Tesoro’s Stock Rose in Anticipation of 2Q16 Results



Tesoro’s stock performance

Tesoro (TSO) announced its results on August 3, 2016, after the markets closed. Let’s quickly look at Tesoro’s stock performance on the day of its earnings release. TSO opened the day at $73.58 per share, just below the previous close of $73.98. Tesoro saw highs of $77.32 and lows of $73.00 during the day and eventually closed at $77.13, around 4.3% higher than its previous day’s close but in line with peers.

On August 3, 2016, TSO’s peers Marathon Petroleum (MPC), Valero Energy (VLO), and Phillips 66 (PSX) rose by 6.3%, 4.5%, and 3.3%, respectively. For exposure to refining sector stocks, investors can consider the Vanguard Energy ETF (VDE), which has ~8% exposure to the sector.

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Tesoro’s capex and management comments

In 2Q16, Tesoro incurred capex of $209 million. $42 million of this went towards Tesoro Logistics (TLLP). For 2016, Tesoro expects to incur capex of $970 million. Of this $270 million is expected to be incurred towards TLLP. In 2Q16, Tesoro acquired Dakota Prairie Refining, which provides the locational advantage to Tesoro in the form of easy access to Bakken crude oil.

Tesoro expects business improvements in operating income of $400 million–$500 million in 2016. TSO expects refining improvements in the range of $200 million–$250 million, logistics in the range of $175 million-$200 million, and marketing in the range of $25 million–$50 million.

Tesoro’s management stated, “Tesoro remains confident in delivering these annual improvements to operating income. Through the first half of the year, estimated Refining improvements are trending towards the high end of the range, Marketing improvements are on track with full year expectations and estimated Logistics improvements are tracking slightly below the range, primarily attributable to slower than expected organic growth due to the weak commodity price environment.”


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