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Form 8-K TESORO CORP /NEW/ For: Oct 31

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October 31, 2016 5:09 PM 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 31, 2016

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
(Registrant’s 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 31, 2016, issued a press release announcing financial results for its third quarter ended September 30, 2016. 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 9.01 Financial Statements and Exhibits.
 
(d)
Exhibits.
 
 
 
 
 
 
99.1
Press release announcing third quarter financial results issued on October 31, 2016, by Tesoro Corporation.


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 31, 2016
 
 
 
 
 
 
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 31, 2016, by Tesoro Corporation.


4

Exhibit 99.1
tsologo3q16.jpg
TESORO CORPORATION REPORTS 2016 THIRD QUARTER RESULTS

•
Net earnings from continuing operations of $170 million, or $1.43 per diluted share, consolidated net earnings of $201 million and EBITDA of $577 million
•
Total Refining throughput was 873 thousand barrels per day and utilization was 98%
•
Logistics operating income grew 25% year-over-year to $133 million
•
Marketing operating income of $273 million; total branded stations increased by 178 year-over-year
•
Returned $215 million to shareholders; $150 million in share repurchases and $65 million in dividends
•
Closed sale of Alaska Storage and Terminalling Assets to TLLP for $444 million

SAN ANTONIO - October 31, 2016 - Tesoro Corporation (NYSE: TSO) today reported third quarter net earnings from continuing operations of $170 million, or $1.43 per diluted share, compared to net earnings from continuing operations of $759 million, or $6.13 per diluted share a year ago. Consolidated net earnings were $201 million for the third quarter 2016 compared to $799 million for the same period last year. EBITDA for the third quarter of 2016 was $577 million compared to $1.5 billion last year.

 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
(In millions, except per share data)
2016
 
2015
 
2016
 
2015
Segment Operating Income
 
 
 
 
 
 
 
     Refining
$
52

 
$
899

 
$
475

 
$
1,843

     TLLP
133

 
106

 
381

 
312

     Marketing
273

 
379

 
661

 
724

Total Segment Operating Income
$
458

 
$
1,384

 
$
1,517

 
$
2,879

Net Earnings From Continuing Operations Attributable to
   Tesoro
$
170

 
$
759

 
$
646

 
$
1,490

 
 
 
 
 
 
 
 
Diluted EPS - Continuing Operations
$
1.43

 
$
6.13

 
$
5.37

 
$
11.85

Diluted EPS - Discontinued Operations
(0.01
)
 
—

 
0.08

 
(0.03
)
Total Diluted EPS
$
1.42

 
$
6.13

 
$
5.45

 
$
11.82


“We are pleased with the results for the quarter, which are attributable to our integrated business model and the continued execution of our operating improvements,” said Greg Goff, Chairman and CEO. “Our refining operational reliability was very strong, resulting in 98% utilization. Combined with our continued growth in logistics and marketing business, this resulted in strong operating cash flows. Also, we returned $215 million to shareholders in the form of share repurchases and dividends. We are successfully delivering the improvements to operating income that we identified as part of our 2016 plan and remain committed to meeting or exceeding our target of $400 to $500 million.”


 
 
Tesoro Corporation | 1

For the third quarter, the Company recorded segment operating income of $458 million compared to segment operating income of $1.4 billion in the third quarter of 2015. Operating income in the third quarter 2016 grew in Logistics but was lower year-over-year in Refining and Marketing due to a stronger than normal market environment in 2015.

SEGMENT RESULTS
REFINING. Refining operating income was $52 million for the third quarter 2016 compared to $899 million in 2015 and segment EBITDA was $204 million compared to $1.0 billion in 2015. Third quarter 2016 operating income and segment EBITDA include a pre-tax benefit of $20 million related to a lower of cost or market (LCM) inventory adjustment offset by a $14 million charge related to a contract dispute with a supplier.

The Tesoro Index(a) was $12.45 per barrel for the third quarter with a gross refining margin of $9.08 per barrel or 73% capture of the Tesoro Index. For the year ago period, the Tesoro Index was $23.09 per barrel with a gross refining margin of $19.43 per barrel or 84% capture of the Tesoro Index. Refining margins in the third quarter 2016 were negatively impacted by rising RINs prices and the resulting transfer price to Marketing, and by a reduction of inventory in the quarter. Total refinery throughput for the quarter was 873 thousand barrels per day, or 98% utilization. Manufacturing costs in the third quarter of 2016 increased $0.27 per barrel over last year to $5.11 per barrel primarily due to the addition of the Dickinson Refinery and the Tesoro Great Plains assets in 2016.

LOGISTICS. Logistics operating income increased to $133 million in the third quarter 2016 from $106 million in 2015 and segment EBITDA increased to $181 million from $153 million last year. This performance was driven by year-over-year growth in Tesoro Logistics LP (NYSE: TLLP) crude oil gathering, terminalling and transportation throughput as well as contributions from the acquisitions of Los Angeles Storage and Pipeline Assets last year and the Alaska Storage and Terminalling Assets completed during the quarter.

MARKETING. Marketing operating income was $273 million, segment EBITDA was $285 million and fuel margins were 14.9 cents per gallon in the third quarter 2016. This compares to operating income of $379 million, segment EBITDA of $390 million and fuel margins of 20.5 cents per gallon a year ago. The year-over-year comparison to operating results reflect the stronger than normal market conditions in 2015. However, consumer demand remained strong in the third quarter 2016 and the Company’s total branded stations increased by 178 over the year ago period.

CORPORATE AND OTHER
Corporate and unallocated costs for the third quarter 2016 were $98 million. Net interest was $70 million, which includes a $6 million write-off for the unamortized financing costs related to refinancing Tesoro’s revolving credit facility in the quarter. The effective tax rate was 32% for the quarter.

BALANCE SHEET AND CASH FLOW
Tesoro ended the third quarter with $1.4 billion in cash and cash equivalents compared to $942 million at the end of 2015. Tesoro has $2.0 billion of availability under its new revolving credit facility. Total debt, net of unamortized issuance costs, was $4.7 billion or 36% of total capitalization at the end of the third quarter. Excluding TLLP debt and equity, total debt was $1.3 billion or 19% of total capitalization.

Capital spending for the third quarter was $185 million for Tesoro and $42 million for TLLP. Turnaround expenditures for the third quarter were $42 million.


 
 
Tesoro Corporation | 2

The Company executed 1.9 million of share repurchases for approximately $150 million in the third quarter and paid cash dividends of $65 million. Tesoro today announced that its board of directors has declared a quarterly cash dividend of $0.55 per share payable on December 15, 2016 to all holders of record as of November 30, 2016. Tesoro continues to maintain a strong balance sheet while investing in high-return capital projects and acquisitions as well as returning cash to shareholders.

STRATEGIC UPDATE
During the quarter, Tesoro closed both portions of the sale of the Alaska Storage and Terminalling Assets to TLLP for a total consideration of $444 million, which included cash proceeds of $400 million and the issuance of common and general partner units to Tesoro, valued at approximately $44 million.

Also during the quarter, the Company closed the acquisition of Virent, Inc., an innovative renewable fuels and chemicals company that supports Tesoro’s renewable fuels strategy of developing high-quality, lower-carbon, renewable feedstocks and blendstocks that can either be co-processed in existing refineries or blended seamlessly with traditional fuels. By generating valuable credits, this strategy may lower Tesoro's compliance costs with the federal renewable fuel standard and California's low carbon fuel standard.

On September 30, 2016, the Company entered into a new $2.0 billion senior secured revolving credit agreement. This new four-year cash flow credit facility replaces Tesoro's previous $3.0 billion asset based credit facility, which was scheduled to mature in November 2019. While the new credit facility is currently guaranteed by certain Tesoro subsidiaries and collateral, these will be released and the facility will become unsecured upon Tesoro achieving an investment grade credit rating from either Moody's Investors Service or S&P Global Ratings.

On October 14, 2016, S&P Global Ratings upgraded TLLP's credit rating to BB+ with a stable outlook from the previous rating of BB. This rating is now the same rating as that of Tesoro and one level below investment grade.

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 11¢ to 14¢ per gallon and crude oil differentials reflecting transportation costs. Through the first nine months 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. Tesoro continues to expect year-over-year improvements from higher utilization and operational efficiencies of $400 to $500 million.

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. Even in the current challenging market environment, Tesoro remains confident in delivering these annual improvements to operating income. Through the first nine months of the year, estimated Refining and Marketing improvements are trending above the range. However, estimated Logistics improvements are trending slightly below the range, primarily due to the weak commodity price environment, which has impacted organic growth and volumes.

PUBLIC INVITED TO LISTEN TO ANALYST AND INVESTOR CONFERENCE CALL
Tesoro will live broadcast its conference call at 7:30 a.m. CT tomorrow morning to discuss third 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.


 
 
Tesoro Corporation | 3

2016 INVESTOR AND ANALYST DAY
Tesoro Corporation will host its 2016 Investor and Analyst Day at The St. Regis Hotel in New York City on December 6, 2016 at 9:00 a.m. ET. Because space is limited, reservations are required to attend and will be accepted on a first-come, first-serve basis. Interested parties can request an invitation by contacting the Investor Relations department via email at [email protected]. The presentation will also be webcast live at 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 (NYSE: 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™, Rebel™ and Tesoro® brands.

This earnings release contains “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, including without limitation statements concerning: our operational, financial and growth strategies, including maintaining a strong balance sheet, investing in high-return capital projects and acquisitions, returning cash to our shareholders, and delivering our targeted annual improvements to operating income; our ability to successfully effect those strategies and the expected timing and results thereof; our financial and operational outlook, and ability to fulfill that outlook; our financial position, liquidity and capital resources; the expected benefits to us of our recent acquisition of Virent, Inc.; and expectations regarding annual improvements to operating income, including expectations with respect to each segment. For more information concerning factors that could affect these statements, see our annual report on Form 10-K, quarterly reports on Form 10-Q, and other public filings and press releases, available at www.tsocorp.com. We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.

Contact:
Investors:
Sam Ramraj, Vice President, Investor Relations, (210) 626-4757

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













(a)
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 | 4

TESORO CORPORATION
2016 FOURTH QUARTER GUIDANCE (Unaudited)
Throughput (Mbpd)
 
California
500 - 525
Pacific Northwest
180 - 190
Mid-Continent
125 - 140
Consolidated
805 - 855
 
 
Manufacturing Cost ($/throughput barrel)
 
California
$6.20 - 6.45
Pacific Northwest
$3.90 - 4.15
Mid-Continent
$4.65 - 4.90
Consolidated
$5.45 - 5.70
 
 
Corporate/System ($ millions)
 
Refining depreciation
$150
TLLP depreciation
$50
Corporate expense (before depreciation)
$95 - 105
Interest expense (before interest income)
$72
Noncontrolling Interest
$35 - 40

2016 CAPITAL OUTLOOK (Unaudited) (in millions)
 
2016 Capital Expenditures Outlook
Capital Expenditures
 
Tesoro Corporation
$
700

Tesoro Logistics LP
200

Total Capital Expenditures
$
900




 
 
Tesoro Corporation | 5

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 expenses (“EBITDA”);
•
Segment EBITDA is defined as a segment’s U.S. GAAP operating income before depreciation and amortization expenses 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 we believe these measures help us analyze our results of operations and liquidity in conjunction with our U.S. GAAP results. 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 | 6

TESORO CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in millions)
 
September 30,
2016
 
December 31,
2015
ASSETS
 
 
 
Current Assets
 
 
 
Cash and cash equivalents (TLLP: $497 and $16, respectively)
$
1,387

 
$
942

Receivables, net of allowance for doubtful accounts
1,037

 
792

Inventories, net (b)
2,317

 
2,302

Prepayments and other current assets
364

 
271

Total Current Assets
5,105

 
4,307

Property, Plant and Equipment, Net (TLLP: $3,129 and $3,467, respectively)
9,769

 
9,541

Other Noncurrent Assets, Net (TLLP: $1,447 and $1,190, respectively)
3,131

 
2,484

Total Assets
$
18,005

 
$
16,332

 
 
 
 
LIABILITIES AND EQUITY
 
 
 
Current Liabilities
 
 
 
Accounts payable
$
1,547

 
$
1,568

Other current liabilities
1,146

 
962

Total Current Liabilities
2,693

 
2,530

Deferred Income Taxes
1,438

 
1,222

Other Noncurrent Liabilities
1,012

 
773

Debt, Net of Unamortized Issuance Costs (TLLP: $3,382 and $2,844, respectively)
4,667

 
4,067

Equity
8,195

 
7,740

Total Liabilities and Equity
$
18,005

 
$
16,332


(b)
We recorded a lower of cost or market (“LCM”) reserve of $123 million and $359 million at September 30, 2016 and December 31, 2015, respectively, to cost of sales 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.


 
 
Tesoro Corporation | 7

TESORO CORPORATION
RESULTS OF CONSOLIDATED OPERATIONS (Unaudited) (in millions, except per share amounts)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Revenues
$
6,544

 
$
7,743

 
$
17,930

 
$
22,438

Costs and Expenses:
 
 
 
 
 
 
 
Cost of sales (excluding the lower of cost or market inventory valuation adjustment)
5,232

 
5,429

 
14,114

 
17,090

Lower of cost or market inventory valuation adjustment (b)
(20
)
 
83

 
(236
)
 
41

Operating expenses
652

 
640

 
1,872

 
1,816

Selling, general and administrative expenses (c)
107

 
103

 
283

 
285

Depreciation and amortization expenses
211

 
192

 
633

 
553

Loss on asset disposals and impairments
2

 
4

 
7

 
12

Operating Income
360

 
1,292

 
1,257

 
2,641

Interest and financing costs, net
(70
)
 
(54
)
 
(190
)
 
(163
)
Equity in earnings of equity method investments
7

 
6

 
12

 
9

Other income, net (d)
—

 
13

 
32

 
12

Earnings Before Income Taxes
297

 
1,257

 
1,111

 
2,499

Income tax expense
95

 
458

 
362

 
888

Net Earnings From Continuing Operations
202

 
799

 
749

 
1,611

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

 
10

 
(4
)
Net Earnings
201

 
799

 
759

 
1,607

Less: Net earnings from continuing operations attributable to noncontrolling interest
32

 
40

 
103

 
121

Net Earnings Attributable to Tesoro Corporation
$
169

 
$
759

 
$
656

 
$
1,486

Net Earnings (Loss) Attributable to Tesoro Corporation:
 
 
 
 
 
 
 
Continuing operations
$
170

 
$
759

 
$
646

 
$
1,490

Discontinued operations
(1
)
 
—

 
10

 
(4
)
Total
$
169

 
$
759

 
$
656

 
$
1,486

Net Earnings (Loss) Per Share - Basic:
 
 
 
 
 
 
 
Continuing operations
$
1.44

 
$
6.19

 
$
5.43

 
$
11.98

Discontinued operations
(0.01
)
 
—

 
0.08

 
(0.03
)
Total
$
1.43

 
$
6.19

 
$
5.51

 
$
11.95

Weighted average common shares outstanding - Basic
118.2

 
122.5

 
119.1

 
124.3

Net Earnings (Loss) Per Share - Diluted:
 
 
 
 
 
 
 
Continuing operations
$
1.43

 
$
6.13

 
$
5.37

 
$
11.85

Discontinued operations
(0.01
)
 
—

 
0.08

 
(0.03
)
Total
$
1.42

 
$
6.13

 
$
5.45

 
$
11.82

Weighted average common shares outstanding - Diluted
119.3

 
123.8

 
120.4

 
125.7


(c)
Includes stock-based compensation expense of $13 million and $22 million for the three months ended September 30, 2016 and 2015, respectively, and expense of $21 million and $57 million for the nine months ended September 30, 2016 and 2015, respectively. The significant impact to stock-based compensation expense is primarily a result of changes in Tesoro’s stock price.
(d)
Other income, net for the nine months ended September 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 nine months ended September 30, 2016. During the three and nine months ended September 30, 2015, we recorded a gain of $11 million as other income for insurance proceeds related to the settlement of claims associated with the Washington Refinery Fire.

 
 
Tesoro Corporation | 8

TESORO CORPORATION
SELECTED SEGMENT OPERATING DATA (Unaudited) (in millions)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Earnings Before Income Taxes
 
 
 
 
 
 
 
Refining
$
52

 
$
899

 
$
475

 
$
1,843

TLLP
133

 
106

 
381

 
312

Marketing
273

 
379

 
661

 
724

Total Segment Operating Income
458

 
1,384

 
1,517

 
2,879

Corporate and unallocated costs (c)
(98
)
 
(92
)
 
(260
)
 
(238
)
Operating Income
360

 
1,292

 
1,257

 
2,641

Interest and financing costs, net
(70
)
 
(54
)
 
(190
)
 
(163
)
Equity in earnings of equity method investments
7

 
6

 
12

 
9

Other income, net (d)
—

 
13

 
32

 
12

Earnings Before Income Taxes
$
297

 
$
1,257

 
$
1,111

 
$
2,499

Depreciation and Amortization Expenses
 
 
 
 
 
 
 
Refining
$
148

 
$
133

 
$
445

 
$
373

TLLP
45

 
45

 
134

 
133

Marketing
12

 
11

 
36

 
34

Corporate
6

 
3

 
18

 
13

Total Depreciation and Amortization Expenses
$
211

 
$
192

 
$
633

 
$
553

Segment EBITDA
 
 
 
 
 
 
 
Refining
$
204

 
$
1,036

 
$
947

 
$
2,219

TLLP
181

 
153

 
531

 
451

Marketing
285

 
390

 
697

 
758

Total Segment EBITDA
$
670

 
$
1,579

 
$
2,175

 
$
3,428

Capital Expenditures
 
 
 
 
 
 
 
Refining
$
153

 
$
152

 
$
409

 
$
483

TLLP
42

 
93

 
125

 
237

Marketing
3

 
8

 
22

 
20

Corporate
29

 
6

 
68

 
16

Total Capital Expenditures
$
227

 
$
259

 
$
624

 
$
756



 
 
Tesoro Corporation | 9

TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (in millions)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Reconciliation of Net Earnings to EBITDA
 
 
 
 
 
 
 
Net earnings
$
201

 
$
799

 
$
759

 
$
1,607

Depreciation and amortization expenses
211

 
192

 
633

 
553

Interest and financing costs, net
70

 
54

 
190

 
163

Income tax expense
95

 
458

 
362

 
888

EBITDA
$
577

 
$
1,503

 
$
1,944

 
$
3,211

Reconciliation of Refining Operating Income to Refining Segment EBITDA
 
 
 
 
 
 
 
Operating income
$
52

 
$
899

 
$
475

 
$
1,843

Depreciation and amortization expenses
148

 
133

 
445

 
373

Equity in earnings of equity method investments
4

 
4

 
2

 
3

Other income, net (d)
—

 
—

 
25

 
—

Segment EBITDA
$
204


$
1,036


$
947


$
2,219

 
 
 
 
 
 
 
 
Reconciliation of TLLP Operating Income to TLLP Segment EBITDA
 
 
 
 
 
 
 
Operating income
$
133

 
$
106

 
$
381

 
$
312

Depreciation and amortization expenses
45

 
45

 
134

 
133

Equity in earnings of equity method investments
3

 
2

 
10

 
6

Other income, net (d)
—

 
—

 
6

 
—

Segment EBITDA
$
181


$
153


$
531


$
451

 
 
 
 
 
 
 
 
Reconciliation of Marketing Operating Income to Marketing Segment EBITDA
 
 
 
 
 
 
 
Operating income
$
273

 
$
379

 
$
661

 
$
724

Depreciation and amortization expenses
12

 
11

 
36

 
34

Segment EBITDA
$
285

 
$
390

 
$
697

 
$
758



 
 
Tesoro Corporation | 10

TESORO CORPORATION
OTHER SUMMARY FINANCIAL INFORMATION (Unaudited) (in millions)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Cash Flows From (Used in):
 
 
 
 
 
 
 
Operating activities
$
573

 
$
940

 
$
1,201

 
$
1,847

Investing activities
(214
)
 
(235
)
 
(1,020
)
 
(783
)
Financing activities
(93
)
 
(724
)
 
264

 
(1,105
)
Increase (Decrease) in Cash and Cash Equivalents
$
266

 
$
(19
)
 
$
445

 
$
(41
)
 
 
 
 
 
 
 
 
 
 
 
 
 
September 30,
2016
 
December 31,
2015
Working capital (current assets less current liabilities)
 
 
 
 
$
2,412

 
$
1,777

Total market value of TLLP common units held by Tesoro (e)
 
 
 
 
$
1,608

 
$
1,633


 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Cash distributions received from TLLP (f):
 
 
 
 
 
 
 
For common units held
$
27

 
$
20

 
$
79

 
$
58

For general partner units held
38

 
18

 
95

 
48

Total Cash Distributions Received from TLLP
$
65

 
$
38

 
$
174

 
$
106


TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (in millions, except percentages)
 
September 30,
2016
 
December 31,
2015
Tesoro consolidated debt (g)
$
4,682

 
$
4,073

TLLP debt (g)
3,382

 
2,844

Tesoro Debt Excluding TLLP (g)
$
1,300

 
$
1,229

 
 
 
 
Total equity
$
8,195

 
$
7,740

Noncontrolling interest
2,695

 
2,527

Tesoro Corporation Stockholders’ Equity
$
5,500

 
$
5,213

 
 
 
 
Tesoro debt, net of unamortized issuance costs, to capitalization ratio (g)
36
%
 
34
%
Tesoro debt, net of unamortized issuance costs, to capitalization ratio excluding
TLLP and noncontrolling interest (g)
19
%
 
19
%

(e)
Represents market value of the 33,194,109 and 32,445,115 common units held by Tesoro at September 30, 2016 and December 31, 2015, respectively. The market values were $48.44 and $50.32 per unit based on the closing unit price at September 30, 2016 and December 31, 2015, respectively.
(f)
Represents distributions received from TLLP during the three and nine months ended September 30, 2016 and 2015 on common units and general partner units held by Tesoro.
(g)
These amounts and calculations are shown net of unamortized issuance costs.


 
 
Tesoro Corporation | 11

TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) (dollars in millions, except per barrel amounts)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
REFINING SEGMENT
2016
 
2015
 
2016
 
2015
Total Refining Segment
 
 
 
 
 
 
 
Throughput (Mbpd)
 
 
 
 
 
 
 
Heavy crude (h)
186

 
178

 
176

 
150

Light crude
636

 
635

 
595

 
575

Other feedstocks
51

 
48

 
49

 
56

Total Throughput
873

 
861

 
820

 
781

Yield (Mbpd)
 
 
 
 
 
 
 
Gasoline and gasoline blendstocks
455

 
438

 
449

 
405

Diesel fuel
202

 
195

 
183

 
166

Jet fuel
133

 
122

 
117

 
119

Heavy fuel oils, residual products, internally produced fuel and other
143

 
158

 
126

 
140

Total Yield
933

 
913

 
875

 
830

Refined Product Sales (Mbpd) (i)
 
 
 
 
 
 
 
Gasoline and gasoline blendstocks
531

 
530

 
527

 
510

Diesel fuel
215

 
213

 
204

 
198

Jet fuel
158

 
148

 
145

 
153

Heavy fuel oils, residual products and other
112

 
101

 
105

 
91

Total Refined Product Sales
1,016

 
992

 
981

 
952

 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
Refined products (j)
$
5,641

 
$
6,817

 
$
15,434

 
$
19,867

Crude oil resales and other
257

 
172

 
710

 
780

Refining Revenues
5,898

 
6,989

 
16,144

 
20,647

Cost of Sales
 
 
 
 
 
 
 
Cost of sales (excluding lower of cost or market adjustments)
5,189

 
5,367

 
13,965

 
16,934

Lower of cost or market adjustments (b)
(20
)
 
83

 
(236
)
 
41

Refining cost of sales
5,169

 
5,450

 
13,729

 
16,975

Gross refining margin (k)
729

 
1,539

 
2,415

 
3,672

Expenses
 
 
 
 
 
 
 
Operating expenses
 
 
 
 
 
 
 
Manufacturing costs
412

 
383

 
1,172

 
1,177

Other operating expenses
116

 
117

 
318

 
259

Selling, general and administrative expenses
1

 
5

 
5

 
12

Depreciation and amortization expenses
148

 
133

 
445

 
373

Loss on asset disposals and impairments
—

 
2

 
—

 
8

Segment Operating Income
$
52

 
$
899

 
$
475

 
$
1,843

 
 
 
 
 
 
 
 
Gross Refining Margin ($/throughput barrel) (l) (m)
$
9.08

 
$
19.43

 
$
10.75

 
$
17.22

Manufacturing Cost before Depreciation and Amortization Expenses ($/throughput barrel) (l)
$
5.11

 
$
4.84

 
$
5.22

 
$
5.53


(h)
We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.
(i)
Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties.

 
 
Tesoro Corporation | 12

(j)
Refined product sales include intersegment sales to our Marketing segment of $3.6 billion and $4.5 billion for the three months ended September 30, 2016 and 2015, respectively, and $10.2 billion and $12.8 billion for the nine months ended September 30, 2016 and 2015, respectively.
(k)
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.
(l)
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 expenses (“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.
(m)
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 | 13

TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) (dollars in millions, except per barrel amounts)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
Refining By Region
2016
 
2015
 
2016
 
2015
California (Martinez and Los Angeles)
 
 
 
 
 
 
 
Throughput (Mbpd)
 
 
 
 
 
 
 
Heavy crude (h)
177

 
172

 
170

 
144

Light crude
321

 
328

 
301

 
313

Other feedstocks
35

 
34

 
33

 
37

Total Throughput
533

 
534

 
504

 
494

 
 
 
 
 
 
 
 
Yield (Mbpd)
 
 
 
 
 
 
 
Gasoline and gasoline blendstocks
297

 
279

 
293

 
265

Diesel fuel
120

 
111

 
107

 
98

Jet fuel
79

 
76

 
71

 
76

Heavy fuel oils, residual products, internally produced fuel and other
86

 
109

 
78

 
94

Total Yield
582

 
575

 
549

 
533

 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
Refined products (j)
$
3,680

 
$
4,525

 
$
10,358

 
$
13,501

Crude oil resales and other (n)
55

 
94

 
157

 
233

Regional Revenue
3,735

 
4,619

 
10,515

 
13,734

Cost of Sales
 
 
 
 
 
 
 
Cost of sales (excluding LCM) (n)
3,292

 
3,547

 
9,076

 
11,296

LCM
(10
)
 
56

 
(154
)
 
26

Regional Cost of Sales
3,282

 
3,603

 
8,922

 
11,322

Gross refining margin (k)
453

 
1,016

 
1,593

 
2,412

Expenses
 
 
 
 
 
 
 
Manufacturing costs
285

 
284

 
823

 
851

Other operating expenses
57

 
78

 
152

 
164

Selling, general and administrative expenses
1

 
5

 
4

 
11

Depreciation and amortization expenses
95

 
88

 
285

 
249

Loss on asset disposals and impairments
—

 
1

 
—

 
3

Operating Income
$
15

 
$
560

 
$
329

 
$
1,134

 
 
 
 
 
 
 
 
Gross Refining Margin ($/throughput barrel) (l) (m)
$
9.24

 
$
20.68

 
$
11.54

 
$
17.88

Manufacturing Cost before Depreciation and Amortization Expenses ($/throughput barrel) (l)
$
5.79

 
$
5.79

 
$
5.97

 
$
6.32

Capital Expenditures
$
91

 
$
85

 
$
244

 
$
198



 
 
Tesoro Corporation | 14

TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Pacific Northwest (Washington and Alaska)
 
 
 
 
 
 
 
Throughput (Mbpd)
 
 
 
 
 
 
 
Heavy crude (h)
9

 
6

 
6

 
6

Light crude
171

 
177

 
161

 
147

Other feedstocks
11

 
9

 
11

 
15

Total Throughput
191

 
192

 
178

 
168

 
 
 
 
 
 
 
 
Yield (Mbpd)
 
 
 
 
 
 
 
Gasoline and gasoline blendstocks
79

 
84

 
79

 
74

Diesel fuel
37

 
41

 
34

 
31

Jet fuel
40

 
36

 
34

 
33

Heavy fuel oils, residual products, internally produced fuel and other
42

 
38

 
36

 
36

Total Yield
198

 
199

 
183

 
174

 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
Refined products (j)
$
1,146

 
$
1,332

 
$
2,934

 
$
3,771

Crude oil resales and other (n)
89

 
53

 
175

 
314

Regional Revenue
1,235

 
1,385

 
3,109

 
4,085

Cost of Sales
 
 
 
 
 
 
 
Cost of sales (excluding LCM) (n)
1,117

 
1,129

 
2,778

 
3,434

LCM
(8
)
 
18

 
(60
)
 
10

Regional Cost of Sales
1,109

 
1,147

 
2,718

 
3,444

Gross refining margin (k)
126

 
238

 
391

 
641

Expenses
 
 
 
 
 
 
 
Manufacturing costs
69

 
59

 
190

 
181

Other operating expenses
16

 
20

 
43

 
48

Selling, general and administrative expenses
—

 
—

 
1

 
—

Depreciation and amortization expenses
24

 
24

 
69

 
64

Loss on asset disposals and impairments
—

 
1

 
—

 
1

Operating Income
$
17

 
$
134

 
$
88

 
$
347

 
 
 
 
 
 
 
 
Gross Refining Margin ($/throughput barrel) (l) (m)
$
7.17

 
$
13.47

 
$
8.02

 
$
13.98

Manufacturing Cost before Depreciation and Amortization Expenses ($/throughput barrel) (l)
$
3.87

 
$
3.35

 
$
3.87

 
$
3.97

Capital Expenditures
$
29

 
$
32

 
$
95

 
$
87


(n)
Certain of our foreign operations that are typically reported with our Pacific Northwest region were erroneously reported in our California region during the three and six months ended June 30, 2016 and 2015 with no impact on regional or consolidated gross refining margins presented for those periods. For the three and nine month periods ended September 30, 2016 and 2015 presented above, those foreign operations are reported in the correct regions impacting comparability period over period.


 
 
Tesoro Corporation | 15

TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) ($ in millions, except per barrel amounts)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2016
 
2015
 
2016
 
2015
Mid-Continent (North Dakota and Utah)
 
 
 
 
 
 
 
Throughput (Mbpd)
 
 
 
 
 
 
 
Light crude
144

 
130

 
133

 
115

Other feedstocks
5

 
5

 
5

 
4

Total Throughput
149

 
135

 
138

 
119

 
 
 
 
 
 
 
 
Yield (Mbpd)
 
 
 
 
 
 
 
Gasoline and gasoline blendstocks
79

 
75

 
77

 
66

Diesel fuel
45

 
43

 
42

 
37

Jet fuel
14

 
10

 
12

 
10

Heavy fuel oils, residual products, internally produced fuel and other
15

 
11

 
12

 
10

Total Yield
153

 
139

 
143

 
123

 
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
Refined products (j)
$
815

 
$
960

 
$
2,142

 
$
2,595

Crude oil resales and other
113

 
25

 
378

 
233

Regional Revenue
928

 
985

 
2,520

 
2,828

Cost of Sales
 
 
 
 
 
 
 
Cost of sales (excluding LCM)
780

 
691

 
2,111

 
2,204

LCM
(2
)
 
9

 
(22
)
 
5

Regional Cost of Sales
778

 
700

 
2,089

 
2,209

Gross refining margin (k)
150

 
285

 
431

 
619

Expenses
 
 
 
 
 
 
 
Manufacturing costs
58

 
40

 
159

 
145

Other operating expenses
43

 
19

 
123

 
47

Selling, general and administrative expenses
—

 
—

 
—

 
1

Depreciation and amortization expenses
29

 
21

 
91

 
60

Loss on asset disposals and impairments
—

 
—

 
—

 
4

Operating Income
$
20

 
$
205

 
$
58

 
$
362

 
 
 
 
 
 
 
 
Gross Refining Margin ($/throughput barrel) (l) (m)
$
10.94

 
$
22.95

 
$
11.40

 
$
19.05

Manufacturing Cost before Depreciation and Amortization Expenses ($/throughput barrel) (l)
$
4.27

 
$
3.19

 
$
4.21

 
$
4.45

Capital Expenditures
$
33

 
$
35

 
$
70

 
$
198



 
 
Tesoro Corporation | 16

TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) (dollars in millions, except per barrel and MMBtu amounts)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
TLLP SEGMENT
2016
 
2015
 
2016
 
2015
Gathering
 
 
 
 
 
 
 
Gas gathering throughput (thousands of MMBtu/day) (o)
887

 
1,115

 
881

 
1,069

Average gas gathering revenue per MMBtu (o)
$
0.48

 
$
0.45

 
$
0.51

 
$
0.44

Crude oil gathering pipeline throughput (Mbpd)
206

 
199

 
210

 
182

Average crude oil gathering pipeline revenue per barrel
$
1.71

 
$
1.71

 
$
1.73

 
$
1.77

Crude oil trucking volume (Mbpd)
32

 
34

 
30

 
42

Average crude oil trucking revenue per barrel
$
3.25

 
$
3.14

 
$
3.26

 
$
3.24

Processing
 
 
 
 
 
 
 
NGLs processing throughput (Mbpd)
6.7

 
7.8

 
7.4

 
7.5

Average keep-whole fee per barrel of NGLs
$
38.35

 
$
35.75

 
$
36.58

 
$
34.26

Fee-based processing throughput (thousands of MMBtu/
   day)
625

 
767

 
648

 
742

Average fee-based processing revenue per MMBtu
$
0.50

 
$
0.39

 
$
0.45

 
$
0.40

Terminalling and Transportation
 
 
 
 
 
 
 
Terminalling throughput (Mbpd)
1,023

 
964

 
998

 
932

Average terminalling revenue per barrel
$
1.33

 
$
1.05

 
$
1.27

 
$
1.08

Pipeline transportation throughput (Mbpd)
908

 
838

 
866

 
819

Average pipeline transportation revenue per barrel
$
0.38

 
$
0.40

 
$
0.39

 
$
0.39

 
 
 
 
 
 
 
 
Segment Operating Income
 
 
 
 
 
 
 
Revenues
 
 
 
 
 
 
 
Gathering
 
 
 
 
 
 
 
Gas gathering
$
39

 
$
46

 
$
122

 
$
128

Crude oil gathering pipeline
33

 
31

 
100

 
88

Crude oil trucking
9

 
10

 
27

 
37

Other
1

 
—

 
6

 
—

Processing
 
 
 
 
 
 
 
NGLs processing
23

 
26

 
74

 
71

Fee-based processing
29

 
28

 
80

 
81

Other processing
17

 
17

 
54

 
53

Terminalling and transportation
 
 
 
 
 
 
 
Terminalling
125

 
93

 
345

 
275

Pipeline transportation
32

 
31

 
93

 
87

TLLP Revenues (p)
308

 
282

 
901

 
820

Expenses
 
 
 
 
 
 
 
Operating expenses (q)
104

 
103

 
313

 
294

General and administrative expenses (r)
24

 
28

 
70

 
81

Depreciation and amortization expenses
45

 
45

 
134

 
133

Gain on asset disposals and impairments
2

 
—

 
3

 
—

Segment Operating Income
$
133

 
$
106

 
$
381

 
$
312


(o)
Prior to the 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 TLLP’s results of operations. Third party volumes associated with RGS, included in gas gathering volume for the three and nine months ended September 30, 2015, were 142 thousand and 145 thousand MMBtu/d and reduced our average gas gathering revenue per MMBtu for both periods by $0.05.

 
 
Tesoro Corporation | 17

(p)
TLLP segment revenues from services provided to our Refining segment were $184 million and $152 million for the three months ended September 30, 2016 and 2015, respectively, and $521 million and $454 million for the nine months ended September 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 $40 million and $33 million for the three months ended September 30, 2016 and 2015, respectively, and $113 million and $93 million for the nine months ended September 30, 2016 and 2015, respectively. Operating expenses also include imbalance gains and reimbursements pursuant to the Amended Omnibus Agreement of $5 million and $12 million for the three months ended September 30, 2016 and 2015, respectively, and $17 million and $31 million for the nine months ended September 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 $18 million and $16 million for the three months ended September 30, 2016 and 2015, respectively, and $51 million for both the nine months ended September 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 | 18

TESORO CORPORATION
SEGMENT OPERATING DATA AND RESULTS (Unaudited) (dollars in millions, except cents per gallon)
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
MARKETING SEGMENT
2016
 
2015
 
2016
 
2015
Revenues
 
 
 
 
 
 
 
Fuel
$
4,118

 
$
5,144

 
$
11,493

 
$
14,143

Other non-fuel
23

 
16

 
65

 
48

Total Revenues
4,141

 
5,160

 
11,558

 
14,191

Cost of Sales
 
 
 
 
 
 
 
Fuel
3,773

 
4,684

 
10,612

 
13,192

Other non-fuel
5

 
—

 
13

 
3

Total Cost of Sales
3,778

 
4,684

 
10,625

 
13,195

Gross Margin
 
 
 
 
 
 
 
Fuel (s)
345

 
460

 
881

 
951

Other non-fuel
18

 
16

 
52

 
45

Total Gross Margins
363

 
476

 
933

 
996

Expenses
 
 
 
 
 
 
 
Operating expenses
73

 
82

 
221

 
223

Selling, general and administrative expenses
5

 
3

 
12

 
12

Depreciation and amortization expenses
12

 
11

 
36

 
34

Loss on asset disposals and impairments
—

 
1

 
3

 
3

Segment Operating Income
$
273

 
$
379

 
$
661

 
$
724

 
 
 
 
 
 
 
 
Fuel Sales (millions of gallons)
2,311

 
2,249

 
6,698

 
6,408

Fuel Margin (¢/gallon) (s)

14.9
¢
 

20.5
¢
 

13.2
¢
 

14.8
¢
 
 
 
 
 
 
 
 
Number of Branded Stations (at the end of the period)
 
 
 
 
 
 
 
MSO operated
 
 
 
 
590

 
579

Jobber/Dealer operated
 
 
 
 
1,877

 
1,710

Total Stations
 
 
 
 
2,467

 
2,289


(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 | 19

TESORO CORPORATION
RECONCILIATION OF AMOUNTS REPORTED UNDER U.S. GAAP (Unaudited) (in millions)
 
Northern California
Assets Acquisition
Reconciliation of Projected Net Earnings to Projected Annual EBITDA:
 
Projected net earnings
$ 28 - 33

Add: Depreciation and amortization expenses
8

Add: Interest and financing costs, net
9

Expected Annual EBITDA
$ 45 - 50


 
TLLP 2017 Annual Expected Segment EBITDA
Reconciliation of Projected Operating Income to Projected Annual Segment EBITDA:
 
Projected operating income
$
820

Add: Depreciation and amortization expenses
180

Projected Annual Segment EBITDA
$
1,000



 
 
Tesoro Corporation | 20

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