Barclays CEO Energy/Power Conference September September 2009 2009 1
Agenda Whats keeping investors on the sideline Uncertainty 3
How Will GDP Trend United States GDP, Quarterly Change 2.5% 2.0% 1.5% 1.0% V-Shaped Recovery 0.5% 0.0% Flat -0.5% -1.0% -1.5% Continued Decline -2.0% 1Q 2002 1Q 2004 1Q 2006 1Q 2008 1Q 2010e 1Q 2012e Source: Bureau…
Will Unemployment Ease Continued weakness U.S. Unemployment Rate 10% Flattens out 9% 8% Improvement 7% 6% 5% 4% 3% 2% 1% 0% 2004 2005 2006 2007 2008 2009 2010e 2011e 2012e Source: Bureau of Labor Statistics…
Clean Product Inventories: Build or Draw Refiners oversupply demand and build United States Product Inventories, mmbbls inventories 800 Maintain current 750 balance Refiners run below demand and 700 inventories decline 650…
Biofuel Market Penetration United States Ethanol Use and Mandate, mbbls 600 Increased blending 500 400 Current mandate 300 Blend wall 200 100 0 2000 2002 2004 2006 2008 2010e 2012e Source: Department of Energy 7
Global Refining Supply/Demand Balance Global Refining Capacity and Demand, mmbpd 93 New capacity 91 lower demand Excess Capacity 89 87 Supply rationalization/ 85 higher demand 83 2007 2008 2009e 2010e 2011e 2012e…
Agenda Whats keeping investors on the sideline Uncertainty its priced into refiner share prices 9
Agenda Whats keeping investors on the sideline Uncertainty its priced into refiner share prices Why is now a time to consider investing in Tesoro Valuation 12
The Market Is Trying to Pick Winners/Losers Based On The Box Refineries in the U.S. 25.0 TSO 20.0 Mid-Continent Refineries Nelson Complexity 15.0 At Risk 10.0 5.0 Alaska & Hawaii 0.0 0 50 100 150 200 250 300…
The Box Effect On Tesoros Share Price Tesoro is trading at 60% of book value Cost of Capital and Returns 35% 23.00 30% 25% 1990-2008 Avg ROCE 20% 12% 13.88 15% 10% 5% 0% -5% -10% 90 92 94 96 98 00 02 04…
Why The Box Doesnt Work Ideal configuration in Mandan, ND Access to light, sweet crude field Supplies local product market Ideal configuration in Salt Lake City, UT Access to light, sweet crude field Supplies local product…
Agenda Whats keeping investors on the sideline Uncertainty its priced into refiner share prices Why is now a time to consider investing in Tesoro Valuation Competitive regional dynamics 16
Regional Dynamics at Work PADD 5 Gasoline Inventories, 2009 vs 5-Yr Avg US Gasoline Inventories, 2009 vs 5-Yr Avg 20% 20% 10% 10% 0% 0% -10% -10% -20% -20% ar ar g n n ay g ay n n r r…
Regional Dynamics At Work PADD 5 Diesel Inventories, 2009 vs 5-Yr Avg US Diesel Inventories, 2009 vs 5-Yr Avg 30% 30% 20% 20% 10% 10% 0% 0% -10% -10% -20% -20% -30% -30% r n ar b l g n ay r n ar…
West Coast Refinery Runs Are Down 2009 Refinery Utilization Rates, % 95 90 85 80 75 70 65 60 Jan Feb Mar Apr May Jun Jul Aug US PADD 5 West Coast refinery utilization rates are running well below the U.S. Source:…
Agenda Whats keeping investors on the sideline Uncertainty its priced into refiner share prices Why is now a time to consider investing in Tesoro Valuation Competitive regional dynamics Advantaged assets 20
Mid-Continent Assets These two refineries were built to run local light, sweet crudes: Mandan: Bakken Field Salt Lake City: Rocky Mountain Mandan, ND 58mbpd These two refineries sell products into local markets: Mandan: ND,…
Alaska and Hawaii Assets Kenai, AK Processes ANS and Cook Inlet crudes Sole producer of Ultra Low Sulfur Diesel in the state Kenai, AK 72mbpd Polar Route for cargo planes Kapolei, HI One of two refineries in Hawaii Primarily…
West Coast Assets West Coast System Anacortes, WA 120mbpd Shipping economics: splitting crude cargoes between refineries Our Jones Act ship fleet constantly carries intermediates between refineries Opportunities also exist with…
Agenda Whats keeping investors on the sideline Uncertainty its priced into refiner share prices Why is now a time to consider investing in Tesoro Valuation Competitive regional dynamics Advantaged assets Improvement…
2009 Improvement Platform Tesoros Goals For Continued Improvement: Lower breakeven cost 2.50/bbl Margin improvement Expense reduction Capital expenditure reduction 25
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 Index Improvements Improvements Program Index After…
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…
2009 Expense Reduction Focus Areas: Energy Consumption Maintenance Processes 45 million in savings* 25 million in savings Goal: Improve energy efficiency and flexibility by improving light-end recovery Focus resources on…
2009 Improvement Platform Tesoros Goals For Continued Improvement: Lower breakeven cost 2.50/bbl Margin improvement Expense reduction Capital expenditure reduction Build quick-hit capital program 29
2009 Key Year-Over-Year Improvement Factors In the Hopper Capital Projects Total Project Ideas: Greater than 300 Average Project spend: 2 3 million Average simple payback: Two years Projected cash position and improved…
Conclusions There is uncertainty in the marketplace today Winners/Losers will be determined by markets and metals The West Coast has balanced product supply to lower demand requirements We continue to execute on our strategy to…
Appendix 32
Assumptions Slide 25-27 - Tesoro Index & Cash Breakeven: The actual 2008 Index required for cash breakeven was 9.18/bbl. The variance to our expected 10.50/bbl assumption in the Analyst Day presentation on Dec 16, 2008 was primarily…
Actual and Expected Capital Spend in millions 1,307 1,101 1,143 932 724 600-700 570 600 2006 2007 2008 2009e 2010e Actuals Capital Program* Revised Capital Program** * 2008e, 2009e and 2010e as presented at the 2007…
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