Tesoro ends 2014 with $1 billion cash balance, total consolidated debt of $4.3 billion

By Lisa Kerner

Charlotte, N.C., Feb. 12 – Tesoro Corp. ended 2014 with “a strong cash balance of $1 billion” and total consolidated debt of $4.3 billion, or 38% of total capitalization, said chief financial officer Steven Sterin during the company’s fourth-quarter earnings call on Thursday.

The company had excess credit capacity of $2.2 billion on a corporate revolver, with no borrowings.

Excluding Tesoro Logistics LP debt and equity, total debt was $1.7 billion, or 27% of total capitalization, at the end of the fourth quarter. TLLP ended the quarter with $260 million in borrowings under its separate revolving credit facility.

When asked about the current debt level and possible uses of cash, Sterin said that operating with a total debt-to-capitalization under 30% is “very comfortable.” Tesoro is also continuing to move in the direction of investment grade, he said.

“Based on the overall cost of capital, the cash generation of the business, [and] the flexibility we have with our current balance sheet, delevering the balance sheet right now isn’t the highest priority,” said Sterin.

Tesoro had fourth-quarter net earnings of $145 million, or $1.13 per diluted share, compared to a $7 million loss for the prior-year period. For the full-year, Tesoro’s net earnings were up 105% year over year at $843 million.

Share repurchases, dividends

Tesoro returned $187 million to shareholders in the fourth quarter. The company bought 2.2 million shares for $150 million, completing its previously existing $1 billion share repurchase program, and paid $37 million in dividends, according to Sterin.

Tesoro expects to continue to focus on opportunistic repurchases in 2015 under the new $1 billion share repurchase program authorized by the board of directors in July, the earnings news release stated.

During 2014, Tesoro returned more than $600 million to shareholders in the form of dividends and share repurchases. The company also invested $500 million in TLLP during 2014, noted chairman, president and chief executive officer Greg Goff.

On Feb. 11, Tesoro’s board announced a 40% increase in the regular quarterly dividend to $0.425 per share payable on March 13 to all holders of record as of Feb. 27.

Tesoro is a San Antonio-based owner, operator, developer and acquirer of crude oil and refined products logistics assets.

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