Discipline Transformation through Distinctive Performance Grow Logistics Improve the Base 33
  33. Deutsche Bank Energy Conference – Tesoro Corporation – slide 33
    Los Angeles Refinery Integration Project Largest California synergy capital project Project includes1 Improved gasoline/distillate yield flexibility Decommissions Wilmington fluid catalytic cracking unit Reduces CO2 emissions…
  34. Deutsche Bank Energy Conference – Tesoro Corporation – slide 34
    Salt Lake City Conversion Project Phase 1 Expanded waxy crude capacity Completed 2Q 2013 Total cost of 175 million Phase 2 Additional expansion of waxy crude capacity up to 22 MBD Increases throughput capacity by 4 MBD Enhances…
  35. Deutsche Bank Energy Conference – Tesoro Corporation – slide 35
    Turnaround Spending Tesoro Turnaround Spending in millions 435 400 300 260 270 2012 2013E 2014E 2015E 2016E Lower turnaround spending in 2014 and 2015 Note: 2014 to 2016 includes deferred rebranding costs of 50, 40 and…
  36. Deutsche Bank Energy Conference – Tesoro Corporation – slide 36
    Non-GAPP Financial Measures EBITDA represents earnings before interest and financing costs, net, interest income, income taxes, and depreciation and amortization expense. We present EBITDA because we believe some investors and…
  37. Deutsche Bank Energy Conference – Tesoro Corporation – slide 37
    Non-GAPP Financial Measures (In millions) Unaudited Improve the Base EBITDA 2014E 2015E Projected net earnings 50 63 Add income tax expense 30 37 Add depreciation and amortization expense 0 0 EBITDA (1) 80 100 (In millions)…

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