The two sides of San Antonio, TX-based Tesoro Corp. and its midstream unit, Tesoro Logistics (TLP), showed different faces of the low commodity price environment in 2Q2016, but CEO Greg Goff said there are opportunities for both companies.

While both were in the black during the most recent quarter, Tesoro Corp. reported lower quarter-over-quarter results and TLP showed increased profits.

Goff reiterated a strategy aimed at growth through acquisitions during recent quarterly conference calls.

"We completed two acquisitions during the quarter that further strengthened our portfolio and each have significant energy opportunities and growth potential," said Goff, referring to Flint HIlls Resources’ wholesale marketing/logistics assets in Alaska and the Dakota Prairie refinery in North Dakota (see Shale Daily, June 28).

On the downside, however, Goff said crude oil differentials continue to be "significantly narrower" than the company's expectations, resulting in "lower capture rates and refining profitability" than Tesoro's expectations at the start of this year. "Refining utilization is at the low end of our expectations,” he said.

For TLP, the quarter saw growth in crude oil pipeline gathering, natural gas liquids terminalling/transportation, and newly acquired Los Angeles crude-handling and storage assets, Goff said.

"TLP continues to grow its business, remaining on track to achieve our target of $825 million of annual revenues and more than $1 billion of annual EBITDA by the end of 2017," he said.

Goff classified the operations and earnings in the midstream as "resilient," saying that even with the current challenging commodity price environment, "we continue to focus on capturing existing crude oil production in the Bakken."

He reiterated for analysts that the strategy remains to grow TLP through acquisitions, noting that the company raised $700 million in debt during the quarter to fund the strategy. It also raised more than $300 million in unit sales in the master limited partnership.

Tesoro is delaying the drop down of the Great Northern assets into TLP until early next year to finish restructuring of the newly acquired assets.

"We're doing some restructuring to the assets to provide some advantages to the producers for our crude supply in North Dakota, and that is going to take a little longer than we expected, so we decided to move that drop down into next year," Goff said. "The customers on the system are both producers and Tesoro because of the rail facility on the southern portion of the assets, so it's a mix and Tesoro will be using the rail facilities to ship to the West Coast, starting next year."

For 2Q2016, Tesoro had net earnings of $806 million ($3.47/share), compared to $1.07 billion ($4.62) for the same period in 2015. For TLP, the most recent quarter showed net earnings of $83 million, compared to $67 million for the second quarter last year.

For up-to-date 2Q2016 earnings and projections, check out NGI's Earnings Call and Coverage sheet.