Tesoro’s Growth Plans: Aiming at a Diversified Portfolio
Is Tesoro Evolving into an Integrated Downstream Player?
Tesoro’s business segment
Besides refining, Tesoro (TSO) has a presence in logistics through Tesoro Logistics (TLLP) and its marketing segments. Tesoro (TSO) aims to diversify its earnings portfolio by 2018. It plans to enhance the share of its midstream and marketing segments in EBITDA (earnings before interest, taxation, depreciation, and amortization) from 37% in 2015 to 55% in 2018. Tesoro’s EBITDA for 2015 stood at $3.6 billion.
Tesoro’s growth plans in its refining segment
In its refining segment, Tesoro (TSO) has four major projects that are expected to come on stream by 2017–2018. Below are the expectations for those projects:
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Los Angeles refinery integration project to improve product yield and feedstock flexibility
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Vancouver Energy project to improve logistics capabilities
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West Coast mixed xylene project to tap the high-demand Asian market
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Anacortes isomerization project to optimize gasoline production
The above projects are expected to cost around $1 billion and contribute about $350 million to TSO’s annual EBITDA.
Tesoro’s growth plans in its logistics segment
By 2017, TSO expects about $1 billion of EBITDA from its logistics segment. The company plans to grow the segment by focusing on low-risk, accretive growth projects. In this segment, Tesoro operates through its master limited partnership Tesoro Logistics LP (TLLP).
In this segment, TSO aims to enhance operational efficiency and maximize asset utilization. Tesoro also targets inorganic growth through acquisitions of strategic logistics assets. The drop-down transactions to TLLP are expected to continue.
Tesoro’s growth plans in its marketing segment
In its marketing segment, Tesoro (TSO) has a mixture of multibrand retail and unbranded wholesale operations. The company has a network of 2,397 branded retail stations. TSO aims to grow this segment since it provides stable cash flow and assured sales of its refined products. Tesoro plans to focus on investing in its branded retail operations through store improvements. It’s also planning to capitalize on acquisition opportunities in the segment.
The Energy Select Sector SPDR ETF (XLE) can give you a combined exposure of ~9% to Phillips 66 (PSX), Valero (VLO), Marathon Petroleum (MPC), and Tesoro (TSO).
Now let’s move on to see how Tesoro’s leverage compares to its peers.
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