Tesoro’s Cash Flow Analysis: Rising Shareholders’ Returns
Tesoro’s cash flow analysis
In the previous part of this series, we examined Tesoro Corporation’s (TSO) leverage position. In this part, we will analyze TSO’s cash flow.
Tesoro’s (TSO) expansion plans have led to a fall in cash balances from 3Q14–3Q15. TSO’s cash balance in 3Q15 stood at $959 million, showing a 37% fall over 3Q14.
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Tesoro’s cash flow from operations and investing
Tesoro’s cash flow from operations has remained robust in the past couple of quarters due to better earnings in its Refining segment. TSO’s cash from operations grew by 40% to $940 million in 3Q15 compared to 3Q14.
From 3Q14–3Q15, TSO has maintained average quarterly cash flow from operations at $567 million. The company has continued its focus on growth. During 3Q14–3Q15, except 4Q14, TSO has on an average committed $261 million per quarter to fund its investing activities. In 4Q14, Tesoro closed the acquisition transaction of the Rockies Natural Gas Business (or QEP Field Services LLC) from QEP Resources Inc. for $2.5 billion.
In 4Q14, Tesoro closed the acquisition transaction of the Rockies Natural Gas Business (or QEP Field Services LLC) from QEP Resources Inc. for $2.5 billion.
Tesoro’s cash flow from financing
TSO’s cash flow from financing activities mainly comprised changes in debt, dividend payments, and share buybacks. In the past two quarters, Tesoro (TSO) has delivered more value to its shareholders by paying more dividends and repurchasing shares. Plus, in 3Q15, Tesoro partially repaid its debt, raising the cash outflow from financing to $724 million.
Tesoro’s dividend has grown steadily from 3Q14–3Q15. In 3Q15, TSO paid a dividend of $62 million, showing 59% growth over 3Q14. With a rising dividend and stock price, dividend yield remained stable at 1.7% in 3Q15. The dividend yield is a measure of the dividend per share paid compared to the price of the share. TSO’s dividend yield stood at average 1.6% in the past four quarters.
In 3Q15, the dividend yield for Valero Energy Corporation (VLO), Marathon Petroleum Corporation (MPC), and Phillips 66 (PSX) stood at 2.5%, 2.3%, and 2.8%, respectively. In 2014, Tesoro’s (TSO) dividend outflow grew by 17% to $141 million. Tesoro has already surpassed this figure in 9M15. TSO has paid $169 million worth of dividend in 9M15.
Plus, Tesoro Corporation (TSO) has also focused on share buybacks in past two quarters. TSO has repurchased net shares worth $229 million and $199 million in 2Q15 and 3Q15, respectively. Combining dividend and buybacks, Tesoro’s total shareholder returns amounted to $592 million in 9M15 compared to $284 million in 9M14.
The iShares Global Energy ETF (IXC) holds VLO, MPC, TSO, and PSX in its portfolio. IXC has ~7% exposure to oil refining sector stocks.