Andeavor Makes Headway on West Coast Refinery Projects

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Researched by Industrial Info Resources (Sugar Land, Texas)--Andeavor (NYSE: ANDV) (San Antonio, Texas) has started construction of its Los Angeles refining and integration project in California, company executives said recently. The project includes the full integration of the Carson and Wilmington operations, which have a combined capacity of 380,000 barrels per day (BBL/d). Formerly known as Tesoro Corporation, the company officially became Andeavor on August 1. Industrial Info is tracking $1.8 billion in project activity by the refining, marketing and logistics company.

Speaking to investment analysts during the company's second-quarter earnings conference call, Chief Executive Officer Gregory Goff said that in addition to integrating the operations of the two refineries, the project will yield flexibility of 30,000- to 40,000-BBL/d between gasoline and distillates, and will reduce greenhouse gas emissions. The company expects the project to generate $65 million of net earnings and $125 million of annual earnings before interest, taxes, depreciation and amortization (EBITDA) and will be completed in 2019.

"The two large elements of the project are decommissioning the fluid catalytic cracking unit, or FCCU, and the construction of the Los Angeles refinery interconnect pipeline system," Goff said. "We expect to decommission the FCCU by year-end 2018 and the pipeline bundle, which further connects both portions of the Los Angeles refining complex, is expected to be completed in mid-2018."

At the Carson refinery, Industrial Info is tracking the $80 million Wet Jet Merox Treater Unit Addition project, which is part of the refinery integration and compliance project. The 50,000-barrel-per-day unit would reduce sulfur content in jet fuel. For related information, see Industrial Info's project report, and March 9, 2017, article - Tesoro's 2017 Capex Reflects West Coast Refining, Terminal Projects.

The company has also made progress on its Clean Products Upgrade Project in Anacortes, Washington. Industrial Info is tracking more than $500 million in project activity that is tied to the upgrade. As part of that upgrade, Andeavor expects the naphtha isomerization unit addition to be completed in the second quarter of 2018. For more information, see Industrial Info's project report.

The mixed xylene project at Anacortes has also obtained its environmental impact statement permit, and can now move forward on remaining permits, Goff said, adding: "We expect to make a final investment decision on this project at the beginning of 2018." For more information, see Industrial Info's project report.

Also this month, Andeavor said it received enough commitments from third-party shippers to warrant construction of the Conan Crude Oil Gathering Pipeline System in the Delaware Basin. The 130-mile pipeline would transport crude oil from origins in Lea County, New Mexico, and Loving County, Texas, to a terminal to be constructed in Loving Country, where the gathering system interconnects with long-haul pipeline carriers. The first phase of the Conan Pipeline system will have a capacity of about 250,000 BBL/d. The system is expected to begin commercial service in mid-2018. Future phases of may expand capacity up to 500,000 BBL/d per day. For related information, see Industrial Info project report.

Andeavor expects 2017 capital expenditures to be about $1.35 billion. Expected turnaround cash expenditures are $485 million.

Tesoro changed to Andeavor following the acquisition of Western Refining Incorporated (El Paso, Texas) earlier this year. Western Refining assets include refineries in El Paso, Gallup, New Mexico and St. Paul Park, Minnesota. Goff said Andeavor will focus on gasoline and diesel markets in northwest Mexico.

Andeavor reported second-quarter 2017 earnings of $40 million, compared with $418 million in second-quarter 2016. The results for the just-ended quarter reflect a pre-tax expense of $209 million and integration costs of $124 million related to the Western Refining acquisition. They also reflect the absence of a pre-tax benefit of $363 million that was reported in second-quarter 2016.

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