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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Andeavor | NYSE:ANDV | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 153.50 | 0 | 01:00:00 |
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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o
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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95‑0862768
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(State or other jurisdiction of
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(I.R.S. Employer
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incorporation or organization)
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Identification No.)
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19100 Ridgewood Pkwy, San Antonio, Texas 78259-1828
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(Address of principal executive offices) (Zip Code)
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210-626-6000
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(Registrant’s telephone number, including area code)
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Large accelerated filer
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þ
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Accelerated filer
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o
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Non-accelerated filer
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o
(Do not check if a smaller reporting company)
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Smaller reporting company
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o
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Emerging growth company
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o
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TABLE OF CONTENTS
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2
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Tesoro Corporation
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FINANCIAL STATEMENTS
|
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Three Months Ended March 31,
|
||||||
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2017
|
|
2016
|
||||
|
(In millions, except per share amounts)
|
||||||
Revenues (a)
|
$
|
6,638
|
|
|
$
|
5,101
|
|
Costs and Expenses
|
|
|
|
||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment) (a)
|
5,426
|
|
|
3,866
|
|
||
Lower of cost or market inventory valuation adjustment
|
—
|
|
|
147
|
|
||
Operating expenses
|
654
|
|
|
611
|
|
||
General and administrative expenses
|
136
|
|
|
82
|
|
||
Depreciation and amortization expenses
|
226
|
|
|
212
|
|
||
Loss on asset disposals and impairments
|
1
|
|
|
4
|
|
||
Operating Income
|
195
|
|
|
179
|
|
||
Interest and financing costs, net
|
(89
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)
|
|
(60
|
)
|
||
Other income, net
|
2
|
|
|
9
|
|
||
Earnings Before Income Taxes
|
108
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|
|
128
|
|
||
Income tax expense
|
21
|
|
|
30
|
|
||
Net Earnings from Continuing Operations
|
87
|
|
|
98
|
|
||
Earnings from discontinued operations, net of tax
|
—
|
|
|
11
|
|
||
Net Earnings
|
87
|
|
|
109
|
|
||
Less: Net earnings from continuing operations attributable to noncontrolling interest
|
37
|
|
|
40
|
|
||
Net Earnings Attributable to Tesoro Corporation
|
$
|
50
|
|
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$
|
69
|
|
|
|
|
|
||||
Net Earnings Attributable to Tesoro Corporation
|
|
|
|
||||
Continuing operations
|
$
|
50
|
|
|
$
|
58
|
|
Discontinued operations
|
—
|
|
|
11
|
|
||
Total
|
$
|
50
|
|
|
$
|
69
|
|
Net Earnings per Share - Basic
|
|
|
|
||||
Continuing operations
|
$
|
0.43
|
|
|
$
|
0.49
|
|
Discontinued operations
|
—
|
|
|
0.09
|
|
||
Total
|
$
|
0.43
|
|
|
$
|
0.58
|
|
Weighted average common shares outstanding - Basic
|
117.1
|
|
|
119.6
|
|
||
Net Earnings per Share - Diluted
|
|
|
|
||||
Continuing operations
|
$
|
0.42
|
|
|
$
|
0.48
|
|
Discontinued operations
|
—
|
|
|
0.09
|
|
||
Total
|
$
|
0.42
|
|
|
$
|
0.57
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Weighted average common shares outstanding - Diluted
|
118.1
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121.2
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Dividends per Share
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$
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0.55
|
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$
|
0.50
|
|
|
|
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|
||||
Supplemental Information
|
|
|
|
||||
(a)
Includes excise taxes collected by our Marketing segment
|
$
|
134
|
|
|
$
|
142
|
|
|
|
March 31, 2017
|
3
|
FINANCIAL STATEMENTS
|
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
|
(In millions, except share data)
|
||||||
ASSETS
|
|
|
|
||||
Current Assets
|
|
|
|
||||
Cash and cash equivalents
(TLLP:
$35
and $688, respectively)
|
$
|
2,298
|
|
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$
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3,295
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Receivables, net of allowance for doubtful accounts
|
1,007
|
|
|
1,108
|
|
||
Inventories
|
2,624
|
|
|
2,640
|
|
||
Prepayments and other current assets
|
332
|
|
|
371
|
|
||
Total Current Assets
|
6,261
|
|
|
7,414
|
|
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Property, Plant and Equipment, Net
(TLLP:
$3,986
and $3,444, respectively)
|
10,603
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9,976
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|
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Acquired Intangibles, Net
(TLLP:
$1,090
and $947, respectively)
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1,413
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1,277
|
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Other Noncurrent Assets, Net
(TLLP:
$504
and $531, respectively)
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1,792
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1,731
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Total Assets
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$
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20,069
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$
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20,398
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LIABILITIES AND EQUITY
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Current Liabilities
|
|
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|
||||
Accounts payable
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$
|
1,644
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$
|
2,032
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Current maturities of debt
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465
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465
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|
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Other current liabilities
|
944
|
|
|
1,057
|
|
||
Total Current Liabilities
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3,053
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|
3,554
|
|
||
Deferred Income Taxes
|
1,493
|
|
|
1,428
|
|
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Debt, Net of Unamortized Issuance Costs
(TLLP:
$3,765
and $4,053, respectively)
|
6,178
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6,468
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Other Noncurrent Liabilities
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1,011
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821
|
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Total Liabilities
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11,735
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|
12,271
|
|
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Commitments and Contingencies (Note 8)
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Equity
|
|
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|
||||
Tesoro Corporation Stockholders’ Equity
|
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|
||||
Common stock, par value $0.16
2
/
3
; authorized
300,000,000
shares (200,000,000 in 2016);
160,222,281
shares issued (159,474,572 in 2016)
|
27
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|
|
27
|
|
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Additional paid-in capital
|
1,531
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|
1,473
|
|
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Retained earnings
|
6,422
|
|
|
6,437
|
|
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Treasury stock,
42,825,622
common shares (42,574,625 in 2016), at cost
|
(2,306
|
)
|
|
(2,284
|
)
|
||
Accumulated other comprehensive loss, net of tax
|
(188
|
)
|
|
(188
|
)
|
||
Total Tesoro Corporation Stockholders’ Equity
|
5,486
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|
|
5,465
|
|
||
Noncontrolling Interest
|
2,848
|
|
|
2,662
|
|
||
Total Equity
|
8,334
|
|
|
8,127
|
|
||
Total Liabilities and Equity
|
$
|
20,069
|
|
|
$
|
20,398
|
|
4
|
Tesoro Corporation
|
|
|
|
|
FINANCIAL STATEMENTS
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(In millions)
|
||||||
Cash Flows From (Used In) Operating Activities
|
|
|
|
||||
Net earnings
|
$
|
87
|
|
|
$
|
109
|
|
Adjustments to reconcile net earnings to net cash from operating activities:
|
|
|
|
||||
Depreciation and amortization expenses
|
226
|
|
|
212
|
|
||
Lower of cost or market inventory valuation adjustment
|
—
|
|
|
147
|
|
||
Stock-based compensation expense (benefit)
|
14
|
|
|
(3
|
)
|
||
Deferred income taxes
|
38
|
|
|
—
|
|
||
Turnaround and branding charges
|
(117
|
)
|
|
(133
|
)
|
||
Other operating activity
|
10
|
|
|
(3
|
)
|
||
Changes in current assets and current liabilities
|
(315
|
)
|
|
(22
|
)
|
||
Changes in noncurrent assets and noncurrent liabilities
|
157
|
|
|
(123
|
)
|
||
Net cash from operating activities
|
100
|
|
|
184
|
|
||
Cash Flows From (Used In) Investing Activities
|
|
|
|
||||
Capital expenditures
|
(258
|
)
|
|
(217
|
)
|
||
Acquisitions, net of cash
|
(672
|
)
|
|
(314
|
)
|
||
Other investing activities
|
1
|
|
|
(4
|
)
|
||
Net cash used in investing activities
|
(929
|
)
|
|
(535
|
)
|
||
Cash Flows From (Used In) Financing Activities
|
|
|
|
||||
Borrowings under revolving credit agreements
|
44
|
|
|
297
|
|
||
Repayments on revolving credit agreements
|
(334
|
)
|
|
(67
|
)
|
||
Repayments of debt
|
(3
|
)
|
|
(252
|
)
|
||
Dividend payments
|
(65
|
)
|
|
(60
|
)
|
||
Net proceeds from issuance of Tesoro Logistics LP common units
|
281
|
|
|
5
|
|
||
Distributions by Tesoro Logistics LP to noncontrolling interest
|
(63
|
)
|
|
(48
|
)
|
||
Taxes paid related to net share settlement of equity awards
|
(22
|
)
|
|
(20
|
)
|
||
Other financing activities
|
(6
|
)
|
|
(7
|
)
|
||
Net cash used in financing activities
|
(168
|
)
|
|
(152
|
)
|
||
Decrease in Cash and Cash Equivalents
|
(997
|
)
|
|
(503
|
)
|
||
Cash and Cash Equivalents, Beginning of Period
|
3,295
|
|
|
942
|
|
||
Cash and Cash Equivalents, End of Period
|
$
|
2,298
|
|
|
$
|
439
|
|
|
|
March 31, 2017
|
5
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
6
|
Tesoro Corporation
|
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
March 31, 2017
|
7
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Domestic crude oil and refined products
|
$
|
2,219
|
|
|
$
|
2,099
|
|
Foreign subsidiary crude oil
|
171
|
|
|
310
|
|
||
Materials and supplies
|
153
|
|
|
149
|
|
||
Oxygenates and by-products
|
80
|
|
|
81
|
|
||
Merchandise
|
1
|
|
|
1
|
|
||
Total Inventories
|
$
|
2,624
|
|
|
$
|
2,640
|
|
8
|
Tesoro Corporation
|
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Refining
|
$
|
8,196
|
|
|
$
|
8,067
|
|
TLLP
|
4,645
|
|
|
4,059
|
|
||
Marketing
|
936
|
|
|
934
|
|
||
Corporate
|
455
|
|
|
412
|
|
||
Property, Plant and Equipment, at Cost
|
14,232
|
|
|
13,472
|
|
||
Accumulated depreciation
|
(3,629
|
)
|
|
(3,496
|
)
|
||
Property, Plant and Equipment, Net
|
$
|
10,603
|
|
|
$
|
9,976
|
|
•
|
price risks associated with the purchase or sale of feedstocks, refined products and energy supplies related to our refineries, terminals, marketing fuel inventory and customers;
|
•
|
price risks associated with inventories above or below our target levels;
|
•
|
future emission credit requirements; and
|
•
|
exchange rate fluctuations on our purchases of Canadian crude oil.
|
|
|
March 31, 2017
|
9
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
|
Derivative Assets
|
|
Derivative Liabilities
|
||||||||||||
|
Balance Sheet Location
|
March 31,
2017 |
|
December 31,
2016 |
|
March 31,
2017 |
|
December 31,
2016 |
||||||||
Commodity Futures Contracts
|
Prepayments and other current assets
|
$
|
566
|
|
|
$
|
821
|
|
|
$
|
567
|
|
|
$
|
871
|
|
Commodity Swap Contracts
|
Prepayments and other current assets
|
5
|
|
|
11
|
|
|
6
|
|
|
13
|
|
||||
Commodity Swap Contracts
|
Accounts payable
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||
Commodity Options Contracts
|
Prepayments and other current assets
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
||||
Commodity Forward Contracts
|
Receivables
|
2
|
|
|
6
|
|
|
—
|
|
|
—
|
|
||||
Commodity Forward Contracts
|
Accounts payable
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
||||
Total Gross Mark-to-Market Derivatives
|
573
|
|
|
839
|
|
|
575
|
|
|
888
|
|
|||||
Less: Counterparty Netting and Cash Collateral (a)
|
(533
|
)
|
|
(744
|
)
|
|
(565
|
)
|
|
(832
|
)
|
|||||
Total Net Fair Value of Derivatives
|
$
|
40
|
|
|
$
|
95
|
|
|
$
|
10
|
|
|
$
|
56
|
|
(a)
|
Certain of our derivative contracts, under master netting arrangements, include both asset and liability positions. We offset both the fair value amounts and any related cash collateral amounts recognized for multiple derivative instruments executed with the same counterparty when there is a legally enforceable right and an intention to settle net or simultaneously. As of
March 31, 2017
and
December 31, 2016
, we had provided cash collateral amounts of
$32 million
and
$88 million
, respectively, related to our unrealized derivative positions. Cash collateral amounts are netted with mark-to-market derivative assets.
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Commodity Contracts
|
$
|
28
|
|
|
$
|
38
|
|
Foreign Currency Forward Contracts
|
—
|
|
|
1
|
|
||
Total Gain on Mark-to-Market Derivatives
|
$
|
28
|
|
|
$
|
39
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Revenues
|
$
|
8
|
|
|
$
|
15
|
|
Cost of sales
|
20
|
|
|
23
|
|
||
Other income, net
|
—
|
|
|
1
|
|
||
Total Gain on Mark-to-Market Derivatives
|
$
|
28
|
|
|
$
|
39
|
|
10
|
Tesoro Corporation
|
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
Contract Volumes by Year of Maturity
|
|
Unit of Measure
|
||||
Mark-to-Market Derivative Instrument
|
2017
|
|
2018
|
|
2019
|
|
|
Crude oil, refined products and blending products:
|
|
|
|
|
|
|
|
Futures Contracts - short
|
(3,687)
|
|
(785)
|
|
—
|
|
Barrels
|
Swap Contracts - long
|
—
|
|
990
|
|
—
|
|
Barrels
|
Swap Contracts - short
|
(853)
|
|
—
|
|
—
|
|
Barrels
|
Forward Contracts - Long
|
394
|
|
—
|
|
—
|
|
Barrels
|
Carbon emissions credits:
|
|
|
|
|
|
|
|
Futures Contracts - long
|
1,000
|
|
—
|
|
—
|
|
Tons
|
Corn:
|
|
|
|
|
|
|
|
Futures Contracts - short
|
(145)
|
|
—
|
|
—
|
|
Bushels
|
|
March 31, 2017
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting and Collateral (a)
|
|
Total
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodity Futures Contracts
|
$
|
562
|
|
|
$
|
4
|
|
|
$
|
—
|
|
|
$
|
(528
|
)
|
|
$
|
38
|
|
Commodity Swap Contracts
|
—
|
|
|
5
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|||||
Commodity Forward Contracts
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||
Total Assets
|
$
|
562
|
|
|
$
|
11
|
|
|
$
|
—
|
|
|
$
|
(533
|
)
|
|
$
|
40
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodity Futures Contracts
|
$
|
567
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(560
|
)
|
|
$
|
7
|
|
Commodity Swap Contracts
|
—
|
|
|
6
|
|
|
—
|
|
|
(5
|
)
|
|
1
|
|
|||||
Commodity Forward Contracts
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||
Environmental Credit Obligations
|
—
|
|
|
199
|
|
|
—
|
|
|
—
|
|
|
199
|
|
|||||
Total Liabilities
|
$
|
567
|
|
|
$
|
207
|
|
|
$
|
—
|
|
|
$
|
(565
|
)
|
|
$
|
209
|
|
|
|
March 31, 2017
|
11
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
December 31, 2016
|
||||||||||||||||||
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Netting and Collateral (a)
|
|
Total
|
||||||||||
Assets:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodity Futures Contracts
|
$
|
821
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(733
|
)
|
|
$
|
88
|
|
Commodity Swap Contracts
|
—
|
|
|
11
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|||||
Commodity Options Contracts
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
Commodity Forward Contracts
|
—
|
|
|
6
|
|
|
—
|
|
|
—
|
|
|
6
|
|
|||||
Total Assets
|
$
|
822
|
|
|
$
|
17
|
|
|
$
|
—
|
|
|
$
|
(744
|
)
|
|
$
|
95
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Liabilities:
|
|
|
|
|
|
|
|
|
|
||||||||||
Commodity Futures Contracts
|
$
|
870
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
(821
|
)
|
|
$
|
50
|
|
Commodity Swap Contracts
|
—
|
|
|
15
|
|
|
—
|
|
|
(11
|
)
|
|
4
|
|
|||||
Commodity Forward Contracts
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|||||
Environmental Credit Obligations
|
—
|
|
|
79
|
|
|
—
|
|
|
—
|
|
|
79
|
|
|||||
Total Liabilities
|
$
|
870
|
|
|
$
|
97
|
|
|
$
|
—
|
|
|
$
|
(832
|
)
|
|
$
|
135
|
|
(a)
|
Certain of our derivative contracts, under master netting arrangements, include both asset and liability positions. We offset both the fair value amounts and any related cash collateral amounts recognized for multiple derivative instruments executed with the same counterparty when there is a legally enforceable right and an intention to settle net or simultaneously. As of
March 31, 2017
and
December 31, 2016
we had provided cash collateral amounts of
$32 million
and
$88 million
, respectively, related to our unrealized derivative positions. Cash collateral amounts are netted with mark-to-market derivative assets.
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Total debt (a)
|
$
|
6,749
|
|
|
$
|
7,042
|
|
Unamortized issuance costs
|
(106
|
)
|
|
(109
|
)
|
||
Current maturities
|
(465
|
)
|
|
(465
|
)
|
||
Debt, Net of Current Maturities and Unamortized Issuance Costs
|
$
|
6,178
|
|
|
$
|
6,468
|
|
(a)
|
Total debt related to TLLP, which is non-recourse to Tesoro, except for TLGP, was
$3.8 billion
and
$4.1 billion
at
March 31, 2017
and
December 31, 2016
, respectively.
|
12
|
Tesoro Corporation
|
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
Total
Capacity
|
|
Amount Borrowed as of March 31, 2017
|
|
Outstanding
Letters of Credit
|
|
Available Capacity
|
|
Expiration
|
||||||||
Tesoro Corporation Revolving Credit Facility (a)
|
$
|
2,000
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
1,996
|
|
|
September 30, 2020
|
TLLP Revolving Credit Facility (b)
|
600
|
|
|
40
|
|
|
—
|
|
|
560
|
|
|
January 29, 2021
|
||||
TLLP Dropdown Credit Facility
|
1,000
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
|
January 29, 2021
|
||||
Letter of Credit Facilities
|
975
|
|
|
—
|
|
|
—
|
|
|
975
|
|
|
|
||||
Total Credit Facilities
|
$
|
4,575
|
|
|
$
|
40
|
|
|
$
|
4
|
|
|
$
|
4,531
|
|
|
|
(a)
|
The
$2.0 billion
total capacity does not include the additional
$1.0 billion
related to the incremental revolver, as defined in Note 12 to our consolidated financial statements in our Annual Report on Form 10-K for the year ended
December 31, 2016
, which may be used to fund amounts required for the acquisition of Western Refining and certain other specified uses in connection with the transaction.
|
(b)
|
The weighted average interest rate for borrowings under the TLLP Revolving Credit Facility was
3.23%
at
March 31, 2017
.
|
|
Pension Benefits
|
|
Other Postretirement Benefits
|
||||||||||||
|
Three Months Ended March 31,
|
||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Service cost
|
$
|
13
|
|
|
$
|
11
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
8
|
|
|
8
|
|
|
—
|
|
|
1
|
|
||||
Expected return on plan assets
|
(7
|
)
|
|
(7
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization of prior service credit
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
(9
|
)
|
||||
Recognized net actuarial loss
|
5
|
|
|
5
|
|
|
1
|
|
|
1
|
|
||||
Recognized curtailment loss and settlement cost
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
||||
Net Periodic Benefit Expense (Income)
|
$
|
19
|
|
|
$
|
22
|
|
|
$
|
(6
|
)
|
|
$
|
(6
|
)
|
|
|
March 31, 2017
|
13
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
Tesoro
Corporation
Stockholders’
Equity
|
|
Noncontrolling
Interest
|
|
Total Equity
|
||||||
Balance at December 31, 2016 (a)
|
$
|
5,465
|
|
|
$
|
2,662
|
|
|
$
|
8,127
|
|
Net earnings
|
50
|
|
|
37
|
|
|
87
|
|
|||
Dividend payments
|
(65
|
)
|
|
—
|
|
|
(65
|
)
|
|||
Net effect of amounts related to equity-based compensation (b)
|
16
|
|
|
1
|
|
|
17
|
|
|||
Taxes paid related to net share settlement of equity awards
|
(22
|
)
|
|
—
|
|
|
(22
|
)
|
|||
Net proceeds from issuance of TLLP common units (c)
|
(1
|
)
|
|
282
|
|
|
281
|
|
|||
Distributions to noncontrolling interest
|
—
|
|
|
(63
|
)
|
|
(63
|
)
|
|||
Transfers to (from) Tesoro paid-in capital related to:
|
|
|
|
|
|
||||||
TLLP’s issuance of common units
|
43
|
|
|
(71
|
)
|
|
(28
|
)
|
|||
Balance at March 31, 2017 (a)(d)
|
$
|
5,486
|
|
|
$
|
2,848
|
|
|
$
|
8,334
|
|
(a)
|
We have
5.0 million
shares of preferred stock authorized with
no
par value per share.
No
shares of preferred stock were outstanding as of
March 31, 2017
and
December 31, 2016
.
|
(b)
|
We issued less than
0.1 million
shares during both the
three
months ended
March 31, 2017
and
2016
, for proceeds of
$2 million
and
$1 million
, respectively, primarily for stock option exercises under our equity-based compensation plans. See Note 10 for information on stock-based compensation.
|
(c)
|
TLLP sold
5,000,000
of its common units at a price of
$56.19
per unit on
February 27, 2017
and used the net proceeds to repay borrowings outstanding under the TLLP Revolving Credit Facility.
|
(d)
|
During a special stockholder meeting on March 24, 2017, Tesoro stockholders approved, among other things, the issuance of shares of Tesoro common stock in connection with the Merger and an amendment to Tesoro’s restated certificate of incorporation increasing authorized shares from
200 million
to
300 million
.
|
|
Three Months Ended March 31,
|
||||
|
2017
|
|
2016
|
||
Weighted average common shares outstanding
|
117.1
|
|
|
119.6
|
|
Common stock equivalents
|
1.0
|
|
|
1.6
|
|
Total Diluted Shares
|
118.1
|
|
|
121.2
|
|
14
|
Tesoro Corporation
|
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Stock appreciation rights (a)
|
$
|
—
|
|
|
$
|
(13
|
)
|
Performance share awards (b)
|
5
|
|
|
2
|
|
||
Market stock units (c)
|
7
|
|
|
7
|
|
||
Other stock-based awards (d)
|
2
|
|
|
1
|
|
||
Total Stock-Based Compensation Expense (Benefit)
|
$
|
14
|
|
|
$
|
(3
|
)
|
(a)
|
We had
$4 million
and
$6 million
recorded in other current liabilities associated with our stock appreciation rights (“SARs”) awards at
March 31, 2017
and
December 31, 2016
, respectively. We paid cash of
$2 million
to settle
0.04 million
SARs that were exercised during the
three
months ended
March 31, 2017
and
$20 million
to settle
0.3 million
SARs that were exercised during the
three
months ended
March 31, 2016
.
|
(b)
|
We granted
0.1 million
market condition performance share awards at a weighted average grant date fair value of
$118.09
per share under the amended and restated 2011 Long-Term Incentive Plan (“2011 Plan”) during the
three
months ended
March 31, 2017
.
|
(c)
|
We granted
0.4 million
market stock units at a weighted average grant date fair value of
$107.43
per unit under the 2011 Plan during the
three
months ended
March 31, 2017
.
|
(d)
|
We have aggregated expenses for certain award types as they are not considered significant.
|
|
|
March 31, 2017
|
15
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
|
(In millions)
|
||||||
Revenues
|
|
|
|
||||
Refining:
|
|
|
|
||||
Refined products
|
$
|
5,812
|
|
|
$
|
4,285
|
|
Crude oil resales and other
|
244
|
|
|
211
|
|
||
TLLP:
|
|
|
|
||||
Gathering and processing
|
245
|
|
|
162
|
|
||
Terminalling and transportation
|
175
|
|
|
138
|
|
||
Marketing:
|
|
|
|
||||
Fuel (a)
|
4,083
|
|
|
3,298
|
|
||
Other non-fuel
|
21
|
|
|
20
|
|
||
Intersegment sales
|
(3,942
|
)
|
|
(3,013
|
)
|
||
Total Revenues
|
$
|
6,638
|
|
|
$
|
5,101
|
|
Segment Operating Income (Loss)
|
|
|
|
||||
Refining (b)
|
$
|
34
|
|
|
$
|
(93
|
)
|
TLLP (b) (c)
|
150
|
|
|
119
|
|
||
Marketing
|
133
|
|
|
227
|
|
||
Total Segment Operating Income
|
317
|
|
|
253
|
|
||
Corporate and unallocated costs (c)
|
(122
|
)
|
|
(74
|
)
|
||
Operating Income
|
195
|
|
|
179
|
|
||
Interest and financing costs, net
|
(89
|
)
|
|
(60
|
)
|
||
Other income, net
|
2
|
|
|
9
|
|
||
Earnings Before Income Taxes
|
$
|
108
|
|
|
$
|
128
|
|
Depreciation and Amortization Expenses
|
|
|
|
||||
Refining (b)
|
$
|
148
|
|
|
$
|
148
|
|
TLLP (b)
|
58
|
|
|
46
|
|
||
Marketing
|
13
|
|
|
12
|
|
||
Corporate
|
7
|
|
|
6
|
|
||
Total Depreciation and Amortization Expenses
|
$
|
226
|
|
|
$
|
212
|
|
Capital Expenditures
|
|
|
|
||||
Refining (b)
|
$
|
132
|
|
|
$
|
100
|
|
TLLP (b)
|
45
|
|
|
60
|
|
||
Marketing
|
6
|
|
|
13
|
|
||
Corporate
|
43
|
|
|
15
|
|
||
Total Capital Expenditures
|
$
|
226
|
|
|
$
|
188
|
|
(a)
|
Federal and state motor fuel excise taxes on sales by our Marketing segment at retail sites where we own the inventory are included in both revenues and cost of sales in our condensed statements of consolidated operations. These taxes totaled
$134 million
and
$142 million
for the
three
months ended
March 31, 2017
and
2016
, respectively.
|
(b)
|
When TLLP acquires certain assets from our Refining segment (the “Predecessors”), the associated liabilities and results of operations of the Predecessors, as applicable, are recast as if the assets were owned by TLLP for all periods presented. Adjusted for the historical results of the Predecessors.
|
(c)
|
We present TLLP’s segment operating income net of general and administrative expenses totaling
$10 million
and
$8 million
representing TLLP’s corporate costs for the
three
months ended
March 31, 2017
and
2016
, respectively, which are not allocated by TLLP to its operating segments.
|
16
|
Tesoro Corporation
|
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantors
|
Consolidating Adjustments
|
Consolidated
|
||||||||||
Revenues
|
$
|
—
|
|
$
|
7,114
|
|
$
|
942
|
|
$
|
(1,418
|
)
|
$
|
6,638
|
|
Costs and Expenses
|
|
|
|
|
|
||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment)
|
—
|
|
6,217
|
|
551
|
|
(1,342
|
)
|
5,426
|
|
|||||
Operating, general and administrative expenses
|
2
|
|
694
|
|
170
|
|
(76
|
)
|
790
|
|
|||||
Depreciation and amortization expenses
|
—
|
|
164
|
|
62
|
|
—
|
|
226
|
|
|||||
Loss on asset disposals and impairments
|
—
|
|
1
|
|
—
|
|
—
|
|
1
|
|
|||||
Operating Income (Loss)
|
(2
|
)
|
38
|
|
159
|
|
—
|
|
195
|
|
|||||
Interest and financing costs, net
|
(41
|
)
|
(9
|
)
|
(39
|
)
|
—
|
|
(89
|
)
|
|||||
Equity in earnings of subsidiaries
|
80
|
|
63
|
|
—
|
|
(143
|
)
|
—
|
|
|||||
Other income, net
|
—
|
|
—
|
|
2
|
|
—
|
|
2
|
|
|||||
Earnings Before Income Taxes
|
37
|
|
92
|
|
122
|
|
(143
|
)
|
108
|
|
|||||
Income tax expense (benefit) (a)
|
(13
|
)
|
6
|
|
28
|
|
—
|
|
21
|
|
|||||
Net Earnings
|
50
|
|
86
|
|
94
|
|
(143
|
)
|
87
|
|
|||||
Less: Net earnings from continuing operations attributable to noncontrolling interest
|
—
|
|
—
|
|
37
|
|
—
|
|
37
|
|
|||||
Net Earnings Attributable to Tesoro Corporation
|
$
|
50
|
|
$
|
86
|
|
$
|
57
|
|
$
|
(143
|
)
|
$
|
50
|
|
|
|
|
|
|
|
||||||||||
Comprehensive Income
|
|
|
|
|
|
||||||||||
Total comprehensive income
|
$
|
50
|
|
$
|
86
|
|
$
|
94
|
|
$
|
(143
|
)
|
$
|
87
|
|
Less: Noncontrolling interest in comprehensive income
|
—
|
|
—
|
|
37
|
|
—
|
|
37
|
|
|||||
Comprehensive Income Attributable to Tesoro Corporation
|
$
|
50
|
|
$
|
86
|
|
$
|
57
|
|
$
|
(143
|
)
|
$
|
50
|
|
(a)
|
The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.
|
|
|
March 31, 2017
|
17
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantors
|
Consolidating Adjustments
|
Consolidated
|
||||||||||
Revenues
|
$
|
—
|
|
$
|
5,377
|
|
$
|
857
|
|
$
|
(1,133
|
)
|
$
|
5,101
|
|
Costs and Expenses
|
|
|
|
|
|
||||||||||
Cost of sales (excluding the lower of cost or market inventory valuation adjustment)
|
—
|
|
4,369
|
|
545
|
|
(1,048
|
)
|
3,866
|
|
|||||
Lower of cost or market inventory valuation adjustment
|
—
|
|
146
|
|
1
|
|
—
|
|
147
|
|
|||||
Operating, general and administrative expenses
|
1
|
|
603
|
|
174
|
|
(85
|
)
|
693
|
|
|||||
Depreciation and amortization expenses
|
—
|
|
154
|
|
58
|
|
—
|
|
212
|
|
|||||
Loss on asset disposals and impairments
|
—
|
|
3
|
|
1
|
|
—
|
|
4
|
|
|||||
Operating Income (Loss)
|
(1
|
)
|
102
|
|
78
|
|
—
|
|
179
|
|
|||||
Interest and financing costs, net
|
(14
|
)
|
(16
|
)
|
(30
|
)
|
—
|
|
(60
|
)
|
|||||
Equity in earnings of subsidiaries
|
71
|
|
46
|
|
—
|
|
(117
|
)
|
—
|
|
|||||
Other income (loss), net
|
—
|
|
(1
|
)
|
10
|
|
—
|
|
9
|
|
|||||
Earnings Before Income Taxes
|
56
|
|
131
|
|
58
|
|
(117
|
)
|
128
|
|
|||||
Income tax expense (benefit) (a)
|
(2
|
)
|
30
|
|
2
|
|
—
|
|
30
|
|
|||||
Net Earnings from Continuing Operations
|
58
|
|
101
|
|
56
|
|
(117
|
)
|
98
|
|
|||||
Earnings from discontinued operations, net of tax
|
11
|
|
—
|
|
—
|
|
—
|
|
11
|
|
|||||
Net Earnings
|
69
|
|
101
|
|
56
|
|
(117
|
)
|
109
|
|
|||||
Less: Net earnings from continuing operations attributable to noncontrolling interest
|
—
|
|
—
|
|
40
|
|
—
|
|
40
|
|
|||||
Net Earnings Attributable to Tesoro Corporation
|
$
|
69
|
|
$
|
101
|
|
$
|
16
|
|
$
|
(117
|
)
|
$
|
69
|
|
|
|
|
|
|
|
||||||||||
Comprehensive Income
|
|
|
|
|
|
||||||||||
Total comprehensive income (b)
|
$
|
59
|
|
$
|
101
|
|
$
|
56
|
|
$
|
(117
|
)
|
$
|
99
|
|
Less: Noncontrolling interest in comprehensive income
|
—
|
|
—
|
|
40
|
|
—
|
|
40
|
|
|||||
Comprehensive Income Attributable to Tesoro Corporation
|
$
|
59
|
|
$
|
101
|
|
$
|
16
|
|
$
|
(117
|
)
|
$
|
59
|
|
(a)
|
The income tax expense (benefit) reflected in each column does not include any tax effect of the equity in earnings from corporate subsidiaries, but does include the tax effect of the corporate partners’ share of partnership income.
|
(b)
|
Accumulated other comprehensive income decreased
$10 million
, net of tax, due to the recognition of a settlement loss for one of our executive retirement plans and remeasurement of the pension liability in the three months ended
March 31, 2016
.
|
18
|
Tesoro Corporation
|
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantors
|
Consolidating Adjustments
|
Consolidated
|
||||||||||
ASSETS
|
|
|
|
|
|
||||||||||
Current Assets
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
—
|
|
$
|
2,220
|
|
$
|
78
|
|
$
|
—
|
|
$
|
2,298
|
|
Receivables, net of allowance for doubtful accounts
|
—
|
|
843
|
|
164
|
|
—
|
|
1,007
|
|
|||||
Short-term receivables from affiliates
|
—
|
|
5
|
|
15
|
|
(20
|
)
|
—
|
|
|||||
Inventories
|
—
|
|
2,441
|
|
183
|
|
—
|
|
2,624
|
|
|||||
Prepayments and other current assets
|
47
|
|
262
|
|
23
|
|
—
|
|
332
|
|
|||||
Total Current Assets
|
47
|
|
5,771
|
|
463
|
|
(20
|
)
|
6,261
|
|
|||||
Property, Plant and Equipment, Net
|
—
|
|
6,271
|
|
4,332
|
|
—
|
|
10,603
|
|
|||||
Investment in Subsidiaries
|
9,310
|
|
805
|
|
—
|
|
(10,115
|
)
|
—
|
|
|||||
Long-Term Receivables from Affiliates
|
3,322
|
|
—
|
|
—
|
|
(3,322
|
)
|
—
|
|
|||||
Long-Term Intercompany Note Receivable
|
—
|
|
—
|
|
2,386
|
|
(2,386
|
)
|
—
|
|
|||||
Acquired Intangibles, Net
|
—
|
|
322
|
|
1,091
|
|
—
|
|
1,413
|
|
|||||
Other Noncurrent Assets, Net
|
50
|
|
1,224
|
|
520
|
|
(2
|
)
|
1,792
|
|
|||||
Total Assets
|
$
|
12,729
|
|
$
|
14,393
|
|
$
|
8,792
|
|
$
|
(15,845
|
)
|
$
|
20,069
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
LIABILITIES AND EQUITY
|
|
|
|
|
|
|
|||||||||
Current Liabilities
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
1
|
|
$
|
1,442
|
|
$
|
201
|
|
$
|
—
|
|
$
|
1,644
|
|
Short-term payables to affiliates
|
—
|
|
15
|
|
5
|
|
(20
|
)
|
—
|
|
|||||
Current maturities of debt
|
450
|
|
14
|
|
1
|
|
—
|
|
465
|
|
|||||
Other current liabilities
|
113
|
|
674
|
|
157
|
|
—
|
|
944
|
|
|||||
Total Current Liabilities
|
564
|
|
2,145
|
|
364
|
|
(20
|
)
|
3,053
|
|
|||||
Long-Term Payables to Affiliates
|
—
|
|
3,029
|
|
293
|
|
(3,322
|
)
|
—
|
|
|||||
Deferred Income Taxes
|
1,492
|
|
2
|
|
1
|
|
(2
|
)
|
1,493
|
|
|||||
Debt, Net of Unamortized Issuance Costs
|
2,322
|
|
91
|
|
3,765
|
|
—
|
|
6,178
|
|
|||||
Long-Term Intercompany Note Payable
|
2,386
|
|
—
|
|
—
|
|
(2,386
|
)
|
—
|
|
|||||
Other Noncurrent Liabilities
|
479
|
|
472
|
|
60
|
|
—
|
|
1,011
|
|
|||||
Equity-Tesoro Corporation
|
5,486
|
|
8,654
|
|
1,461
|
|
(10,115
|
)
|
5,486
|
|
|||||
Equity-Noncontrolling Interest
|
—
|
|
—
|
|
2,848
|
|
—
|
|
2,848
|
|
|||||
Total Liabilities and Equity
|
$
|
12,729
|
|
$
|
14,393
|
|
$
|
8,792
|
|
$
|
(15,845
|
)
|
$
|
20,069
|
|
|
|
March 31, 2017
|
19
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantors
|
Consolidating Adjustments
|
Consolidated
|
||||||||||
ASSETS
|
|
|
|
|
|
||||||||||
Current Assets
|
|
|
|
|
|
||||||||||
Cash and cash equivalents
|
$
|
—
|
|
$
|
2,576
|
|
$
|
719
|
|
$
|
—
|
|
$
|
3,295
|
|
Receivables, net of allowance for doubtful accounts
|
10
|
|
882
|
|
216
|
|
—
|
|
1,108
|
|
|||||
Short-term receivables from affiliates
|
—
|
|
171
|
|
28
|
|
(199
|
)
|
—
|
|
|||||
Inventories
|
—
|
|
2,321
|
|
319
|
|
—
|
|
2,640
|
|
|||||
Prepayments and other current assets
|
50
|
|
298
|
|
23
|
|
—
|
|
371
|
|
|||||
Total Current Assets
|
60
|
|
6,248
|
|
1,305
|
|
(199
|
)
|
7,414
|
|
|||||
Property, Plant and Equipment, Net
|
—
|
|
6,183
|
|
3,793
|
|
—
|
|
9,976
|
|
|||||
Investment in Subsidiaries
|
9,201
|
|
785
|
|
—
|
|
(9,986
|
)
|
—
|
|
|||||
Long-Term Receivables from Affiliates
|
3,326
|
|
—
|
|
—
|
|
(3,326
|
)
|
—
|
|
|||||
Long-Term Intercompany Note Receivable
|
—
|
|
—
|
|
2,386
|
|
(2,386
|
)
|
—
|
|
|||||
Acquired Intangibles, Net
|
—
|
|
329
|
|
948
|
|
—
|
|
1,277
|
|
|||||
Other Noncurrent Assets, Net
|
46
|
|
1,138
|
|
549
|
|
(2
|
)
|
1,731
|
|
|||||
Total Assets
|
$
|
12,633
|
|
$
|
14,683
|
|
$
|
8,981
|
|
$
|
(15,899
|
)
|
$
|
20,398
|
|
|
|
|
|
|
|
||||||||||
LIABILITIES AND EQUITY
|
|
|
|
|
|
||||||||||
Current Liabilities
|
|
|
|
|
|
||||||||||
Accounts payable
|
$
|
6
|
|
$
|
1,762
|
|
$
|
264
|
|
$
|
—
|
|
$
|
2,032
|
|
Short-term payables to affiliates
|
—
|
|
28
|
|
171
|
|
(199
|
)
|
—
|
|
|||||
Current maturities of debt
|
450
|
|
14
|
|
1
|
|
—
|
|
465
|
|
|||||
Other current liabilities
|
98
|
|
853
|
|
106
|
|
—
|
|
1,057
|
|
|||||
Total Current Liabilities
|
554
|
|
2,657
|
|
542
|
|
(199
|
)
|
3,554
|
|
|||||
Long-Term Payables to Affiliates
|
—
|
|
3,074
|
|
252
|
|
(3,326
|
)
|
—
|
|
|||||
Deferred Income Taxes
|
1,428
|
|
2
|
|
—
|
|
(2
|
)
|
1,428
|
|
|||||
Debt, Net of Unamortized Issuance Costs
|
2,321
|
|
94
|
|
4,053
|
|
—
|
|
6,468
|
|
|||||
Long-Term Intercompany Note Payable
|
2,386
|
|
—
|
|
—
|
|
(2,386
|
)
|
—
|
|
|||||
Other Noncurrent Liabilities
|
479
|
|
289
|
|
53
|
|
—
|
|
821
|
|
|||||
Equity-Tesoro Corporation
|
5,465
|
|
8,567
|
|
1,419
|
|
(9,986
|
)
|
5,465
|
|
|||||
Equity-Noncontrolling Interest
|
—
|
|
—
|
|
2,662
|
|
—
|
|
2,662
|
|
|||||
Total Liabilities and Equity
|
$
|
12,633
|
|
$
|
14,683
|
|
$
|
8,981
|
|
$
|
(15,899
|
)
|
$
|
20,398
|
|
20
|
Tesoro Corporation
|
|
|
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantors
|
Consolidating Adjustments
|
Consolidated
|
||||||||||
Cash Flows From (Used In) Operating Activities
|
|
|
|
|
|
||||||||||
Net cash from (used in) operating activities
|
$
|
36
|
|
$
|
(208
|
)
|
$
|
359
|
|
$
|
(87
|
)
|
$
|
100
|
|
Cash Flows From (Used In) Investing Activities
|
|
|
|
|
|
||||||||||
Capital expenditures
|
—
|
|
(200
|
)
|
(58
|
)
|
—
|
|
(258
|
)
|
|||||
Acquisitions, net of cash
|
—
|
|
—
|
|
(672
|
)
|
—
|
|
(672
|
)
|
|||||
Intercompany notes, net
|
57
|
|
—
|
|
—
|
|
(57
|
)
|
—
|
|
|||||
Investment in subsidiaries
|
—
|
|
(24
|
)
|
—
|
|
24
|
|
—
|
|
|||||
Other investing activities
|
—
|
|
1
|
|
—
|
|
—
|
|
1
|
|
|||||
Net cash from (used in) investing activities
|
57
|
|
(223
|
)
|
(730
|
)
|
(33
|
)
|
(929
|
)
|
|||||
Cash Flows From (Used In) Financing Activities
|
|
|
|
|
|
||||||||||
Borrowings under revolving credit agreements
|
—
|
|
—
|
|
44
|
|
—
|
|
44
|
|
|||||
Repayments on revolving credit agreements
|
—
|
|
—
|
|
(334
|
)
|
—
|
|
(334
|
)
|
|||||
Repayments of debt
|
—
|
|
(3
|
)
|
—
|
|
—
|
|
(3
|
)
|
|||||
Dividend payments
|
(65
|
)
|
—
|
|
—
|
|
—
|
|
(65
|
)
|
|||||
Net proceeds from issuance of Tesoro Logistics LP common units
|
—
|
|
—
|
|
281
|
|
—
|
|
281
|
|
|||||
Distributions by Tesoro Logistics LP to noncontrolling interest
|
—
|
|
—
|
|
(63
|
)
|
—
|
|
(63
|
)
|
|||||
Taxes paid related to net share settlement of equity awards
|
(22
|
)
|
—
|
|
—
|
|
—
|
|
(22
|
)
|
|||||
Net intercompany borrowings (repayments)
|
—
|
|
78
|
|
(135
|
)
|
57
|
|
—
|
|
|||||
Contribution by parent
|
—
|
|
—
|
|
24
|
|
(24
|
)
|
—
|
|
|||||
Distributions to affiliates
|
—
|
|
—
|
|
(87
|
)
|
87
|
|
—
|
|
|||||
Other financing activities
|
(6
|
)
|
—
|
|
—
|
|
—
|
|
(6
|
)
|
|||||
Net cash from (used in) financing activities
|
(93
|
)
|
75
|
|
(270
|
)
|
120
|
|
(168
|
)
|
|||||
Decrease in Cash And Cash Equivalents
|
—
|
|
(356
|
)
|
(641
|
)
|
—
|
|
(997
|
)
|
|||||
Cash and Cash Equivalents, Beginning of Period
|
—
|
|
2,576
|
|
719
|
|
—
|
|
3,295
|
|
|||||
Cash and Cash Equivalents, End of Period
|
$
|
—
|
|
$
|
2,220
|
|
$
|
78
|
|
$
|
—
|
|
$
|
2,298
|
|
|
|
March 31, 2017
|
21
|
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
|
|
|
|
Parent
|
Guarantor
Subsidiaries
|
Non-
Guarantors
|
Consolidating Adjustments
|
Consolidated
|
||||||||||
Cash Flows From (Used In) Operating Activities
|
|
|
|
|
|
||||||||||
Net cash from (used in) operating activities
|
$
|
26
|
|
$
|
(146
|
)
|
$
|
363
|
|
$
|
(59
|
)
|
$
|
184
|
|
Cash Flows From (Used In) Investing Activities
|
|
|
|
|
|
||||||||||
Capital expenditures
|
—
|
|
(128
|
)
|
(89
|
)
|
—
|
|
(217
|
)
|
|||||
Acquisitions, net of cash
|
—
|
|
—
|
|
(314
|
)
|
—
|
|
(314
|
)
|
|||||
Intercompany notes, net
|
373
|
|
—
|
|
—
|
|
(373
|
)
|
—
|
|
|||||
Investment in subsidiaries
|
(319
|
)
|
(45
|
)
|
—
|
|
364
|
|
—
|
|
|||||
Other investing activities
|
—
|
|
—
|
|
(4
|
)
|
—
|
|
(4
|
)
|
|||||
Net cash from (used in) investing activities
|
54
|
|
(173
|
)
|
(407
|
)
|
(9
|
)
|
(535
|
)
|
|||||
Cash Flows From (Used In) Financing Activities
|
|
|
|
|
|
||||||||||
Borrowings under revolving credit agreements
|
—
|
|
—
|
|
297
|
|
—
|
|
297
|
|
|||||
Repayments on revolving credit agreements
|
—
|
|
—
|
|
(67
|
)
|
—
|
|
(67
|
)
|
|||||
Repayments of debt
|
—
|
|
(1
|
)
|
(251
|
)
|
—
|
|
(252
|
)
|
|||||
Dividend payments
|
(60
|
)
|
—
|
|
—
|
|
—
|
|
(60
|
)
|
|||||
Net proceeds from issuance of Tesoro Logistics LP common units
|
—
|
|
—
|
|
5
|
|
—
|
|
5
|
|
|||||
Distributions by Tesoro Logistics LP to noncontrolling interest
|
—
|
|
—
|
|
(48
|
)
|
—
|
|
(48
|
)
|
|||||
Taxes paid related to net share settlement of equity awards
|
(20
|
)
|
—
|
|
—
|
|
—
|
|
(20
|
)
|
|||||
Net intercompany borrowings (repayments)
|
—
|
|
(175
|
)
|
(198
|
)
|
373
|
|
—
|
|
|||||
Contribution by parent
|
—
|
|
—
|
|
364
|
|
(364
|
)
|
—
|
|
|||||
Distributions to affiliates
|
—
|
|
—
|
|
(59
|
)
|
59
|
|
—
|
|
|||||
Other financing activities
|
—
|
|
—
|
|
(7
|
)
|
—
|
|
(7
|
)
|
|||||
Net cash from (used in) financing activities
|
(80
|
)
|
(176
|
)
|
36
|
|
68
|
|
(152
|
)
|
|||||
Decrease in Cash And Cash Equivalents
|
—
|
|
(495
|
)
|
(8
|
)
|
—
|
|
(503
|
)
|
|||||
Cash and Cash Equivalents, Beginning of Period
|
—
|
|
895
|
|
47
|
|
—
|
|
942
|
|
|||||
Cash and Cash Equivalents, End of Period
|
$
|
—
|
|
$
|
400
|
|
$
|
39
|
|
$
|
—
|
|
$
|
439
|
|
22
|
Tesoro Corporation
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
•
|
three refineries in Texas, New Mexico and Minnesota with a total refining capacity of approximately 254 thousand barrels per day (“Mbpd”), which would expand the combined company’s operational capabilities and improve our access to advantaged crude oil and extended product regions;
|
•
|
three premium and value retail and convenience store brands to serve a broader customer base and regional preferences; and
|
•
|
an extensive and complementary logistics network with access to advantaged crude oil basins, including the Permian Basin.
|
|
|
March 31, 2017
|
23
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
•
|
CORE VALUES – We act individually and collectively with the highest level of integrity and we are steadfast in our commitment to safety, health and the environment.
|
•
|
EXCEPTIONAL PEOPLE – We employ the best people and develop our capabilities and leadership to realize our objectives.
|
•
|
SHARED PURPOSE – Everyone clearly understands and owns our vision, strategy, how they fit and what they are expected to contribute.
|
•
|
POWERFUL COLLABORATION – We leverage the power of collaboration and our individual and collective expertise to create value and competitive advantage.
|
•
|
SUPERIOR EXECUTION – We pursue and deliver our objectives with energy, passion and a sense of urgency to deliver industry-leading results.
|
24
|
Tesoro Corporation
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
Operational
Efficiency &
Effectiveness
|
|
Value Chain Optimization
|
|
Financial
Discipline
|
|
Value
Driven
Growth
|
|
High Performing Culture
|
SAFETY.
Our Salt Lake City refinery achieved two years with zero process safety incidents.
|
|
ü
|
|
|
|
|
|
|
|
ü
|
TLLP ACQUISITION.
On January 1, 2017, TLLP completed its previously announced acquisition of crude oil, natural gas and produced water gathering pipelines and two processing facilities in the Bakken Region of North Dakota for $705 million.
|
|
|
|
ü
|
|
ü
|
|
ü
|
|
|
RECOGNITION.
Our Anacortes refinery received the “Gold Distinguished Safety Award” from the American Fuel & Petrochemical Manufacturers.
|
|
ü
|
|
|
|
|
|
|
|
ü
|
TLLP EQUITY ISSUANCE.
On February 21, 2017, TLLP and TLGP entered into an underwriting agreement which provided for the issuance and sale of an aggregate of 5.0 million common units representing limited partner interests in TLLP at a price of $56.19 per common unit. TLLP received net proceeds from the offering of approximately $281 million and used the net proceeds to repay borrowings outstanding under the TLLP revolving credit facility and for general partnership purposes.
|
|
|
|
|
|
ü
|
|
|
|
|
|
|
|
|
|
March 31, 2017
|
25
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
•
|
EBITDA—U.S.
GAAP-based
net
earnings
before
interest,
income
taxes,
and
depreciation
and
amortization expenses; and
|
•
|
Debt to capitalization ratio excluding TLLP—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.
|
•
|
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.
|
26
|
Tesoro Corporation
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
|
|
March 31, 2017
|
27
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
(a)
|
Tesoro had a total refining capacity of 895 Mbpd in 2016 following the acquisition of the Dickinson refinery in June. Prior to the Dickinson refinery acquisition, Tesoro had a total refining capacity of 875 Mbpd.
|
28
|
Tesoro Corporation
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
•
|
Gross refining margin per barrel—calculated by dividing gross refining margin (revenues less costs of feedstocks, purchased refined products, transportation and distribution) by total refining throughput
|
•
|
Manufacturing costs before depreciation and amortization expense (“Manufacturing Costs”) per throughput barrel—calculated by dividing Manufacturing Costs by total refining throughput
|
|
|
March 31, 2017
|
29
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
(a)
|
We define heavy crude oil as crude oil with an American Petroleum Institute gravity of 24 degrees or less.
|
(a)
|
Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. Total refined product sales include sales of manufactured and purchased refined products. Refined product sales include all sales through our Marketing segment as well as in bulk markets and exports through our Refining segment.
|
30
|
Tesoro Corporation
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Refining Revenues
|
|
|
|
||||
Refined products (a)
|
$
|
5,812
|
|
|
$
|
4,285
|
|
Crude oil resales and other
|
244
|
|
|
211
|
|
||
Total Revenues
|
6,056
|
|
|
4,496
|
|
||
Refining Cost of Sales
|
|
|
|
||||
Cost of sales (excluding LCM)
|
5,355
|
|
|
3,809
|
|
||
LCM
|
—
|
|
|
147
|
|
||
Total Cost of Sales
|
5,355
|
|
|
3,956
|
|
||
Gross refining margin
|
701
|
|
|
540
|
|
||
Expenses
|
|
|
|
||||
Operating expenses
|
|
|
|
||||
Manufacturing costs
|
421
|
|
|
395
|
|
||
Other operating expenses
|
95
|
|
|
88
|
|
||
General and administrative expenses
|
2
|
|
|
2
|
|
||
Depreciation and amortization expenses
|
148
|
|
|
148
|
|
||
Loss on asset disposals and impairments
|
1
|
|
|
—
|
|
||
Segment Operating Income (Loss)
|
$
|
34
|
|
|
$
|
(93
|
)
|
Gross refining margin per throughput barrel
|
$
|
9.44
|
|
|
$
|
7.59
|
|
Manufacturing costs per throughput barrel
|
$
|
5.67
|
|
|
$
|
5.55
|
|
(a)
|
Refined product sales include intersegment sales to our Marketing segment of
$3.7 billion
and
$3.0 billion
for the
2017
Quarter and the
2016
Quarter, respectively.
|
|
|
March 31, 2017
|
31
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
Three Months Ended March 31,
|
||||||||||||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||||||
|
California
(Martinez and Los Angeles)
|
|
Pacific Northwest
(Washington and Alaska)
|
|
Mid-Continent
(North Dakota and Utah)
|
||||||||||||||||||
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Refined products
|
$
|
3,924
|
|
|
$
|
2,947
|
|
|
$
|
1,092
|
|
|
$
|
782
|
|
|
$
|
796
|
|
|
$
|
556
|
|
Crude oil resales and other
|
144
|
|
|
80
|
|
|
53
|
|
|
28
|
|
|
47
|
|
|
102
|
|
||||||
Total Revenues
|
4,068
|
|
|
3,027
|
|
|
1,145
|
|
|
810
|
|
|
843
|
|
|
658
|
|
||||||
Refining Cost of Sales
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cost of sales (excluding LCM)
|
3,594
|
|
|
2,537
|
|
|
1,017
|
|
|
709
|
|
|
744
|
|
|
562
|
|
||||||
LCM
|
—
|
|
|
91
|
|
|
—
|
|
|
33
|
|
|
—
|
|
|
23
|
|
||||||
Total Cost of Sales
|
3,594
|
|
|
2,628
|
|
|
1,017
|
|
|
742
|
|
|
744
|
|
|
585
|
|
||||||
Gross refining margin
|
474
|
|
|
399
|
|
|
128
|
|
|
68
|
|
|
99
|
|
|
73
|
|
||||||
Expenses
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Manufacturing costs
|
295
|
|
|
283
|
|
|
67
|
|
|
64
|
|
|
59
|
|
|
48
|
|
||||||
Other operating expenses
|
56
|
|
|
36
|
|
|
18
|
|
|
13
|
|
|
21
|
|
|
39
|
|
||||||
General and administrative expenses
|
2
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Depreciation and amortization expenses
|
94
|
|
|
91
|
|
|
27
|
|
|
23
|
|
|
27
|
|
|
34
|
|
||||||
Loss on asset disposals and impairments
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||
Operating Income (Loss)
|
$
|
26
|
|
|
$
|
(13
|
)
|
|
$
|
16
|
|
|
$
|
(32
|
)
|
|
$
|
(8
|
)
|
|
$
|
(48
|
)
|
Refining throughput (Mbpd)
|
500
|
|
|
461
|
|
|
186
|
|
|
186
|
|
|
139
|
|
|
135
|
|
||||||
Gross refining margin per throughput barrel
|
$
|
10.53
|
|
|
$
|
9.51
|
|
|
$
|
7.65
|
|
|
$
|
4.02
|
|
|
$
|
7.91
|
|
|
$
|
5.94
|
|
Manufacturing costs per throughput barrel
|
$
|
6.56
|
|
|
$
|
6.74
|
|
|
$
|
4.00
|
|
|
$
|
3.81
|
|
|
$
|
4.72
|
|
|
$
|
3.85
|
|
|
|
|
•
|
Average margin on NGL sales per barrel—calculated as the difference between the NGL sales and the costs associated with the NGL sales divided by total NGL sales volumes;
|
32
|
Tesoro Corporation
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
•
|
Average gas gathering and processing revenue per Million British thermal units (“MMBtu”)—calculated as total gathering and processing fee-based revenue divided by total gas gathering throughput;
|
•
|
Average crude oil and water gathering revenue per barrel—calculated as total crude oil and water gathering fee-based revenue divided by total crude oil and water gathering throughput;
|
•
|
Average terminalling revenue per barrel—calculated as total terminalling revenue divided by total terminalling throughput; and
|
•
|
Average pipeline transportation revenue per barrel—calculated as total pipeline transportation revenue divided by total pipeline transportation throughput.
|
(a)
|
Volumes represent barrels sold under TLLP’s keep-whole arrangements, net barrels retained under its percent of proceeds
(“POP”)
arrangements and other associated products.
|
|
|
March 31, 2017
|
33
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016 (a)
|
||||
Revenues
|
|
|
|
||||
Gathering and Processing
|
|
|
|
||||
NGL sales (b)
|
$
|
83
|
|
|
$
|
27
|
|
Gas gathering and processing
|
80
|
|
|
68
|
|
||
Crude oil and water gathering
|
39
|
|
|
35
|
|
||
Pass-thru and other revenue
|
43
|
|
|
32
|
|
||
Terminalling and transportation
|
|
|
|
||||
Terminalling
|
145
|
|
|
108
|
|
||
Pipeline transportation
|
30
|
|
|
30
|
|
||
Total Revenues (c)
|
420
|
|
|
300
|
|
||
Costs and Expenses
|
|
|
|
||||
Cost of NGL sales (b)(d)
|
59
|
|
|
—
|
|
||
Operating expenses (e)
|
126
|
|
|
110
|
|
||
General and administrative expenses (f)
|
27
|
|
|
24
|
|
||
Depreciation and amortization expenses
|
58
|
|
|
46
|
|
||
Loss on asset disposals and impairments
|
—
|
|
|
1
|
|
||
Segment Operating Income
|
$
|
150
|
|
|
$
|
119
|
|
Average margin on NGL sales per barrel (b)(d)
|
$
|
39.15
|
|
|
$
|
34.49
|
|
Average gas gathering and processing revenue per MMBtu
|
$
|
0.94
|
|
|
$
|
0.83
|
|
Average crude oil and water gathering revenue per barrel
|
$
|
1.73
|
|
|
$
|
1.77
|
|
Average terminalling revenue per barrel
|
$
|
1.58
|
|
|
$
|
1.31
|
|
Average pipeline transportation revenue per barrel
|
$
|
0.40
|
|
|
$
|
0.40
|
|
(a)
|
Adjusted to include the historical results of TLLP’s Predecessors. Refer to “Items Impacting Comparability” for further discussion.
|
(b)
|
For
the
2017
Quarter, TLLP had
21.1
Mbpd of gross NGL sales under POP and keep-whole arrangements. TLLP
retained
7.4
Mbpd
under
these arrangements. The difference between gross sales barrels and barrels retained is reflected in costs of sales resulting
from
the
gross
presentation required for the POP arrangements associated with the North Dakota Gathering and Processing Assets.
|
(c)
|
TLLP segment revenues from services provided to our Refining segment were
$203 million
and
$169 million
for the
2017
Quarter and the
2016
Quarter, respectively. These amounts are eliminated upon consolidation.
|
(d)
|
Included in cost of NGL sales for the
2017
Quarter were approximately
$2 million
of cost of sales related to crude oil volumes obtained in connection with the acquisition of the North Dakota Gathering and Processing Assets. The corresponding revenues were recognized in pass-thru and other revenue. As such, the calculation of the average margin on NGL sales per barrel excludes this amount.
|
(e)
|
TLLP segment operating expenses include amounts billed by Tesoro for services provided to TLLP under various operational contracts. Amounts billed by Tesoro totaled
$39 million
and
$35 million
for the
2017
Quarter and the
2016
Quarter, respectively. The net amounts billed include imbalance gains and reimbursements of
$5 million
and
$7 million
for the
2017
Quarter and the
2016
Quarter, 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 upon consolidation.
|
(f)
|
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
$20 million
and
$17 million
for the
2017
Quarter and the
2016
Quarter, respectively, and are eliminated upon consolidation. TLLP segment third-party 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.
|
|
|
|
34
|
Tesoro Corporation
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
March 31, 2017
|
35
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Marketing Revenues
|
|
|
|
||||
Fuel
|
$
|
4,083
|
|
|
$
|
3,298
|
|
Other non-fuel
|
21
|
|
|
20
|
|
||
Total Revenues
|
4,104
|
|
|
3,318
|
|
||
Marketing Cost of Sales
|
|
|
|
||||
Fuel
|
3,881
|
|
|
2,996
|
|
||
Other non-fuel
|
4
|
|
|
4
|
|
||
Total Cost of Sales
|
3,885
|
|
|
3,000
|
|
||
Marketing Gross Margin
|
|
|
|
||||
Fuel
|
202
|
|
|
302
|
|
||
Other non-fuel
|
17
|
|
|
16
|
|
||
Total Gross Margin
|
219
|
|
|
318
|
|
||
Expenses
|
|
|
|
||||
Operating expenses
|
68
|
|
|
72
|
|
||
General and administrative expenses
|
5
|
|
|
5
|
|
||
Depreciation and amortization expenses
|
13
|
|
|
12
|
|
||
Loss on asset disposals and impairments
|
—
|
|
|
2
|
|
||
Segment Operating Income
|
$
|
133
|
|
|
$
|
227
|
|
|
|
|
|
||||
Fuel sales in millions of gallons
|
2,097
|
|
|
2,166
|
|
||
Fuel margin per gallon
|
|
9.6
|
¢
|
|
|
13.9
|
¢
|
|
|
|
36
|
Tesoro Corporation
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
March 31,
2017 |
|
December 31,
2016 |
||||
Debt, including current maturities:
|
|
|
|
||||
Tesoro Senior Notes
|
$
|
2,825
|
|
|
$
|
2,825
|
|
Term Loan Facility
|
63
|
|
|
64
|
|
||
Capital lease obligations and other
|
42
|
|
|
44
|
|
||
Tesoro Debt
|
2,930
|
|
|
2,933
|
|
||
TLLP Credit Facilities
|
40
|
|
|
330
|
|
||
TLLP Senior Notes
|
3,770
|
|
|
3,770
|
|
||
TLLP Capital lease obligations and other
|
9
|
|
|
9
|
|
||
TLLP Debt
|
3,819
|
|
|
4,109
|
|
||
Total Debt
|
6,749
|
|
|
7,042
|
|
||
Unamortized Issuance Costs (a)
|
(106
|
)
|
|
(109
|
)
|
||
Debt, Net of Unamortized Issuance Costs
|
6,643
|
|
|
6,933
|
|
||
Total Equity
|
8,334
|
|
|
8,127
|
|
||
Total Capitalization
|
$
|
14,977
|
|
|
$
|
15,060
|
|
(a)
|
The unamortized issuance costs for TLLP were
$53 million
and
$55 million
as of
March 31, 2017
and
December 31, 2016
, respectively.
|
|
Total
Capacity
|
|
Amount Borrowed as of March 31, 2017
|
|
Outstanding
Letters of Credit
|
|
Available Capacity
|
|
Expiration
|
||||||||
Tesoro Corporation Revolving
Credit Facility (a)
|
$
|
2,000
|
|
|
$
|
—
|
|
|
$
|
4
|
|
|
$
|
1,996
|
|
|
September 30, 2020
|
TLLP Revolving Credit Facility
|
600
|
|
|
40
|
|
|
—
|
|
|
560
|
|
|
January 29, 2021
|
||||
TLLP Dropdown Credit Facility
|
1,000
|
|
|
—
|
|
|
—
|
|
|
1,000
|
|
|
January 29, 2021
|
||||
Letter of Credit Facilities
|
975
|
|
|
—
|
|
|
—
|
|
|
975
|
|
|
|
||||
Total Credit Facilities
|
$
|
4,575
|
|
|
$
|
40
|
|
|
$
|
4
|
|
|
$
|
4,531
|
|
|
|
(a)
|
The
$2.0 billion
total capacity does not include the additional $1.0 billion related to the incremental revolving facility.
|
|
|
March 31, 2017
|
37
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
Credit Facility
|
30 Day Eurodollar (LIBOR) Rate at March 31, 2017
|
|
Eurodollar Margin
|
|
Base Rate
|
|
Base Rate Margin
|
|
Commitment Fee
(unused portion) |
Tesoro Corporation Revolving Credit Facility
($2.0 billion)
|
0.98%
|
|
1.75%
|
|
4.00%
|
|
0.75%
|
|
0.300%
|
TLLP Revolving Credit Facility ($600 million) (a)
|
0.98%
|
|
2.25%
|
|
4.00%
|
|
1.25%
|
|
0.375%
|
TLLP Dropdown Credit Facility ($1.0 billion)
|
0.98%
|
|
2.26%
|
|
4.00%
|
|
1.26%
|
|
0.375%
|
(a)
|
The weighted average interest rate for borrowings under the secured TLLP Revolving Credit Facility was
3.23%
at
March 31, 2017
.
|
•
|
pay dividends and make other distributions with respect to our capital stock and purchase, redeem or retire our capital stock;
|
•
|
enter into certain hedging agreements;
|
•
|
incur additional indebtedness;
|
•
|
sell assets unless the proceeds from those sales are used to repay debt or are reinvested in our business;
|
•
|
incur liens on assets to secure certain debt;
|
•
|
engage in certain business activities;
|
•
|
make certain payments and distributions from our subsidiaries;
|
•
|
engage in certain investments, mergers or consolidations and transfers of assets; and
|
•
|
enter into non-arm’s length transactions with affiliates.
|
|
Three Months Ended March 31,
|
||||||
|
2017
|
|
2016
|
||||
Cash Flows From (Used in):
|
|
|
|
||||
Operating activities
|
$
|
100
|
|
|
$
|
184
|
|
Investing activities
|
(929
|
)
|
|
(535
|
)
|
||
Financing activities
|
(168
|
)
|
|
(152
|
)
|
||
Decrease in Cash and Cash Equivalents
|
$
|
(997
|
)
|
|
$
|
(503
|
)
|
38
|
Tesoro Corporation
|
|
|
|
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
•
|
the constantly
changing margin between the price we pay for
crude
oil
and
other
refinery
feedstocks
as
well
as
renewable
identification
numbers
(“RINs”)
and environmental credits, and the prices at which we are able to sell refined products;
|
•
|
changes in the expected value of and benefits derived from acquisitions and capital projects;
|
•
|
changes in global economic conditions on our business, especially in California, and the business of our suppliers, customers, business partners and credit lenders;
|
|
|
March 31, 2017
|
39
|
MANAGEMENT’S DISCUSSION AND ANALYSIS
|
|
|
•
|
changes in fuel and utility costs for our facilities;
|
•
|
changes in the cost or availability of third-party vessels, pipelines and other means of transporting crude oil feedstocks and refined products;
|
•
|
regulatory and other requirements concerning the transportation of crude oil, particularly from the Bakken area;
|
•
|
changes in the carrying costs of our inventory;
|
•
|
the timing and extent of changes in commodity prices and underlying demand for our refined products, natural gas and NGLs;
|
•
|
the availability and costs of crude oil, other refinery feedstocks, refined products and RINs;
|
•
|
changes in our cash flow from operations;
|
•
|
direct or indirect effects on our business resulting from actual or threatened terrorist incidents, cyber-security breaches or acts of war;
|
•
|
weather conditions, earthquakes or other natural disasters affecting our operations or the areas in which our refined products are marketed;
|
•
|
actions of customers and competitors;
|
•
|
state and federal environmental, economic, health and safety, energy and other policies and regulations, including
|
•
|
adverse rulings, judgments, or settlements in litigation or other legal or tax matters, including unexpected environmental remediation costs in excess of any reserves;
|
•
|
operational hazards inherent in refining operations and in transporting and storing crude oil and refined products;
|
•
|
changes in our credit profile;
|
•
|
changes in capital requirements or in execution of planned capital projects;
|
•
|
disruptions due to equipment interruption or failure at our facilities or third-party facilities;
|
•
|
seasonal variations in demand for refined products and natural gas;
|
•
|
risks related to labor relations and workplace safety;
|
•
|
political developments; and
|
•
|
the factors described in greater detail under “Competition” and “Risk Factors” in Items 1 and 1A of our Annual Report on Form 10-K for the year ended
December 31, 2016
, and our other filings with the SEC.
|
40
|
Tesoro Corporation
|
|
|
LEGAL PROCEEDINGS AND RISK FACTORS
|
|
|
Period
|
Total Number of
Shares
Purchased (a)
|
|
Average Price
Paid
per Share
|
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (b)
|
|
Approximate Dollar
Value of Shares that May Yet Be Purchased Under the Plans or Programs
(in Millions) (b)
|
||||||
January 2017
|
35,940
|
|
|
$
|
80.50
|
|
|
—
|
|
|
$
|
2,106
|
|
February 2017
|
212,975
|
|
|
$
|
88.00
|
|
|
—
|
|
|
$
|
2,106
|
|
March 2017
|
2,082
|
|
|
$
|
82.48
|
|
|
—
|
|
|
$
|
2,106
|
|
Total
|
250,997
|
|
|
|
|
—
|
|
|
|
(a)
|
Represents shares acquired from employees during the
first
quarter of
2017
to satisfy tax withholding obligations in connection with the vesting of performance share awards, market stock units and restricted stock issued to them.
|
(b)
|
Our Board of Directors (“Board”) authorized a $1.0 billion share repurchase program on July 30, 2014. On October 28, 2015, our Board approved a new $1.0 billion share repurchase program to become effective upon the full completion of the previous $1.0 billion of share repurchases authorized. On November 16, 2016, the Board approved an additional $1.0 billion of share repurchases.
|
|
|
March 31, 2017
|
41
|
OTHER INFORMATION AND EXHIBITS
|
Name
|
|
For
|
|
Against
|
|
Withheld
|
|
Broker Non-Votes
|
Rodney F. Chase
|
|
85,770,726
|
|
836,633
|
|
81,890
|
|
7,968,339
|
Edward G. Galante
|
|
85,744,142
|
|
862,542
|
|
82,565
|
|
7,968,339
|
Gregory J. Goff
|
|
82,354,989
|
|
3,649,337
|
|
684,923
|
|
7,968,339
|
David Lilley
|
|
86,090,317
|
|
511,814
|
|
87,118
|
|
7,968,339
|
Mary Pat McCarthy
|
|
86,478,867
|
|
137,643
|
|
72,739
|
|
7,968,339
|
J.W. Nokes
|
|
86,203,502
|
|
409,062
|
|
76,685
|
|
7,968,339
|
William H. Schumann, III
|
|
86,451,085
|
|
150,961
|
|
87,203
|
|
7,968,339
|
Susan Tomasky
|
|
85,847,653
|
|
757,816
|
|
83,780
|
|
7,968,339
|
Michael E. Wiley
|
|
85,435,389
|
|
1,172,150
|
|
81,710
|
|
7,968,339
|
Patrick Y. Yang
|
|
85,939,921
|
|
671,360
|
|
77,968
|
|
7,968,339
|
For
|
|
Against
|
|
Withheld
|
|
Broker Non-Votes
|
82,918,787
|
|
3,618,764
|
|
151,696
|
|
7,968,341
|
For
|
|
Against
|
|
Withheld
|
|
Broker Non-Votes
|
93,750,818
|
|
773,199
|
|
133,571
|
|
—
|
1 Year
|
|
2 Year
|
|
3 Year
|
|
Withheld
|
|
Broker Non-Votes
|
77,159,189
|
|
171,047
|
|
9,271,100
|
|
87,910
|
|
7,968,342
|
42
|
Tesoro Corporation
|
|
|
EXHIBITS
|
|
|
|
|
Incorporated by Reference (File No. 1-3473, unless otherwise indicated)
|
||||
Exhibit Number
|
|
Description of Exhibit
|
|
Form
|
|
Exhibit
|
|
Filing Date
|
2.1
|
|
Agreement and Plan of Merger among Western Refining, Inc., Tesoro Corporation, Tahoe Merger Sub 1, Inc., and Tahoe Merger Sub 2, LLC, dated as of November 16, 2016
(Schedules have been omitted pursuant to Item 601(b)(2) of Regulation S-K. Tesoro Corporation agrees to furnish supplementally a copy of such schedules, or any section thereof, to the SEC upon request.)
|
|
8-K
|
|
2.1
|
|
11/18/2016
|
|
|
|
|
|
|
|
|
|
3.1
|
|
|
S-3ASR
(File No. 333-183872)
|
|
3.1
|
|
9/13/2012
|
|
|
|
|
|
|
|
|
|
|
3.2
|
|
|
8-K
|
|
3.1
|
|
10/25/2016
|
|
|
|
|
|
|
|
|
|
|
†10.1
|
|
|
8-K
|
|
10.1
|
|
2/21/2017
|
|
|
|
|
|
|
|
|
|
|
†10.2
|
|
|
8-K
|
|
10.2
|
|
2/21/2017
|
|
|
|
|
|
|
|
|
|
|
†10.3
|
|
|
8-K
|
|
10.3
|
|
2/21/2017
|
|
|
|
|
|
|
|
|
|
|
†10.4
|
|
|
8-K
|
|
10.4
|
|
2/21/2017
|
|
|
|
|
|
|
|
|
|
|
*31.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*31.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*32.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*32.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**101.INS
|
|
XBRL Instance Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**101.SCH
|
|
XBRL Taxonomy Extension Schema Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase Document
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase Document
|
|
|
|
|
|
|
*
|
Filed herewith.
|
**
|
Submitted electronically herewith.
|
†
|
Compensatory plan or arrangement.
|
|
|
March 31, 2017
|
43
|
|
|
TESORO CORPORATION
|
|
|
|
Date:
|
May 9, 2017
|
/s/ STEVEN M. STERIN
|
|
|
Steven M. Sterin
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
(Principal Financial Officer)
|
44
|
Tesoro Corporation
|
|
|
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