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December 2011 Investor Day – Tesoro Corporation

Tesoro Corporation · Dec 5, 2011 · 53 slides

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Slides

  1. December 2011 Investor Day – Tesoro Corporation – slide 1
    Analyst / Investor Day New York Stock Exchange Monday, December 5, 2011
  2. December 2011 Investor Day – Tesoro Corporation – slide 2
    Management Team Greg Goff, President and CEO Dan Romasko, EVP, Operations Chuck Parrish, EVP, General Counsel Scott Spendlove, SVP, Chief Financial Officer Chuck Flagg, SVP, Strategy & Business Development Frank Wheeler, SVP,…
  3. December 2011 Investor Day – Tesoro Corporation – slide 3
    About Tesoro Positioned in the western United States Seven refineries 665,000 barrels per day capacity Nearly 1,200 retail stations branded Kenai, AK Tesoro, Shell and USA Gasoline Additional 290 retail stations in 2012 and…
  4. December 2011 Investor Day – Tesoro Corporation – slide 4
    Key Messages Delivering sustainable improvements in 2011; first year of a multiyear plan Reinvesting free cash flow into highreturn capital projects TLLP creating significant value; strategic vehicle for growth Strengthening…
  5. December 2011 Investor Day – Tesoro Corporation – slide 5
    What We Told You Last Year 2010 Analyst/Investor Meeting Operational efficiency and effectiveness Drive gross margin capture Deliver reliability and cost improvements Execute highreturn capital program Commercial excellence…
  6. December 2011 Investor Day – Tesoro Corporation – slide 6
    What We Delivered Operational Value Commercial Financial Efficiency & Driven Excellence Discipline Effectiveness Growth Refinery utilization improved 13% 1,2 Refinery reliability improved 4% 1,2 Refining gross margin improved 56%…
  7. December 2011 Investor Day – Tesoro Corporation – slide 7
    Operational Efficiency & Effectiveness Driving Gross Margin Capture Gross Margin vs Index, /bbl Crude oil flexibility facilitated higher 4.50 margin capture 3.15 1.50 Refining and marketing integration 0.80 enabled…
  8. December 2011 Investor Day – Tesoro Corporation – slide 8
    Operational Efficiency & Effectiveness Delivering Reliability and Cost Improvements 1 Allin Cost Per Barrel 9.79 Improved reliability reduced fixed costs 8.99 8.43 * 8.06 Increased energy efficiency Significant investment in…
  9. December 2011 Investor Day – Tesoro Corporation – slide 9
    Operational Efficiency & Effectiveness HighReturn Capital Program Income Capital Spend by Year Cumulative EBITDA in millions in millions 110 110 125 105 72 40 30 17 2009 2010 2011 Plan 2011 2009 2010 2011 Plan 2011…
  10. December 2011 Investor Day – Tesoro Corporation – slide 10
    Operational Efficiency & Effectiveness HighReturn Capital Program Anacortes Asphalt rail rack conversion to crude Capital: 1 million Annual EBITDA: 1 million Mandan Hydrotreater conversion to distillate Kenai Martinez Capital:…
  11. December 2011 Investor Day – Tesoro Corporation – slide 11
    Commercial Excellence West Coast Crude ANS Purchases1 Captured significant feedstock cost advantage Increased Bakken crude oil supply 2007 2008 2009 2010 2011 YTD Increased exports off the West PADD5 Gas & Diesel Net…
  12. December 2011 Investor Day – Tesoro Corporation – slide 12
    Financial Discipline Repurchased 328 million of debt Cash Balance 1.1 Reduced Total Debt to Total Capitalization in billions from 38% to 28% 0.6 Reduced postretirement benefit liabilities by 0.4 about 300 million 0.0…
  13. December 2011 Investor Day – Tesoro Corporation – slide 13
    ValueDriven Growth Refining & Marketing Integration Strengthening refining and marketing Refining & Marketing Integration 2 integration 74% - Increased wholesale marketing longterm supply agreements by 76 mbpd 30% -…
  14. December 2011 Investor Day – Tesoro Corporation – slide 14
    ValueDriven Growth Tesoro Logistics LP Public offering in April 2011 exceeded expectations - Net proceeds of 333 million Unlocked embedded value of logistics assets Improved cost of capital for future growth Supports…
  15. December 2011 Investor Day – Tesoro Corporation – slide 15
    Strong 2011 EBITDA Growth YTD EBITDA up over 1.1 billion YTD Sept EBITDA ( in billions) Market improvement of 0.4 billion 1 1.5 Anacortes impact of nearly 0.2 billion2 Market Remaining 0.5 billion: 0.5 Refinery utilization…
  16. December 2011 Investor Day – Tesoro Corporation – slide 16
    Market Outlook Key Drivers Tesoros View Economy Slow U.S. recovery World Product Demand Growth Gasoline 1% and Diesel 2% per year U.S. Product Demand Growth Gasoline flat and Diesel 2% per year U.S. Crude Oil Supply Strong growth…
  17. December 2011 Investor Day – Tesoro Corporation – slide 17
    Market Outlook LLS & WTI, /bbl 140 Light Louisiana Sweet 120 100 80 West Texas Intermediate 60 40 20 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Outlook Inland crude oil dislocation declines to…
  18. December 2011 Investor Day – Tesoro Corporation – slide 18
    Market Outlook Light/Heavy Differentials, /bbl 20 LLS to Maya 15 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Outlook Gradual increase relative to 2010 Source: Purvin & Gertz, PIRA, Tesoro 19
  19. December 2011 Investor Day – Tesoro Corporation – slide 19
    Market Outlook Regional Crack Spreads, /bbl 30 West Coast 321 (ANS) 25 Group 3 321 (WTI) 20 15 10 Gulf Coast 321 (LLS) 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Outlook Relatively flat overall…
  20. December 2011 Investor Day – Tesoro Corporation – slide 20
    Market Outlook USGC Diesel to Gasoline Differential, /bbl 15 10 5 0 5 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Outlook Global diesel demand drives premium over gasoline Source: Purvin & Gertz,…
  21. December 2011 Investor Day – Tesoro Corporation – slide 21
    Market Outlook US Gasoline and Diesel Net Imports/(Exports), mbpd 1,200 1,000 Gasoline 800 600 400 Diesel 200 0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 (200) Outlook (400) (600) (800) Reduction…
  22. December 2011 Investor Day – Tesoro Corporation – slide 22
    Market Outlook Tesoro Index, /bbl 20 15 10 5 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Outlook Inland crude discounts expected to narrow through 2014 Source: Tesoro 23
  23. December 2011 Investor Day – Tesoro Corporation – slide 23
    Market Outlook Regulatory Environment Enacted RFS2 Biofuel Mandate (in billions of gallons) Renewable Fuels Standard 2 (RFS2) 35 California Assembly Bill 32 30 25 Potential 20 15 EPA regulatory agenda 10 5 Greenhouse gas…
  24. December 2011 Investor Day – Tesoro Corporation – slide 24
    Strategic Priorities Operational efficiency and effectiveness Safety and reliability System improvements Cost leadership Commercial excellence Financial discipline Valuedriven growth Strategic priorities remain the same 25
  25. December 2011 Investor Day – Tesoro Corporation – slide 25
    Key Elements of 2012 Plan Execute highreturn capital projects; provide significant EBITDA growth beyond 2012 Maintain reliability and increase refinery throughput; execute major turnaround plan Growth in refining and marketing…
  26. December 2011 Investor Day – Tesoro Corporation – slide 26
    Refining OSHA Recordable Incident Rate Continue safety and environmental Rate per 200,000 hours improvements 0.9 1.0 0.8 0.5 Maintain availability at 98% Address West Coast operating costs 2008 2009 2010 2011 YTD Execute…
  27. December 2011 Investor Day – Tesoro Corporation – slide 27
    Marketing Integrate 290 new retail operations over plan period1 * Upgrade to highest netback channel of trade Identify and pursue additional profitable growth opportunities Deliver valueadded business around refining…
  28. December 2011 Investor Day – Tesoro Corporation – slide 28
    Tesoro Logistics LP Tesoro Benefits From TLLPs Growth 1 TLLP LP + GP Equity Value Unlocks value of legacy logistics in billions assets 0.7 1.4 Allows greater capture of total refining and marketing value chain 900MM 0.7…
  29. December 2011 Investor Day – Tesoro Corporation – slide 29
    Tesoro Logistics LP Growth Opportunities Driving logistics organic growth Bakken gathering system expansion TLLP EBITDA Expectations, million California distribution capabilities 47 100 Unit train rail facilities Volumetric…
  30. December 2011 Investor Day – Tesoro Corporation – slide 30
    Tesoro Logistics LP Asset Drop Down Opportunities Right of First Offer Assets Product Terminals Kenai, AK Anacortes, WA Martinez, CA Pipelines Wilmington, CA Kenai, AK Marine Terminals Kenai, AK Anacortes, WA Martinez,…
  31. December 2011 Investor Day – Tesoro Corporation – slide 31
    Commercial Implement supply and trading strategy - Bakken crude oil supply supports investment at Mandan and Anacortes - Utah waxy crude oil supply supports investment at Salt Lake City - Product supply and trading activity…
  32. December 2011 Investor Day – Tesoro Corporation – slide 32
    Operational Efficiency & Effectiveness Competitive Position California (Wilmington and Martinez) More Competitive TSO Average Regional TSO Competitor TSO TSO TSO TSO Less Competitive Feedstock Yields Operating Sustaining…
  33. December 2011 Investor Day – Tesoro Corporation – slide 33
    Operational Efficiency & Effectiveness System Improvements California (Wilmington and Martinez) Runrate net margin gain of 16 19% Enhance product yield Integrate Thrifty retail stations1 Execute major 2012 turnaround plan…
  34. December 2011 Investor Day – Tesoro Corporation – slide 34
    Wilmington Yield Improvement Vacuum Distillation Unit replacement Product yield upgrade from petroleum coke to clean products Total cost of 40 million 2025 million annual runrate EBITDA* Expected completion 3Q 2012 Maintain…
  35. December 2011 Investor Day – Tesoro Corporation – slide 35
    Operational Efficiency & Effectiveness Competitive Position Pacific Northwest (Anacortes and Kenai) More Competitive TSO TSO TSO Average Regional TSO Competitor TSO TSO Less Competitive Feedstock Yields Operating Sustaining…
  36. December 2011 Investor Day – Tesoro Corporation – slide 36
    Operational Efficiency & Effectiveness System Improvements Pacific Northwest (Anacortes and Kenai) Runrate net margin gain of 9 12% Capture yield and cost advantage on 30 mbpd Bakken crude oil Maximize Canadian crude oil…
  37. December 2011 Investor Day – Tesoro Corporation – slide 37
    Bakken Crude Oil Supply to Anacortes Facility to unload 30 mbpd of Bakken crude oil at Anacortes, 25% of refining capacity Total cost of 60 million 3540 million annual runrate EBITDA* Expected completion 4Q 2012 Supports…
  38. December 2011 Investor Day – Tesoro Corporation – slide 38
    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 Yields Operating…
  39. December 2011 Investor Day – Tesoro Corporation – slide 39
    Operational Efficiency & Effectiveness System Improvements MidContinent (Mandan and Salt Lake City) Runrate net margin gain of 18 20% 10 mbpd expansion and DDU project at Mandan Product yield and crude oil cost advantage…
  40. December 2011 Investor Day – Tesoro Corporation – slide 40
    Mandan Refinery Expansion Expand capacity from 58 to 68 mbpd Total cost of 35 million 3540 million annual EBITDA* Expected completion 2Q 2012 Supports growth of Tesoro Logistics Increase throughput of advantaged Bakken crude…
  41. December 2011 Investor Day – Tesoro Corporation – slide 41
    Mandan DDU Expansion Expand diesel desulfurization unit (DDU) capacity from 17 to 22 mbpd Increase diesel fuel yield at Mandan Total cost of 35 million 1012 million annual EBITDA* Expected completion 4Q 2013 Optimize…
  42. December 2011 Investor Day – Tesoro Corporation – slide 42
    Salt Lake City Conversion Project Improve yields of gasoline and diesel Increase throughput capacity by 4 mbpd 100% increase of advantaged waxy crude oil throughput to 21 mbpd Total cost of 180 million Estimated 100 million…
  43. December 2011 Investor Day – Tesoro Corporation – slide 43
    Operational Efficiency & Effectiveness Competitive Position MidPacific (Kapolei) More Competitive TSO TSO Average Regional TSO Competitor TSO TSO TSO Less Competitive Feedstock Yields Operating Sustaining Logistics…
  44. December 2011 Investor Day – Tesoro Corporation – slide 44
    Operational Efficiency & Effectiveness System Improvements MidPacific (Kapolei) Runrate net margin gain of 12 35% Energy efficiency projects Process alternative feedstocks Improve yields Enhanced naphtha export…
  45. December 2011 Investor Day – Tesoro Corporation – slide 45
    Capital and Turnaround Summary Capital Spending Turnaround Spending in millions in millions 670 300 260 545 430 320 135 110 2011E 2012E 2013E 2014E 2011E 2012E 2013E 2014E Regulatory Maintenance Income Significant…
  46. December 2011 Investor Day – Tesoro Corporation – slide 46
    HighReturn Capital Investments Income Capital Spend Cumulative EBITDA in millions in millions 375 485495 305 420430 245 195205 110 105 2011E 2012E 2013E 2014E 2011E 2012E 2013E 2014E Large Capital Projects Small Capital…
  47. December 2011 Investor Day – Tesoro Corporation – slide 47
    Financial Discipline Maintain average cash balance of 600 to 750 million Solid Operating Results Repurchase remaining 299 million Strategic Capital 2012 Senior Unsecured Notes Growth Discipline Increase investment in…
  48. December 2011 Investor Day – Tesoro Corporation – slide 48
    ValueDriven Growth Significant efforts directed at high value refinery improvement projects Continued focus on: Logistics Refining and marketing integration Pursue strategic opportunities accretive to shareholder value…
  49. December 2011 Investor Day – Tesoro Corporation – slide 49
    Becoming an Industry Leader Target 150 to 200 million of EBITDA improvements in 2012 Investing free cash flow in sustainable highreturn capital projects Over 1.0 billion between 2011 and 2014 Cumulative EBITDA of nearly 500…
  50. December 2011 Investor Day – Tesoro Corporation – slide 50
    Summary Exceeded delivery of our 2011 1Year Share Price Return 100% improvement plan 80% Redeploying free cash flow into 60% highreturn capital projects 40% 20% Driving fundamental and sustainable 0% improvements in the…
  51. December 2011 Investor Day – Tesoro Corporation – slide 51
    Appendix 52
  52. December 2011 Investor Day – Tesoro Corporation – slide 52
    NonGAAP Financial Measure EBITDA represents earnings before interest and financing costs, interest income, income taxes, and depreciation and amortization expense. We present EBITDA because we believe some investors and analysts use…
  53. December 2011 Investor Day – Tesoro Corporation – slide 53
    NonGAAP Financial Measure (In millions) Unaudited TLLP EBITDA (Standalone) Expectations 2012 Growth 2013 IPO Initiatives Runrate Net Earnings 41.5 36.5 79.0 Add interest and financing costs 9.5 5.0 13.5 Add depreciation and…

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