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Andeavor turns toward executing business after recent slate of acquisitions

Andeavor executives said the company's recent pace of acquisitions is not necessarily indicative of its plans for the rest of the year as it eyes EBITDA growth of $1.4 billion by 2020.

The company was formed in 2017 from the merger between Tesoro Corporation and Western Refining Inc., while the master limited partnership Andeavor Logistics LP was formed out of the combination of Tesoro Logistics and Western Refining Logistics.

On Jan. 3, Andeavor announced the acquisition of Rangeland Energy II LLC, which operates assets in the Delaware and Midland basins, including a crude oil pipeline, three oil storage terminals, and a frac sand storage and truck-loading facility.

On Feb. 12, Andeavor announced the acquisition of five asphalt terminals from Delek.

"Our first priority for 2018 is the integration value," Andeavor president and CEO Greg Goff said during a Feb. 16 earnings call. "The things that we just announced … are partly just timing … things that we were looking at to fit into things. I don't think that's indicative of the rest of the year to be honest with you."

Goff said the company's plan to grow net earnings by $1 billion and EBITDA by $1.4 billion by 2020 is "very front-end loaded and … about execution of the business."

Following the completion of the merger, Goff said the company exited 2017 with $190 million in annual run-rate synergies, of which $100 million are corporate efficiencies and $90 million consist of value chain optimization and operational improvements. Goff said he expects the company to achieve a run rate of between $350 million and $425 million by mid-2019.

Andeavor CFO Steven Sterin said following the U.S. Tax Cut and Jobs act signed into law by President Trump at the end of 2017, he expects Andeavor to have an effective tax rate of between 20% and 24%, comprised of a cash tax rate between 8% and 10% and a deferred tax rate of approximately 12% to 15%.

Despite lower taxes, executives affirmed 2018 CapEx guidance of $1.5 billion, of which $1.1 billion would go to Andeavor and the remainder would go to Andeavor Logistics.

"We don't see [CapEx] growing over time," Goff said. "So basically, [that] makes it available to return to shareholders. We will probably reduce our debt slightly during that period of time."

For the fourth quarter of 2017, the company reported earnings of $879 million, or $5.61 per share, including a $911 million income tax benefit. The results missed the S&P Capital IQ consensus GAAP estimate of $5.64 per share.

Refining, marketing and logistics operating income was $375 million, up from $335 million during the fourth quarter of 2016.

The company reported a fourth quarter of 2017 operating loss for its refining segment of $56 million versus operating income of $43 million during the fourth quarter of 2016, due to a negative $185 million impact that stemmed from building inventories in advance of first-quarter maintenance, inventory and Canadian crude oil supply hedging, unplanned maintenance, and "other special items."

For 2017, the company reported earnings of $1.53 billion, up from $734 million in 2016.