We are maintaining our Neutral recommendation on Tesoro
Corporation. In an effort to tighten fuel emissions, the EPA
proposed new gasoline standards, asking refiners to significantly
curb sulfur content in gasoline starting from 2017. Complying with
the new rules is expected to push up capital expenditures for
downstream operators like Tesoro. The company is also faced with
volatile industry fundamentals and limited geographic
diversification, which may further limit its ability to generate
positive earnings surprises. Partially offsetting these negatives
are the scale and diversification benefits afforded by Tesoro's
portfolio of six refineries, as well as the recent acquisition of
BP's Southern California refinery and its shareholder-friendly
San Antonio, Texas-based Tesoro Corporation (TSO) is an
independent refiner and marketer of refined petroleum products in
the western U.S. The company operates in three segments: Refining
(accounted for 81% of the company's total 2013 operating income),
TLLP (8%) and Retail (11%).
Refining: The Refining segment manufactures and sells gasoline
and gasoline-blend stocks, jet fuel, diesel fuel, and other refined
products to customers, primarily in the mid-continental and the
western U.S. This segment also markets liquefied petroleum gas,
petroleum coke, and asphalt. The company owns and operates six
refineries in the western U.S., with a combined crude oil
processing capacity of approximately 850,000 Bbl/d. Tesoro's
geographically focused refining business has made it the largest
independent refiner on the U.S. West Coast.
TLLP: Tesoro Logistics L.P. (TLLP) is engaged in the ownership,
operation, development and acquisition of crude oil and refined
products logistics assets.
Retail: The Retail segment distributes motor fuels to wholesale
and retail customers, as well as to commercial end-users through a
network of more than 2,250 branded retail outlets, primarily under
the Tesoro', Shell', USA Gasoline', and Mirastar' names.
Tesoro Corporation (TSO): Read the Full Research
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