Tesoro's CEO Hosts 2011 Analyst and Investor Day Presentation - Event Transcript

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Tesoro Corporation (TSO)

2011 Analyst and Investor Day Presentation

December 05, 2011 2:30 pm ET

Executives

Louie Rubiola - Director of Investor Relations

Daniel Robert Romasko - Executive Vice President of Operations

Gregory J. Goff - Chief Executive Officer, President and Director

Analysts

Arjun N. Murti - Goldman Sachs Group Inc., Research Division

Mark Gilman - The Benchmark Company, LLC, Research Division

Unknown Analyst

Edward Westlake - Crédit Suisse AG, Research Division

Paul Sankey - Deutsche Bank AG, Research Division

Chi Chow - Macquarie Research

Douglas George Blyth Leggate - BofA Merrill Lynch, Research Division

Presentation

Louie Rubiola

Good afternoon, everyone, and welcome to Tesoro's 2011 Analyst and Investor Day Presentation. My name is Louie Rubiola. I lead our investor relations efforts for Tesoro and Tesoro Logistics. We're very glad to have you all today and appreciate you taking the time out of your busy schedule to come join us this afternoon.

A quick thing I'd like to mention. Much that you'll hear today are -- will include forward-looking statements, which are intended to be covered by the Safe Harbor provision of the Securities Act. And I also -- before we start, would like to do -- to have a safety message. In Tesoro, safety is a priority and a core value of ours, and we like to start all meetings with a safety message. So today, I'd like to share kind of the appropriate route in the unlikely event of an evacuation. If we, for any reason, have to leave the building, the appropriate way to leave would be straight out back the way you came. You'll take a left out of the main door, and there will be a set of stairs on your left. You'll go down to the lobby floor, and once you come out of the staircase, you will take a left, and it will exit onto the Wall Street level. So that will be the appropriate way out.

With that, it's my pleasure to introduce -- oh, I'm sorry. Also, please turn off your cell phones and pagers. And with that, it's my pleasure to introduce Greg Goff, our President and CEO.

Gregory J. Goff

Thanks, Louie. Welcome, everyone, and thanks for taking your time to come here today. It's -- when we were walking here, it actually seemed like to some of us that we were just here yesterday, doing the 2010 presentation. So it's been a frantic and a quick year.

What we'd like to do today is we'd like to take about an hour or so and share with you our plans for 2012, and some of the things that we'll talk about may lead into a little bit beyond 2012, particularly as it relates to our capital program. And then once we're done, we'll provide sufficient time for questions, and we'll be glad to entertain any questions that you may have as we finish the presentations.

2011 has actually been a very successful year for Tesoro, and we're very proud of things that we have accomplished. We really -- we believe that with the changes in management back in 2010, we really embarked upon a very ambitious plan to really fundamentally and significantly improve the business. And we thought when we put this plan together back in 2010 that it would take us about 3 years to really achieve all the things that we set out to do, and 2011 was really the first year where we really got things going, and we'll share some of the accomplishments that we think we have accrued [ph] today on this journey to really significantly improve the performance of the business. And really, this improvement, it's really characterized by a lot of things. I mean, our focus, like Louie said, on both personal and process safety, driving performance in our overall environmental performance to really be able to go in and get -- develop a better cost structure for the business, drive improvements in the reliability around our assets, really being able to exercise a lot of capital discipline and take our free cash flow and with our stated intent to reinvest it in the business to generate additional earnings as we go forward, and then really to drive a high level of integration between refining a market. And because of our geographic location, like we said last year, we felt one of the things that was very critical was that we have a high degree of integration so that we could get higher utilization out of our refineries, and we've made a good step forward in that. And then finally, it's just to maintain a strong financial position.

So what we'd like to be able to do today is -- our presentation is really broken into 3 parts. I'd like to take a few minutes and really talk to you about 2011. One of the things that we felt last year was that we needed to develop a plan, and we also needed to develop a reputation of being a company that delivered on what we said, and we'd like to take some time and share with you what we said we were going to do and, more importantly, what we’ve accomplished. Then I'd like to spend a little bit of time talking about the market and kind of what our outlook is as we enter 2012. And then finally, we're going to talk about our plans for 2012 and really get into the substance of what we see going on. And to be able to do the presentation today, I’ll take the first 2 parts. I'll talk about 2011 and, really, our market outlook. And then Dan Romasko, who runs our operations, will then talk about our plans for 2012.

But before we get started, I'd like to just take a minute and introduce the members of the Tesoro management team with me here today. And actually, as a company, we've gone through a fair amount of change from a leadership standpoint, and so I'd like to just introduce some of the key people here today. And they'll be available to answer any questions either during the Q&A part of the -- after we finish the presentation or even after we finish the -- after we're done with the Q&A section. But with me today up on the stage is Dan Romasko. Dan joined the company earlier this year. Dan is responsible for operations. So he runs refining, marketing, logistics and our marine business. Sitting next to him, which I think most of you already know, is Scott Spendlove, our CFO; and Louie, he just introduced himself just a minute ago. On the front row up here is Dave Kirshner. Dave is responsible for our commercial operations, and Dave just joined us at the beginning of October. Next to Dave is Claude Moreau. Claude Moreau runs all of our marketing operation. Next to Claude is Chuck Flagg, which many of you probably know. Chuck runs our corporate strategy and business development. Phil Anderson, which many of you know. Phil is now responsible for our MLP, and he's been out actually talking to investors about our MLP today. And we'll touch briefly on the MLP during the presentation today. Chuck Parrish is the General Counsel for the business. Tracy Jackson is our treasurer. And for some reason put over in the corner to be away from all the rest of them is Frank Wheeler, who runs our refining operation. And in the very back of the room is Ralph Grimmer, who is -- who runs the logistics part of the company. So Ralph and Phil have been out talking about the logistics company today.

So personally, we've gone through a lot of changes. And one thing that I feel really good about, I am extremely confident in our management team. We work together really well, and it's just such an enjoyment to have the people you have assembled to really take the business. And we're all very focused on where we're trying to take the company, and I think that's a very important thing.

A little bit about the company. I don't think I need to spend a lot of time because most of you are pretty familiar with the company, but there are probably 2 or 3 things that really stand out. We've had a focus to really drive the integration between refining and marketing, and you'll see on this slide that our marketing business last year, we had about 900 retail stations that were branded 1 of our 3 brands. We grew that to about 1,200 this year. And as most of you are aware, by starting next year, we'll have -- we already have planned growth of another 300 stations, not including anything else we may do. So we've made good progress to really strengthen our refining and marketing integrations in our core areas. The second thing is one of the advantages of the markets we operate in is we enjoy a higher gross margin, which has been really a focus of what we've been trying to do to really drive even a higher gross margin. And then finally, in most cases, we enjoyed some crude advantage that we really try to take to use so that we can get lower crude cost into our refineries.

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