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2/12/2013 7:13:59 PM
Credit Suisse says" "Focus Still on FTC; West Coast Cracks Rebound; Revising Estimates and Raising Target Price to $63 (from $60)"
Bottom Line: "Despite narrower WTI-Brent, we think TSO shares will be positively impacted by the seasonal recovery in West Coast cracks (margins have improved by c$10-$15/bbl over the past 2 weeks), closure of the Carson City refinery acquisition, growth in TLLP logistics, further plans to capture advantaged domestic crude and once debt is reduced post Carson - ongoing share buybacks and a steady dividend payout (TSO raised the regular quarterly dividend by 33% to $0.20/sh (1.5% div yield annualized)."
Revising Estimates: "While TSO's 4Q12 results came in below consensus estimates, this was the first time the company generated positive (adjusted) earnings in the 4Q over the past 4 years (which is notable given that 4Q is considered to be a seasonally weak quarter). 2013 EPS estimates rise by c2% due to downtime impacts (1H13), while 2014-15 rise by c3% primarily on a better expected performance out of California (i.e. reliability). We are revising our 2013/2014/2015 EPS estimates to $5.49/$6.20/$6.34 (from $5.39/$6.01/$6.13) respectively. We raise our TP to $63 (from $60)."
FTC process on-going: "The second request for information was completed in January, and TSO believes that they are still on schedule for a mid-year completion. Note that FTC concerns have lingered since the deal was announced as TSO should have 28% of the California refining market when the deal closes, high but not excessive (our estimates do not reflect Carson)."
Crude into the West Coast Makes Sense. "TSO has started with Anacortes (40KBD currently, 50KBD post 2Q13 turnaround) and continues to pursue additional opportunities to deliver crude into Martinez (currently only 5KBD of Bakken) and Carson/Wilmington via Anacortes/marine. If TSO is successful in delivering these types of projects on a similar scale to Anacortes, the EBITDA uplift could be substantial."