Upcoming AWS Coverage on HollyFrontier Post-Earnings Results
LONDON, UK / ACCESSWIRE / May 24, 2017 / Active Wall St. announces its post-earnings coverage on Tesoro Corp. (NYSE: TSO). The Company posted its first quarter fiscal 2017 financial results on May 08, 2017. The oil refiner surpassed earnings expectations. Register with us now for your free membership at:
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One of Tesoro's competitors within the Oil & Gas Refining & Marketing space, HollyFrontier Corp. (NYSE: HFC), reported on May 03, 2017, its results for Q1 ended March 31, 2017. AWS will be initiating a research report on HollyFrontier in the coming days.
Today, AWS is promoting its earnings coverage on TSO; touching on HFC. Get our free coverage by signing up to
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Earnings Reviewed
Tesoro reported revenues of $6.64 billion for the quarter ended March 31, 2017, compared to revenue of $5.10 billion in Q1 2016, reflecting growth of 30%. However, the Company's reported numbers missed analysts' consensus estimates of $7.81 billion. Tesoro's EBITDA for the reported quarter was $423 million compared to $411 million in the prior year's same quarter.
Tesoro reported Q1 2017 net earnings from continuing operations attributable to Tesoro of $50 million, or $0.42 per diluted share, compared to $58 million, or $0.48 per diluted share, a year ago. The reported quarter results included pre-tax costs associated with acquisitions of $19 million. Earnings, adjusted for costs related to mergers and acquisitions totaled $0.52 per share, ahead of Wall Street's expectations of $0.34 per share.
Segment Results
During Q1 2017, Tesoro's Refining segment's operating income was $34 million compared to an operating loss of $93 million in Q1 2016. The segment's EBITDA was $181 million for the reported quarter compared to $53 million in the prior year's same quarter.
The Tesoro Index was $12.40 per barrel during Q1 2017 with a gross refining margin of $701 million, or $9.44 per barrel, compared to Tesoro Index of $12.15 per barrel with a gross refining margin of $540 million, or $7.59 per barrel, in Q1 2016. The segment's total refinery throughput for the reported quarter was 825 thousand barrels per day, or 92% utilization, compared to 782 thousand barrels per day, or 89% utilization, for the year ago same quarter. Tesoro's Manufacturing costs in Q1 2017 were $5.67 per barrel compared to $5.55 per barrel in Q1 2016, slightly higher primarily as a result of higher energy costs.
Tesoro's Logistics segment's operating income increased to $150 million in Q1 2017 from $119 million in Q1 2016, and the segment's EBITDA increased to $210 million from $175 million in the prior year's comparable quarter. The performance of Tesoro Logistics L.P. (TLLP) was driven by contributions from the acquisitions of the North Dakota Gathering and Processing Assets, the Northern California Terminalling and Storage Assets completed in Q4 2016 and the Alaska Storage and Terminalling assets in Q3 2016.
During Q1 2017, Tesoro's Marketing segment's operating income was $133 million, the segment's EBITDA was $146 million and fuel margins were $0.096 per gallon compared to operating income of $227 million, the segment's EBITDA of $239 million and fuel margins of $0.139 per gallon in Q1 2016. The segment's performance was negatively impacted by lower fuel sales due to an abnormally rainy winter in California, partially offset by lower operating expenses. Tesoro increased its branded station network by 3% to 2,513 with the addition of 77 stations over the last twelve months.
Balance Sheet & Cash Flow
Tesoro ended Q1 2017 with $2.3 billion in cash and cash equivalents, which includes $1.6 billion of proceeds from the senior notes issued during previous quarter. This was down from $3.3 billion at the end of 2016 primarily due to TLLP`s $705 million acquisition of the North Dakota Gathering and Processing Assets. Tesoro has $2.0 billion of availability under its revolving credit facility and an additional $1.0 billion of availability under its new revolving credit facility that is contingent on the close of the Western Refining acquisition. As a result of the senior notes issuance in Q1 2016, the Company's total debt, net of unamortized issuance costs, was $6.6 billion, or 44% of total capitalization, at the end of Q1 2017.
During Q1 2017, Capital spending for Tesoro was $181 million and $45 million for TLLP. Turnaround expenditures for the reported quarter were $111 million. The Company now expects total capital expenditures for FY17 of approximately $1.1 billion given the delay in timing of permit approvals for the Company`s major projects.
Tesoro announced that its board of directors has declared a quarterly cash dividend of $0.55 per share payable on June 15, 2017, to all holders of record as of May 19, 2017.
Strategic Update
In March 2017, stockholders of both Tesoro and Western Refining voted to approve Tesoro`s expected acquisition of Western Refining. At separate special stockholders` meetings, Tesoro stockholders approved the issuance of shares of Tesoro's common stock in connection with the expected acquisition, and stockholders of Western Refining approved the adoption of the previously disclosed agreement and plan of merger. Tesoro remains committed to delivering $350 million to $425 million in annual synergies from operational improvements, value chain optimization and corporate initiatives, with the run rate to be achieved by the end of the second year following closing. The Company continues to expect the transaction to close in Q2 2017.
In January 2017, TLLP closed the previously announced North Dakota Gathering and Processing Assets acquisition for approximately $705 million. This acquisition includes over 650 miles of crude oil, natural gas, and produced water gathering pipelines; 170 MMcf per day of natural gas processing capacity; and 18,700 barrels per day of fractionation capacity in the Williston Basin in North Dakota.
Outlook
Tesoro reiterated its market assumptions for 2017, which include a Tesoro Index of $12 to $14 per barrel and Marketing segment fuel margins of $0.11 to $0.14 per gallon. The Company also reiterated its commitment to delivering an estimated $475 million to $575 million of annual improvements to operating income in 2017 which is comprised of $395 million to $475 million from growth and productivity and $80 million to $100 million from higher throughput and other operational improvements.
Stock Performance
At the close of trading session on Tuesday, May 23, 2017, Tesoro's stock price was marginally down by 0.29% to end the day at $83.02. A total volume of 1.26 million shares were exchanged during the session. The Company's share price has gained 7.80% in the past twelve months. The Company's shares are trading at a PE ratio of 13.89 and have a dividend yield of 2.65%. The stock currently has a market cap of $9.72 billion.
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