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Form 8-K TESORO CORP /NEW/ For: Oct 30

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October 31, 2014 6:01 AM EDT


�


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form�8-K
CURRENT REPORT
Pursuant to Section�13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October�30, 2014
Tesoro Corporation
(Exact name of registrant as specified in its charter)


�
�
�
�
�
Delaware
�
1-3473
�
95-0862768
�
�
�
�
�
(State or other jurisdiction
of incorporation)
�
(Commission File Number)
�
(IRS Employer Identification No.)
�
�
�
19100 Ridgewood Pkwy
San Antonio, Texas
�
78259-1828
�
�
�
(Address of principal executive offices)
�
(Zip Code)

(210)�626-6000
(Registrants telephone number,
including area code)

Not Applicable
(Former name or former address, if
changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
�
�
�
o
�
Written communications pursuant to Rule�425 under the Securities Act (17 CFR 230.425)
�
�
�
o
�
Soliciting material pursuant to Rule�14a-12 under the Exchange Act (17 CFR 240.14a-12)
�
�
�
o
�
Pre-commencement communications pursuant to Rule�14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
�
�
�
o
�
Pre-commencement communications pursuant to Rule�13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


�




Item 2.02 Results of Operations and Financial Condition.

Tesoro Corporation (or the Company) on October�30, 2014, issued a press release announcing financial results for its third quarter ended September 30, 2014. The press release is filed as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.

The information above is being furnished, not filed, pursuant to Item 2.02 of Form 8-K. Accordingly, the information in Item 2.02 of this Current Report, including the press release, will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference.

Item�7.01��Regulation�FD Disclosure.

Financial information supplemental to the third quarter earnings conference call is available on the Company's website at www.tsocorp.com. The conference call is scheduled on October 31, 2014 at 7:30 a.m. CST. The financial information supplemental to the conference call is filed as Exhibit�99.2 to this Current Report on Form 8-K and is incorporated herein by reference.

The information above is being furnished, not filed, pursuant to Item�7.01 of Form 8-K. Accordingly, the information in Item�7.01 of this Current Report, including the Slide Presentation, will not be incorporated by reference into any registration statement filed by the Company under the Securities Act of 1933, as amended, unless specifically identified therein as being incorporated by reference.

Item 9.01 Financial Statements and Exhibits.
�
(d)
Exhibits.
�
�
�
�
�
�
99.1

Press release announcing third quarter financial results issued on October 30, 2014, by Tesoro Corporation.
�
�
99.2

Supplemental earnings presentation financial information dated as of October 30, 2014.


2


SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: October�30, 2014
�
�
�
�
�
�
TESORO CORPORATION

�
�
�
By:��
/s/ STEVEN M. STERIN
�
�
�
Steven M. Sterin
�
�
�
Executive Vice President and Chief Financial Officer
�
�


3


Index to Exhibits
�
�
�
Exhibit Number
�
Description
�
�
�
99.1
�
Press release announcing third quarter financial results issued on October 30, 2014, by Tesoro Corporation.
99.2
�
Supplemental earnings presentation financial information dated as of October 30, 2014.


4
Exhibit 99.1

Tesoro Corporation Delivers on Distinctive Performance Objectives with Record Results in
Third Quarter of 2014

"
Net income of $396 million, or $3.05 per diluted share
"
Delivered $390 million towards California synergies and business improvements year to date
"
Tesoro Logistics LP (TLLP) to become full-service logistics company with announced acquisition of QEP Field Services
"
Closed the West Coast Logistics Assets acquisition with TLLP for $270 million
"
Repurchased $150 million of shares during third quarter
"
Declared a regular quarterly dividend of $0.30 per share

SAN ANTONIO - October 30, 2014 - Tesoro Corporation (NYSE: TSO) today reported third quarter 2014 net income of $396 million, or $3.05 per diluted share compared to net income of $99 million, or $0.72 per diluted share for the third quarter of 2013. The third quarter of 2013 results included discontinued operations of $0.26 per diluted share related to the sale of the Hawaii business.

Results from continuing operations were $3.06 per diluted share compared to $0.44 per diluted share for the third quarter of 2013, excluding special items. The third quarter of 2013 results included one-time special items of $0.02 per diluted share related to integration costs, legal reserves, insurance proceeds and an inventory adjustment.

We continue to execute on our strategic priorities and business improvement actions. In addition, our focus on operational efficiency and effectiveness resulted in strong operating performance across our integrated value chain. As a result of this progress and strong commercial results in a favorable market, we delivered the highest quarterly EBITDA in company history. said Greg Goff, President and CEO. With the addition of our recently announced acquisition of QEP Field Services, we plan to continue to significantly increase shareholder value by building upon our logistics capabilities.

For the third quarter 2014, the Company recorded segment operating income of $777 million compared to segment operating income of $197 million in the third quarter of 2013. The refining segments operating income was $578 million for the quarter, compared to $128 million in the third quarter of 2013. The Tesoro Index was $12.32 per barrel (/bbl) for the quarter, up almost $4/bbl. The California and Pacific Northwest regions experienced an increase in the Tesoro Index compared to last year, as a result of improved market fundamentals.

Overall gross margin for the quarter was $15.49/bbl or 126% of the Tesoro Index, compared to $8.50/bbl or 101% of the Tesoro Index last year. This improvement was driven by the continued delivery of the California synergies and our business improvement initiatives.

Total throughput for the quarter was 858 thousand barrels per day, or 101% utilization. The strong margin environment, high retail demand from our integrated network and our excellent operating performance allowed us to run our refineries at slightly higher utilization than we had originally forecast. Direct manufacturing costs per barrel in the third quarter 2014 relative to the second quarter 2014 were down $0.46/bbl to $5.42/bbl as a result of higher utilization.


1

During the quarter, Tesoro Corporation completed the sale of the West Coast Logistics Assets to Tesoro Logistics LP for a total consideration of $270 million. The logistics segments operating income was $61 million, up $48 million or 369% from the third quarter of 2013. The substantial growth has been driven by increased throughput volume from the High Plains System, Los Angeles Logistics Assets and contributions from the West Coast Logistics Assets.

The retail segments operating income was $138 million, an increase of 146% year-over-year from $56 million in the third quarter of last year. Strong sales from our ARCO network, our expanding Exxon and Mobil retail branding program and favorable market conditions resulting from strong demand and slowly decreasing crude oil prices resulted in record level retail segment performance. Same store fuel sales were higher during the quarter by approximately 1% versus third quarter last year.

Corporate and unallocated costs were $75 million, including $4 million of corporate depreciation. This is higher than our run rate due to the timing impact of employee costs.

Capital Spending and Liquidity
Capital spending for the third quarter 2014 was $131 million for Tesoro Corporation and $63 million for TLLP. The Company now estimates full year 2014 capital spending, excluding TLLP, of $550 million, a $75 million reduction from prior guidance. TLLP capital spending is estimated to be approximately $200 million. Turnaround expenditures for the third quarter were $19 million. The Company expects full year 2014 turnaround spending of $195 million and deferred retail branding costs of $20 million.

The Company ended the third quarter with $1.5 billion in cash and $2.2 billion of availability on the Tesoro Corporation revolving credit facility. There are currently no borrowings under the Companys revolving credit facility. Excluding TLLP debt and equity, total debt was $1.7 billion or 27% of total capitalization at the end of the third quarter 2014. On a consolidated basis total outstanding debt was $2.9 billion.

TLLP ended the quarter with $243 million in borrowings under its separate revolving credit facility.

Returning Cash to Shareholders
During the third quarter, Tesoro returned about $189 million to shareholders through the purchase of nearly 2.5 million of the Companys shares for $150 million and its regular quarterly dividend of $39 million.

Through the end of October, the Company has purchased an additional $50 million of shares and we expect to complete the remaining $100 million under the $1.0 billion share repurchase program by the end of 2014. The Company expects to continue repurchasing shares in 2015 under the new $1.0 billion share repurchase program authorized by the board of directors in July 2014.

Tesoro Corporation today also announced that the board of directors has declared a regular quarterly cash dividend of $0.30 per share payable on December�15, 2014, to all holders of record as of November�28, 2014.


2

Strategic Update
Through the end of September we estimate that we delivered $390 million towards our ongoing initiatives around synergy and business improvement objectives. These initiatives, which focus on improving capture rates and managing our costs to drive improvement in operating income, are clearly reflected in our results this quarter. We expect to exceed our full year estimate of $370 to $430 million for 2014.

On October 20, 2014, we announced that TLLP will become a full-service logistics company through acquisition of QEP Field Services for $2.5 billion, including 58% ownership in QEP Midstream Partners. After the announcement TLLP successfully completed the $1.3 billion of equity and $1.3 billion of debt offerings to finance this acquisition. Tesoro participated in the equity offering investing an additional $500 million to purchase 8.7 million TLLP common units. Prior to the transaction Tesoro owned 19.5 million TLLP common units or 33% and after the recent equity offering we now own 28.2 million TLLP common units or 35% of the outstanding TLLP units. The Company is excited about the opportunity as this acquisition advances our distinctive strategy to build a customer-focused full-service logistics business, broadening Tesoros capabilities across the value chain to deliver enhanced shareholder value.

With the growth in the base logistics business we expect 2015 EBITDA to grow $75 to $100 million over 2014 and with the announced acquisition of QEP Field Services, TLLP expects to generate an additional $250 to $275 million before integration expenses. Tesoro is focused on driving further EBITDA growth and continuing to increase distributions.

The permit process for the Vancouver Energy project, to construct a 360 thousand barrel per day crude oil rail-to-marine terminal, is continuing to progress with Washington States Energy Facility Site Evaluation Committee (EFSEC). We have fully submitted the Preliminary Draft Environmental Impact Study to EFSEC. We expect EFSEC to release the Draft Environmental Impact Study for public comment and begin the adjudicative phase shortly, which is the last stage prior to a recommendation being submitted to the governor of Washington. The joint venture will begin construction of the facilities upon governor approval of the project and issuance of permits. Project construction is estimated to take nine to twelve months, however initial operations are expected to begin within six months of start of construction.

The Los Angeles refinery integration project, which is designed to improve the flexibility of gasoline and diesel yields and reduce emissions, is moving forward and the initial permits were submitted during the third quarter. We expect the project, which is still subject to final regulatory and board approval, to be completed in early 2017.

We are progressing forward with the review and commercialization efforts around the West Coast Mixed Xylenes project we announced in July. This $400 million project to build a 15 thousand barrel per day mixed xylene extraction unit in Anacortes, Washington will supply the growing global xylene market from our West Coast refining system. This is an attractive diversification of Tesoros product mix and supports our goals of enhancing our gross margin and investing in high return capital projects.


3

Analyst and Investor Presentation
Tesoro Corporation and Tesoro Logistics LP will be hosting a joint Analyst and Investor Presentation at Le Parker Meridian Hotel in New York City on December 9, 2014 at 9:00 a.m. ET. Because space is limited, reservations will be required to attend and accepted on a first-come, first-serve basis. Interested parties should contact Tara Murr in the Investor Relations department via email at [email protected] or phone at (210) 626-6603. Reservations will be accepted until close of business on Monday, December 1, 2014. Interested parties may also access the presentation over the Internet by logging on to http://www.tsocorp.com.

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 third quarter 2014 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.

Twitter Communication
Tesoro Corporation is utilizing Twitter, in conjunction with other Regulation FD-compliant disclosure vehicles, such as press releases, 8-Ks and its investor relations web site, as part of broader investor and stakeholder communication strategy. The Twitter page can be found at http://twitter.com/TesoroCorp.

Tesoro Corporation, a Fortune 100 company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates six refineries in the western United States with a combined capacity of over 850,000 barrels per day and ownership in a logistics business which includes a 35% interest in Tesoro Logistics LP (NYSE: TLLP) and ownership of its general partner. Tesoro's retail-marketing system includes over 2,200 retail stations under the ARCO�, Shell�, Exxon�, Mobil�, USA Gasoline" 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 estimates and expectations of exceeding our 2014 synergy and business improvement performance objectives; increases in shareholder value as a result of the pending acquisition of QEP Field Services; expectations about capital spending, turnaround expenditures and deferred retail branding costs; completion of the current share repurchase program and continued share repurchases under the new program; TLLPs anticipated 2015 year-end EBITDA run-rate; and timing and benefits of various capital expansion projects, including the Vancouver Energy project, Los Angeles refinery integration project and West Coast Mixed Xylenes project. 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:
Brian Randecker, Senior Director, Investor Relations, (210) 626-4757

Media:
Tesoro Media Relations, [email protected], (210) 626-7702

4

Factors Affecting Comparability

As of December 31, 2013, we began reporting the logistics assets and operations of our consolidated variable interest entity, Tesoro Logistics LP (TLLP), as a separate operating segment. In previous periods, when certain quantitative thresholds had not been met, TLLPs assets and operations were presented within our refining operating segment. TLLPs assets and operations include certain crude oil gathering assets and crude oil and refined products terminalling and transportation assets acquired from Tesoro and third parties. The TLLP financial and operational data presented include the historical results of all assets acquired from Tesoro prior to the acquisition dates. The historical results of operations of these assets have been retrospectively adjusted to conform to current presentation. These adjustments resulted in lower gross refining margins. The refining segment now includes costs for transportation and terminalling services provided by TLLP that were previously eliminated with consolidated reporting of TLLP revenues within our refining segment results.

On September 25, 2013, we completed the sale of all of our interest in Tesoro Hawaii, LLC, which operated a 94 thousand barrels per day (Mbpd) Hawaii refinery, retail stations and associated logistics assets (the Hawaii Business). As a result, we have reflected its results as discontinued operations in the results of operations for all periods presented and have excluded the Hawaii Business from the financial and operational data presented in the tables that follow.


5


TESORO CORPORATION
RESULTS OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions, except per share amounts)
�
Three Months Ended
September 30,
�
Nine Months Ended
September 30,
�
2014
�
2013
�
2014
�
2013
Revenues
$
11,151

�
$
11,241

�
$
32,188

�
$
27,485

Costs and Expenses:
�
�
�
�
�
�
�
Cost of sales
9,594

�
10,355

�
28,409

�
24,827

Operating expenses
624

�
542

�
1,813

�
1,351

Selling, general and administrative expenses (a)
86

�
54

�
209

�
229

Depreciation and amortization expense
144

�
140

�
409

�
356

(Gain) loss on asset disposals and impairments (b)
1

�
4

�
(2
)
�
19

Operating Income
702

�
146

�
1,350

�
703

Interest and financing costs, net (c)
(51
)
�
(47
)
�
(169
)
�
(110
)
Other income, net (d)
12

�
22

�
14

�
78

Earnings Before Income Taxes
663

�
121

�
1,195

�
671

Income tax expense
249

�
47

�
437

�
243

Net Earnings From Continuing Operations
414

�
74

�
758

�
428

Earnings (loss) from discontinued operations, net of tax (e)
(1
)
�
35

�
(2
)
�
23

Net Earnings
413

�
109

�
756

�
451

Less: Net earnings from continuing operations attributable to noncontrolling interest
17

�
10

�
58

�
32

NET EARNINGS ATTRIBUTABLE TO TESORO CORPORATION
$
396

�
$
99

�
$
698

�
$
419

�
�
�
�
�
�
�
�
NET EARNINGS (LOSS) ATTRIBUTABLE TO TESORO CORPORATION
�
�
�
�
�
�
�
Continuing operations
$
397

�
$
64

�
$
700

�
$
396

Discontinued operations
(1
)
�
35

�
(2
)
�
23

Total
$
396

�
$
99

�
$
698

�
$
419

�
�
�
�
�
�
�
�
NET EARNINGS (LOSS) PER SHARE - BASIC:
�
�
�
�
�
�
�
Continuing operations
$
3.11

�
$
0.48

�
$
5.41

�
$
2.92

Discontinued operations
(0.01
)
�
0.26

�
(0.02
)
�
0.17

Total
$
3.10

�
$
0.74

�
$
5.39

�
$
3.09

Weighted average common shares outstanding - Basic
127.9

�
134.6

�
129.5

�
135.8

�
�
�
�
�
�
�
�
NET EARNINGS (LOSS) PER SHARE - DILUTED:
�
�
�
�
�
�
�
Continuing operations
$
3.06

�
$
0.46

�
$
5.32

�
$
2.86

Discontinued operations
(0.01
)
�
0.26

�
(0.02
)
�
0.17

Total
$
3.05

�
$
0.72

�
$
5.30

�
$
3.03

Weighted average common shares outstanding - Diluted
129.7

�
136.8

�
131.7

�
138.1



6


________________________
(a)
Includes stock-based compensation expense of $12 million and benefit of $12 million for the three months ended September�30, 2014 and 2013, respectively, and expense of $20 million and $33 million for the nine months ended September�30, 2014 and 2013, respectively. The significant impact to stock-based compensation expense is primarily a result of changes in Tesoros stock price during the three and nine months ended September�30, 2014 as compared to the three and nine months ended September�30, 2013. Also includes transaction and integration costs related to our acquisition of BPs integrated Southern California refining, marketing and logistics business on June 1, 2013 from BP West Coast Products, LLC and other affiliated sellers (the Los Angeles Acquisition) and TLLPs acquisition of Chevrons northwest products system of $14 million ($9 million after-tax) and $47 million ($30 million after-tax) for the three and nine months ended September�30, 2013, respectively.
(b)
Includes a gain of $5 million for the nine months ended September�30, 2014 resulting from TLLPs sale of its Boise terminal.
(c)
Includes charges totaling $10 million and $41 million for premiums and unamortized debt issuance costs associated with the redemption of the 2019 Notes and 2020 Notes during the three and nine months ended September�30, 2014.
(d)
Includes a $16 million ($10 million after-tax) benefit related to the release of a legal reserve as a result of a favorable litigation settlement for the three and nine months ended September�30, 2013. Also includes $54 million in refunds from a settlement of a rate proceeding from the California Public Utilities Commission for the nine months ended September�30, 2013.
(e)
On September 25, 2013, we completed the sale of all of our interest in the Hawaii Business to a subsidiary of Par Petroleum. As a result, we have reflected its results as discontinued operations in our consolidated statements of operations for all periods presented and have excluded the Hawaii Business from the financial and operational data presented in the tables and discussion that follow. Net earnings from discontinued operations include an $80 million ($49 million after-tax) gain related to the sale of the Hawaii Business, which includes a $17 million curtailment gain related to the remeasurement of our pension and other postretirement benefit obligations during the three and nine months ended September�30, 2013.


7


TESORO CORPORATION
SELECTED SEGMENT OPERATING DATA
(Unaudited) (In millions)
�
Three Months Ended
September 30,
�
Nine Months Ended
September 30,
�
2014
�
2013
�
2014
�
2013
Segment Operating Income
�
�
�
�
�
�
�
Refining
$
578

�
$
128

�
$
1,137

�
$
766

TLLP (b)
61

�
13

�
169

�
53

Retail
138

�
56

�
229

�
96

Total Segment Operating Income
777

�
197

�
1,535

�
915

Corporate and unallocated costs (a)
(75
)
�
(51
)
�
(185
)
�
(212
)
Operating Income
702

�
146

�
1,350

�
703

Interest and financing costs, net (c)
(51
)
�
(47
)
�
(169
)
�
(110
)
Other income, net (d)
12

�
22

�
14

�
78

Earnings Before Income Taxes
$
663

�
$
121

�
$
1,195

�
$
671

�
�
�
�
�
�
�
�
Depreciation and Amortization Expense
�
�
�
�
�
�
�
Refining
$
112

�
$
109

�
$
317

�
$
286

TLLP
18

�
16

�
51

�
28

Retail
10

�
9

�
30

�
26

Corporate
4

�
6

�
11

�
16

Total Depreciation and Amortization Expense
$
144

�
$
140

�
$
409

�
$
356

�
�
�
�
�
�
�
�
Capital Expenditures
�
�
�
�
�
�
�
Refining
$
118

�
$
88

�
$
280

�
$
317

TLLP
63

�
23

�
137

�
59

Retail
9

�
10

�
27

�
26

Corporate
4

�
2

�
20

�
10

Total Capital Expenditures
$
194

�
$
123

�
$
464

�
$
412



8


TESORO CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION
(Unaudited) (Dollars in millions)
�
September�30,
2014
�
December�31,
2013
Cash and cash equivalents (TLLP: $3 and $23, respectively)
$
1,530

�
$
1,238

Inventories (f)
2,674

�
2,565

Current maturities of debt
6

�
6

Long-term debt (TLLP: $1,276 and $1,164, respectively)
2,938

�
2,823

Total equity
5,892

�
5,485

Total debt to capitalization ratio
33
%
�
34
%
Total debt to capitalization ratio excluding TLLP debt (g)
27
%
�
28
%
Working capital
2,296

�
1,918

Total market value of TLLP units held by Tesoro (i)
1,379

�
1,000

�
�
�
�
�
Three Months Ended
September 30,
�
2014
�
2013
Cash distributions received from TLLP (h):
�
�
�
For common units held
$
12

�
$
9

For general partner units held
8

�
2

_______________________
(f)
The total carrying value of our crude oil and refined product inventories was less than replacement cost by approximately $1.6 billion and $1.7 billion at September�30, 2014 and December�31, 2013, respectively.
(g)
Excludes TLLPs total debt, including capital leases, of $1.3 billion and $1.2 billion and noncontrolling interest of $1.3 billion and $1.2 billion at September�30, 2014 and December�31, 2013, respectively, which are non-recourse to Tesoro, except for Tesoro Logistics GP, LLC.
(h)
Represents distributions received from TLLP during the three months ended September�30, 2014 and 2013 on units held by Tesoro.
(i)
Represents market value of units held at September�30, 2014 and December�31, 2013. Tesoro held 19,481,557 common units at a market value of $70.77 per unit based on the closing unit price at September�30, 2014. Tesoro held 3,855,824 common units and 15,254,890 subordinated units at a market value of $52.34 per unit based on the closing unit price at December�31, 2013.


9



TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
�
Three Months Ended
September 30,
�
Nine Months Ended
September 30,
REFINING SEGMENT
2014
�
2013
�
2014
�
2013
Total Refining Segment
�
�
�
�
�
�
�
Throughput (Mbpd)
�
�
�
�
�
�
�
Heavy crude (j)
157

�
208

�
163

�
195

Light crude
641

�
591

�
614

�
425

Other feedstocks
60

�
64

�
54

�
48

Total Throughput
858

�
863

�
831

�
668

�
�
�
�
�
�
�
�
Yield (Mbpd)
�
�
�
�
�
�
�
Gasoline and gasoline blendstocks
445

�
418

�
430

�
331

Jet fuel
130

�
126

�
126

�
93

Diesel fuel
199

�
198

�
196

�
152

Heavy fuel oils, residual products, internally produced fuel
and other
141

�
173

�
135

�
132

Total Yield
915

�
915

�
887

�
708

�
�
�
�
�
�
�
�
Refined Product Sales (Mbpd) (k)
�
�
�
�
�
�
�
Gasoline and gasoline blendstocks
516

�
499

�
511

�
407

Jet fuel
146

�
144

�
146

�
108

Diesel fuel
223

�
223

�
208

�
175

Heavy fuel oils, residual products and other
87

�
98

�
85

�
85

Total Refined Product Sales
972

�
964

�
950

�
775

�
�
�
�
�
�
�
�
Segment Operating Income ($ millions)
�
�
�
�
�
�
�
Gross refining margin (l)
$
1,222

�
$
675

�
$
3,008

�
$
2,165

Expenses
�
�
�
�
�
�
�
Manufacturing costs
428

�
378

�
1,280

�
919

Other operating expenses
95

�
57

�
259

�
174

Selling, general and administrative expenses
7

�
2

�
14

�
9

Depreciation and amortization expense
112

�
109

�
317

�
286

Loss on asset disposal and impairments
2

�
1

�
1

�
11

Segment Operating Income
$
578

�
$
128

�
$
1,137

�
$
766

�
�
�
�
�
�
�
�
Gross refining margin ($/throughput bbl) (m)
$
15.49

�
$
8.50

�
13.27

�
$
11.88

Manufacturing cost before depreciation and amortization
expense ($/throughput bbl) (m)
$
5.42

�
$
4.76

�
5.65

�
$
5.04

Refined Product Sales Margin ($/bbl) (m)
�
�
�
�
�
�
�
Average sales price
$
118.75

�
$
120.39

�
$
119.04

�
$
120.54

Average costs of sales
106.93

�
113.47

�
107.77

�
111.38

Refined Product Sales Margin
$
11.82

�
$
6.92

�
$
11.27

�
$
9.16



10


___________________________
(j)
We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.
(k)
Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. Total refined product sales margins include margins on sales of manufactured and purchased refined products.
(l)
Gross refining margin includes the effect of intersegment sales to the retail segment at prices which approximate market and fees charged by TLLP for the transportation and terminalling of crude oil and refined products at prices which we believe are no less favorable to either party than those that could have been negotiated with unaffiliated parties with respect to similar services. Gross refining margin approximates total refining throughput multiplied by the gross refining margin per barrel.����
(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 and refined product sales margin per barrel. We calculate gross refining margin per barrel by dividing gross refining margin (revenues 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. We calculate refined product sales margin per barrel by dividing refined product sales and refined product cost of sales by total refining throughput, and subtracting refined product cost of sales per barrel from refined product sales per barrel. Investors and analysts use these financial measures to help analyze and compare companies in the industry on the basis of operating performance. These financial measures should not be considered alternatives to segment operating income, revenues, costs of sales and operating expenses or any other measure of financial performance presented in accordance with U.S. GAAP.


11


TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
�
Three Months Ended
September 30,
�
Nine Months Ended
September 30,
Refining By Region
2014
�
2013
�
2014
�
2013
California (Martinez and Los Angeles)
�
�
�
�
�
�
�
Throughput (Mbpd) (j)
�
�
�
�
�
�
�
Heavy crude (j)
153

�
193

�
158

�
187

Light crude
342

�
319

�
334

�
175

Other feedstocks
43

�
45

�
36

�
35

Total Throughput
538

�
557

�
528

�
397

�
�
�
�
�
�
�
�
Yield (Mbpd)
�
�
�
�
�
�
�
Gasoline and gasoline blendstocks
292

�
275

�
284

�
203

Jet fuel
84

�
84

�
81

�
52

Diesel fuel
119

�
123

�
123

�
92

Heavy fuel oils, residual products, internally produced fuel
and other
90

�
117

�
86

�
82

Total Yield
585

�
599

�
574

�
429

�
�
�
�
�
�
�
�
Gross refining margin ($ millions)
$
644

�
$
342

�
$
1,620

�
$
1,028

Gross refining margin ($/throughput bbl) (m)
$
13.01

�
$
6.67

�
$
11.24

�
$
9.47

Manufacturing cost before depreciation and amortization
expense ($/throughput bbl) (m)
$
6.26

�
$
5.39

�
$
6.46

�
$
5.75

Capital expenditures ($ millions)
$
36

�
$
38

�
$
101

�
$
104

�
�
�
�
�
�
�
�
Pacific Northwest (Alaska & Washington)
�
�
�
�
�
�
�
Throughput (Mbpd) (j)
�
�
�
�
�
�
�
Heavy crude (j)
4

�
15

�
5

�
8

Light crude
171

�
153

�
154

�
136

Other feedstocks
12

�
14

�
13

�
9

Total Throughput
187

�
182

�
172

�
153

�
�
�
�
�
�
�
�
Yield (Mbpd)
�
�
�
�
�
�
�
Gasoline and gasoline blendstocks
80

�
75

�
74

�
62

Jet fuel
36

�
32

�
32

�
29

Diesel fuel
38

�
36

�
33

�
28

Heavy fuel oils, residual products, internally produced fuel
and other
39

�
45

�
38

�
38

Total Yield
193

�
188

�
177

�
157

�
�
�
�
�
�
�
�
Gross refining margin ($ millions)
$
269

�
$
109

�
$
538

�
$
421

Gross refining margin ($/throughput bbl) (m)
$
15.64

�
$
6.48

�
$
11.49

�
$
10.11

Manufacturing cost before depreciation and amortization
expense ($/throughput bbl) (m)
$
4.00

�
$
3.57

�
$
4.33

�
$
4.13

Capital expenditures ($ millions)
$
18

�
$
9

�
$
30

�
$
43



12


TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
�
Three Months Ended
September 30,
�
Nine Months Ended
September 30,
�
2014
�
2013
�
2014
�
2013
Mid-Continent (North Dakota and Utah)
�
�
�
�
�
�
�
Throughput (Mbpd)
�
�
�
�
�
�
�
Light crude
128

�
119

�
126

�
114

Other feedstocks
5

�
5

�
5

�
4

Total Throughput
133

�
124

�
131

�
118

�
�
�
�
�
�
�
�
Yield (Mbpd)
�
�
�
�
�
�
�
Gasoline and gasoline blendstocks
73

�
68

�
72

�
66

Jet fuel
10

�
10

�
13

�
12

Diesel fuel
42

�
39

�
40

�
32

Heavy fuel oils, residual products, internally produced fuel
and other
12

�
11

�
11

�
12

Total Yield
137

�
128

�
136

�
122

�
�
�
�
�
�
�
�
Gross refining margin ($ millions)
$
308

�
$
224

�
$
846

�
$
711

Gross refining margin ($/throughput bbl) (m)
$
25.23

�
$
19.66

�
$
23.62

�
$
22.12

Manufacturing cost before depreciation and amortization
expense ($/throughput bbl) (m)
$
4.02

�
$
3.68

�
$
4.08

�
$
3.82

Capital expenditures ($ millions)
$
64

�
$
42

�
$
149

�
$
175



13


TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
�
Three Months Ended
September 30,
�
Nine Months Ended
September 30,
TLLP SEGMENT
2014
�
2013
�
2014
�
2013
Crude Oil Gathering
�
�
�
�
�
�
�
Pipeline gathering throughput (Mbpd)
136

�
91

�
114

�
85

Average pipeline gathering revenue per barrel
$
1.38

�
$
1.28

�
$
1.35

�
$
1.26

Trucking volume (Mbpd)
51

�
47

�
47

�
45

Average trucking revenue per barrel
$
3.30

�
$
3.02

�
$
3.24

�
$
3.04

Terminalling and Transportation
�
�
�
�
�
�
�
Terminalling throughput (Mbpd)
943

�
1,020

�
919

�
675

Average terminalling revenue per barrel
$
1.03

�
$
0.63

�
$
0.97

�
$
0.67

Pipeline transportation throughput (Mbpd)
843

�
213

�
824

�
153

Average pipeline transportation revenue per barrel
$
0.36

�
$
0.71

�
$
0.36

�
$
0.54

�
�
�
�
�
�
�
�
Segment Operating Income ($ millions)
�
�
�
�
�
�
�
Revenues
�
�
�
�
�
�
�
Crude Oil Gathering
$
32

�
$
24

�
$
84

�
$
66

Terminalling and Transportation
118

�
73

�
326

�
146

Total Revenues (n)
150

�
97

�
410

�
212

Expenses
�
�
�
�
�
�
�
Operating expenses (o)
55

�
59

�
155

�
109

General and administrative expenses (p)
16

�
9

�
39

�
22

Depreciation and amortization expense
18

�
16

�
51

�
28

Gain on asset disposals and impairments


�


�
(4
)
�


Segment Operating Income
$
61

�
$
13

�
$
169

�
$
53

___________________________
(n)
TLLP segment revenues from services provided to our refining segment were $130 million and $81 million for the three months ended September�30, 2014 and 2013, respectively, and $358 million and $187 million for the nine months ended September�30, 2014 and 2013, respectively. These amounts are eliminated upon consolidation.
(o)
TLLP segment operating expenses include amounts billed by Tesoro for services provided to TLLP under various operational contracts. These amounts totaled $1 million and $28 million for the three months ended September�30, 2014 and 2013, respectively, and $24 million and $48 million for the nine months ended September�30, 2014 and 2013. These amounts are eliminated upon consolidation. TLLP segment third-party operating expenses related to the transportation of crude oil and refined products are reclassified to cost of sales upon consolidation.
(p)
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 $10 million and $6 million for the three months ended September�30, 2014 and 2013, respectively, and $28 million and $13 million for the nine months ended September�30, 2014 and 2013, respectively. These amounts are eliminated upon consolidation.


14


TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS
(Unaudited)
�
Three Months Ended
September 30,
�
Nine Months Ended
September 30,
RETAIL SEGMENT
2014
�
2013
�
2014
�
2013
Average Stations (during period)
�
�
�
�
�
�
�
Company-operated
586

�
572

�
580

�
570

Branded jobber/dealer (q)
1,693

�
1,640

�
1,694

�
1,154

Total Average Retail Stations
2,279

�
2,212

�
2,274

�
1,724

�
�
�
�
�
�
�
�
Fuel Sales (millions of gallons)
�
�
�
�
�
�
�
Company-operated
287

�
278

�
826

�
806

Branded jobber/dealer (q)
788

�
768

�
2,295

�
1,333

Total Fuel Sales
1,075

�
1,046

�
3,121

�
2,139

�
�
�
�
�
�
�
�
Fuel margin ($/gallon) (r)
$
0.20

�
$
0.12

�
$
0.14

�
$
0.14

�
�
�
�
�
�
�
�
Segment Operating Income ($ millions)
�
�
�
�
�
�
�
Gross Margins
�
�
�
�
�
�
�
Fuel (r)
$
214

�
$
123

�
$
445

�
$
294

Merchandise and other non-fuel margin
33

�
31

�
92

�
71

Total Gross Margins
247

�
154

�
537

�
365

Expenses
�
�
�
�
�
�
�
Operating expenses
97

�
86

�
271

�
231

Selling, general and administrative expenses
2

�
1

�
5

�
8

Depreciation and amortization expense
10

�
9

�
30

�
26

Loss on asset disposals and impairments


�
2

�
2

�
4

Segment Operating Income
$
138

�
$
56

�
$
229

�
$
96

___________________________
(q)
Reflects the acquisition of supply rights for approximately 835 dealer-operated and branded wholesale retail stations with the Los Angeles Acquisition on June 1, 2013.
(r)
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; different companies may calculate it in different ways. We calculate fuel margin per gallon by dividing fuel gross margin by fuel sales volumes. Investors and analysts may use fuel margin per gallon to help analyze and compare companies in the industry on the basis of operating performance. This financial measure should not be considered an alternative to revenues, segment operating income or any other measure of financial performance presented in accordance with U.S. GAAP. Fuel margin and fuel margin per gallon include the effect of intersegment purchases from the refining segment at prices which approximate market.


15


TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP
(Unaudited) (In millions)
�
Three Months Ended
September 30,
�
Nine Months Ended
September 30,
�
2014
�
2013
�
2014
�
2013
Reconciliation of Net Earnings to EBITDA
�
�
�
�
�
�
�
Net earnings attributable to Tesoro Corporation
$
396

�
$
99

�
$
698

�
$
419

(Earnings) loss from discontinued operations, net of tax
1

�
(35
)
�
2

�
(23
)
Depreciation and amortization expense
144

�
140

�
409

�
356

Income tax expense
249

�
47

�
437

�
243

Interest and financing costs, net
51

�
47

�
169

�
110

Interest income
(1
)
�


�
(1
)
�
(1
)
EBITDA (s)
$
840

�
$
298

�
$
1,714

�
$
1,104

�
�
�
�
�
�
�
�
Reconciliation of Cash Flows from (used in) Operating Activities to EBITDA
�
�
�
�
�
�
�
Net cash from (used in) operating activities
$
671

�
$
831

�
$
1,047

�
$
670

Net earnings attributable to noncontrolling interest
(17
)
�
(10
)
�
(58
)
�
(32
)
Net cash used in (from) discontinued operations
1

�
118

�
2

�
(74
)
Debt redemption charges
(10
)
�


�
(41
)
�


Deferred charges
40

�
56

�
119

�
333

Changes in current assets and liabilities
25

�
(615
)
�
228

�
129

Income tax expense
249

�
47

�
437

�
243

Stock-based compensation benefit (expense)
(12
)
�
12

�
(20
)
�
(33
)
Interest and financing costs, net
51

�
47

�
169

�
110

Deferred income taxes
(203
)
�
(180
)
�
(227
)
�
(222
)
Other
45

�
(8
)
�
58

�
(20
)
EBITDA (s)
$
840

�
$
298

�
$
1,714

�
$
1,104

___________________________
(s)
EBITDA represents consolidated earnings, excluding net earnings (loss) from discontinued operations, before depreciation and amortization expense, net interest and financing costs, income taxes and interest income.We present EBITDA because we believe some investors and analysts use EBITDA to help analyze our cash flows including our ability to satisfy principal and interest obligations with respect to our indebtedness and use cash for other purposes, including capital expenditures. EBITDA is also used by some investors and analysts to analyze and compare companies on the basis of operating performance and by management for internal analysis. EBITDA should not be considered as an alternative to U.S. GAAP net earnings or net cash from operating activities. EBITDA has important limitations as an analytical tool, because it excludes some items that affect net earnings and net cash from operating activities.


16


TESORO CORPORATION
RECONCILIATION OF TLLP FORECASTED EBITDA TO AMOUNTS UNDER U.S. GAAP
(Unaudited) (In millions)

�
QEPFS Assets
Reconciliation of TLLP Forecasted 2015 EBITDA to Forecasted Net Earnings:
�
�
Forecasted net earnings
$
32 - 57

Add depreciation and amortization expense
�
132

Add interest and financing costs, net
�
86

Forecasted EBITDA
$
250 - 275


�
2014 TLLP Forecasted Current Business
�
2015 TLLP Forecasted Current Business
Reconciliation of TLLP Forecasted EBITDA to Forecasted Net Earnings:
�
�
�
�
�
Forecasted net earnings
$
150 - 165

�
$
225 - 265

Add depreciation and amortization expense
�
70

�
�
70

Add interest and financing costs, net
�
80

�
�
80

Forecasted EBITDA
$
300 - 315

�
$
375 - 415



17


TESORO CORPORATION
NET EARNINGS ADJUSTED FOR SPECIAL ITEMS
(Unaudited) (In millions)
�
Three Months Ended
September 30,
�
2014
�
2013
Net Earnings Attributable to Tesoro Corporation from
Continuing Operations - U.S. GAAP
$
397

�
$
64

Special Items, After-tax:
�
�
�
Transaction and integration costs (a)


�
9

Business interruption insurance recoveries (t)


�
(10
)
Release of legal reserve (d)


�
(10
)
Non-cash inventory valuation adjustment (u)


�
7

Net Earnings Adjusted for Special Items (v)
$
397

�
$
60

�
�
�
�
Diluted Net Earnings per Share from Continuing Operations
Attributable to Tesoro Corporation - U.S. GAAP
$
3.06

�
$
0.46

Special Items Per Share, After-tax:
�
�
�
Transaction and integration costs (a)


�
0.07

Business interruption insurance recoveries (t)


�
(0.07
)
Release of legal reserve (d)


�
(0.07
)
Non-cash inventory valuation adjustment (u)


�
0.05

Net Earnings per Diluted Share Adjusted for Special Items (v)
$
3.06

�
$
0.44

________________________
(t)
Represents a benefit of $16 million ($10 million after-tax) from business interruption recoveries related to the April 2, 2010 incident at the Washington refinery for the three months ended September�30, 2013.
(u)
Represents an increase to cost of sales of $11 million ($7 million after-tax) related to a non-cash inventory valuation adjustment recorded for the Los Angeles Acquisition during the three months ended September�30, 2013.
(v)
We present net earnings adjusted for special items (Adjusted Earnings) and net earnings per diluted share adjusted for special items (Adjusted Diluted EPS) as management believes that the impact of these items on net earnings and diluted earnings per share is important information for an investors understanding of the operations of our business and the financial information presented. Adjusted Earnings and Adjusted Diluted EPS should not be considered as an alternative to net earnings, earnings per diluted share or any other measure of financial performance presented in accordance with U.S. GAAP.� Adjusted Earnings and Adjusted Diluted EPS may not be comparable to similarly titled measures used by other entities.


18
3rd Quarter Earnings Slides October 30, 2014 Exhibit 99.2

�
This Presentation includes and references forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to, among other things, expectations regarding refining margins, revenues, cash flows, capital expenditures, turnaround expenses and other financial items. These statements also relate to our business strategy, goals and expectations concerning our market position, future operations, margins and profitability. We have used the words anticipate, believe, could, estimate, expect, intend, may, plan, predict, project, will, would and similar terms and phrases to identify forward-looking statements in this Presentation, which speak only as of the date the statements were made. Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors which are described in greater detail in our filings with the SEC. All future written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the previous statements. We undertake no obligation to update any information contained herein or to publicly release the results of any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of this Presentation. Forward Looking Statements 2

�
4Q 2014 Guidance 3 California Pacific Northwest Mid- Continent Throughput (mbpd) 495- 515 160 - 170 120 - 130 Manufacturing Cost ($/bbl) $ 6.05- 6.30 $ 4.45 - 4.70 $ 3.80 - 4.05 $ in millions Corporate/System Refining/ Logistics Depreciation $ 105/10 Corporate Expense Before Depreciation $ 60 Interest Expense1 Before Interest Income $ 56 1. Interest expense will also include approximately $30 million of additional interest expense during the fourth quarter for TLLPs financing and acquisition of QEP Field Services. Included in this number is the additional interest on the notes issued on 10/22/2014 and the one time fees for $15.6 million of bridge fees, $12.5 million for advisory fees, and other acquisition expenses of $2 million

�
Net Earnings (Loss) 4 0.46 (0.03) 0.59 1.70 3.06 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 EPS (Diluted) from Continuing Operations $ per share $ in millions, except per share amounts 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 Refining $ 128 $ 107 $ 185 $ 374 $ 578 TLLP 13 21 60 48 61 Retail 56 24 19 72 138 Corporate and Unallocated Costs (51) (100) (26) (84) (75) Interest and Financing Costs (47) (41) (77) (41) (51) Other Income (Expense), Net1 22 (2) (1) 3 12 Income Tax Expense (47) (3) (56) (132) (249) Net Earnings (Loss) from discontinued operations, net of tax2 35 (3) (1) 0 (1) Net Earnings Attributable to Non-Controlling Interest (10) (10) (25) (16) (17) Net Earnings (Loss) Attributable to Tesoro Corporation $ 99 $ (7) $ 78 $ 224 $ 396 EPS (Diluted) from Continuing Operations $ 0.46 $ (0.03) $ 0.59 $ 1.70 $ 3.06 EPS (Diluted) from Discontinued Operations $ 0.26 $ (0.02) $ (0.01) $ 0.00 $ (0.01) 1. Represents net amount of interest income , other income (expense) and equity in earnings of equity method investments as reported. 2. On September 25, 2013, we completed the sale of all of our interest in Tesoro Hawaii, LLC, which operates the 94 mbpd Hawaii refinery, retail stations and associated logistics assets to a subsidiary of Par Petroleum Corporation. As a result, we have reflected its results of operations as discontinued operations for all periods presented, and we have excluded our Hawaii operations from the operational data presented in the tables and discussion that follow. 99 (7) 78 224 3Q 2013 4Q 2013 1Q 2014 2Q 2014 3Q 2014 Net Earnings (Loss) Attributable to Tesoro Corporation $ in millions 396

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1,239 1,530 840 62 222 116 210 Beginning Cash EBITDA Working Capital & Other Interest & Tax, Net Capital Expenditures & Turnaround Changes in Debt Shareholder Distributions and Buybacks Ending Cash 3Q 2014 Cash Flow 5 $ in millions 1. Reconciliations of EBITDA, a non-GAAP financial measure, to net income and cash flows from operating activities are included in the press release issued on October 30, 2014. 1 61

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Throughput by Refining Region 6 182 180 187 100 120 140 160 180 200 3Q 2013 3Q 2014 Guidance 3Q 2014 Actual MBPD Pacific Northwest 124 125 133 0 30 60 90 120 150 3Q 2013 3Q 2014 Guidance 3Q 2014 Actual MBPD Mid-Continent 557 515 538 100 200 300 400 500 600 3Q 2013 3Q 2014 Guidance 3Q 2014 Actual MBPD California

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Manufacturing Cost by Refining Region 3.57 4.08 4.00 - 1.00 2.00 3.00 4.00 5.00 3Q 2013 3Q 2014 Guidance 3Q 2014 Actual $/bbl Pacific Northwest 3.68 4.23 4.02 - 1.00 2.00 3.00 4.00 5.00 3Q 2013 3Q 2014 Guidance 3Q 2014 Actual $/bbl Mid-Continent 5.39 6.58 6.26 - 2.00 4.00 6.00 8.00 3Q 2013 3Q 2014 Guidance 3Q 2014 Actual $/bbl California 7

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