- Net earnings from continuing operations of $418 million, or $3.47 per diluted share, consolidated net earnings of $449 million and EBITDA of $956 million, all include a pre-tax benefit of $363 million related to lower of cost or market inventory adjustment
- Logistics operating income grew 20% year-over-year to $125 million
- Successfully raised approximately $1 billion of debt and equity in Tesoro Logistics primarily to fund acquisitions from Tesoro and future growth
- Closed acquisition of Flint Hills Resources wholesale marketing and logistics assets in Alaska
- Closed acquisition of Dakota Prairie Refining, LLC in North Dakota
- Increased the quarterly cash dividend by 10% to $0.55 per share
SAN ANTONIO - August 3, 2016 - Tesoro Corporation TSO today reported second quarter net earnings from continuing operations of $418 million, or $3.47 per diluted share compared to net earnings from continuing operations of $586 million, or $4.62 per diluted share a year ago. Consolidated net earnings were $449 million for the second quarter 2016 compared to $620 million for the same period last year. EBITDA for the second quarter of 2016 was $956 million compared to $1.2 billion last year. Second quarter 2016 earnings and EBITDA include a pre-tax benefit of $363 million ($220 million(a) after-tax) related to a lower of cost or market (LCM) inventory adjustment.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
($ in millions, except per share data) | 2016 | 2015 | 2016 | 2015 | |||||||||||
Operating Income | |||||||||||||||
Refining | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
TLLP | 125 | 104 | 251 | 208 | |||||||||||
Marketing | 161 | 212 | 388 | 345 | |||||||||||
Total Segment Operating Income | $ | 806 | $ | 1,073 | $ | 1,059 | $ | 1,495 | |||||||
Net Earnings From Continuing Operations Attributable to Tesoro | $ | 418 | $ | 586 | $ | 476 | $ | 731 | |||||||
Diluted EPS - Continuing Operations | $ | 3.47 | $ | 4.62 | $ | 3.94 | $ | 5.77 | |||||||
Diluted EPS - Discontinued Operations | - | (0.03 | ) | 0.09 | (0.03 | ) | |||||||||
Total Diluted EPS | $ | 3.47 | $ | 4.59 | $ | 4.03 | $ | 5.74 |
"Tesoro's integrated business model continues to perform well, even with the Tesoro Index 6% lower this quarter compared to the average of 2014 and 2015," said Greg Goff, Chairman and CEO. "We continue to focus on driving sustainable improvements to the business and growing Logistics and Marketing to further enhance shareholder value."
For the second quarter, the Company recorded segment operating income of $806 million compared to segment operating income of $1.1 billion in the second quarter of 2015. Second quarter 2016 results reflect lower operating income in Refining and Marketing, offset by continued growth in Logistics.
Tesoro previously provided adjusted EBITDA, adjusted earnings and certain other metrics including special adjustments for unusual items impacting quarterly results. The Company decided to limit its disclosures of non-GAAP financial measures to EBITDA (which has been revised to include discontinued operations), segment EBITDA and debt to capitalization, excluding Tesoro Logistics LP TLLP. The Company also adjusted the presentation of certain items to conform to recent guidance regarding non-GAAP measures. Tesoro will continue to highlight significant items impacting quarterly results in its earnings releases and quarterly SEC filings to facilitate analysis of its results.
SEGMENT RESULTS
REFINING. Refining operating income was $520 million for the second quarter 2016 compared to $757 million in 2015 and segment EBITDA was $692 million compared to $880 million in 2015. The Tesoro Index(b) was $13.93 per barrel for the second quarter with a gross refining margin of $15.70 per barrel or 113% capture of the Tesoro Index, compared to a gross refining margin of $19.13 per barrel or 89% capture of the Tesoro Index of $21.61 per barrel last year. Second quarter 2016 gross refining margin and segment EBITDA include a pre-tax benefit of $363 million related to a LCM inventory adjustment. Total refinery throughput for the quarter was 802 thousand barrels per day, or 92% utilization. Manufacturing costs in the second quarter of 2016 decreased $0.57 per barrel over last year to $5.01 per barrel, due to a combination of higher throughput in 2016 and a decline in natural gas prices. Throughput and capture rates in the second quarter were impacted by an extension of planned maintenance in the Kenai, Alaska refinery and unplanned unit downtime within our California region.
LOGISTICS. Logistics operating income increased to $125 million in the second quarter 2016 from $104 million in 2015 and segment EBITDA increased to $172 million from $149 million last year. This performance was driven by volume growth in TLLP's crude oil gathering and natural gas gathering and processing businesses as well as contributions from the LA Storage and Handling Assets acquisition. Year-to-date, TLLP has seen volume growth of approximately 23% in crude oil pipeline gathering volumes, 5% in NGL processing throughput, 4% in terminalling throughput and 4% in pipeline transportation volumes over the same period last year.
MARKETING. Marketing operating income was $161 million compared to $212 million a year ago and segment EBITDA was $173 million compared to $223 million a year ago. In the quarter, the Company experienced lower overall margins but continued to see high consumer demand and growth in the branded network of retail stations. Total stations in second quarter grew 8% over the same period last year. The year-over-year decline in operating income was impacted by fuel margins which declined to 10.5 cents per gallon from 13.7 cents per gallon a year ago.
CORPORATE AND OTHER
Corporate and unallocated costs for the second quarter 2016 were $88 million. The effective tax rate was 34.5% for the quarter.
BALANCE SHEET AND CASH FLOW
Tesoro ended the second quarter with $1.1 billion in cash and cash equivalents compared to $942 million at the end of 2015. Tesoro has $2.1 billion of availability under the Company's revolving credit facility. Total debt, net of unamortized issuance costs, was $4.5 billion or 36% of total capitalization at the end of the second quarter. Excluding TLLP debt and equity, total debt was $1.3 billion or 19% of total capitalization.
Capital spending for the second quarter was $167 million for Tesoro and $42 million for TLLP. Turnaround expenditures for the second quarter were $191 million.
The Company repurchased 1.3 million shares for approximately $100 million in the second quarter and has $1.3 billion remaining under its previously approved share repurchase programs. Tesoro is well positioned to continue to execute its financial priorities of investing in high-return capital projects, returning cash to shareholders and maintaining a strong balance sheet.
Tesoro today announced that the board of directors has increased the quarterly cash dividend by 10% to $0.55 per share payable on September 15, 2016, to all holders of record as of August 31, 2016.
STRATEGIC UPDATE
In June, Tesoro closed the acquisition of Flint Hills Resources wholesale marketing and logistics assets in Anchorage and Fairbanks, Alaska. This acquisition enhances the Company's capabilities to efficiently and reliably serve customers in the state of Alaska. In addition, the Company acquired Dakota Prairie Refining, LLC, which owns a refinery near Dickinson, North Dakota, with strategic access to Bakken crude oil and is located just 100 miles west of the Tesoro Mandan Refinery. Tesoro plans to continue to market the ultra-low sulfur diesel to local customers and utilize the naphtha and resid in its integrated value chain system.
On July 1, 2016, Tesoro executed an agreement for the sale of storage and terminalling assets in Alaska to TLLP for a total consideration of $444 million. The Alaska Storage and Terminalling Assets include crude oil, feedstock and refined product storage tanks in Kenai, Alaska and refined product terminals in Anchorage and Fairbanks. The first phase, the storage portion of the acquisition, closed on July 1, 2016. The second phase, the acquisition of the Anchorage and Fairbanks terminals, is expected to close in the third quarter once the Consent Decree with the State of Alaska becomes effective. The Consent Decree is related to Tesoro's acquisition of certain Flint Hills Resources Alaska assets, which closed on June 20, 2016. The total acquisition price of $444 million includes cash proceeds to Tesoro of $400 million and the issuance of common and general partner units to Tesoro, valued at approximately $44 million.
At Tesoro's 2015 Investor and Analyst Day, the Company provided its expectations for 2016. These included a Tesoro index of $12 to $14 per barrel, Marketing segment fuel margins of $0.11 to $0.14 per gallon, crude oil differentials reflecting transportation costs and year-over-year improvements from higher utilization and operational efficiencies of $500 to $600 million. Through the first half of 2016, the Tesoro Index and Marketing fuel margins are in line with expectations. Crude oil differentials continue to be significantly narrower than expectations and have resulted in lower capture rates and lower refining profitability than the Company's expectations. Refining utilization is at the low end of the Company's expectations, primarily due to unplanned maintenance and, as a result, Tesoro now expects year-over-year improvements from higher utilization and operational efficiencies of $400 to $500 million.
In addition, the Company committed to delivering $400 to $500 million of annual improvements to operating income in 2016, consisting of $200 to $250 million in Refining, $175 to $200 million in Logistics and $25 to $50 million in Marketing. Tesoro remains confident in delivering these annual improvements to operating income. Through the first half of the year, estimated Refining improvements are trending towards the high end of the range, Marketing improvements are on track with full year expectations and estimated Logistics improvements are tracking slightly below the range, primarily attributable to slower than expected organic growth due to the weak commodity price environment.
PUBLIC INVITED TO LISTEN TO ANALYST AND INVESTOR CONFERENCE CALL
At 7:30 a.m. CT tomorrow morning, Tesoro will broadcast, live, its conference call with analysts regarding second quarter 2016 results and other business matters. Interested parties may listen to the live conference call over the Internet by logging on to http://www.tsocorp.com.
ABOUT TESORO CORPORATION
Tesoro Corporation, a Fortune 100 company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates seven refineries in the western United States with a combined capacity of over 895,000 barrels per day and ownership in a logistics business, which includes an interest in Tesoro Logistics LP TLLP and ownership of its general partner. Tesoro's retail-marketing system includes over 2,400 retail stations under the ARCO®, Shell®, Exxon®, Mobil®, USA Gasoline(TM), Rebel(TM) and Tesoro® brands.
This earnings release contains certain statements that are "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 concerning the ability of our integrated business model to continue performing well, even in a challenging refining margin environment; our ability to continue driving sustainable improvements to the business and grow Logistics and Marketing to further enhance shareholder value; our positioning and ability to continue executing our financial priorities of investing in high-return capital projects, returning cash to shareholders, and maintaining a strong balance sheet; the ability of our recently acquired wholesale marketing and logistics assets to enhance our capabilities to efficiently and reliability serve customers in the state of Alaska; our expectations to continue to market ultra-low sulfur diesel to local customers from our recently acquired refinery near Dickinson, North Dakota and utilize the naphtha and residuals in our integrated value chain system; our expectations regarding the sale of storage and terminalling assets in Alaska to TLLP, including the timing of closing for the second phase of the transaction; the impact of crude differentials on our capture rates, refining profitability and other factors on our expectations for 2016 and our revised expectations for year-over-year improvements from higher utilization and operational efficiencies; our ability to deliver anticipated annual improvements to operating income in 2016 and the impact of the weak commodity price environment on our targeted 2016 Logistics improvements; expectations for throughput, manufacturing costs, depreciation, corporate expense and interest expense in the third quarter of 2016; and our outlook for 2016 capital expenditures. For more information concerning factors that could affect these statements see our annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date hereof.
Contact:
Investors:
Sam Ramraj, Vice President, Investor Relations, (210) 626-4757
Media:
Tesoro Media Relations, media@tsocorp.com, (210) 626-7702
(a) After-tax amount utilizes the marginal tax rate.
(b) As a performance benchmark, we utilize crack spreads and the Tesoro Index to measure the difference between market prices for crude oil and refined products. Crack spreads are a commonly used proxy within the industry to estimate or identify trends in gross refining margins, while the Tesoro Index is more specifically designed around Tesoro's assets. Crack spreads and the Tesoro Index can fluctuate significantly over time as a result of market conditions and supply and demand balances. For example, The West Coast 321 crack spread is calculated using three barrels of Alaska North Slope crude oil (ANS) producing two barrels of Los Angeles CARB gasoline and one barrel of Los Angeles CARB diesel. In comparison the Tesoro Index uses several crude oils and approximately 8 to 10 products to provide a potentially closer representation of the trends in the available margin. Our actual gross refining margins differ from these crack spreads and the Tesoro Index based on the actual slate of crude oil we run at our refineries and the products we produce or yield.
TESORO CORPORATION
THIRD QUARTER 2016 GUIDANCE (Unaudited)
Throughput (Mbpd) | |
California | 515 - 540 |
Pacific Northwest | 180 - 190 |
Mid-Continent | 140 - 155 |
Consolidated | 835 - 885 |
Manufacturing Cost ($/throughput barrel) | |
California | $5.40 - 5.65 |
Pacific Northwest | $3.60 - 3.85 |
Mid-Continent | $4.50 - 4.75 |
Consolidated | $4.85 - 5.10 |
Corporate/System ($ millions) | |
Refining depreciation | $150 |
TLLP depreciation | $45 |
Corporate expense (before depreciation) | $90 - 100 |
Interest expense (before interest income) | $65 |
Noncontrolling Interest | $40 - 45 |
2016 CAPITAL OUTLOOK (Unaudited) (in millions)
2016 Capital Expenditures Outlook | |||
Capital Expenditures | |||
Tesoro Corporation | $ | 700 | |
Tesoro Logistics LP | 270 | ||
Total Capital Expenditures | $ | 970 |
ITEMS IMPACTING COMPARABILITY
The TLLP financial and operational data presented include the historical results of all assets acquired from Tesoro prior to the acquisition dates. The acquisitions from Tesoro were transfers between entities under common control. Accordingly, the financial information of TLLP contained herein has been retrospectively adjusted to include the historical results of the assets acquired in the acquisitions from Tesoro prior to the effective date of each acquisition for all periods presented. The TLLP financial data is derived from the combined financial results of the TLLP predecessor (the "TLLP Predecessor"). We refer to the TLLP Predecessor and, prior to each acquisition date, the acquisitions from Tesoro collectively, as "TLLP's Predecessors."
NON-GAAP MEASURES
Our management uses certain performance "non-GAAP" measures to analyze operating segment performance. Our management also uses additional measures that are known as "non-GAAP" financial measures in its evaluation of past performance and prospects for the future to supplement our financial information presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). These financial non-GAAP measures are important factors in assessing our operating results and profitability and include the following:
- U.S. GAAP-based net earnings before interest, income taxes, and depreciation and amortization expense ("EBITDA");
- Segment EBITDA is defined as a segment's U.S. GAAP operating income before depreciation and amortization expense plus equity in earnings (loss) of equity method investments and other income (expense), net; and
- Debt to capitalization ratio excluding TLLP, reflects the ratio achieved by dividing the net result of our consolidated debt less all debt owed by TLLP (both net of unamortized issuance costs) by the sum of our consolidated debt less TLLP's total debt (both net of unamortized issuance costs) and our total equity less noncontrolling interest associated with the public ownership of TLLP.
We present the measures defined above because investors, analysts, lenders and ratings agencies may use these measures to help analyze our results of operations and liquidity in conjunction with our U.S. GAAP results, including but not limited to the following:
- our operating performance as compared to other publicly traded companies in the refining, logistics and marketing industries, without regard to historical cost basis or financing methods;
- our ability to incur and service debt and fund capital expenditures; and
- the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.
In addition, these measures are used by management to assess internal performance. We believe these measures, when supplemental to information presented under U.S. GAAP, may provide meaningful information to the users of our financial statements. Each of the performance measures should not be used in isolation from their comparable U.S. GAAP measure and thus should not be considered as alternatives to any U.S. GAAP measure. Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income.
TESORO CORPORATION
CONDENSED CONSOLIDATING BALANCE SHEETS (Unaudited) (In millions)
June 30, 2016 | December 31, 2015 | ||||||||||||||
ASSETS | |||||||||||||||
Current Assets | |||||||||||||||
Cash and cash equivalents (TLLP: 2 and , respectively) $ 1,121 $ 942 Receivables, net of allowance for doubtful accounts 1,065 792 Inventories (c) 2,422 2,302 Prepayments and other current assets 263 271 Total Current Assets 4,871 4,307 Net Property, Plant and Equipment (TLLP: | $ | 956 | $ | 1,190 | $ | 1,367 | $ | 1,708 |
Reconciliation of Refining Operating Income to Refining Segment EBITDA | |||||||||||||||
Operating income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Equity in earnings (loss) of equity method investments | - | 1 | (2 | ) | (1 | ) | |||||||||
Other income (expense), net | 24 | 1 | 25 | (1 | ) | ||||||||||
Segment EBITDA | $ | 692 | $ | 880 | $ | 741 | $ | 1,180 | |||||||
Reconciliation of TLLP Operating Income to TLLP Segment EBITDA | |||||||||||||||
Operating income | $ | 125 | $ | 104 | $ | 251 | $ | 208 | |||||||
Depreciation and amortization expense | 44 | 44 | 88 | 88 | |||||||||||
Equity in earnings of equity method investments | 3 | 1 | 7 | 4 | |||||||||||
Other income, net | - | - | 6 | - | |||||||||||
Segment EBITDA | $ | 172 | $ | 149 | $ | 352 | $ | 300 | |||||||
Reconciliation of Marketing Operating Income to Marketing Segment EBITDA | |||||||||||||||
Operating income | $ | 161 | $ | 212 | $ | 388 | $ | 345 | |||||||
Depreciation and amortization expense | 12 | 11 | 24 | 23 | |||||||||||
Segment EBITDA | $ | 173 | $ | 223 | $ | 412 | $ | 368 |
TESORO CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION (Unaudited) (In millions, except percentages)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash Flows From (Used in): | |||||||||||||||
Operating activities | $ | 444 | $ | 1,055 | $ | 628 | $ | 907 | |||||||
Investing activities | (271 | ) | (275 | ) | (806 | ) | (548 | ) | |||||||
Financing activities | 509 | (261 | ) | 357 | (381 | ) | |||||||||
Increase (Decrease) in Cash and Cash Equivalents | $ | 682 | $ | 519 | $ | 179 | $ | (22 | ) | ||||||
June 30, 2016 | December 31, 2015 | ||||||||||||||
Working capital (current assets less current liabilities) | $ | 2,204 | $ | 1,777 | |||||||||||
Total market value of TLLP units held by Tesoro (f) | $ | 1,607 | $ | 1,633 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash distributions received from TLLP (g): | |||||||||||||||
For common units held | $ | 27 | $ | 19 | $ | 52 | $ | 38 | |||||||
For general partner units held | 32 | 14 | 57 | 30 | |||||||||||
Total Cash Distributions Received from TLLP | $ | 59 | $ | 33 | $ | 109 | $ | 68 |
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
June 30, 2016 | December 31, 2015 | ||||||
Tesoro consolidated debt (h) | $ | 4,515 | $ | 4,073 | |||
TLLP debt (h) | 3,218 | 2,844 | |||||
Tesoro Debt Excluding TLLP (h) | $ | 1,297 | $ | 1,229 | |||
Tesoro consolidated equity | $ | 8,202 | $ | 7,740 | |||
Noncontrolling interest | 2,664 | 2,527 | |||||
Tesoro Stockholder's Equity | $ | 5,538 | $ | 5,213 | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio (h) | 36 | % | 34 | % | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio excluding TLLP and noncontrolling interest (h) | 19 | % | 19 | % |
(f) Represents market value of the 32,445,115 common units held by Tesoro at both June 30, 2016 and December 31, 2015. The market values were $49.53 and $50.32 per unit based on the closing unit price at June 30, 2016 and December 31, 2015, respectively.
(g) Represents distributions received from TLLP during the three and six months ended June 30, 2016 and 2015 on common units and general partner units held by Tesoro.
(h) These amounts and calculations are shown net of unamortized issuance costs.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
REFINING SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Total Refining Segment | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 165 | 174 | 170 | 135 | |||||||||||
Light crude | 586 | 542 | 574 | 544 | |||||||||||
Other feedstocks | 51 | 67 | 48 | 61 | |||||||||||
Total Throughput | 802 | 783 | 792 | 740 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 448 | 416 | 446 | 388 | |||||||||||
Diesel fuel | 173 | 158 | 173 | 151 | |||||||||||
Jet fuel | 101 | 118 | 108 | 118 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 134 | 144 | 118 | 130 | |||||||||||
Total Yield | 856 | 836 | 845 | 787 | |||||||||||
Refined Product Sales (Mbpd) (j) | |||||||||||||||
Gasoline and gasoline blendstocks | 529 | 512 | 525 | 500 | |||||||||||
Diesel fuel | 200 | 201 | 198 | 190 | |||||||||||
Jet fuel | 141 | 152 | 138 | 155 | |||||||||||
Heavy fuel oils, residual products and other | 104 | 98 | 101 | 86 | |||||||||||
Total Refined Product Sales | 974 | 963 | 962 | 931 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 5,508 | $ | 7,357 | $ | 9,793 | $ | 13,050 | |||||||
Crude oil resales and other | 242 | 309 | 453 | 608 | |||||||||||
Refining Revenues | 5,750 | 7,666 | 10,246 | 13,658 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding lower of cost or market adjustments) | 4,967 | 6,303 | 8,776 | 11,567 | |||||||||||
Lower of cost or market adjustments | (363 | ) | - | (216 | ) | (42 | ) | ||||||||
Refining cost of sales | 4,604 | 6,303 | 8,560 | 11,525 | |||||||||||
Gross refining margin (l) | 1,146 | 1,363 | 1,686 | 2,133 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | |||||||||||||||
Manufacturing costs | 365 | 397 | 760 | 794 | |||||||||||
Other operating expenses | 111 | 81 | 204 | 144 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 7 | |||||||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Loss on asset disposal and impairments | - | 3 | - | 6 | |||||||||||
Segment Operating Income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.70 | $ | 19.13 | $ | 11.70 | $ | 15.93 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.01 | $ | 5.58 | $ | 5.28 | $ | 5.93 |
(i) We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.
(j) Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties.
(k) Refined product sales include intersegment sales to our marketing segment of $3.8 billion and $4.8 billion for the three months ended June 30, 2016 and 2015, respectively, and $6.8 billion and $8.5 billion for the six months ended June 30, 2016 and 2015, respectively.
(l) Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Gross refining margin includes the effect of intersegment sales to the marketing segment and services provided by TLLP. Gross refining margin reflects the incremental expense or benefit associated with the LCM adjustments for all periods presented.
(m) Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense ("Manufacturing Costs") per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues for manufactured refined products sold less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput.
(n) Gross refining margin per throughput barrel on a consolidated and regional basis includes the incremental expense or benefit associated with the LCM adjustments for all periods presented.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Refining By Region | 2016 | 2015 | 2016 | 2015 | |||||||||||
California (Martinez and Los Angeles) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 160 | 169 | 166 | 129 | |||||||||||
Light crude | 314 | 313 | 289 | 305 | |||||||||||
Other feedstocks | 39 | 41 | 32 | 39 | |||||||||||
Total Throughput | 513 | 523 | 487 | 473 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 301 | 290 | 291 | 258 | |||||||||||
Diesel fuel | 103 | 101 | 100 | 92 | |||||||||||
Jet fuel | 65 | 80 | 65 | 76 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 89 | 98 | 74 | 86 | |||||||||||
Total Yield | 558 | 569 | 530 | 512 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 3,731 | $ | 5,100 | $ | 6,678 | $ | 8,976 | |||||||
Crude oil resales and other | 73 | 171 | 183 | 396 | |||||||||||
Regional Revenue | 3,804 | 5,271 | 6,861 | 9,372 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 3,298 | 4,314 | 5,866 | 8,006 | |||||||||||
LCM | (235 | ) | - | (144 | ) | (30 | ) | ||||||||
Regional Cost of Sales | 3,063 | 4,314 | 5,722 | 7,976 | |||||||||||
Gross refining margin (l) | 741 | 957 | 1,139 | 1,396 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 255 | 280 | 538 | 567 | |||||||||||
Other operating expenses | 54 | 50 | 94 | 86 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 6 | |||||||||||
Depreciation and amortization expense | 98 | 82 | 191 | 161 | |||||||||||
Loss on asset disposals and impairments | - | - | - | 2 | |||||||||||
Operating Income | $ | 332 | $ | 541 | $ | 312 | $ | 574 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.85 | $ | 20.10 | $ | 12.83 | $ | 16.27 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.47 | $ | 5.89 | $ | 6.07 | $ | 6.62 | |||||||
Capital Expenditures | $ | 77 | $ | 59 | $ | 153 | $ | 114 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Pacific Northwest (Alaska & Washington) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 5 | 5 | 4 | 6 | |||||||||||
Light crude | 146 | 126 | 157 | 132 | |||||||||||
Other feedstocks | 7 | 23 | 11 | 18 | |||||||||||
Total Throughput | 158 | 154 | 172 | 156 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 75 | 71 | 80 | 70 | |||||||||||
Diesel fuel | 29 | 23 | 32 | 25 | |||||||||||
Jet fuel | 26 | 31 | 32 | 32 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 33 | 34 | 34 | 34 | |||||||||||
Total Yield | 163 | 159 | 178 | 161 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 1,006 | $ | 1,386 | $ | 1,788 | $ | 2,439 | |||||||
Crude oil resales and other | 6 | 1 | 5 | 4 | |||||||||||
Regional Revenue | 1,012 | 1,387 | 1,793 | 2,443 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 901 | 1,147 | 1,580 | 2,048 | |||||||||||
LCM | (85 | ) | - | (52 | ) | (8 | ) | ||||||||
Regional Cost of Sales | 816 | 1,147 | 1,528 | 2,040 | |||||||||||
Gross refining margin (l) | 196 | 240 | 265 | 403 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 57 | 60 | 121 | 122 | |||||||||||
Other operating expenses | 16 | 16 | 30 | 30 | |||||||||||
Selling, general and administrative expenses | - | - | - | - | |||||||||||
Depreciation and amortization expense | 22 | 20 | 45 | 40 | |||||||||||
Loss on asset disposals and impairments | - | - | - | - | |||||||||||
Operating Income | $ | 101 | $ | 144 | $ | 69 | $ | 211 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 13.66 | $ | 17.12 | $ | 8.46 | $ | 14.29 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 3.95 | $ | 4.28 | $ | 3.87 | $ | 4.36 | |||||||
Capital Expenditures | $ | 37 | $ | 29 | $ | 67 | $ | 55 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||
Mid-Continent (North Dakota and Utah) | ||||||||||||||||||||||||||
Throughput (Mbpd) | ||||||||||||||||||||||||||
Light crude | 126 | 103 | 128 | 107 | ||||||||||||||||||||||
Other feedstocks | 5 | 3 | 5 | 4 | ||||||||||||||||||||||
Total Throughput | 131 | 106 | 133 | 111 | ||||||||||||||||||||||
Yield (Mbpd) | ||||||||||||||||||||||||||
Gasoline and gasoline blendstocks | 72 | 55 | 75 | 60 | ||||||||||||||||||||||
Diesel fuel | 41 | 34 | 41 | 34 | ||||||||||||||||||||||
Jet fuel | 10 | 7 | 11 | 10 | ||||||||||||||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 12 | 12 | 10 | 10 | ||||||||||||||||||||||
Total Yield | 135 | 108 | 137 | 114 | ||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||
Refined products (k) | $ | 771 | $ | 871 | $ | 1,327 | $ | 1,635 | ||||||||||||||||||
Crude oil resales and other | 163 | 137 | 265 | 208 | ||||||||||||||||||||||
Regional Revenue | 934 | 1,008 | 1,592 | 1,843 | ||||||||||||||||||||||
Cost of Sales | ||||||||||||||||||||||||||
Cost of sales (excluding LCM) | 768 | 842 | 1,330 | 1,513 | ||||||||||||||||||||||
LCM | (43 | ) | - | (20 | ,086 and | $ | 956 | $ | 1,190 | $ | 1,367 | $ | 1,708 |
Reconciliation of Refining Operating Income to Refining Segment EBITDA | |||||||||||||||
Operating income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Equity in earnings (loss) of equity method investments | - | 1 | (2 | ) | (1 | ) | |||||||||
Other income (expense), net | 24 | 1 | 25 | (1 | ) | ||||||||||
Segment EBITDA | $ | 692 | $ | 880 | $ | 741 | $ | 1,180 | |||||||
Reconciliation of TLLP Operating Income to TLLP Segment EBITDA | |||||||||||||||
Operating income | $ | 125 | $ | 104 | $ | 251 | $ | 208 | |||||||
Depreciation and amortization expense | 44 | 44 | 88 | 88 | |||||||||||
Equity in earnings of equity method investments | 3 | 1 | 7 | 4 | |||||||||||
Other income, net | - | - | 6 | - | |||||||||||
Segment EBITDA | $ | 172 | $ | 149 | $ | 352 | $ | 300 | |||||||
Reconciliation of Marketing Operating Income to Marketing Segment EBITDA | |||||||||||||||
Operating income | $ | 161 | $ | 212 | $ | 388 | $ | 345 | |||||||
Depreciation and amortization expense | 12 | 11 | 24 | 23 | |||||||||||
Segment EBITDA | $ | 173 | $ | 223 | $ | 412 | $ | 368 |
TESORO CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION (Unaudited) (In millions, except percentages)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash Flows From (Used in): | |||||||||||||||
Operating activities | $ | 444 | $ | 1,055 | $ | 628 | $ | 907 | |||||||
Investing activities | (271 | ) | (275 | ) | (806 | ) | (548 | ) | |||||||
Financing activities | 509 | (261 | ) | 357 | (381 | ) | |||||||||
Increase (Decrease) in Cash and Cash Equivalents | $ | 682 | $ | 519 | $ | 179 | $ | (22 | ) | ||||||
June 30, 2016 | December 31, 2015 | ||||||||||||||
Working capital (current assets less current liabilities) | $ | 2,204 | $ | 1,777 | |||||||||||
Total market value of TLLP units held by Tesoro (f) | $ | 1,607 | $ | 1,633 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash distributions received from TLLP (g): | |||||||||||||||
For common units held | $ | 27 | $ | 19 | $ | 52 | $ | 38 | |||||||
For general partner units held | 32 | 14 | 57 | 30 | |||||||||||
Total Cash Distributions Received from TLLP | $ | 59 | $ | 33 | $ | 109 | $ | 68 |
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
June 30, 2016 | December 31, 2015 | ||||||
Tesoro consolidated debt (h) | $ | 4,515 | $ | 4,073 | |||
TLLP debt (h) | 3,218 | 2,844 | |||||
Tesoro Debt Excluding TLLP (h) | $ | 1,297 | $ | 1,229 | |||
Tesoro consolidated equity | $ | 8,202 | $ | 7,740 | |||
Noncontrolling interest | 2,664 | 2,527 | |||||
Tesoro Stockholder's Equity | $ | 5,538 | $ | 5,213 | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio (h) | 36 | % | 34 | % | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio excluding TLLP and noncontrolling interest (h) | 19 | % | 19 | % |
(f) Represents market value of the 32,445,115 common units held by Tesoro at both June 30, 2016 and December 31, 2015. The market values were $49.53 and $50.32 per unit based on the closing unit price at June 30, 2016 and December 31, 2015, respectively.
(g) Represents distributions received from TLLP during the three and six months ended June 30, 2016 and 2015 on common units and general partner units held by Tesoro.
(h) These amounts and calculations are shown net of unamortized issuance costs.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
REFINING SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Total Refining Segment | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 165 | 174 | 170 | 135 | |||||||||||
Light crude | 586 | 542 | 574 | 544 | |||||||||||
Other feedstocks | 51 | 67 | 48 | 61 | |||||||||||
Total Throughput | 802 | 783 | 792 | 740 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 448 | 416 | 446 | 388 | |||||||||||
Diesel fuel | 173 | 158 | 173 | 151 | |||||||||||
Jet fuel | 101 | 118 | 108 | 118 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 134 | 144 | 118 | 130 | |||||||||||
Total Yield | 856 | 836 | 845 | 787 | |||||||||||
Refined Product Sales (Mbpd) (j) | |||||||||||||||
Gasoline and gasoline blendstocks | 529 | 512 | 525 | 500 | |||||||||||
Diesel fuel | 200 | 201 | 198 | 190 | |||||||||||
Jet fuel | 141 | 152 | 138 | 155 | |||||||||||
Heavy fuel oils, residual products and other | 104 | 98 | 101 | 86 | |||||||||||
Total Refined Product Sales | 974 | 963 | 962 | 931 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 5,508 | $ | 7,357 | $ | 9,793 | $ | 13,050 | |||||||
Crude oil resales and other | 242 | 309 | 453 | 608 | |||||||||||
Refining Revenues | 5,750 | 7,666 | 10,246 | 13,658 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding lower of cost or market adjustments) | 4,967 | 6,303 | 8,776 | 11,567 | |||||||||||
Lower of cost or market adjustments | (363 | ) | - | (216 | ) | (42 | ) | ||||||||
Refining cost of sales | 4,604 | 6,303 | 8,560 | 11,525 | |||||||||||
Gross refining margin (l) | 1,146 | 1,363 | 1,686 | 2,133 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | |||||||||||||||
Manufacturing costs | 365 | 397 | 760 | 794 | |||||||||||
Other operating expenses | 111 | 81 | 204 | 144 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 7 | |||||||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Loss on asset disposal and impairments | - | 3 | - | 6 | |||||||||||
Segment Operating Income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.70 | $ | 19.13 | $ | 11.70 | $ | 15.93 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.01 | $ | 5.58 | $ | 5.28 | $ | 5.93 |
(i) We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.
(j) Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties.
(k) Refined product sales include intersegment sales to our marketing segment of $3.8 billion and $4.8 billion for the three months ended June 30, 2016 and 2015, respectively, and $6.8 billion and $8.5 billion for the six months ended June 30, 2016 and 2015, respectively.
(l) Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Gross refining margin includes the effect of intersegment sales to the marketing segment and services provided by TLLP. Gross refining margin reflects the incremental expense or benefit associated with the LCM adjustments for all periods presented.
(m) Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense ("Manufacturing Costs") per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues for manufactured refined products sold less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput.
(n) Gross refining margin per throughput barrel on a consolidated and regional basis includes the incremental expense or benefit associated with the LCM adjustments for all periods presented.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Refining By Region | 2016 | 2015 | 2016 | 2015 | |||||||||||
California (Martinez and Los Angeles) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 160 | 169 | 166 | 129 | |||||||||||
Light crude | 314 | 313 | 289 | 305 | |||||||||||
Other feedstocks | 39 | 41 | 32 | 39 | |||||||||||
Total Throughput | 513 | 523 | 487 | 473 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 301 | 290 | 291 | 258 | |||||||||||
Diesel fuel | 103 | 101 | 100 | 92 | |||||||||||
Jet fuel | 65 | 80 | 65 | 76 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 89 | 98 | 74 | 86 | |||||||||||
Total Yield | 558 | 569 | 530 | 512 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 3,731 | $ | 5,100 | $ | 6,678 | $ | 8,976 | |||||||
Crude oil resales and other | 73 | 171 | 183 | 396 | |||||||||||
Regional Revenue | 3,804 | 5,271 | 6,861 | 9,372 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 3,298 | 4,314 | 5,866 | 8,006 | |||||||||||
LCM | (235 | ) | - | (144 | ) | (30 | ) | ||||||||
Regional Cost of Sales | 3,063 | 4,314 | 5,722 | 7,976 | |||||||||||
Gross refining margin (l) | 741 | 957 | 1,139 | 1,396 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 255 | 280 | 538 | 567 | |||||||||||
Other operating expenses | 54 | 50 | 94 | 86 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 6 | |||||||||||
Depreciation and amortization expense | 98 | 82 | 191 | 161 | |||||||||||
Loss on asset disposals and impairments | - | - | - | 2 | |||||||||||
Operating Income | $ | 332 | $ | 541 | $ | 312 | $ | 574 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.85 | $ | 20.10 | $ | 12.83 | $ | 16.27 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.47 | $ | 5.89 | $ | 6.07 | $ | 6.62 | |||||||
Capital Expenditures | $ | 77 | $ | 59 | $ | 153 | $ | 114 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Pacific Northwest (Alaska & Washington) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 5 | 5 | 4 | 6 | |||||||||||
Light crude | 146 | 126 | 157 | 132 | |||||||||||
Other feedstocks | 7 | 23 | 11 | 18 | |||||||||||
Total Throughput | 158 | 154 | 172 | 156 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 75 | 71 | 80 | 70 | |||||||||||
Diesel fuel | 29 | 23 | 32 | 25 | |||||||||||
Jet fuel | 26 | 31 | 32 | 32 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 33 | 34 | 34 | 34 | |||||||||||
Total Yield | 163 | 159 | 178 | 161 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 1,006 | $ | 1,386 | $ | 1,788 | $ | 2,439 | |||||||
Crude oil resales and other | 6 | 1 | 5 | 4 | |||||||||||
Regional Revenue | 1,012 | 1,387 | 1,793 | 2,443 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 901 | 1,147 | 1,580 | 2,048 | |||||||||||
LCM | (85 | ) | - | (52 | ) | (8 | ) | ||||||||
Regional Cost of Sales | 816 | 1,147 | 1,528 | 2,040 | |||||||||||
Gross refining margin (l) | 196 | 240 | 265 | 403 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 57 | 60 | 121 | 122 | |||||||||||
Other operating expenses | 16 | 16 | 30 | 30 | |||||||||||
Selling, general and administrative expenses | - | - | - | - | |||||||||||
Depreciation and amortization expense | 22 | 20 | 45 | 40 | |||||||||||
Loss on asset disposals and impairments | - | - | - | - | |||||||||||
Operating Income | $ | 101 | $ | 144 | $ | 69 | $ | 211 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 13.66 | $ | 17.12 | $ | 8.46 | $ | 14.29 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 3.95 | $ | 4.28 | $ | 3.87 | $ | 4.36 | |||||||
Capital Expenditures | $ | 37 | $ | 29 | $ | 67 | $ | 55 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Mid-Continent (North Dakota and Utah) | ||||||||||||||||||
Throughput (Mbpd) | ||||||||||||||||||
Light crude | 126 | 103 | 128 | 107 | ||||||||||||||
Other feedstocks | 5 | 3 | 5 | 4 | ||||||||||||||
Total Throughput | 131 | 106 | 133 | 111 | ||||||||||||||
Yield (Mbpd) | ||||||||||||||||||
Gasoline and gasoline blendstocks | 72 | 55 | 75 | 60 | ||||||||||||||
Diesel fuel | 41 | 34 | 41 | 34 | ||||||||||||||
Jet fuel | 10 | 7 | 11 | 10 | ||||||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 12 | 12 | 10 | 10 | ||||||||||||||
Total Yield | 135 | 108 | 137 | 114 | ||||||||||||||
Revenues | ||||||||||||||||||
Refined products (k) | $ | 771 | $ | 871 | $ | 1,327 | $ | 1,635 | ||||||||||
Crude oil resales and other | 163 | 137 | 265 | 208 | ||||||||||||||
Regional Revenue | 934 | 1,008 | 1,592 | 1,843 | ||||||||||||||
Cost of Sales | ||||||||||||||||||
Cost of sales (excluding LCM) | 768 | 842 | 1,330 | 1,513 | ||||||||||||||
LCM | (43 | ) | - | (20 | ,450, respectively) 9,642 9,541 Other Noncurrent Assets (TLLP: TLLP: $682 and $16, respectively) | $ | 1,121 | $ | 942 | |||||||||
Receivables, net of allowance for doubtful accounts | 1,065 | 792 | ||||||||||||||||
Inventories (c) | 2,422 | 2,302 | ||||||||||||||||
Prepayments and other current assets | 263 | 271 | ||||||||||||||||
Total Current Assets | 4,871 | 4,307 | ||||||||||||||||
Net Property, Plant and Equipment (TLLP: $3,086 and $3,450, respectively) | 9,642 | 9,541 | ||||||||||||||||
Other Noncurrent Assets (TLLP: $1,453 and $1,190, respectively) | 3,099 | 2,484 | ||||||||||||||||
Total Assets | $ | 17,612 | $ | 16,332 | ||||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||
Current Liabilities | ||||||||||||||||||
Accounts payable | $ | 1,763 | $ | 1,568 | ||||||||||||||
Other current liabilities | 904 | 962 | ||||||||||||||||
Total Current Liabilities | 2,667 | 2,530 | ||||||||||||||||
Deferred Income Taxes | 1,353 | 1,222 | ||||||||||||||||
Other Noncurrent Liabilities | 889 | 773 | ||||||||||||||||
Debt, Net of Unamortized Issuance Costs (TLLP: $3,218 and $2,844, respectively) | 4,501 | 4,067 | ||||||||||||||||
Equity | 8,202 | 7,740 | ||||||||||||||||
Total Liabilities and Equity | $ | 17,612 | $ | 16,332 |
(c) We recorded a lower of cost or market ("LCM") adjustment to cost of sales of $143 million and $359 million at June 30, 2016 and December 31, 2015, respectively, for our crude oil, refined products, oxygenates and by-product inventories to adjust carrying value of our inventories to reflect replacement cost as of those reporting dates. We reverse any lower of cost or market reserve in the subsequent period because the inventories are sold or used and then perform a complete lower of cost or market assessment of ending inventories at the end of each reporting period to determine if a reserve is required.
TESORO CORPORATION
RESULTS OF CONSOLIDATED OPERATIONS (Unaudited) (In millions, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | $ | 6,285 | $ | 8,232 | $ | 11,386 | $ | 14,695 | |||||||
Costs and Expenses: | |||||||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 5,019 | 6,352 | 8,880 | 11,659 | |||||||||||
Lower of cost or market inventory valuation adjustment (c) | (363 | ) | - | (216 | ) | (42 | ) | ||||||||
Operating expenses | 606 | 601 | 1,222 | 1,178 | |||||||||||
Selling, general and administrative expenses (d) | 94 | 84 | 176 | 182 | |||||||||||
Depreciation and amortization expense | 210 | 182 | 422 | 361 | |||||||||||
Loss on asset disposals and impairments | 1 | 4 | 5 | 8 | |||||||||||
Operating Income | 718 | 1,009 | 897 | 1,349 | |||||||||||
Interest and financing costs, net | (60 | ) | (54 | ) | (120 | ) | (109 | ) | |||||||
Equity in earnings of equity method investments | 3 | 2 | 5 | 3 | |||||||||||
Other income (expense), net (e) | 25 | 1 | 32 | (1 | ) | ||||||||||
Earnings Before Income Taxes | 686 | 958 | 814 | 1,242 | |||||||||||
Income tax expense | 237 | 334 | 267 | 430 | |||||||||||
Net Earnings From Continuing Operations | 449 | 624 | 547 | 812 | |||||||||||
Earnings (Loss) from discontinued operations, net of tax | - | (4 | ) | 11 | (4 | ) | |||||||||
Net Earnings | 449 | 620 | 558 | 808 | |||||||||||
Less: Net earnings from continuing operations attributable to noncontrolling interest | 31 | 38 | 71 | 81 | |||||||||||
Net Earnings Attributable to Tesoro Corporation | $ | 418 | $ | 582 | $ | 487 | $ | 727 | |||||||
Net Earnings (Loss) Attributable to Tesoro Corporation: | |||||||||||||||
Continuing operations | $ | 418 | $ | 586 | $ | 476 | $ | 731 | |||||||
Discontinued operations | - | (4 | ) | 11 | (4 | ) | |||||||||
Total | $ | 418 | $ | 582 | $ | 487 | $ | 727 | |||||||
Net Earnings (Loss) Per Share - Basic: | |||||||||||||||
Continuing operations | $ | 3.50 | $ | 4.67 | $ | 3.98 | $ | 5.84 | |||||||
Discontinued operations | - | (0.03 | ) | 0.09 | (0.03 | ) | |||||||||
Total | $ | 3.50 | $ | 4.64 | $ | 4.07 | $ | 5.81 | |||||||
Weighted average common shares outstanding - Basic | 119.5 | 125.2 | 119.5 | 125.2 | |||||||||||
Net Earnings (Loss) Per Share - Diluted: | |||||||||||||||
Continuing operations | $ | 3.47 | $ | 4.62 | $ | 3.94 | $ | 5.77 | |||||||
Discontinued operations | - | (0.03 | ) | 0.09 | (0.03 | ) | |||||||||
Total | $ | 3.47 | $ | 4.59 | $ | 4.03 | $ | 5.74 | |||||||
Weighted average common shares outstanding - Diluted | 120.6 | 126.3 | 120.8 | 126.6 |
(d) Includes stock-based compensation expense of $11 million and $7 million for the three months ended June 30, 2016 and 2015, respectively, and expense of $8 million and $35 million for the six months ended June 30, 2016 and 2015, respectively. The significant impact to stock-based compensation expense is primarily a result of changes in Tesoro's stock price.
(e) Other income (expense), net for the three and six months ended June 30, 2016 included insurance proceeds related to a shipment of contaminated crude oil that was received in 2014 as well as a refund of certain tariff charges that were disputed. Additionally, a gain recognized by TLLP on a settlement of amounts disputed by one of its customers on the annual calculation of the natural gas gathering rate is included for the six months ended June 30, 2016.
TESORO CORPORATION
SELECTED SEGMENT OPERATING DATA (Unaudited) (In millions)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Earnings Before Income Taxes | |||||||||||||||
Refining | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
TLLP | 125 | 104 | 251 | 208 | |||||||||||
Marketing | 161 | 212 | 388 | 345 | |||||||||||
Total Segment Operating Income | 806 | 1,073 | 1,059 | 1,495 | |||||||||||
Corporate and unallocated costs (d) | (88 | ) | (64 | ) | (162 | ) | (146 | ) | |||||||
Operating Income | 718 | 1,009 | 897 | 1,349 | |||||||||||
Interest and financing costs, net | (60 | ) | (54 | ) | (120 | ) | (109 | ) | |||||||
Equity in earnings of equity method investments | 3 | 2 | 5 | 3 | |||||||||||
Other income (expenses), net | 25 | 1 | 32 | (1 | ) | ||||||||||
Earnings Before Income Taxes | $ | 686 | $ | 958 | $ | 814 | $ | 1,242 | |||||||
Depreciation and Amortization Expense | |||||||||||||||
Refining | $ | 148 | $ | 121 | $ | 298 | $ | 240 | |||||||
TLLP | 44 | 44 | 88 | 88 | |||||||||||
Marketing | 12 | 11 | 24 | 23 | |||||||||||
Corporate | 6 | 6 | 12 | 10 | |||||||||||
Total Depreciation and Amortization Expense | $ | 210 | $ | 182 | $ | 422 | $ | 361 | |||||||
Segment EBITDA | |||||||||||||||
Refining | $ | 692 | $ | 880 | $ | 741 | $ | 1,180 | |||||||
TLLP | 172 | 149 | 352 | 300 | |||||||||||
Marketing | 173 | 223 | 412 | 368 | |||||||||||
Total Segment EBITDA | $ | 1,037 | $ | 1,252 | $ | 1,505 | $ | 1,848 | |||||||
Capital Expenditures | |||||||||||||||
Refining | $ | 137 | $ | 148 | $ | 256 | $ | 331 | |||||||
TLLP | 42 | 77 | 83 | 144 | |||||||||||
Marketing | 6 | 8 | 19 | 12 | |||||||||||
Corporate | 24 | 4 | 39 | 10 | |||||||||||
Total Capital Expenditures | $ | 209 | $ | 237 | $ | 397 | $ | 497 |
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Reconciliation of Net Earnings to EBITDA | |||||||||||||||
Net earnings | $ | 449 | $ | 620 | $ | 558 | $ | 808 | |||||||
Depreciation and amortization expense | 210 | 182 | 422 | 361 | |||||||||||
Interest and financing costs, net | 60 | 54 | 120 | 109 | |||||||||||
Income tax expense | 237 | 334 | 267 | 430 | |||||||||||
EBITDA | $ | 956 | $ | 1,190 | $ | 1,367 | $ | 1,708 |
Reconciliation of Refining Operating Income to Refining Segment EBITDA | |||||||||||||||
Operating income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Equity in earnings (loss) of equity method investments | - | 1 | (2 | ) | (1 | ) | |||||||||
Other income (expense), net | 24 | 1 | 25 | (1 | ) | ||||||||||
Segment EBITDA | $ | 692 | $ | 880 | $ | 741 | $ | 1,180 | |||||||
Reconciliation of TLLP Operating Income to TLLP Segment EBITDA | |||||||||||||||
Operating income | $ | 125 | $ | 104 | $ | 251 | $ | 208 | |||||||
Depreciation and amortization expense | 44 | 44 | 88 | 88 | |||||||||||
Equity in earnings of equity method investments | 3 | 1 | 7 | 4 | |||||||||||
Other income, net | - | - | 6 | - | |||||||||||
Segment EBITDA | $ | 172 | $ | 149 | $ | 352 | $ | 300 | |||||||
Reconciliation of Marketing Operating Income to Marketing Segment EBITDA | |||||||||||||||
Operating income | $ | 161 | $ | 212 | $ | 388 | $ | 345 | |||||||
Depreciation and amortization expense | 12 | 11 | 24 | 23 | |||||||||||
Segment EBITDA | $ | 173 | $ | 223 | $ | 412 | $ | 368 |
TESORO CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION (Unaudited) (In millions, except percentages)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash Flows From (Used in): | |||||||||||||||
Operating activities | $ | 444 | $ | 1,055 | $ | 628 | $ | 907 | |||||||
Investing activities | (271 | ) | (275 | ) | (806 | ) | (548 | ) | |||||||
Financing activities | 509 | (261 | ) | 357 | (381 | ) | |||||||||
Increase (Decrease) in Cash and Cash Equivalents | $ | 682 | $ | 519 | $ | 179 | $ | (22 | ) | ||||||
June 30, 2016 | December 31, 2015 | ||||||||||||||
Working capital (current assets less current liabilities) | $ | 2,204 | $ | 1,777 | |||||||||||
Total market value of TLLP units held by Tesoro (f) | $ | 1,607 | $ | 1,633 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash distributions received from TLLP (g): | |||||||||||||||
For common units held | $ | 27 | $ | 19 | $ | 52 | $ | 38 | |||||||
For general partner units held | 32 | 14 | 57 | 30 | |||||||||||
Total Cash Distributions Received from TLLP | $ | 59 | $ | 33 | $ | 109 | $ | 68 |
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
June 30, 2016 | December 31, 2015 | ||||||
Tesoro consolidated debt (h) | $ | 4,515 | $ | 4,073 | |||
TLLP debt (h) | 3,218 | 2,844 | |||||
Tesoro Debt Excluding TLLP (h) | $ | 1,297 | $ | 1,229 | |||
Tesoro consolidated equity | $ | 8,202 | $ | 7,740 | |||
Noncontrolling interest | 2,664 | 2,527 | |||||
Tesoro Stockholder's Equity | $ | 5,538 | $ | 5,213 | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio (h) | 36 | % | 34 | % | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio excluding TLLP and noncontrolling interest (h) | 19 | % | 19 | % |
(f) Represents market value of the 32,445,115 common units held by Tesoro at both June 30, 2016 and December 31, 2015. The market values were $49.53 and $50.32 per unit based on the closing unit price at June 30, 2016 and December 31, 2015, respectively.
(g) Represents distributions received from TLLP during the three and six months ended June 30, 2016 and 2015 on common units and general partner units held by Tesoro.
(h) These amounts and calculations are shown net of unamortized issuance costs.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
REFINING SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Total Refining Segment | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 165 | 174 | 170 | 135 | |||||||||||
Light crude | 586 | 542 | 574 | 544 | |||||||||||
Other feedstocks | 51 | 67 | 48 | 61 | |||||||||||
Total Throughput | 802 | 783 | 792 | 740 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 448 | 416 | 446 | 388 | |||||||||||
Diesel fuel | 173 | 158 | 173 | 151 | |||||||||||
Jet fuel | 101 | 118 | 108 | 118 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 134 | 144 | 118 | 130 | |||||||||||
Total Yield | 856 | 836 | 845 | 787 | |||||||||||
Refined Product Sales (Mbpd) (j) | |||||||||||||||
Gasoline and gasoline blendstocks | 529 | 512 | 525 | 500 | |||||||||||
Diesel fuel | 200 | 201 | 198 | 190 | |||||||||||
Jet fuel | 141 | 152 | 138 | 155 | |||||||||||
Heavy fuel oils, residual products and other | 104 | 98 | 101 | 86 | |||||||||||
Total Refined Product Sales | 974 | 963 | 962 | 931 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 5,508 | $ | 7,357 | $ | 9,793 | $ | 13,050 | |||||||
Crude oil resales and other | 242 | 309 | 453 | 608 | |||||||||||
Refining Revenues | 5,750 | 7,666 | 10,246 | 13,658 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding lower of cost or market adjustments) | 4,967 | 6,303 | 8,776 | 11,567 | |||||||||||
Lower of cost or market adjustments | (363 | ) | - | (216 | ) | (42 | ) | ||||||||
Refining cost of sales | 4,604 | 6,303 | 8,560 | 11,525 | |||||||||||
Gross refining margin (l) | 1,146 | 1,363 | 1,686 | 2,133 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | |||||||||||||||
Manufacturing costs | 365 | 397 | 760 | 794 | |||||||||||
Other operating expenses | 111 | 81 | 204 | 144 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 7 | |||||||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Loss on asset disposal and impairments | - | 3 | - | 6 | |||||||||||
Segment Operating Income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.70 | $ | 19.13 | $ | 11.70 | $ | 15.93 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.01 | $ | 5.58 | $ | 5.28 | $ | 5.93 |
(i) We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.
(j) Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties.
(k) Refined product sales include intersegment sales to our marketing segment of $3.8 billion and $4.8 billion for the three months ended June 30, 2016 and 2015, respectively, and $6.8 billion and $8.5 billion for the six months ended June 30, 2016 and 2015, respectively.
(l) Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Gross refining margin includes the effect of intersegment sales to the marketing segment and services provided by TLLP. Gross refining margin reflects the incremental expense or benefit associated with the LCM adjustments for all periods presented.
(m) Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense ("Manufacturing Costs") per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues for manufactured refined products sold less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput.
(n) Gross refining margin per throughput barrel on a consolidated and regional basis includes the incremental expense or benefit associated with the LCM adjustments for all periods presented.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Refining By Region | 2016 | 2015 | 2016 | 2015 | |||||||||||
California (Martinez and Los Angeles) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 160 | 169 | 166 | 129 | |||||||||||
Light crude | 314 | 313 | 289 | 305 | |||||||||||
Other feedstocks | 39 | 41 | 32 | 39 | |||||||||||
Total Throughput | 513 | 523 | 487 | 473 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 301 | 290 | 291 | 258 | |||||||||||
Diesel fuel | 103 | 101 | 100 | 92 | |||||||||||
Jet fuel | 65 | 80 | 65 | 76 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 89 | 98 | 74 | 86 | |||||||||||
Total Yield | 558 | 569 | 530 | 512 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 3,731 | $ | 5,100 | $ | 6,678 | $ | 8,976 | |||||||
Crude oil resales and other | 73 | 171 | 183 | 396 | |||||||||||
Regional Revenue | 3,804 | 5,271 | 6,861 | 9,372 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 3,298 | 4,314 | 5,866 | 8,006 | |||||||||||
LCM | (235 | ) | - | (144 | ) | (30 | ) | ||||||||
Regional Cost of Sales | 3,063 | 4,314 | 5,722 | 7,976 | |||||||||||
Gross refining margin (l) | 741 | 957 | 1,139 | 1,396 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 255 | 280 | 538 | 567 | |||||||||||
Other operating expenses | 54 | 50 | 94 | 86 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 6 | |||||||||||
Depreciation and amortization expense | 98 | 82 | 191 | 161 | |||||||||||
Loss on asset disposals and impairments | - | - | - | 2 | |||||||||||
Operating Income | $ | 332 | $ | 541 | $ | 312 | $ | 574 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.85 | $ | 20.10 | $ | 12.83 | $ | 16.27 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.47 | $ | 5.89 | $ | 6.07 | $ | 6.62 | |||||||
Capital Expenditures | $ | 77 | $ | 59 | $ | 153 | $ | 114 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Pacific Northwest (Alaska & Washington) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 5 | 5 | 4 | 6 | |||||||||||
Light crude | 146 | 126 | 157 | 132 | |||||||||||
Other feedstocks | 7 | 23 | 11 | 18 | |||||||||||
Total Throughput | 158 | 154 | 172 | 156 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 75 | 71 | 80 | 70 | |||||||||||
Diesel fuel | 29 | 23 | 32 | 25 | |||||||||||
Jet fuel | 26 | 31 | 32 | 32 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 33 | 34 | 34 | 34 | |||||||||||
Total Yield | 163 | 159 | 178 | 161 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 1,006 | $ | 1,386 | $ | 1,788 | $ | 2,439 | |||||||
Crude oil resales and other | 6 | 1 | 5 | 4 | |||||||||||
Regional Revenue | 1,012 | 1,387 | 1,793 | 2,443 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 901 | 1,147 | 1,580 | 2,048 | |||||||||||
LCM | (85 | ) | - | (52 | ) | (8 | ) | ||||||||
Regional Cost of Sales | 816 | 1,147 | 1,528 | 2,040 | |||||||||||
Gross refining margin (l) | 196 | 240 | 265 | 403 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 57 | 60 | 121 | 122 | |||||||||||
Other operating expenses | 16 | 16 | 30 | 30 | |||||||||||
Selling, general and administrative expenses | - | - | - | - | |||||||||||
Depreciation and amortization expense | 22 | 20 | 45 | 40 | |||||||||||
Loss on asset disposals and impairments | - | - | - | - | |||||||||||
Operating Income | $ | 101 | $ | 144 | $ | 69 | $ | 211 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 13.66 | $ | 17.12 | $ | 8.46 | $ | 14.29 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 3.95 | $ | 4.28 | $ | 3.87 | $ | 4.36 | |||||||
Capital Expenditures | $ | 37 | $ | 29 | $ | 67 | $ | 55 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Mid-Continent (North Dakota and Utah) | ||||||||||||||||||
Throughput (Mbpd) | ||||||||||||||||||
Light crude | 126 | 103 | 128 | 107 | ||||||||||||||
Other feedstocks | 5 | 3 | 5 | 4 | ||||||||||||||
Total Throughput | 131 | 106 | 133 | 111 | ||||||||||||||
Yield (Mbpd) | ||||||||||||||||||
Gasoline and gasoline blendstocks | 72 | 55 | 75 | 60 | ||||||||||||||
Diesel fuel | 41 | 34 | 41 | 34 | ||||||||||||||
Jet fuel | 10 | 7 | 11 | 10 | ||||||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 12 | 12 | 10 | 10 | ||||||||||||||
Total Yield | 135 | 108 | 137 | 114 | ||||||||||||||
Revenues | ||||||||||||||||||
Refined products (k) | $ | 771 | $ | 871 | $ | 1,327 | $ | 1,635 | ||||||||||
Crude oil resales and other | 163 | 137 | 265 | 208 | ||||||||||||||
Regional Revenue | 934 | 1,008 | 1,592 | 1,843 | ||||||||||||||
Cost of Sales | ||||||||||||||||||
Cost of sales (excluding LCM) | 768 | 842 | 1,330 | 1,513 | ||||||||||||||
LCM | (43 | ) | - | (20 | ),453 and TLLP: $682 and $16, respectively) | $ | 1,121 | $ | 942 | |||||||||
Receivables, net of allowance for doubtful accounts | 1,065 | 792 | ||||||||||||||||
Inventories (c) | 2,422 | 2,302 | ||||||||||||||||
Prepayments and other current assets | 263 | 271 | ||||||||||||||||
Total Current Assets | 4,871 | 4,307 | ||||||||||||||||
Net Property, Plant and Equipment (TLLP: $3,086 and $3,450, respectively) | 9,642 | 9,541 | ||||||||||||||||
Other Noncurrent Assets (TLLP: $1,453 and $1,190, respectively) | 3,099 | 2,484 | ||||||||||||||||
Total Assets | $ | 17,612 | $ | 16,332 | ||||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||
Current Liabilities | ||||||||||||||||||
Accounts payable | $ | 1,763 | $ | 1,568 | ||||||||||||||
Other current liabilities | 904 | 962 | ||||||||||||||||
Total Current Liabilities | 2,667 | 2,530 | ||||||||||||||||
Deferred Income Taxes | 1,353 | 1,222 | ||||||||||||||||
Other Noncurrent Liabilities | 889 | 773 | ||||||||||||||||
Debt, Net of Unamortized Issuance Costs (TLLP: $3,218 and $2,844, respectively) | 4,501 | 4,067 | ||||||||||||||||
Equity | 8,202 | 7,740 | ||||||||||||||||
Total Liabilities and Equity | $ | 17,612 | $ | 16,332 |
(c) We recorded a lower of cost or market ("LCM") adjustment to cost of sales of $143 million and $359 million at June 30, 2016 and December 31, 2015, respectively, for our crude oil, refined products, oxygenates and by-product inventories to adjust carrying value of our inventories to reflect replacement cost as of those reporting dates. We reverse any lower of cost or market reserve in the subsequent period because the inventories are sold or used and then perform a complete lower of cost or market assessment of ending inventories at the end of each reporting period to determine if a reserve is required.
TESORO CORPORATION
RESULTS OF CONSOLIDATED OPERATIONS (Unaudited) (In millions, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | $ | 6,285 | $ | 8,232 | $ | 11,386 | $ | 14,695 | |||||||
Costs and Expenses: | |||||||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 5,019 | 6,352 | 8,880 | 11,659 | |||||||||||
Lower of cost or market inventory valuation adjustment (c) | (363 | ) | - | (216 | ) | (42 | ) | ||||||||
Operating expenses | 606 | 601 | 1,222 | 1,178 | |||||||||||
Selling, general and administrative expenses (d) | 94 | 84 | 176 | 182 | |||||||||||
Depreciation and amortization expense | 210 | 182 | 422 | 361 | |||||||||||
Loss on asset disposals and impairments | 1 | 4 | 5 | 8 | |||||||||||
Operating Income | 718 | 1,009 | 897 | 1,349 | |||||||||||
Interest and financing costs, net | (60 | ) | (54 | ) | (120 | ) | (109 | ) | |||||||
Equity in earnings of equity method investments | 3 | 2 | 5 | 3 | |||||||||||
Other income (expense), net (e) | 25 | 1 | 32 | (1 | ) | ||||||||||
Earnings Before Income Taxes | 686 | 958 | 814 | 1,242 | |||||||||||
Income tax expense | 237 | 334 | 267 | 430 | |||||||||||
Net Earnings From Continuing Operations | 449 | 624 | 547 | 812 | |||||||||||
Earnings (Loss) from discontinued operations, net of tax | - | (4 | ) | 11 | (4 | ) | |||||||||
Net Earnings | 449 | 620 | 558 | 808 | |||||||||||
Less: Net earnings from continuing operations attributable to noncontrolling interest | 31 | 38 | 71 | 81 | |||||||||||
Net Earnings Attributable to Tesoro Corporation | $ | 418 | $ | 582 | $ | 487 | $ | 727 | |||||||
Net Earnings (Loss) Attributable to Tesoro Corporation: | |||||||||||||||
Continuing operations | $ | 418 | $ | 586 | $ | 476 | $ | 731 | |||||||
Discontinued operations | - | (4 | ) | 11 | (4 | ) | |||||||||
Total | $ | 418 | $ | 582 | $ | 487 | $ | 727 | |||||||
Net Earnings (Loss) Per Share - Basic: | |||||||||||||||
Continuing operations | $ | 3.50 | $ | 4.67 | $ | 3.98 | $ | 5.84 | |||||||
Discontinued operations | - | (0.03 | ) | 0.09 | (0.03 | ) | |||||||||
Total | $ | 3.50 | $ | 4.64 | $ | 4.07 | $ | 5.81 | |||||||
Weighted average common shares outstanding - Basic | 119.5 | 125.2 | 119.5 | 125.2 | |||||||||||
Net Earnings (Loss) Per Share - Diluted: | |||||||||||||||
Continuing operations | $ | 3.47 | $ | 4.62 | $ | 3.94 | $ | 5.77 | |||||||
Discontinued operations | - | (0.03 | ) | 0.09 | (0.03 | ) | |||||||||
Total | $ | 3.47 | $ | 4.59 | $ | 4.03 | $ | 5.74 | |||||||
Weighted average common shares outstanding - Diluted | 120.6 | 126.3 | 120.8 | 126.6 |
(d) Includes stock-based compensation expense of $11 million and $7 million for the three months ended June 30, 2016 and 2015, respectively, and expense of $8 million and $35 million for the six months ended June 30, 2016 and 2015, respectively. The significant impact to stock-based compensation expense is primarily a result of changes in Tesoro's stock price.
(e) Other income (expense), net for the three and six months ended June 30, 2016 included insurance proceeds related to a shipment of contaminated crude oil that was received in 2014 as well as a refund of certain tariff charges that were disputed. Additionally, a gain recognized by TLLP on a settlement of amounts disputed by one of its customers on the annual calculation of the natural gas gathering rate is included for the six months ended June 30, 2016.
TESORO CORPORATION
SELECTED SEGMENT OPERATING DATA (Unaudited) (In millions)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Earnings Before Income Taxes | |||||||||||||||
Refining | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
TLLP | 125 | 104 | 251 | 208 | |||||||||||
Marketing | 161 | 212 | 388 | 345 | |||||||||||
Total Segment Operating Income | 806 | 1,073 | 1,059 | 1,495 | |||||||||||
Corporate and unallocated costs (d) | (88 | ) | (64 | ) | (162 | ) | (146 | ) | |||||||
Operating Income | 718 | 1,009 | 897 | 1,349 | |||||||||||
Interest and financing costs, net | (60 | ) | (54 | ) | (120 | ) | (109 | ) | |||||||
Equity in earnings of equity method investments | 3 | 2 | 5 | 3 | |||||||||||
Other income (expenses), net | 25 | 1 | 32 | (1 | ) | ||||||||||
Earnings Before Income Taxes | $ | 686 | $ | 958 | $ | 814 | $ | 1,242 | |||||||
Depreciation and Amortization Expense | |||||||||||||||
Refining | $ | 148 | $ | 121 | $ | 298 | $ | 240 | |||||||
TLLP | 44 | 44 | 88 | 88 | |||||||||||
Marketing | 12 | 11 | 24 | 23 | |||||||||||
Corporate | 6 | 6 | 12 | 10 | |||||||||||
Total Depreciation and Amortization Expense | $ | 210 | $ | 182 | $ | 422 | $ | 361 | |||||||
Segment EBITDA | |||||||||||||||
Refining | $ | 692 | $ | 880 | $ | 741 | $ | 1,180 | |||||||
TLLP | 172 | 149 | 352 | 300 | |||||||||||
Marketing | 173 | 223 | 412 | 368 | |||||||||||
Total Segment EBITDA | $ | 1,037 | $ | 1,252 | $ | 1,505 | $ | 1,848 | |||||||
Capital Expenditures | |||||||||||||||
Refining | $ | 137 | $ | 148 | $ | 256 | $ | 331 | |||||||
TLLP | 42 | 77 | 83 | 144 | |||||||||||
Marketing | 6 | 8 | 19 | 12 | |||||||||||
Corporate | 24 | 4 | 39 | 10 | |||||||||||
Total Capital Expenditures | $ | 209 | $ | 237 | $ | 397 | $ | 497 |
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Reconciliation of Net Earnings to EBITDA | |||||||||||||||
Net earnings | $ | 449 | $ | 620 | $ | 558 | $ | 808 | |||||||
Depreciation and amortization expense | 210 | 182 | 422 | 361 | |||||||||||
Interest and financing costs, net | 60 | 54 | 120 | 109 | |||||||||||
Income tax expense | 237 | 334 | 267 | 430 | |||||||||||
EBITDA | $ | 956 | $ | 1,190 | $ | 1,367 | $ | 1,708 |
Reconciliation of Refining Operating Income to Refining Segment EBITDA | |||||||||||||||
Operating income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Equity in earnings (loss) of equity method investments | - | 1 | (2 | ) | (1 | ) | |||||||||
Other income (expense), net | 24 | 1 | 25 | (1 | ) | ||||||||||
Segment EBITDA | $ | 692 | $ | 880 | $ | 741 | $ | 1,180 | |||||||
Reconciliation of TLLP Operating Income to TLLP Segment EBITDA | |||||||||||||||
Operating income | $ | 125 | $ | 104 | $ | 251 | $ | 208 | |||||||
Depreciation and amortization expense | 44 | 44 | 88 | 88 | |||||||||||
Equity in earnings of equity method investments | 3 | 1 | 7 | 4 | |||||||||||
Other income, net | - | - | 6 | - | |||||||||||
Segment EBITDA | $ | 172 | $ | 149 | $ | 352 | $ | 300 | |||||||
Reconciliation of Marketing Operating Income to Marketing Segment EBITDA | |||||||||||||||
Operating income | $ | 161 | $ | 212 | $ | 388 | $ | 345 | |||||||
Depreciation and amortization expense | 12 | 11 | 24 | 23 | |||||||||||
Segment EBITDA | $ | 173 | $ | 223 | $ | 412 | $ | 368 |
TESORO CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION (Unaudited) (In millions, except percentages)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash Flows From (Used in): | |||||||||||||||
Operating activities | $ | 444 | $ | 1,055 | $ | 628 | $ | 907 | |||||||
Investing activities | (271 | ) | (275 | ) | (806 | ) | (548 | ) | |||||||
Financing activities | 509 | (261 | ) | 357 | (381 | ) | |||||||||
Increase (Decrease) in Cash and Cash Equivalents | $ | 682 | $ | 519 | $ | 179 | $ | (22 | ) | ||||||
June 30, 2016 | December 31, 2015 | ||||||||||||||
Working capital (current assets less current liabilities) | $ | 2,204 | $ | 1,777 | |||||||||||
Total market value of TLLP units held by Tesoro (f) | $ | 1,607 | $ | 1,633 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash distributions received from TLLP (g): | |||||||||||||||
For common units held | $ | 27 | $ | 19 | $ | 52 | $ | 38 | |||||||
For general partner units held | 32 | 14 | 57 | 30 | |||||||||||
Total Cash Distributions Received from TLLP | $ | 59 | $ | 33 | $ | 109 | $ | 68 |
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
June 30, 2016 | December 31, 2015 | ||||||
Tesoro consolidated debt (h) | $ | 4,515 | $ | 4,073 | |||
TLLP debt (h) | 3,218 | 2,844 | |||||
Tesoro Debt Excluding TLLP (h) | $ | 1,297 | $ | 1,229 | |||
Tesoro consolidated equity | $ | 8,202 | $ | 7,740 | |||
Noncontrolling interest | 2,664 | 2,527 | |||||
Tesoro Stockholder's Equity | $ | 5,538 | $ | 5,213 | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio (h) | 36 | % | 34 | % | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio excluding TLLP and noncontrolling interest (h) | 19 | % | 19 | % |
(f) Represents market value of the 32,445,115 common units held by Tesoro at both June 30, 2016 and December 31, 2015. The market values were $49.53 and $50.32 per unit based on the closing unit price at June 30, 2016 and December 31, 2015, respectively.
(g) Represents distributions received from TLLP during the three and six months ended June 30, 2016 and 2015 on common units and general partner units held by Tesoro.
(h) These amounts and calculations are shown net of unamortized issuance costs.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
REFINING SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Total Refining Segment | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 165 | 174 | 170 | 135 | |||||||||||
Light crude | 586 | 542 | 574 | 544 | |||||||||||
Other feedstocks | 51 | 67 | 48 | 61 | |||||||||||
Total Throughput | 802 | 783 | 792 | 740 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 448 | 416 | 446 | 388 | |||||||||||
Diesel fuel | 173 | 158 | 173 | 151 | |||||||||||
Jet fuel | 101 | 118 | 108 | 118 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 134 | 144 | 118 | 130 | |||||||||||
Total Yield | 856 | 836 | 845 | 787 | |||||||||||
Refined Product Sales (Mbpd) (j) | |||||||||||||||
Gasoline and gasoline blendstocks | 529 | 512 | 525 | 500 | |||||||||||
Diesel fuel | 200 | 201 | 198 | 190 | |||||||||||
Jet fuel | 141 | 152 | 138 | 155 | |||||||||||
Heavy fuel oils, residual products and other | 104 | 98 | 101 | 86 | |||||||||||
Total Refined Product Sales | 974 | 963 | 962 | 931 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 5,508 | $ | 7,357 | $ | 9,793 | $ | 13,050 | |||||||
Crude oil resales and other | 242 | 309 | 453 | 608 | |||||||||||
Refining Revenues | 5,750 | 7,666 | 10,246 | 13,658 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding lower of cost or market adjustments) | 4,967 | 6,303 | 8,776 | 11,567 | |||||||||||
Lower of cost or market adjustments | (363 | ) | - | (216 | ) | (42 | ) | ||||||||
Refining cost of sales | 4,604 | 6,303 | 8,560 | 11,525 | |||||||||||
Gross refining margin (l) | 1,146 | 1,363 | 1,686 | 2,133 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | |||||||||||||||
Manufacturing costs | 365 | 397 | 760 | 794 | |||||||||||
Other operating expenses | 111 | 81 | 204 | 144 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 7 | |||||||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Loss on asset disposal and impairments | - | 3 | - | 6 | |||||||||||
Segment Operating Income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.70 | $ | 19.13 | $ | 11.70 | $ | 15.93 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.01 | $ | 5.58 | $ | 5.28 | $ | 5.93 |
(i) We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.
(j) Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties.
(k) Refined product sales include intersegment sales to our marketing segment of $3.8 billion and $4.8 billion for the three months ended June 30, 2016 and 2015, respectively, and $6.8 billion and $8.5 billion for the six months ended June 30, 2016 and 2015, respectively.
(l) Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Gross refining margin includes the effect of intersegment sales to the marketing segment and services provided by TLLP. Gross refining margin reflects the incremental expense or benefit associated with the LCM adjustments for all periods presented.
(m) Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense ("Manufacturing Costs") per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues for manufactured refined products sold less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput.
(n) Gross refining margin per throughput barrel on a consolidated and regional basis includes the incremental expense or benefit associated with the LCM adjustments for all periods presented.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Refining By Region | 2016 | 2015 | 2016 | 2015 | |||||||||||
California (Martinez and Los Angeles) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 160 | 169 | 166 | 129 | |||||||||||
Light crude | 314 | 313 | 289 | 305 | |||||||||||
Other feedstocks | 39 | 41 | 32 | 39 | |||||||||||
Total Throughput | 513 | 523 | 487 | 473 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 301 | 290 | 291 | 258 | |||||||||||
Diesel fuel | 103 | 101 | 100 | 92 | |||||||||||
Jet fuel | 65 | 80 | 65 | 76 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 89 | 98 | 74 | 86 | |||||||||||
Total Yield | 558 | 569 | 530 | 512 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 3,731 | $ | 5,100 | $ | 6,678 | $ | 8,976 | |||||||
Crude oil resales and other | 73 | 171 | 183 | 396 | |||||||||||
Regional Revenue | 3,804 | 5,271 | 6,861 | 9,372 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 3,298 | 4,314 | 5,866 | 8,006 | |||||||||||
LCM | (235 | ) | - | (144 | ) | (30 | ) | ||||||||
Regional Cost of Sales | 3,063 | 4,314 | 5,722 | 7,976 | |||||||||||
Gross refining margin (l) | 741 | 957 | 1,139 | 1,396 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 255 | 280 | 538 | 567 | |||||||||||
Other operating expenses | 54 | 50 | 94 | 86 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 6 | |||||||||||
Depreciation and amortization expense | 98 | 82 | 191 | 161 | |||||||||||
Loss on asset disposals and impairments | - | - | - | 2 | |||||||||||
Operating Income | $ | 332 | $ | 541 | $ | 312 | $ | 574 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.85 | $ | 20.10 | $ | 12.83 | $ | 16.27 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.47 | $ | 5.89 | $ | 6.07 | $ | 6.62 | |||||||
Capital Expenditures | $ | 77 | $ | 59 | $ | 153 | $ | 114 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Pacific Northwest (Alaska & Washington) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 5 | 5 | 4 | 6 | |||||||||||
Light crude | 146 | 126 | 157 | 132 | |||||||||||
Other feedstocks | 7 | 23 | 11 | 18 | |||||||||||
Total Throughput | 158 | 154 | 172 | 156 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 75 | 71 | 80 | 70 | |||||||||||
Diesel fuel | 29 | 23 | 32 | 25 | |||||||||||
Jet fuel | 26 | 31 | 32 | 32 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 33 | 34 | 34 | 34 | |||||||||||
Total Yield | 163 | 159 | 178 | 161 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 1,006 | $ | 1,386 | $ | 1,788 | $ | 2,439 | |||||||
Crude oil resales and other | 6 | 1 | 5 | 4 | |||||||||||
Regional Revenue | 1,012 | 1,387 | 1,793 | 2,443 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 901 | 1,147 | 1,580 | 2,048 | |||||||||||
LCM | (85 | ) | - | (52 | ) | (8 | ) | ||||||||
Regional Cost of Sales | 816 | 1,147 | 1,528 | 2,040 | |||||||||||
Gross refining margin (l) | 196 | 240 | 265 | 403 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 57 | 60 | 121 | 122 | |||||||||||
Other operating expenses | 16 | 16 | 30 | 30 | |||||||||||
Selling, general and administrative expenses | - | - | - | - | |||||||||||
Depreciation and amortization expense | 22 | 20 | 45 | 40 | |||||||||||
Loss on asset disposals and impairments | - | - | - | - | |||||||||||
Operating Income | $ | 101 | $ | 144 | $ | 69 | $ | 211 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 13.66 | $ | 17.12 | $ | 8.46 | $ | 14.29 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 3.95 | $ | 4.28 | $ | 3.87 | $ | 4.36 | |||||||
Capital Expenditures | $ | 37 | $ | 29 | $ | 67 | $ | 55 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||||||||||
Mid-Continent (North Dakota and Utah) | ||||||||||||||||||||||||||
Throughput (Mbpd) | ||||||||||||||||||||||||||
Light crude | 126 | 103 | 128 | 107 | ||||||||||||||||||||||
Other feedstocks | 5 | 3 | 5 | 4 | ||||||||||||||||||||||
Total Throughput | 131 | 106 | 133 | 111 | ||||||||||||||||||||||
Yield (Mbpd) | ||||||||||||||||||||||||||
Gasoline and gasoline blendstocks | 72 | 55 | 75 | 60 | ||||||||||||||||||||||
Diesel fuel | 41 | 34 | 41 | 34 | ||||||||||||||||||||||
Jet fuel | 10 | 7 | 11 | 10 | ||||||||||||||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 12 | 12 | 10 | 10 | ||||||||||||||||||||||
Total Yield | 135 | 108 | 137 | 114 | ||||||||||||||||||||||
Revenues | ||||||||||||||||||||||||||
Refined products (k) | $ | 771 | $ | 871 | $ | 1,327 | $ | 1,635 | ||||||||||||||||||
Crude oil resales and other | 163 | 137 | 265 | 208 | ||||||||||||||||||||||
Regional Revenue | 934 | 1,008 | 1,592 | 1,843 | ||||||||||||||||||||||
Cost of Sales | ||||||||||||||||||||||||||
Cost of sales (excluding LCM) | 768 | 842 | 1,330 | 1,513 | ||||||||||||||||||||||
LCM | (43 | ) | - | (20 | ),190, respectively) 3,099 2,484 Total Assets $ 17,612 $ 16,332 LIABILITIES AND EQUITY Current Liabilities Accounts payable $ 1,763 $ 1,568 Other current liabilities 904 962 Total Current Liabilities 2,667 2,530 Deferred Income Taxes 1,353 1,222 Other Noncurrent Liabilities 889 773 Debt, Net of Unamortized Issuance Costs (TLLP: | $ | 956 | $ | 1,190 | $ | 1,367 | $ | 1,708 |
Reconciliation of Refining Operating Income to Refining Segment EBITDA | |||||||||||||||
Operating income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Equity in earnings (loss) of equity method investments | - | 1 | (2 | ) | (1 | ) | |||||||||
Other income (expense), net | 24 | 1 | 25 | (1 | ) | ||||||||||
Segment EBITDA | $ | 692 | $ | 880 | $ | 741 | $ | 1,180 | |||||||
Reconciliation of TLLP Operating Income to TLLP Segment EBITDA | |||||||||||||||
Operating income | $ | 125 | $ | 104 | $ | 251 | $ | 208 | |||||||
Depreciation and amortization expense | 44 | 44 | 88 | 88 | |||||||||||
Equity in earnings of equity method investments | 3 | 1 | 7 | 4 | |||||||||||
Other income, net | - | - | 6 | - | |||||||||||
Segment EBITDA | $ | 172 | $ | 149 | $ | 352 | $ | 300 | |||||||
Reconciliation of Marketing Operating Income to Marketing Segment EBITDA | |||||||||||||||
Operating income | $ | 161 | $ | 212 | $ | 388 | $ | 345 | |||||||
Depreciation and amortization expense | 12 | 11 | 24 | 23 | |||||||||||
Segment EBITDA | $ | 173 | $ | 223 | $ | 412 | $ | 368 |
TESORO CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION (Unaudited) (In millions, except percentages)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash Flows From (Used in): | |||||||||||||||
Operating activities | $ | 444 | $ | 1,055 | $ | 628 | $ | 907 | |||||||
Investing activities | (271 | ) | (275 | ) | (806 | ) | (548 | ) | |||||||
Financing activities | 509 | (261 | ) | 357 | (381 | ) | |||||||||
Increase (Decrease) in Cash and Cash Equivalents | $ | 682 | $ | 519 | $ | 179 | $ | (22 | ) | ||||||
June 30, 2016 | December 31, 2015 | ||||||||||||||
Working capital (current assets less current liabilities) | $ | 2,204 | $ | 1,777 | |||||||||||
Total market value of TLLP units held by Tesoro (f) | $ | 1,607 | $ | 1,633 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash distributions received from TLLP (g): | |||||||||||||||
For common units held | $ | 27 | $ | 19 | $ | 52 | $ | 38 | |||||||
For general partner units held | 32 | 14 | 57 | 30 | |||||||||||
Total Cash Distributions Received from TLLP | $ | 59 | $ | 33 | $ | 109 | $ | 68 |
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
June 30, 2016 | December 31, 2015 | ||||||
Tesoro consolidated debt (h) | $ | 4,515 | $ | 4,073 | |||
TLLP debt (h) | 3,218 | 2,844 | |||||
Tesoro Debt Excluding TLLP (h) | $ | 1,297 | $ | 1,229 | |||
Tesoro consolidated equity | $ | 8,202 | $ | 7,740 | |||
Noncontrolling interest | 2,664 | 2,527 | |||||
Tesoro Stockholder's Equity | $ | 5,538 | $ | 5,213 | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio (h) | 36 | % | 34 | % | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio excluding TLLP and noncontrolling interest (h) | 19 | % | 19 | % |
(f) Represents market value of the 32,445,115 common units held by Tesoro at both June 30, 2016 and December 31, 2015. The market values were $49.53 and $50.32 per unit based on the closing unit price at June 30, 2016 and December 31, 2015, respectively.
(g) Represents distributions received from TLLP during the three and six months ended June 30, 2016 and 2015 on common units and general partner units held by Tesoro.
(h) These amounts and calculations are shown net of unamortized issuance costs.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
REFINING SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Total Refining Segment | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 165 | 174 | 170 | 135 | |||||||||||
Light crude | 586 | 542 | 574 | 544 | |||||||||||
Other feedstocks | 51 | 67 | 48 | 61 | |||||||||||
Total Throughput | 802 | 783 | 792 | 740 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 448 | 416 | 446 | 388 | |||||||||||
Diesel fuel | 173 | 158 | 173 | 151 | |||||||||||
Jet fuel | 101 | 118 | 108 | 118 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 134 | 144 | 118 | 130 | |||||||||||
Total Yield | 856 | 836 | 845 | 787 | |||||||||||
Refined Product Sales (Mbpd) (j) | |||||||||||||||
Gasoline and gasoline blendstocks | 529 | 512 | 525 | 500 | |||||||||||
Diesel fuel | 200 | 201 | 198 | 190 | |||||||||||
Jet fuel | 141 | 152 | 138 | 155 | |||||||||||
Heavy fuel oils, residual products and other | 104 | 98 | 101 | 86 | |||||||||||
Total Refined Product Sales | 974 | 963 | 962 | 931 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 5,508 | $ | 7,357 | $ | 9,793 | $ | 13,050 | |||||||
Crude oil resales and other | 242 | 309 | 453 | 608 | |||||||||||
Refining Revenues | 5,750 | 7,666 | 10,246 | 13,658 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding lower of cost or market adjustments) | 4,967 | 6,303 | 8,776 | 11,567 | |||||||||||
Lower of cost or market adjustments | (363 | ) | - | (216 | ) | (42 | ) | ||||||||
Refining cost of sales | 4,604 | 6,303 | 8,560 | 11,525 | |||||||||||
Gross refining margin (l) | 1,146 | 1,363 | 1,686 | 2,133 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | |||||||||||||||
Manufacturing costs | 365 | 397 | 760 | 794 | |||||||||||
Other operating expenses | 111 | 81 | 204 | 144 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 7 | |||||||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Loss on asset disposal and impairments | - | 3 | - | 6 | |||||||||||
Segment Operating Income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.70 | $ | 19.13 | $ | 11.70 | $ | 15.93 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.01 | $ | 5.58 | $ | 5.28 | $ | 5.93 |
(i) We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.
(j) Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties.
(k) Refined product sales include intersegment sales to our marketing segment of $3.8 billion and $4.8 billion for the three months ended June 30, 2016 and 2015, respectively, and $6.8 billion and $8.5 billion for the six months ended June 30, 2016 and 2015, respectively.
(l) Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Gross refining margin includes the effect of intersegment sales to the marketing segment and services provided by TLLP. Gross refining margin reflects the incremental expense or benefit associated with the LCM adjustments for all periods presented.
(m) Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense ("Manufacturing Costs") per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues for manufactured refined products sold less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput.
(n) Gross refining margin per throughput barrel on a consolidated and regional basis includes the incremental expense or benefit associated with the LCM adjustments for all periods presented.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Refining By Region | 2016 | 2015 | 2016 | 2015 | |||||||||||
California (Martinez and Los Angeles) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 160 | 169 | 166 | 129 | |||||||||||
Light crude | 314 | 313 | 289 | 305 | |||||||||||
Other feedstocks | 39 | 41 | 32 | 39 | |||||||||||
Total Throughput | 513 | 523 | 487 | 473 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 301 | 290 | 291 | 258 | |||||||||||
Diesel fuel | 103 | 101 | 100 | 92 | |||||||||||
Jet fuel | 65 | 80 | 65 | 76 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 89 | 98 | 74 | 86 | |||||||||||
Total Yield | 558 | 569 | 530 | 512 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 3,731 | $ | 5,100 | $ | 6,678 | $ | 8,976 | |||||||
Crude oil resales and other | 73 | 171 | 183 | 396 | |||||||||||
Regional Revenue | 3,804 | 5,271 | 6,861 | 9,372 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 3,298 | 4,314 | 5,866 | 8,006 | |||||||||||
LCM | (235 | ) | - | (144 | ) | (30 | ) | ||||||||
Regional Cost of Sales | 3,063 | 4,314 | 5,722 | 7,976 | |||||||||||
Gross refining margin (l) | 741 | 957 | 1,139 | 1,396 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 255 | 280 | 538 | 567 | |||||||||||
Other operating expenses | 54 | 50 | 94 | 86 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 6 | |||||||||||
Depreciation and amortization expense | 98 | 82 | 191 | 161 | |||||||||||
Loss on asset disposals and impairments | - | - | - | 2 | |||||||||||
Operating Income | $ | 332 | $ | 541 | $ | 312 | $ | 574 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.85 | $ | 20.10 | $ | 12.83 | $ | 16.27 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.47 | $ | 5.89 | $ | 6.07 | $ | 6.62 | |||||||
Capital Expenditures | $ | 77 | $ | 59 | $ | 153 | $ | 114 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Pacific Northwest (Alaska & Washington) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 5 | 5 | 4 | 6 | |||||||||||
Light crude | 146 | 126 | 157 | 132 | |||||||||||
Other feedstocks | 7 | 23 | 11 | 18 | |||||||||||
Total Throughput | 158 | 154 | 172 | 156 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 75 | 71 | 80 | 70 | |||||||||||
Diesel fuel | 29 | 23 | 32 | 25 | |||||||||||
Jet fuel | 26 | 31 | 32 | 32 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 33 | 34 | 34 | 34 | |||||||||||
Total Yield | 163 | 159 | 178 | 161 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 1,006 | $ | 1,386 | $ | 1,788 | $ | 2,439 | |||||||
Crude oil resales and other | 6 | 1 | 5 | 4 | |||||||||||
Regional Revenue | 1,012 | 1,387 | 1,793 | 2,443 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 901 | 1,147 | 1,580 | 2,048 | |||||||||||
LCM | (85 | ) | - | (52 | ) | (8 | ) | ||||||||
Regional Cost of Sales | 816 | 1,147 | 1,528 | 2,040 | |||||||||||
Gross refining margin (l) | 196 | 240 | 265 | 403 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 57 | 60 | 121 | 122 | |||||||||||
Other operating expenses | 16 | 16 | 30 | 30 | |||||||||||
Selling, general and administrative expenses | - | - | - | - | |||||||||||
Depreciation and amortization expense | 22 | 20 | 45 | 40 | |||||||||||
Loss on asset disposals and impairments | - | - | - | - | |||||||||||
Operating Income | $ | 101 | $ | 144 | $ | 69 | $ | 211 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 13.66 | $ | 17.12 | $ | 8.46 | $ | 14.29 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 3.95 | $ | 4.28 | $ | 3.87 | $ | 4.36 | |||||||
Capital Expenditures | $ | 37 | $ | 29 | $ | 67 | $ | 55 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||||
Mid-Continent (North Dakota and Utah) | ||||||||||||||||||
Throughput (Mbpd) | ||||||||||||||||||
Light crude | 126 | 103 | 128 | 107 | ||||||||||||||
Other feedstocks | 5 | 3 | 5 | 4 | ||||||||||||||
Total Throughput | 131 | 106 | 133 | 111 | ||||||||||||||
Yield (Mbpd) | ||||||||||||||||||
Gasoline and gasoline blendstocks | 72 | 55 | 75 | 60 | ||||||||||||||
Diesel fuel | 41 | 34 | 41 | 34 | ||||||||||||||
Jet fuel | 10 | 7 | 11 | 10 | ||||||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 12 | 12 | 10 | 10 | ||||||||||||||
Total Yield | 135 | 108 | 137 | 114 | ||||||||||||||
Revenues | ||||||||||||||||||
Refined products (k) | $ | 771 | $ | 871 | $ | 1,327 | $ | 1,635 | ||||||||||
Crude oil resales and other | 163 | 137 | 265 | 208 | ||||||||||||||
Regional Revenue | 934 | 1,008 | 1,592 | 1,843 | ||||||||||||||
Cost of Sales | ||||||||||||||||||
Cost of sales (excluding LCM) | 768 | 842 | 1,330 | 1,513 | ||||||||||||||
LCM | (43 | ) | - | (20 | ,218 and $682 and $16, respectively) | $ | 1,121 | $ | 942 | |||||||||
Receivables, net of allowance for doubtful accounts | 1,065 | 792 | ||||||||||||||||
Inventories (c) | 2,422 | 2,302 | ||||||||||||||||
Prepayments and other current assets | 263 | 271 | ||||||||||||||||
Total Current Assets | 4,871 | 4,307 | ||||||||||||||||
Net Property, Plant and Equipment (TLLP: $3,086 and $3,450, respectively) | 9,642 | 9,541 | ||||||||||||||||
Other Noncurrent Assets (TLLP: $1,453 and $1,190, respectively) | 3,099 | 2,484 | ||||||||||||||||
Total Assets | $ | 17,612 | $ | 16,332 | ||||||||||||||
LIABILITIES AND EQUITY | ||||||||||||||||||
Current Liabilities | ||||||||||||||||||
Accounts payable | $ | 1,763 | $ | 1,568 | ||||||||||||||
Other current liabilities | 904 | 962 | ||||||||||||||||
Total Current Liabilities | 2,667 | 2,530 | ||||||||||||||||
Deferred Income Taxes | 1,353 | 1,222 | ||||||||||||||||
Other Noncurrent Liabilities | 889 | 773 | ||||||||||||||||
Debt, Net of Unamortized Issuance Costs (TLLP: $3,218 and $2,844, respectively) | 4,501 | 4,067 | ||||||||||||||||
Equity | 8,202 | 7,740 | ||||||||||||||||
Total Liabilities and Equity | $ | 17,612 | $ | 16,332 |
(c) We recorded a lower of cost or market ("LCM") adjustment to cost of sales of $143 million and $359 million at June 30, 2016 and December 31, 2015, respectively, for our crude oil, refined products, oxygenates and by-product inventories to adjust carrying value of our inventories to reflect replacement cost as of those reporting dates. We reverse any lower of cost or market reserve in the subsequent period because the inventories are sold or used and then perform a complete lower of cost or market assessment of ending inventories at the end of each reporting period to determine if a reserve is required.
TESORO CORPORATION
RESULTS OF CONSOLIDATED OPERATIONS (Unaudited) (In millions, except per share amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | $ | 6,285 | $ | 8,232 | $ | 11,386 | $ | 14,695 | |||||||
Costs and Expenses: | |||||||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) | 5,019 | 6,352 | 8,880 | 11,659 | |||||||||||
Lower of cost or market inventory valuation adjustment (c) | (363 | ) | - | (216 | ) | (42 | ) | ||||||||
Operating expenses | 606 | 601 | 1,222 | 1,178 | |||||||||||
Selling, general and administrative expenses (d) | 94 | 84 | 176 | 182 | |||||||||||
Depreciation and amortization expense | 210 | 182 | 422 | 361 | |||||||||||
Loss on asset disposals and impairments | 1 | 4 | 5 | 8 | |||||||||||
Operating Income | 718 | 1,009 | 897 | 1,349 | |||||||||||
Interest and financing costs, net | (60 | ) | (54 | ) | (120 | ) | (109 | ) | |||||||
Equity in earnings of equity method investments | 3 | 2 | 5 | 3 | |||||||||||
Other income (expense), net (e) | 25 | 1 | 32 | (1 | ) | ||||||||||
Earnings Before Income Taxes | 686 | 958 | 814 | 1,242 | |||||||||||
Income tax expense | 237 | 334 | 267 | 430 | |||||||||||
Net Earnings From Continuing Operations | 449 | 624 | 547 | 812 | |||||||||||
Earnings (Loss) from discontinued operations, net of tax | - | (4 | ) | 11 | (4 | ) | |||||||||
Net Earnings | 449 | 620 | 558 | 808 | |||||||||||
Less: Net earnings from continuing operations attributable to noncontrolling interest | 31 | 38 | 71 | 81 | |||||||||||
Net Earnings Attributable to Tesoro Corporation | $ | 418 | $ | 582 | $ | 487 | $ | 727 | |||||||
Net Earnings (Loss) Attributable to Tesoro Corporation: | |||||||||||||||
Continuing operations | $ | 418 | $ | 586 | $ | 476 | $ | 731 | |||||||
Discontinued operations | - | (4 | ) | 11 | (4 | ) | |||||||||
Total | $ | 418 | $ | 582 | $ | 487 | $ | 727 | |||||||
Net Earnings (Loss) Per Share - Basic: | |||||||||||||||
Continuing operations | $ | 3.50 | $ | 4.67 | $ | 3.98 | $ | 5.84 | |||||||
Discontinued operations | - | (0.03 | ) | 0.09 | (0.03 | ) | |||||||||
Total | $ | 3.50 | $ | 4.64 | $ | 4.07 | $ | 5.81 | |||||||
Weighted average common shares outstanding - Basic | 119.5 | 125.2 | 119.5 | 125.2 | |||||||||||
Net Earnings (Loss) Per Share - Diluted: | |||||||||||||||
Continuing operations | $ | 3.47 | $ | 4.62 | $ | 3.94 | $ | 5.77 | |||||||
Discontinued operations | - | (0.03 | ) | 0.09 | (0.03 | ) | |||||||||
Total | $ | 3.47 | $ | 4.59 | $ | 4.03 | $ | 5.74 | |||||||
Weighted average common shares outstanding - Diluted | 120.6 | 126.3 | 120.8 | 126.6 |
(d) Includes stock-based compensation expense of $11 million and $7 million for the three months ended June 30, 2016 and 2015, respectively, and expense of $8 million and $35 million for the six months ended June 30, 2016 and 2015, respectively. The significant impact to stock-based compensation expense is primarily a result of changes in Tesoro's stock price.
(e) Other income (expense), net for the three and six months ended June 30, 2016 included insurance proceeds related to a shipment of contaminated crude oil that was received in 2014 as well as a refund of certain tariff charges that were disputed. Additionally, a gain recognized by TLLP on a settlement of amounts disputed by one of its customers on the annual calculation of the natural gas gathering rate is included for the six months ended June 30, 2016.
TESORO CORPORATION
SELECTED SEGMENT OPERATING DATA (Unaudited) (In millions)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Earnings Before Income Taxes | |||||||||||||||
Refining | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
TLLP | 125 | 104 | 251 | 208 | |||||||||||
Marketing | 161 | 212 | 388 | 345 | |||||||||||
Total Segment Operating Income | 806 | 1,073 | 1,059 | 1,495 | |||||||||||
Corporate and unallocated costs (d) | (88 | ) | (64 | ) | (162 | ) | (146 | ) | |||||||
Operating Income | 718 | 1,009 | 897 | 1,349 | |||||||||||
Interest and financing costs, net | (60 | ) | (54 | ) | (120 | ) | (109 | ) | |||||||
Equity in earnings of equity method investments | 3 | 2 | 5 | 3 | |||||||||||
Other income (expenses), net | 25 | 1 | 32 | (1 | ) | ||||||||||
Earnings Before Income Taxes | $ | 686 | $ | 958 | $ | 814 | $ | 1,242 | |||||||
Depreciation and Amortization Expense | |||||||||||||||
Refining | $ | 148 | $ | 121 | $ | 298 | $ | 240 | |||||||
TLLP | 44 | 44 | 88 | 88 | |||||||||||
Marketing | 12 | 11 | 24 | 23 | |||||||||||
Corporate | 6 | 6 | 12 | 10 | |||||||||||
Total Depreciation and Amortization Expense | $ | 210 | $ | 182 | $ | 422 | $ | 361 | |||||||
Segment EBITDA | |||||||||||||||
Refining | $ | 692 | $ | 880 | $ | 741 | $ | 1,180 | |||||||
TLLP | 172 | 149 | 352 | 300 | |||||||||||
Marketing | 173 | 223 | 412 | 368 | |||||||||||
Total Segment EBITDA | $ | 1,037 | $ | 1,252 | $ | 1,505 | $ | 1,848 | |||||||
Capital Expenditures | |||||||||||||||
Refining | $ | 137 | $ | 148 | $ | 256 | $ | 331 | |||||||
TLLP | 42 | 77 | 83 | 144 | |||||||||||
Marketing | 6 | 8 | 19 | 12 | |||||||||||
Corporate | 24 | 4 | 39 | 10 | |||||||||||
Total Capital Expenditures | $ | 209 | $ | 237 | $ | 397 | $ | 497 |
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Reconciliation of Net Earnings to EBITDA | |||||||||||||||
Net earnings | $ | 449 | $ | 620 | $ | 558 | $ | 808 | |||||||
Depreciation and amortization expense | 210 | 182 | 422 | 361 | |||||||||||
Interest and financing costs, net | 60 | 54 | 120 | 109 | |||||||||||
Income tax expense | 237 | 334 | 267 | 430 | |||||||||||
,844, respectively) 4,501 4,067 Equity 8,202 7,740 Total Liabilities and Equity $ 17,612 $ 16,332 (c) We recorded a lower of cost or market ("LCM") adjustment to cost of sales of 3 million and 9 million at June 30, 2016 and December 31, 2015, respectively, for our crude oil, refined products, oxygenates and by-product inventories to adjust carrying value of our inventories to reflect replacement cost as of those reporting dates. We reverse any lower of cost or market reserve in the subsequent period because the inventories are sold or used and then perform a complete lower of cost or market assessment of ending inventories at the end of each reporting period to determine if a reserve is required. TESORO CORPORATIONRESULTS OF CONSOLIDATED OPERATIONS (Unaudited) (In millions, except per share amounts) Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Revenues $ 6,285 $ 8,232 $ 11,386 $ 14,695 Costs and Expenses: Cost of sales (excluding the lower of cost or market inventory valuation adjustment) 5,019 6,352 8,880 11,659 Lower of cost or market inventory valuation adjustment (c) (363 ) - (216 ) (42 ) Operating expenses 606 601 1,222 1,178 Selling, general and administrative expenses (d) 94 84 176 182 Depreciation and amortization expense 210 182 422 361 Loss on asset disposals and impairments 1 4 5 8 Operating Income 718 1,009 897 1,349 Interest and financing costs, net (60 ) (54 ) (120 ) (109 ) Equity in earnings of equity method investments 3 2 5 3 Other income (expense), net (e) 25 1 32 (1 ) Earnings Before Income Taxes 686 958 814 1,242 Income tax expense 237 334 267 430 Net Earnings From Continuing Operations 449 624 547 812 Earnings (Loss) from discontinued operations, net of tax - (4 ) 11 (4 ) Net Earnings 449 620 558 808 Less: Net earnings from continuing operations attributable to noncontrolling interest 31 38 71 81 Net Earnings Attributable to Tesoro Corporation $ 418 $ 582 $ 487 $ 727 Net Earnings (Loss) Attributable to Tesoro Corporation: Continuing operations $ 418 $ 586 $ 476 $ 731 Discontinued operations - (4 ) 11 (4 ) Total $ 418 $ 582 $ 487 $ 727 Net Earnings (Loss) Per Share - Basic: Continuing operations $ 3.50 $ 4.67 $ 3.98 $ 5.84 Discontinued operations - (0.03 ) 0.09 (0.03 ) Total $ 3.50 $ 4.64 $ 4.07 $ 5.81 Weighted average common shares outstanding - Basic 119.5 125.2 119.5 125.2 Net Earnings (Loss) Per Share - Diluted: Continuing operations $ 3.47 $ 4.62 $ 3.94 $ 5.77 Discontinued operations - (0.03 ) 0.09 (0.03 ) Total $ 3.47 $ 4.59 $ 4.03 $ 5.74 Weighted average common shares outstanding - Diluted 120.6 126.3 120.8 126.6 (d) Includes stock-based compensation expense of million and million for the three months ended June 30, 2016 and 2015, respectively, and expense of million and million for the six months ended June 30, 2016 and 2015, respectively. The significant impact to stock-based compensation expense is primarily a result of changes in Tesoro's stock price.(e) Other income (expense), net for the three and six months ended June 30, 2016 included insurance proceeds related to a shipment of contaminated crude oil that was received in 2014 as well as a refund of certain tariff charges that were disputed. Additionally, a gain recognized by TLLP on a settlement of amounts disputed by one of its customers on the annual calculation of the natural gas gathering rate is included for the six months ended June 30, 2016. TESORO CORPORATIONSELECTED SEGMENT OPERATING DATA (Unaudited) (In millions) Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Earnings Before Income Taxes Refining $ 520 $ 757 $ 420 $ 942 TLLP 125 104 251 208 Marketing 161 212 388 345 Total Segment Operating Income 806 1,073 1,059 1,495 Corporate and unallocated costs (d) (88 ) (64 ) (162 ) (146 ) Operating Income 718 1,009 897 1,349 Interest and financing costs, net (60 ) (54 ) (120 ) (109 ) Equity in earnings of equity method investments 3 2 5 3 Other income (expenses), net 25 1 32 (1 ) Earnings Before Income Taxes $ 686 $ 958 $ 814 $ 1,242 Depreciation and Amortization Expense Refining $ 148 $ 121 $ 298 $ 240 TLLP 44 44 88 88 Marketing 12 11 24 23 Corporate 6 6 12 10 Total Depreciation and Amortization Expense $ 210 $ 182 $ 422 $ 361 Segment EBITDA Refining $ 692 $ 880 $ 741 $ 1,180 TLLP 172 149 352 300 Marketing 173 223 412 368 Total Segment EBITDA $ 1,037 $ 1,252 $ 1,505 $ 1,848 Capital Expenditures Refining $ 137 $ 148 $ 256 $ 331 TLLP 42 77 83 144 Marketing 6 8 19 12 Corporate 24 4 39 10 Total Capital Expenditures $ 209 $ 237 $ 397 $ 497 TESORO CORPORATIONRECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions) Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Reconciliation of Net Earnings to EBITDA Net earnings $ 449 $ 620 $ 558 $ 808 Depreciation and amortization expense 210 182 422 361 Interest and financing costs, net 60 54 120 109 Income tax expense 237 334 267 430 EBITDA $ 956 $ 1,190 $ 1,367 $ 1,708 Reconciliation of Refining Operating Income to Refining Segment EBITDA Operating income $ 520 $ 757 $ 420 $ 942 Depreciation and amortization expense 148 121 298 240 Equity in earnings (loss) of equity method investments - 1 (2 ) (1 ) Other income (expense), net 24 1 25 (1 ) Segment EBITDA $ 692 $ 880 $ 741 $ 1,180 Reconciliation of TLLP Operating Income to TLLP Segment EBITDA Operating income $ 125 $ 104 $ 251 $ 208 Depreciation and amortization expense 44 44 88 88 Equity in earnings of equity method investments 3 1 7 4 Other income, net - - 6 - Segment EBITDA $ 172 $ 149 $ 352 $ 300 Reconciliation of Marketing Operating Income to Marketing Segment EBITDA Operating income $ 161 $ 212 $ 388 $ 345 Depreciation and amortization expense 12 11 24 23 Segment EBITDA $ 173 $ 223 $ 412 $ 368 TESORO CORPORATIONOTHER SUMMARY FINANCIAL INFORMATION (Unaudited) (In millions, except percentages) Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Cash Flows From (Used in): Operating activities $ 444 $ 1,055 $ 628 $ 907 Investing activities (271 ) (275 ) (806 ) (548 ) Financing activities 509 (261 ) 357 (381 ) Increase (Decrease) in Cash and Cash Equivalents $ 682 $ 519 $ 179 $ (22 ) June 30, 2016 December 31, 2015 Working capital (current assets less current liabilities) $ 2,204 $ 1,777 Total market value of TLLP units held by Tesoro (f) $ 1,607 $ 1,633 Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Cash distributions received from TLLP (g): For common units held $ 27 $ 19 $ 52 $ 38 For general partner units held 32 14 57 30 Total Cash Distributions Received from TLLP $ 59 $ 33 $ 109 $ 68 TESORO CORPORATIONRECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions) June 30, 2016 December 31, 2015 Tesoro consolidated debt (h) $ 4,515 $ 4,073 TLLP debt (h) 3,218 2,844 Tesoro Debt Excluding TLLP (h) $ 1,297 $ 1,229 Tesoro consolidated equity $ 8,202 $ 7,740 Noncontrolling interest 2,664 2,527 Tesoro Stockholder's Equity $ 5,538 $ 5,213 Tesoro debt, net of unamortized issuance costs, to capitalization ratio (h) 36 % 34 % Tesoro debt, net of unamortized issuance costs, to capitalization ratio excluding TLLP and noncontrolling interest (h) 19 % 19 % (f) Represents market value of the 32,445,115 common units held by Tesoro at both June 30, 2016 and December 31, 2015. The market values were .53 and .32 per unit based on the closing unit price at June 30, 2016 and December 31, 2015, respectively.(g) Represents distributions received from TLLP during the three and six months ended June 30, 2016 and 2015 on common units and general partner units held by Tesoro.(h) These amounts and calculations are shown net of unamortized issuance costs. TESORO CORPORATIONSEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts) Three Months Ended June 30, Six Months Ended June 30, REFINING SEGMENT 2016 2015 2016 2015 Total Refining Segment Throughput (Mbpd) Heavy crude (i) 165 174 170 135 Light crude 586 542 574 544 Other feedstocks 51 67 48 61 Total Throughput 802 783 792 740 Yield (Mbpd) Gasoline and gasoline blendstocks 448 416 446 388 Diesel fuel 173 158 173 151 Jet fuel 101 118 108 118 Heavy fuel oils, residual products, internally produced fuel and other 134 144 118 130 Total Yield 856 836 845 787 Refined Product Sales (Mbpd) (j) Gasoline and gasoline blendstocks 529 512 525 500 Diesel fuel 200 201 198 190 Jet fuel 141 152 138 155 Heavy fuel oils, residual products and other 104 98 101 86 Total Refined Product Sales 974 963 962 931 Revenues Refined products (k) $ 5,508 $ 7,357 $ 9,793 $ 13,050 Crude oil resales and other 242 309 453 608 Refining Revenues 5,750 7,666 10,246 13,658 Cost of Sales Cost of sales (excluding lower of cost or market adjustments) 4,967 6,303 8,776 11,567 Lower of cost or market adjustments (363 ) - (216 ) (42 ) Refining cost of sales 4,604 6,303 8,560 11,525 Gross refining margin (l) 1,146 1,363 1,686 2,133 Expenses Operating expenses Manufacturing costs 365 397 760 794 Other operating expenses 111 81 204 144 Selling, general and administrative expenses 2 4 4 7 Depreciation and amortization expense 148 121 298 240 Loss on asset disposal and impairments - 3 - 6 Segment Operating Income $ 520 $ 757 $ 420 $ 942 Gross Refining Margin ($/throughput barrel) (m) (n) $ 15.70 $ 19.13 $ 11.70 $ 15.93 Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) $ 5.01 $ 5.58 $ 5.28 $ 5.93 (i) We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.(j) Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties.(k) Refined product sales include intersegment sales to our marketing segment of | $ | 956 | $ | 1,190 | $ | 1,367 | $ | 1,708 |
Reconciliation of Refining Operating Income to Refining Segment EBITDA | |||||||||||||||
Operating income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Equity in earnings (loss) of equity method investments | - | 1 | (2 | ) | (1 | ) | |||||||||
Other income (expense), net | 24 | 1 | 25 | (1 | ) | ||||||||||
Segment EBITDA | $ | 692 | $ | 880 | $ | 741 | $ | 1,180 | |||||||
Reconciliation of TLLP Operating Income to TLLP Segment EBITDA | |||||||||||||||
Operating income | $ | 125 | $ | 104 | $ | 251 | $ | 208 | |||||||
Depreciation and amortization expense | 44 | 44 | 88 | 88 | |||||||||||
Equity in earnings of equity method investments | 3 | 1 | 7 | 4 | |||||||||||
Other income, net | - | - | 6 | - | |||||||||||
Segment EBITDA | $ | 172 | $ | 149 | $ | 352 | $ | 300 | |||||||
Reconciliation of Marketing Operating Income to Marketing Segment EBITDA | |||||||||||||||
Operating income | $ | 161 | $ | 212 | $ | 388 | $ | 345 | |||||||
Depreciation and amortization expense | 12 | 11 | 24 | 23 | |||||||||||
Segment EBITDA | $ | 173 | $ | 223 | $ | 412 | $ | 368 |
TESORO CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION (Unaudited) (In millions, except percentages)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash Flows From (Used in): | |||||||||||||||
Operating activities | $ | 444 | $ | 1,055 | $ | 628 | $ | 907 | |||||||
Investing activities | (271 | ) | (275 | ) | (806 | ) | (548 | ) | |||||||
Financing activities | 509 | (261 | ) | 357 | (381 | ) | |||||||||
Increase (Decrease) in Cash and Cash Equivalents | $ | 682 | $ | 519 | $ | 179 | $ | (22 | ) | ||||||
June 30, 2016 | December 31, 2015 | ||||||||||||||
Working capital (current assets less current liabilities) | $ | 2,204 | $ | 1,777 | |||||||||||
Total market value of TLLP units held by Tesoro (f) | $ | 1,607 | $ | 1,633 |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Cash distributions received from TLLP (g): | |||||||||||||||
For common units held | $ | 27 | $ | 19 | $ | 52 | $ | 38 | |||||||
For general partner units held | 32 | 14 | 57 | 30 | |||||||||||
Total Cash Distributions Received from TLLP | $ | 59 | $ | 33 | $ | 109 | $ | 68 |
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
June 30, 2016 | December 31, 2015 | ||||||
Tesoro consolidated debt (h) | $ | 4,515 | $ | 4,073 | |||
TLLP debt (h) | 3,218 | 2,844 | |||||
Tesoro Debt Excluding TLLP (h) | $ | 1,297 | $ | 1,229 | |||
Tesoro consolidated equity | $ | 8,202 | $ | 7,740 | |||
Noncontrolling interest | 2,664 | 2,527 | |||||
Tesoro Stockholder's Equity | $ | 5,538 | $ | 5,213 | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio (h) | 36 | % | 34 | % | |||
Tesoro debt, net of unamortized issuance costs, to capitalization ratio excluding TLLP and noncontrolling interest (h) | 19 | % | 19 | % |
(f) Represents market value of the 32,445,115 common units held by Tesoro at both June 30, 2016 and December 31, 2015. The market values were $49.53 and $50.32 per unit based on the closing unit price at June 30, 2016 and December 31, 2015, respectively.
(g) Represents distributions received from TLLP during the three and six months ended June 30, 2016 and 2015 on common units and general partner units held by Tesoro.
(h) These amounts and calculations are shown net of unamortized issuance costs.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
REFINING SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Total Refining Segment | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 165 | 174 | 170 | 135 | |||||||||||
Light crude | 586 | 542 | 574 | 544 | |||||||||||
Other feedstocks | 51 | 67 | 48 | 61 | |||||||||||
Total Throughput | 802 | 783 | 792 | 740 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 448 | 416 | 446 | 388 | |||||||||||
Diesel fuel | 173 | 158 | 173 | 151 | |||||||||||
Jet fuel | 101 | 118 | 108 | 118 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 134 | 144 | 118 | 130 | |||||||||||
Total Yield | 856 | 836 | 845 | 787 | |||||||||||
Refined Product Sales (Mbpd) (j) | |||||||||||||||
Gasoline and gasoline blendstocks | 529 | 512 | 525 | 500 | |||||||||||
Diesel fuel | 200 | 201 | 198 | 190 | |||||||||||
Jet fuel | 141 | 152 | 138 | 155 | |||||||||||
Heavy fuel oils, residual products and other | 104 | 98 | 101 | 86 | |||||||||||
Total Refined Product Sales | 974 | 963 | 962 | 931 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 5,508 | $ | 7,357 | $ | 9,793 | $ | 13,050 | |||||||
Crude oil resales and other | 242 | 309 | 453 | 608 | |||||||||||
Refining Revenues | 5,750 | 7,666 | 10,246 | 13,658 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding lower of cost or market adjustments) | 4,967 | 6,303 | 8,776 | 11,567 | |||||||||||
Lower of cost or market adjustments | (363 | ) | - | (216 | ) | (42 | ) | ||||||||
Refining cost of sales | 4,604 | 6,303 | 8,560 | 11,525 | |||||||||||
Gross refining margin (l) | 1,146 | 1,363 | 1,686 | 2,133 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | |||||||||||||||
Manufacturing costs | 365 | 397 | 760 | 794 | |||||||||||
Other operating expenses | 111 | 81 | 204 | 144 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 7 | |||||||||||
Depreciation and amortization expense | 148 | 121 | 298 | 240 | |||||||||||
Loss on asset disposal and impairments | - | 3 | - | 6 | |||||||||||
Segment Operating Income | $ | 520 | $ | 757 | $ | 420 | $ | 942 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.70 | $ | 19.13 | $ | 11.70 | $ | 15.93 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.01 | $ | 5.58 | $ | 5.28 | $ | 5.93 |
(i) We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.
(j) Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties.
(k) Refined product sales include intersegment sales to our marketing segment of $3.8 billion and $4.8 billion for the three months ended June 30, 2016 and 2015, respectively, and $6.8 billion and $8.5 billion for the six months ended June 30, 2016 and 2015, respectively.
(l) Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Gross refining margin includes the effect of intersegment sales to the marketing segment and services provided by TLLP. Gross refining margin reflects the incremental expense or benefit associated with the LCM adjustments for all periods presented.
(m) Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense ("Manufacturing Costs") per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues for manufactured refined products sold less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput.
(n) Gross refining margin per throughput barrel on a consolidated and regional basis includes the incremental expense or benefit associated with the LCM adjustments for all periods presented.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Refining By Region | 2016 | 2015 | 2016 | 2015 | |||||||||||
California (Martinez and Los Angeles) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 160 | 169 | 166 | 129 | |||||||||||
Light crude | 314 | 313 | 289 | 305 | |||||||||||
Other feedstocks | 39 | 41 | 32 | 39 | |||||||||||
Total Throughput | 513 | 523 | 487 | 473 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 301 | 290 | 291 | 258 | |||||||||||
Diesel fuel | 103 | 101 | 100 | 92 | |||||||||||
Jet fuel | 65 | 80 | 65 | 76 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 89 | 98 | 74 | 86 | |||||||||||
Total Yield | 558 | 569 | 530 | 512 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 3,731 | $ | 5,100 | $ | 6,678 | $ | 8,976 | |||||||
Crude oil resales and other | 73 | 171 | 183 | 396 | |||||||||||
Regional Revenue | 3,804 | 5,271 | 6,861 | 9,372 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 3,298 | 4,314 | 5,866 | 8,006 | |||||||||||
LCM | (235 | ) | - | (144 | ) | (30 | ) | ||||||||
Regional Cost of Sales | 3,063 | 4,314 | 5,722 | 7,976 | |||||||||||
Gross refining margin (l) | 741 | 957 | 1,139 | 1,396 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 255 | 280 | 538 | 567 | |||||||||||
Other operating expenses | 54 | 50 | 94 | 86 | |||||||||||
Selling, general and administrative expenses | 2 | 4 | 4 | 6 | |||||||||||
Depreciation and amortization expense | 98 | 82 | 191 | 161 | |||||||||||
Loss on asset disposals and impairments | - | - | - | 2 | |||||||||||
Operating Income | $ | 332 | $ | 541 | $ | 312 | $ | 574 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 15.85 | $ | 20.10 | $ | 12.83 | $ | 16.27 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 5.47 | $ | 5.89 | $ | 6.07 | $ | 6.62 | |||||||
Capital Expenditures | $ | 77 | $ | 59 | $ | 153 | $ | 114 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Pacific Northwest (Alaska & Washington) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Heavy crude (i) | 5 | 5 | 4 | 6 | |||||||||||
Light crude | 146 | 126 | 157 | 132 | |||||||||||
Other feedstocks | 7 | 23 | 11 | 18 | |||||||||||
Total Throughput | 158 | 154 | 172 | 156 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 75 | 71 | 80 | 70 | |||||||||||
Diesel fuel | 29 | 23 | 32 | 25 | |||||||||||
Jet fuel | 26 | 31 | 32 | 32 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 33 | 34 | 34 | 34 | |||||||||||
Total Yield | 163 | 159 | 178 | 161 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 1,006 | $ | 1,386 | $ | 1,788 | $ | 2,439 | |||||||
Crude oil resales and other | 6 | 1 | 5 | 4 | |||||||||||
Regional Revenue | 1,012 | 1,387 | 1,793 | 2,443 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 901 | 1,147 | 1,580 | 2,048 | |||||||||||
LCM | (85 | ) | - | (52 | ) | (8 | ) | ||||||||
Regional Cost of Sales | 816 | 1,147 | 1,528 | 2,040 | |||||||||||
Gross refining margin (l) | 196 | 240 | 265 | 403 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 57 | 60 | 121 | 122 | |||||||||||
Other operating expenses | 16 | 16 | 30 | 30 | |||||||||||
Selling, general and administrative expenses | - | - | - | - | |||||||||||
Depreciation and amortization expense | 22 | 20 | 45 | 40 | |||||||||||
Loss on asset disposals and impairments | - | - | - | - | |||||||||||
Operating Income | $ | 101 | $ | 144 | $ | 69 | $ | 211 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 13.66 | $ | 17.12 | $ | 8.46 | $ | 14.29 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 3.95 | $ | 4.28 | $ | 3.87 | $ | 4.36 | |||||||
Capital Expenditures | $ | 37 | $ | 29 | $ | 67 | $ | 55 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Mid-Continent (North Dakota and Utah) | |||||||||||||||
Throughput (Mbpd) | |||||||||||||||
Light crude | 126 | 103 | 128 | 107 | |||||||||||
Other feedstocks | 5 | 3 | 5 | 4 | |||||||||||
Total Throughput | 131 | 106 | 133 | 111 | |||||||||||
Yield (Mbpd) | |||||||||||||||
Gasoline and gasoline blendstocks | 72 | 55 | 75 | 60 | |||||||||||
Diesel fuel | 41 | 34 | 41 | 34 | |||||||||||
Jet fuel | 10 | 7 | 11 | 10 | |||||||||||
Heavy fuel oils, residual products, internally produced fuel and other | 12 | 12 | 10 | 10 | |||||||||||
Total Yield | 135 | 108 | 137 | 114 | |||||||||||
Revenues | |||||||||||||||
Refined products (k) | $ | 771 | $ | 871 | $ | 1,327 | $ | 1,635 | |||||||
Crude oil resales and other | 163 | 137 | 265 | 208 | |||||||||||
Regional Revenue | 934 | 1,008 | 1,592 | 1,843 | |||||||||||
Cost of Sales | |||||||||||||||
Cost of sales (excluding LCM) | 768 | 842 | 1,330 | 1,513 | |||||||||||
LCM | (43 | ) | - | (20 | .8 billion and .8 billion for the three months ended June 30, 2016 and 2015, respectively, and .8 billion and .5 billion for the six months ended June 30, 2016 and 2015, respectively.(l) Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel. Consolidated gross refining margin combines gross refining margin for each of our regions adjusted for other amounts not directly attributable to a specific region. Gross refining margin includes the effect of intersegment sales to the marketing segment and services provided by TLLP. Gross refining margin reflects the incremental expense or benefit associated with the LCM adjustments for all periods presented.(m) Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including gross refining margin per barrel, manufacturing costs before depreciation and amortization expense ("Manufacturing Costs") per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues for manufactured refined products sold less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput. We calculate Manufacturing Costs per barrel by dividing Manufacturing Costs by total refining throughput.(n) Gross refining margin per throughput barrel on a consolidated and regional basis includes the incremental expense or benefit associated with the LCM adjustments for all periods presented. TESORO CORPORATIONSEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts) Three Months Ended June 30, Six Months Ended June 30, Refining By Region 2016 2015 2016 2015 California (Martinez and Los Angeles) Throughput (Mbpd) Heavy crude (i) 160 169 166 129 Light crude 314 313 289 305 Other feedstocks 39 41 32 39 Total Throughput 513 523 487 473 Yield (Mbpd) Gasoline and gasoline blendstocks 301 290 291 258 Diesel fuel 103 101 100 92 Jet fuel 65 80 65 76 Heavy fuel oils, residual products, internally produced fuel and other 89 98 74 86 Total Yield 558 569 530 512 Revenues Refined products (k) $ 3,731 $ 5,100 $ 6,678 $ 8,976 Crude oil resales and other 73 171 183 396 Regional Revenue 3,804 5,271 6,861 9,372 Cost of Sales Cost of sales (excluding LCM) 3,298 4,314 5,866 8,006 LCM (235 ) - (144 ) (30 ) Regional Cost of Sales 3,063 4,314 5,722 7,976 Gross refining margin (l) 741 957 1,139 1,396 Expenses Manufacturing costs 255 280 538 567 Other operating expenses 54 50 94 86 Selling, general and administrative expenses 2 4 4 6 Depreciation and amortization expense 98 82 191 161 Loss on asset disposals and impairments - - - 2 Operating Income $ 332 $ 541 $ 312 $ 574 Gross Refining Margin ($/throughput barrel) (m) (n) $ 15.85 $ 20.10 $ 12.83 $ 16.27 Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) $ 5.47 $ 5.89 $ 6.07 $ 6.62 Capital Expenditures $ 77 $ 59 $ 153 $ 114 TESORO CORPORATIONSEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts) Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Pacific Northwest (Alaska & Washington) Throughput (Mbpd) Heavy crude (i) 5 5 4 6 Light crude 146 126 157 132 Other feedstocks 7 23 11 18 Total Throughput 158 154 172 156 Yield (Mbpd) Gasoline and gasoline blendstocks 75 71 80 70 Diesel fuel 29 23 32 25 Jet fuel 26 31 32 32 Heavy fuel oils, residual products, internally produced fuel and other 33 34 34 34 Total Yield 163 159 178 161 Revenues Refined products (k) $ 1,006 $ 1,386 $ 1,788 $ 2,439 Crude oil resales and other 6 1 5 4 Regional Revenue 1,012 1,387 1,793 2,443 Cost of Sales Cost of sales (excluding LCM) 901 1,147 1,580 2,048 LCM (85 ) - (52 ) (8 ) Regional Cost of Sales 816 1,147 1,528 2,040 Gross refining margin (l) 196 240 265 403 Expenses Manufacturing costs 57 60 121 122 Other operating expenses 16 16 30 30 Selling, general and administrative expenses - - - - Depreciation and amortization expense 22 20 45 40 Loss on asset disposals and impairments - - - - Operating Income $ 101 $ 144 $ 69 $ 211 Gross Refining Margin ($/throughput barrel) (m) (n) $ 13.66 $ 17.12 $ 8.46 $ 14.29 Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) $ 3.95 $ 4.28 $ 3.87 $ 4.36 Capital Expenditures $ 37 $ 29 $ 67 $ 55 TESORO CORPORATIONSEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts) Three Months Ended June 30, Six Months Ended June 30, 2016 2015 2016 2015 Mid-Continent (North Dakota and Utah) Throughput (Mbpd) Light crude 126 103 128 107 Other feedstocks 5 3 5 4 Total Throughput 131 106 133 111 Yield (Mbpd) Gasoline and gasoline blendstocks 72 55 75 60 Diesel fuel 41 34 41 34 Jet fuel 10 7 11 10 Heavy fuel oils, residual products, internally produced fuel and other 12 12 10 10 Total Yield 135 108 137 114 Revenues Refined products (k) $ 771 $ 871 $ 1,327 $ 1,635 Crude oil resales and other 163 137 265 208 Regional Revenue 934 1,008 1,592 1,843 Cost of Sales Cost of sales (excluding LCM) 768 842 1,330 1,513 LCM (43 ) - (20 ) | (4 | ) | ||||||||
Regional Cost of Sales | 725 | 842 | 1,310 | 1,509 | |||||||||||
Gross refining margin (l) | 209 | 166 | 282 | 334 | |||||||||||
Expenses | |||||||||||||||
Manufacturing costs | 53 | 57 | 101 | 105 | |||||||||||
Other operating expenses | 41 | 15 | 80 | 28 | |||||||||||
Selling, general and administrative expenses | - | - | - | 1 | |||||||||||
Depreciation and amortization expense | 28 | 19 | 62 | 39 | |||||||||||
Loss on asset disposals and impairments | - | 3 | - | 4 | |||||||||||
Operating Income | $ | 87 | $ | 72 | $ | 39 | $ | 157 | |||||||
Gross Refining Margin ($/throughput barrel) (m) (n) | $ | 17.56 | $ | 17.15 | $ | 11.69 | $ | 16.68 | |||||||
Manufacturing Cost before Depreciation and Amortization Expense ($/throughput barrel) (m) | $ | 4.51 | $ | 5.94 | $ | 4.17 | $ | 5.22 | |||||||
Capital Expenditures | $ | 23 | $ | 60 | $ | 36 | $ | 163 |
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
TLLP SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Gathering | |||||||||||||||
Gas gathering throughput (thousands of MMBtu/day) (o) | 854 | 1,071 | 878 | 1,046 | |||||||||||
Average gas gathering revenue per MMBtu (o) | $ | 0.51 | $ | 0.48 | $ | 0.52 | $ | 0.43 | |||||||
Crude oil gathering pipeline throughput (Mbpd) | 208 | 187 | 212 | 173 | |||||||||||
Average crude oil gathering pipeline revenue per barrel | $ | 1.72 | $ | 1.71 | $ | 1.74 | $ | 1.80 | |||||||
Crude oil gathering trucking volume (Mbpd) | 30 | 45 | 29 | 46 | |||||||||||
Average crude oil gathering trucking revenue per barrel | $ | 3.30 | $ | 3.32 | $ | 3.27 | $ | 3.28 | |||||||
Processing | |||||||||||||||
NGLs processing throughput (Mbpd) | 7.4 | 7.8 | 7.8 | 7.4 | |||||||||||
Average keep-whole fee per barrel of NGLs | $ | 36.60 | $ | 35.14 | $ | 35.81 | $ | 33.60 | |||||||
Fee-based processing throughput (thousands of MMBtu/ day) | 645 | 768 | 660 | 729 | |||||||||||
Average fee-based processing revenue per MMBtu | $ | 0.43 | $ | 0.36 | $ | 0.43 | $ | 0.40 | |||||||
Terminalling and Transportation | |||||||||||||||
Terminalling throughput (Mbpd) | 994 | 913 | 950 | 916 | |||||||||||
Average terminalling revenue per barrel | $ | 1.24 | $ | 1.10 | $ | 1.27 | $ | 1.10 | |||||||
Pipeline transportation throughput (Mbpd) | 867 | 801 | 845 | 810 | |||||||||||
Average pipeline transportation revenue per barrel | $ | 0.40 | $ | 0.38 | $ | 0.40 | $ | 0.38 | |||||||
Segment Operating Income | |||||||||||||||
Revenues | |||||||||||||||
Gathering | |||||||||||||||
Gas gathering | $ | 40 | $ | 46 | $ | 83 | $ | 82 | |||||||
Crude oil gathering pipeline | 32 | 30 | 67 | 57 | |||||||||||
Crude oil gathering trucking | 9 | 13 | 18 | 27 | |||||||||||
Other | 1 | - | 5 | - | |||||||||||
Processing | |||||||||||||||
NGLs processing | 25 | 25 | 51 | 45 | |||||||||||
Fee-based processing | 25 | 24 | 51 | 53 | |||||||||||
Other processing | 18 | 18 | 37 | 36 | |||||||||||
Terminalling and transportation | |||||||||||||||
Terminalling | 112 | 92 | 220 | 182 | |||||||||||
Pipeline transportation | 31 | 27 | 61 | 56 | |||||||||||
TLLP Revenues (p) | 293 | 275 | 593 | 538 | |||||||||||
Expenses | |||||||||||||||
Operating expenses (q) | 102 | 99 | 207 | 189 | |||||||||||
General and administrative expenses (r) | 22 | 28 | 46 | 53 | |||||||||||
Depreciation and amortization expense | 44 | 44 | 88 | 88 | |||||||||||
Gain on asset disposals and impairments | - | - | 1 | - | |||||||||||
Segment Operating Income | $ | 125 | $ | 104 | $ | 251 | $ | 208 |
(o) Prior to TLLP's deconsolidation of Rendezvous Gas Services L.L.C. ("RGS") as of January 1, 2016, fees paid by TLLP to RGS were eliminated upon consolidation and third-party transactions, including revenue and throughput volumes, were included in its results of operations. Third party volumes associated with RGS, included in gas gathering volume for the three and six months ended June 30, 2015, were both 146 thousand MMBtu/d and reduced our average gas gathering revenue per MMBtu by $0.05 for each period. These volumes are no longer included in TLLP operational data.
(p) TLLP segment revenues from services provided to our refining segment were $168 million and $154 million for the three months ended June 30, 2016 and 2015, respectively, and $337 million and $302 million for the six months ended June 30, 2016 and 2015, respectively. These amounts are eliminated upon consolidation.
(q) TLLP segment operating expenses include amounts billed by Tesoro for services provided to TLLP under various operational contracts. Amounts billed by Tesoro totaled $34 million and $29 million for the three months ended June 30, 2016 and 2015, respectively, and $71 million and $58 million for the six months ended June 30, 2016 and 2015, respectively. Operating expenses also include imbalance gains and reimbursements pursuant to the Amended Omnibus Agreement of $5 million and $11 million for the three months ended June 30, 2016 and 2015, respectively, and $12 million and $19 million for the six months ended June 30, 2016 and 2015, respectively. These amounts are eliminated upon consolidation. TLLP segment third-party operating expenses related to the transportation of crude oil and refined products related to Tesoro's sale of those refined products during the ordinary course of business are reclassified to cost of sales in our condensed statements of consolidated operations upon consolidation.
(r) TLLP segment general and administrative expenses include amounts charged by Tesoro for general and administrative services provided to TLLP under various operational and administrative contracts. These amounts totaled $16 million and $18 million for the three months ended June 30, 2016 and 2015, respectively, and $33 million and $35 million for the six months ended June 30, 2016 and 2015, respectively, and are eliminated upon consolidation. General and administrative expenses are reclassified to cost of sales as it relates to Tesoro's sale of refined products in our condensed statements of consolidated operations upon consolidation.
TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except cents per gallon)
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
MARKETING SEGMENT | 2016 | 2015 | 2016 | 2015 | |||||||||||
Revenues | |||||||||||||||
Fuel | $ | 4,077 | $ | 5,051 | $ | 7,375 | $ | 8,999 | |||||||
Other non-fuel | 22 | 16 | 42 | 32 | |||||||||||
Total Revenues | 4,099 | 5,067 | 7,417 | 9,031 | |||||||||||
Cost of Sales | |||||||||||||||
Fuel | 3,843 | 4,764 | 6,839 | 8,508 | |||||||||||
Other non-fuel | 4 | 1 | 8 | 3 | |||||||||||
Total Cost of Sales | 3,847 | 4,765 | 6,847 | 8,511 | |||||||||||
Gross Margin | |||||||||||||||
Fuel (s) | 234 | 287 | 536 | 491 | |||||||||||
Other non-fuel | 18 | 15 | 34 | 29 | |||||||||||
Total Gross Margins | 252 | 302 | 570 | 520 | |||||||||||
Expenses | |||||||||||||||
Operating expenses | 76 | 72 | 148 | 141 | |||||||||||
Selling, general and administrative expenses | 2 | 6 | 7 | 9 | |||||||||||
Depreciation and amortization expense | 12 | 11 | 24 | 23 | |||||||||||
Loss on asset disposals and impairments | 1 | 1 | 3 | 2 | |||||||||||
Segment Operating Income | $ | 161 | $ | 212 | $ | 388 | $ | 345 | |||||||
Fuel Sales (millions of gallons) | 2,221 | 2,099 | 4,387 | 4,159 | |||||||||||
Fuel Margin (¢/gallon) (s) | 10.5 | ¢ | 13.7 | ¢ | 12.2 | ¢ | 11.8 | ¢ | |||||||
Number of Branded Stations (at the end of the period) | |||||||||||||||
MSO operated | 590 | 582 | |||||||||||||
Jobber/Dealer operated | 1,856 | 1,683 | |||||||||||||
Total Stations | 2,446 | 2,265 |
(s) Management uses fuel margin per gallon to compare fuel results to other companies in the industry. There are a variety of ways to calculate fuel margin per gallon and different companies may calculate it in different ways. We calculate fuel margin per gallon by dividing fuel gross margin by fuel sales volumes. Fuel margin and fuel margin per gallon include the effect of intersegment purchases from the refining segment.
TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (In millions)
Expected Annual EBITDA Contribution | |||||||||
FHR Alaska Assets Dropdown | Martinez Assets Dropdown | Total Asset Dropdown | |||||||
Reconciliation of Projected Net Earnings to Projected Annual EBITDA: | |||||||||
Projected net earnings | $ | 36 | $ 16 - 36 | $ 52 - 72 | |||||
Add: Depreciation and amortization expenses | 4 | 13 | 17 | ||||||
Add: Interest and financing costs, net | 11 | 11 | 22 | ||||||
Expected Annual EBITDA | $ | 51 | $ 40 - 60 | $ 91 - 111 |
TLLP 2017 Annual Expected Segment EBITDA | |||
Reconciliation of Projected Net Earnings to Projected Annual Segment EBITDA: | |||
Projected operating income | $ | 825 | |
Add: Depreciation and amortization expenses | 175 | ||
Projected Annual Segment EBITDA | $ | 1,000 |
Marketing 2018 Annual Expected Segment EBITDA | |||
Reconciliation of Projected Operating Income to Projected Annual Segment EBITDA: | |||
Projected operating income | $ | 960 | |
Add: Depreciation and amortization expenses | 48 | ||
Projected Annual Segment EBITDA | $ | 1,008 |
The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Tesoro Corporation via Globenewswire
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