Tesoro Earnings Call Nuggets: California Details and Vancouver Project Update

Tesoro Corporation (NYSE:TSO) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

California Details

Evan Calio – Morgan Stanley: A question on California. You beat the quarter with the higher capture rate, and I was wondering if you could give me any color here. Did you just run well in California or is that the inclusion of Carson that lifted returns? Any color on separating those two items?

Gregory J. Goff – President and CEO: I’ll let Dan comment on that for you, Evan.

Dan Romasko – EVP, Operations: I think we characterize our capture rate as pretty close to what we expected. 120% plus capture rate on 107% utilization is pretty strong. Actually, the higher utilization reduced capture a bit relative to what we’d expect that utilizations that are sub 100%. Carson, obviously, had a great run in the month of June, and it was a piece of success.

Evan Calio – Morgan Stanley: A question on differentials. They’ve compressed since announcing your planned rail project in Vancouver. If we focus on California, where I presume a lion share of the volumes will likely go, if we consider rail shipping to yield lift, I mean, is the cash breakeven from Bakken (indiscernible) something – is it around $10 number? Can you give any more specifics around where that indifference point is for you?

Gregory J. Goff – President and CEO: Evan, we still see the differentials on that Bakken crude going to the West Coast as unchanged on a go-forward basis. We see the attractiveness of – because of the lower cost to move Bakken there relative to other locations and the yield advantage that you get, that continues to be strong over time.

Evan Calio – Morgan Stanley: Any color on how much. I know you said you’re going to give a synergy updates on Carson later in the year, but any update on how you may change that crude diet or is that also something we’d expect later in the year?

Gregory J. Goff – President and CEO: Yeah. Everything we’ve seen so far we are very positive on our early indications for the business and we plan to fully talk about what we see as we get little bit more time to digest that later this year.

Vancouver Project Update

Jeff Dietert – Simmons & Company International: What I wanted to ask about was the Port of Vancouver railing unloading project. I saw that you had recently received Board of Commissioner approval. What’s the status of your environmental permitting process and what major hurdles do you have before starting construction?

Gregory J. Goff – President and CEO: You’re exactly right, Jeff. We did receive unanimous approval from the commissioners last week, which was very positive step forward. We are now in the process of going through the permitting process to being able to bring the facility online, and that hasn’t really changed. We expect that to take the better part of about a year to get that fully developed in that, and it’s just a normal challenges have going through the regulatory process and complying with all the requirements, but we are fully prepared between Tesoro and with Savage to deal with that. Fortunately, we’ve already gone through a process similar when we did the Anacortes permit last year. So, we have some experience of how to do that.

Jeff Dietert – Simmons & Company International: Is there any notable resistance, either local or state? I know you were successful generating support for the Carson acquisition, any notable resistance to the Vancouver project?

Gregory J. Goff – President and CEO: It’s just what you would expect. There are different parties that have their opinions on this type of activity, that you have for work your way through in that. But we’re very confident with our plans on how we will operate with our sensitivity and awareness of the environment in that, that we’ll be able to work through all of that. But there is nothing that stands out at this point in time.

A Closer Look: Tesoro Earnings Cheat Sheet>>