uploads///TSO Ref Index

Trend Watch: Tesoro’s Refining Margins in 1Q17


Dec. 4 2020, Updated 10:53 a.m. ET

The series so far

So far in this series, we have compared refining companies’ leverage, cash flows, ROE, segment-wise operating income model, refining throughputs, yields, and gross refining margin levels in 4Q16.

In the remaining parts of this series, we’ll analyze the refining margin indicators published by refiners Tesoro (TSO), Marathon Petroleum (MPC), and Valero Energy (VLO). These indicators point toward the likely margin, as well as the profitability trend, in the quarter. Let’s start with Tesoro.

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Tesoro’s refining margins indicator

Tesoro (TSO) publishes refining index values that are regional crack indicators in the areas where its refineries operate. In 1Q17 to date, Tesoro’s refining index values, which are regional crack indicators in the areas where TSO operates, have shown a mixed trend compared to 4Q16, quarter-over-quarter.

The index values in California and Mid-Continent rose to $11.90 per barrel and $12.20 per barrel in 1Q17, respectively, from $11.00 per barrel each in 4Q16. On the other hand, TSO’s Pacific Northwest index value fell to $8.50 per barrel in 1Q17 from $8.90 per barrel in 4Q16.

The marginal fall in Tesoro’s (TSO) Pacific Northwest index value is likely to be offset by the rises in California and Mid-Continent values. On a consolidated basis, TSO’s index has risen by $1.20 per barrel over 4Q16 to $11.30 per barrel in 1Q17 to date. This points toward the likely rise in Tesoro’s GRM in 1Q17 compared to 4Q16.

However, year-over-year, the fall in the California value is partially offset by rising Pacific Northwest and Mid-Continent index values. Tesoro’s consolidated index fell by $0.90 per barrel over 1Q16 to $11.30 per barrel in 1Q17 to date, pointing toward a likely fall in TSO’s refining margin in 1Q17 over 1Q16.

If you’re looking for exposure to S&P 500 Index stocks, you can consider the SPDR S&P 500 ETF (SPY). This ETF also has ~7% exposure to energy sector stocks, including TSO, MPC, VLO, and PSX.


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