Analyst Day Monday, December 13, 2010 Greg Goff President and CEO, Tesoro Corporation
About Tesoro Focused in the western United States 7 Refineries 665,000 barrels per day capacity 665 000 b l d i Over 875 retail stations branded Tesoro, Shell and USA Gasoline Kenai, AK Growing to nearly 1,200 sites in 2011…
2010 Highlights Anacortes safely restarted; at planned rates Insurance recoveries underway Solid earnings in the 2nd and 3rd quarters despite weaker margins and downtime Implemented 120 140 million in overhead and benefit…
Key Messages Cautiously optimistic about improving market conditions Opportunity to drive significant value from existing assets despite margins existing assets, despite margins Our strategic priorities are clear, our plan…
Market Outlook Key Drivers Tesoros View Economy Slow U.S. recovery World Oil Demand Growth p y Gasoline 1% and Diesel 2% per year U.S. Demand Growth Gasoline 0.3% and Diesel 2% per year Crude Oil Supply Trending slightly lighter…
Market Outlook Regional Crack Spreads, /bbl 25 West Coast 20 15 Gulf Coast 10 5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Outlook Crack spreads expected to improve slightly k l hl Source: Purvin…
Market Outlook Light/Heavy Differentials, /bbl 20 15 WTI to Maya 10 5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2011 2012 2013 Outlook Light/heavy differentials widen slowly as Light/heavy…
Market Outlook USGC Diesel to Gasoline Differential, /bbl 15 10 5 0 5 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Outlook Global diesel demand leads to increasing premium over gasoline gp g Source:…
Market Outlook Tesoro Index, /bbl Tesoro Index, /bbl 25 20 15 10 5 0 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Beyond Outlook Gradually improving conditions through 2013 Note: Annual high / low range…
Market Outlook Regulatory Environment EPA regulatory agenda Greenhouse gas emissions Low carbon fuel standards 11
Strategic Priorities Operational efficiency and effectiveness Safety and reliability y y System improvements Cost leadership Commercial excellence Financial discipline Valuedriven growth Value driven growth Significant…
Operational Efficiency & Effectiveness People and Process Safety OSHAs Voluntary Protection Program (VPP) DuPont assessment of process uPont assessment of process safety practices underway B BakerRisk k Ri k inspection…
Operational Efficiency & Effectiveness Reliability Track record of reliable operations Operational Availability, % EDC 95 97 96 96 Structured predictive maintenance 95 program * 90 Standardized process for root cause…
Operational Efficiency & Effectiveness Competitive Position MidContinent (Mandan and Salt Lake City) More Competitive TSO TSO TSO TSO TSO Average Regional Competitor TSO Less Competitive Feedstock Feedstock Yields…
Operational Efficiency & Effectiveness System Improvements MidContinent (Mandan and Salt Lake City) Improvement Plans p Targeted net margin gain of 5 10% Feedstock improvements Run more black wax crude oil Expand crude…
Operational Efficiency & Effectiveness Competitive Position Hawaii More Competitive TSO TSO Average Regional TSO Competitor TSO TSO TSO Less Competitive Feedstock Feedstock Yields Operating Operating Sustaining…
Operational Efficiency & Effectiveness System Improvements Hawaii Targeted net margin g g Improvement Plans gain of 220 225% Process alternative feedstocks Improve yields Enhance marketing integration New low sulfur fuel…
Operational Efficiency & Effectiveness Competitive Position Pacific Northwest (Anacortes and Kenai) More Competitive TSO TSO TSO Average Regional TSO Competitor TSO TSO Less Competitive Feedstock Feedstock Yields…
Operational Efficiency & Effectiveness System Improvements Pacific Northwest (Anacortes and Kenai) Targeted net margin g g Improvement Plans gain of 10 15% * Process alternative feedstocks EExpand ratable offtake to increase…
Operational Efficiency & Effectiveness Competitive Position California (Wilmington and Martinez) More Competitive TSO Average Regional TSO Competitor TSO TSO TSO TSO Less Competitive Feedstock Feedstock Yields Operating…
Operational Efficiency & Effectiveness System Improvements California (Wilmington and Martinez) Targeted net margin g g gain of 20 25% Improvement Plans Yield improvements Greater propane and butane recovery Operating Costs…
Operational Efficiency & Effectiveness HighReturn Capital Investments Income Capital EBITDA in millions in millions 180190 110 115 140150 95 6070 40 30 17 25 2009 2010E 2011E 2012E 2013E 2009 2010E 2011E 2012E 2013E About…
Operational Efficiency & Effectiveness Overhead Costs Reduced headcount and other overhead costs Post Retirement Benefits EEstimated Balance Sheet Liability i dB l Sh Li bili Annual cash savings of 40 50 million in millions…
Commercial Excellence Expand system supply and trading activities around existing assets activities around existing assets Drive regional and system optimization Capture lower feedstock costs Capture higher product values…
Summary of 2011 Improvements in millions Low High Operating Cost Reductions Operating Cost Reductions 70 80 Income Capital EBITDA 60 70 Improvement Initiatives 60 90 Overhead Cost Reductions 40 50 Commercial Excellence 30 45…
Execution Delivers Improvement From 2009 to 2010 TSO Index is flat at around 8.00/bbl Expected EBITDA Growth* Up 50% Throughput is down 12% Consensus EBITDA is up nearly 50% The EBITDA gain reflects execution The EBITDA gain…
Capital and Turnaround Summary Total Capital p Turnaround in millions in millions 380 390 350 315 275 215 150 160 2010E 2011E 2012E 2013E 2010E 2011E 2012E 2013E Regulatory Maintenance Income Income capital is 25% of…
Capital Spending Summary Total Spending by Region Total Spending by Year in millions in millions 1,875 (2009 Analyst Meeting) 800 775 675 700 665 1,200 (2010 Guidance) 565 540 465 450 400 375 400 175 180 CA PNW…
Financial Discipline Exercise capital discipline Reduce total debt to total capitalization Strengthen the balance sheet Drive towards investmentgrade credit rating 30
ValueDriven Growth Base business improvements are key to drive additional free cash flow t di dditi lf h fl Nearterm growth focused on: Logistics Refining and marketing integration Strategic opportunities that are accretive…
Tesoro Logistics MLP This slide intentionally left blank 32
Refining and Marketing Integration Ratable Ratable, secure offtake allows secure off take allows increased refinery utilization Shifts barrels into higher netback channels of trade Achieve greater integration with minimal…
Capability to Deliver Superior Execution Clear and focused strategy Well understood values Relentless focus on results Clear accountability Clear accountability Incentive compensation directly tied to value creation l i…
Tesoros Advantage versus Peers 2011 2009 Gross Costs Capital Net Margin Advantage Gross Costs Capital Net Margin Advantage Execution positions Tesoro as an industry leader 35 Note: Peer companies represented are…
Tesoros Advantage versus Peers 2013 2009 Gross Costs Capital Net Margin Advantage Gross Costs Capital Net Margin Advantage Execution positions Tesoro as an industry leader 36 Note: Peer companies represented are…
Becoming an Industry Leader Targeting over 200 million of improvements in 2011 Capital spending reduced 700 million over 4 years versus 2009 plan Focused on driving operating efficiency and effectiveness Improvements deliver…
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