The growth of domestic U.S. oil production from places like the Bakken Shale in North Dakota and the Uinta Basin in Utah will continue to boost growth of West Coast refining and crude rail operations, according to San Antonio-based Tesoro Corp. CEO Greg Goff.
Given major acquisitions/sales and a favorable cash situation at the end of last year for the independent refiner/marketer, Goff did not express much concern in reporting a 4Q2013 loss of $7 million (minus 5 cents/share) compared to net income of $27 million (19 cents/share) in 4Q2012. Calendar year 2013 net income from continuing operations was $392 million ($2.85/share), compared to $876 million ($6.20/share) in 2012.
In answering questions from financial analysts, Goff was bullish about the company's operations in the Bakken Shale in North Dakota and the Uinta Basin in Utah, and the prospects for increased oil product exports from the West Coast, where Tesoro acquired BP West Coast Products LLC's refining, marketing and logistics businesses and has proposed a crude rail receiving terminal at the Port of Vancouver, WA. Goff said the latter facility should be operable late this year or early next.
"Bakken crude oil prices are holding up and continue to be very attractive," said Goff, noting that prices from North Dakota are averaging about $16/bbl below the global Brent price, a little "weaker" than in 4Q2013.
Another thing that is unlikely to change in the Bakken is the shortfall in diesel refining capacity, even with the prospect of Tesoro's expanded refining capacity at its Mandan, ND, facilities (see Shale Daily, Nov. 12, 2013).
"It is our understanding that this facility will produce diesel fuel to meet continuing strong demand in North Dakota for diesel," Goff said. "The Bakken area is significantly short of diesel, and our estimates are that it is short 40,000-60,000 b/d of diesel, and that is partially why we changed our yield at the refinery.
"The new production when it comes online should be able to meet some of that supply shortfall required for all the drilling activity [in the Bakken]. There are an added 20,000 b/d of diesel fuel so it won't eliminate the ongoing shortfall of diesel It will continue to be a short market going forward."
In response to a question on West Coast operations, Goff said there has been a sizable increase in exports of oil products out of that area and Tesoro sees the trend continuing. For 2013, exports averaged 160,000 b/d, with a peak during part of the year of 240,000 b/d, he said.
A lot of the export products went to Asia and Australia, particularly in the fourth quarter, Goff said. "That was a change from what we had seen, and the exports continue to be strong off the West Coast, and there might even also be more opportunities in Mexico and the west coast of South America going forward."