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News Release

Andeavor Reports Fourth Quarter and Full Year 2017 Results

Financial Highlights

  • Reported full year earnings of $1.5 billion, or $10.81 per diluted share, consolidated net earnings of $1.7 billion and EBITDA of $2.6 billion, which includes $222 million of acquisition and integration costs
  • Reported quarterly earnings of $879 million, or $5.61 per diluted share, consolidated net earnings of $908 million and EBITDA of $445 million, which includes $34 million of acquisition and integration costs
  • Returned over $1 billion to shareholders in 2017 in dividends and share repurchases; returned $383 million to shareholders in fourth quarter including $292 million in share repurchases
  • Delivered approximately $505 million of annual improvements to operating income in 2017

Business Highlights

  • Completed Western Refining and Western Refining Logistics acquisitions
  • Exited the year with $190 million in annual run-rate Western Refining synergies
  • Achieved investment grade credit rating at Andeavor and Andeavor Logistics
  • Expanded Marketing footprint by successfully entering into Mexico
  • Increased total retail and branded stores 31% year-over-year to 3,255 stores
  • Grew full year Logistics segment operating income 37% from last year to $665 million
  • Communicated 2018-2020 business plan at its December Investor and Analyst Day that grows net earnings by $1.0 billion and delivers $1.4 billion of EBITDA growth

San Antonio, Texas - February 15, 2018 - Andeavor (NYSE: ANDV) today reported fourth quarter earnings of $879 million, or $5.61 per diluted share, compared to $78 million, or $0.66 per diluted share a year ago. Consolidated net earnings were $908 million for the fourth quarter 2017 compared to $101 million for the same period last year. EBITDA for the fourth quarter 2017 was $445 million compared to $468 million last year.

Fourth quarter 2017 results included the following pre-tax items totaling $151 million: costs related to Andeavor Logistics' (NYSE: ANDX) debt refinancing, an asset impairment charge related to the Vancouver Energy project, acquisition costs related to Andeavor Logistics' acquisition of Western Refining Logistics, LP (WNRL) and the IDR Buy-In transaction and integration costs related to the Western Refining (Western) acquisition. Fourth quarter 2017 results also included a benefit of $918 million related to the re-measurement of the Company's net deferred tax liabilities due to the recently enacted Tax Cuts and Jobs Act. Fourth quarter 2016 results included a pre-tax benefit related to a lower of cost or market (LCM) inventory adjustment of $123 million.

"2017 was an excellent year for Andeavor; we closed the Western and WNRL acquisitions, expanded into Mexico and achieved investment grade credit ratings at both companies," said Greg Goff, Chairman and CEO. "We delivered $505 million of improvements to operating income and returned over $1 billion to shareholders in the form of dividends and share repurchases in 2017."

"Looking ahead, we remain well-positioned to deliver on the strategic plans outlined at our 2017 Investor and Analyst Day that we expect to grow EBITDA by $1.4 billion over the next three years. We continue to focus on driving strong operational performance and disciplined allocation of capital, further enhancing our integrated business model and returning cash to shareholders," added Goff.

  Three Months Ended
December 31,
  Year Ended
December 31,
(Unaudited) ($ in millions, except per share data) 2017   2016   2017   2016
Segment Operating Income (Loss)              
Marketing $ 236     $ 169     $ 788     $ 830  
Logistics 195     123     665     487  
Refining (56 )   43     785     535  
Total Segment Operating Income $ 375     $ 335     $ 2,238     $ 1,852  
Net Earnings From Continuing Operations Attributable to Andeavor (a) $ 879     $ 78     $ 1,520     $ 724  
               
Diluted EPS - Continuing Operations $ 5.61     $ 0.66     $ 10.75     $ 6.04  
Diluted EPS - Discontinued Operations -     -     0.06     0.08  
Total Diluted EPS $ 5.61     $ 0.66     $ 10.81     $ 6.12  

(a)   Referred to in the body of this press release as "earnings."

Segment Results

Marketing
Marketing segment operating income was $236 million and segment EBITDA was $255 million in the fourth quarter 2017. This compares to segment operating income of $169 million and segment EBITDA of $192 million last year. Overall fuel margins for the fourth quarter 2017 were 12.2 cents per gallon compared to 11.4 cents per gallon last year, and Retail and Branded fuel margins were 23.4 cents per gallon compared to 19.6 cents per gallon in 2016. A stronger market along with positive contributions from the Western Refining stores added to Andeavor's portfolio resulted in increased margins.

For the fourth quarter, merchandise margin increased to $47 million from $1 million in 2016 driven by the Western acquisition. Andeavor continued to grow its network of branded stores, increasing by 763 stores, or 31% year-over-year, to 3,255. This was primarily driven by the Western acquisition, the acquisition of retail stores in northern California and the continued execution of the Company's organic growth plan, including rebranding and expansion into Mexico. Andeavor opened 28 ARCO® stores in Mexico as of January 31, 2018.

Logistics
Logistics segment operating income increased to $195 million in the fourth quarter 2017 from $123 million a year ago and segment EBITDA increased to $267 million from $177 million last year. Results include $9 million of acquisition costs related to Andeavor Logistics' acquisition of WNRL and the IDR Buy-In transaction. The Company reports Andeavor Logistics' wholesale business in its Marketing segment, which represents approximately $6 million of operating income for the fourth quarter. The increase in segment operating income and segment EBITDA was primarily driven by contributions from the WNRL acquisition, the North Dakota Gathering and Processing Assets acquisition, 2016 and 2017 drop downs and organic growth.

Refining
Refining segment operating loss was $56 million for the fourth quarter 2017 compared to segment operating income of $43 million in 2016. Segment EBITDA was $120 million compared to $205 million in 2016.  Refining margin was $787 million, or $7.62 per barrel, for the fourth quarter 2017. This compares to a refining margin of $731 million, or $9.45 per barrel, in the fourth quarter 2016.

Fourth quarter 2017 Refining segment operating loss was negatively impacted by approximately $185 million. This was primarily driven by building inventories in advance of first quarter 2018 maintenance, inventory and Canadian crude oil supply hedging, unplanned maintenance and other special items. To supply marketing requirements during the Los Angeles refineries' maintenance in early 2018, the Company built inventory of gasoline and diesel. This negatively impacted fourth quarter results by $50 million but is expected to have a favorable impact in 2018. In addition, the Company realized a negative impact of $85 million on crude oil inventory that was hedged as well as forward pricing of a portion of Canadian crude oil supply for the St. Paul Park refinery. As a result of the wide Canadian heavy crude differentials, the Company elected to remove the hedges, and this is expected to have a favorable impact on 2018 results. During the quarter, unplanned maintenance was performed at four refineries that negatively impacted yields by $25 million. Finally, $25 million of expense related to litigation, environmental and insurance costs were incurred in the quarter. Fourth quarter 2016 segment operating income and segment EBITDA included a pre-tax benefit related to a LCM inventory adjustment of $123 million.

Corporate and Other
Corporate and unallocated costs for the fourth quarter 2017 were $208 million and included integration costs related to the Western acquisition, costs incurred by Andeavor in connection with Andeavor Logistics' acquisition of WNRL and the IDR Buy-In transaction and an asset impairment charge related to the Vancouver Energy project. Net interest was $166 million in the fourth quarter 2017, which included $77 million of costs associated with the refinancing of debt following Andeavor Logistics' upgrade to investment grade credit rating during the quarter. Due to the Federal tax reform, fourth quarter 2017 results include approximately $918 million of benefit related to the re-measurement of the Company's net deferred tax liabilities. Furthermore, the Company estimates that compared to the 2018-2020 outlook provided at its Investor and Analyst Day in December 2017, Federal tax reform legislation is expected to result in additional cumulative cash flow from operations of approximately $1.0 to $1.5 billion through 2020.

Balance Sheet and Cash Flow
Andeavor ended the year with $543 million in cash and cash equivalents. This was down from $3.3 billion at the end of 2016 primarily due to the closing of the Western acquisition and Andeavor Logistics' acquisition of the North Dakota Gathering and Processing Assets. Andeavor currently has approximately $2.9 billion of availability under its revolving credit facility. Total debt, net of unamortized issuance costs, was $7.7 billion at the end of the fourth quarter. Excluding Andeavor Logistics, total debt was $3.6 billion.

Capital spending for the fourth quarter 2017 was $462 million, consisting of $378 million for Andeavor and $84 million for Andeavor Logistics. Turnaround expenditures for the fourth quarter were $125 million. Capital spending for the full year 2017 was $1.4 billion, consisting of $1.1 billion at Andeavor and $237 million at Andeavor Logistics. Turnaround expenditures for the full year 2017 were $548 million.

Andeavor repurchased 2.7 million shares for approximately $292 million in the fourth quarter and has over $1.4 billion remaining under its previously approved share repurchase programs. The Company paid cash dividends of $91 million in the fourth quarter 2017. Additionally, Andeavor today announced that the board of directors has declared a quarterly cash dividend of $0.59 per share payable on March 15, 2018 to all holders of record as of February 28, 2018. Andeavor remains focused on capital allocation discipline and maintaining a strong, investment grade balance sheet, which provides flexibility to continue to invest in high-return capital projects, return cash to shareholders through share repurchases and dividends and pursue strategic acquisitions.

Strategic Update
Western Synergy Update. Andeavor is committed to delivering an expected $350 to $425 million in annual run-rate synergies by June 2019, the second year following the close of the Western transaction. Andeavor achieved approximately $190 million in annual run-rate synergies in 2017, primarily related to approximately $100 million in corporate efficiencies and the remainder in value chain optimization and operational improvements.

Inaugural Investment Grade Debt Offering. During the quarter, Andeavor completed a $1 billion public offering of senior notes. The Company used the net proceeds from the public offering to repay borrowings under its revolving credit facility and pay the fees and expenses associated with the offering. The inaugural investment grade offering exemplifies the execution of Andeavor's financial strategy, which is focused on creating additional value for investors by lowering the cost of capital and extending debt maturities.

Acquisition of Asphalt Terminals. On February 12, 2018, Andeavor announced its agreement to acquire the West Coast asphalt terminals of Delek US Holdings, Inc. (NYSE: DK). The assets include four wholly-owned terminals in Elk Grove, CA; Bakersfield, CA; Mojave, CA; and Phoenix, AZ, as well as 50% interest in the Paramount Nevada Asphalt Company joint venture terminal in Fernley, NV.

Upon close, Andeavor expects to grow its asphalt business to serve more customers, provide superior customer service and expand the product offering. The Company expects to improve the business and increase sales by approximately 20% over the next three years. This acquisition will bring Andeavor's total asphalt capacity to more than 430,000 tons across ten terminal locations. The acquisition, which is subject to customary closing conditions including regulatory approval, is anticipated to close in the first half of 2018.

Acquisition of Rangeland Energy II, LLC. On January 19, 2018, Andeavor closed the acquisition of 100% of the equity of Rangeland Energy II, LLC, which owns and operates assets in the Delaware and Midland Basins, including a recently-constructed crude oil pipeline, three crude oil storage terminals and a frac sand storage and truck loading facility.  Andeavor plans to integrate the acquired 110-mile crude oil pipeline (with ultimate throughput capacity of 145,000 barrels per day) and crude oil storage terminals with its nearby Conan Crude Oil Gathering System, currently under construction. 

Permian Expansion Update. In 2018, Andeavor expects to offer its newly acquired interest in the Rangeland crude oil assets, as well as other Andeavor Permian logistics assets to Andeavor Logistics. Andeavor also expects to transfer the Conan Crude Oil Gathering System at cost plus interest. This integrated system, combined with Andeavor Logistics existing Permian assets, is expected to see considerable volume growth and additional expansion projects over the next several years.

Andeavor Logistics also announced today that it has been awarded two new crude oil gathering projects in the Delaware Basin. These projects are with investment grade producers and are supported by acreage dedications totaling approximately 40,000 acres. Andeavor Logistics expects a capital investment of $25 to $30 million, with project completions anticipated late 2018 and early 2019. We expect these projects to deliver segment operating income of $3 to $4 million and $4 to $5 million of segment EBITDA to the Logistics segment in 2019, a 6 to 7 times multiple on invested capital.

Andeavor Logistics' Acquisition of Wamsutter Pipeline System. Andeavor Logistics today announced that it has agreed to acquire the Wamsutter Pipeline System from Plains All American Pipeline, L.P. (NYSE: PAA). The system consists of 575 miles of advantaged crude oil transportation pipelines that connect into Salt Lake City refineries. We expect the assets to provide annual segment operating income $14 to $18 million and segment EBITDA of $20 to $24 million for the Logistics segment, including synergies. The acquisition, which is subject to customary closing conditions including regulatory approval, is anticipated to close in the first half of 2018.

Completion of WNRL Acquisition and IDR Buy-In. In the fourth quarter 2017, Andeavor Logistics completed its $1.7 billion acquisition of WNRL. Immediately following the closing of the acquisition, Andeavor and Andeavor Logistics completed the IDR Buy-In Transaction whereby Andeavor Logistics issued ANDX common units to Andeavor in exchange for the cancellation of Andeavor Logistics' IDRs and the conversion of its economic general partner interest into a non-economic general partner interest.

Drop Down of Anacortes Logistics Assets. During the quarter, Andeavor Logistics acquired logistics assets located in Anacortes, Washington from Andeavor for total consideration of $445 million. The Anacortes Logistics Assets located at Andeavor's Anacortes Refinery include 3.9 million barrels of crude oil, feedstock, and refined products storage, the Anacortes Marine terminal, a manifest rail facility, and crude oil and refined product pipelines.

Improvements to Operating Income. Andeavor delivered approximately $505 million of improvements to operating income in 2017, which was within its target of $475 to $575 million. Of these improvements, approximately $40 million were in Marketing, approximately $175 million in Logistics and approximately $290 million in Refining. The improvements to operating income exclude synergies from the Western acquisition.

2018 Outlook
In December 2017, Andeavor issued its expectations for 2018, which include an Andeavor Index of $12 to $14 per barrel and Marketing segment fuel margins of 11 to 14 cents per gallon. The Company expects total capital expenditures for 2018 of approximately $1.5 billion, consisting of $1.1 billion at Andeavor and $430 million at Andeavor Logistics. Turnaround expenditures for the full year 2018 are expected to be $575 million.

"We are excited about the opportunities we see in our business to increase gross margin, improve productivity and deliver synergies from our acquisitions, which support our plan to generate $9 to $12 billion of cash over the next three years, inclusive of the benefits from tax reform. Additionally, we also see the potential for significant opportunities from IMO 2020," said Goff. "As always, we remain focused on disciplined capital allocation that delivers the most value to our shareholders."

Public Invited to Listen to Analyst and Investor Conference Call
At 7:30 a.m. CT tomorrow morning, Andeavor will live broadcast its conference call with analysts regarding fourth quarter 2017 results and other business matters. Interested parties may listen to the conference call by logging on to http://www.andeavor.com.

About Andeavor
Andeavor is a premier, highly integrated marketing, logistics and refining company. Andeavor's retail-marketing system includes more than 3,250 stores marketed under multiple well-known fuel brands, including ARCO®, SUPERAMERICA®, Shell®, Exxon(TM), Mobil(TM), Tesoro®, USA Gasoline(TM) and Giant®. It also has ownership in Andeavor Logistics LP (NYSE: ANDX) and its non-economic general partner. Andeavor operates 10 refineries with a combined capacity of approximately 1.2 million barrels per day in the mid-continent and western United States.


This earnings release contains "forward-looking" statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, including without limitation statements concerning: our operational, financial and growth strategies, including continued growth, disciplined capital allocation, enhancing our integrated business model, maintaining a strong, investment grade balance sheet, investing in high-return capital projects, pursuing strategic acquisitions, returning cash to our shareholders, driving growth and improvements, delivering synergies lowering our cost of capital and extending debt maturities; our ability to successfully effect those strategies and the expected timing and results thereof; our financial and operational outlook, and ability to fulfill that outlook; our financial position, liquidity and capital resources; expectations regarding future economic and market conditions and their effects on us; statements regarding our ability to deliver on the strategic plans outlined at our 2017 Investor and Analyst Day; expected effects of the Federal tax reform; expectations regarding additional cumulative cash flow from operations through 2020; delivery of synergies, including expected annual run-rate synergies from the Western acquisition and the sources thereof; the amount and timing of future dividends; statements regarding the planned West Coast asphalt terminals acquisition, including the expected capacity, timing, future plans and benefits thereof; statements regarding the Rangeland acquisition and plans to integrate it with the Conan Crude Oil Gathering System; statements regarding the expected drop down of Rangeland, other Permian logistics assets and the Conan Crude Oil Gathering System to Andeavor Logistics, including the expected benefits and timing thereof; expectations with respect to the Permian integrated system, including expected volume growth and additional expansion projects; statements regarding Andeavor Logistics' new crude oil gathering projects in the Delaware Basin, including expected capital investment, timing and the expected segment operating income and segment EBITDA provided thereby; statements regarding Andeavor Logistics' planned acquisition of the Wamsutter Pipeline System, including expected timing of the acquisition and the projected annual segment operating income and segment EBITDA provided thereby; growth opportunities and expected cash generation over the next three years; expected opportunities from IMO 2020; and our 2018 outlook, including expectations relating to the Andeavor Index, marketing segment fuel margins, total capital expenditures and the allocation thereof, including turnaround expenditures, first quarter 2018 guidance and expectations, and projected annual net earnings and annual EBITDA. For more information concerning factors that could affect these statements, see our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, and other public filings and press releases, available at www.andeavor.com. We undertake no obligation to revise or update any forward-looking statements as a result of new information, future events or otherwise.


Contact:

Investors:
Brad Troutman, Investor Relations, (210) 626-4568

Media:
Andeavor Media Relations, media@andeavor.com, (210) 626-7702

Andeavor
First Quarter 2018 Guidance (Unaudited)


Throughput (Mbpd)  
California 430 - 455
Pacific Northwest 185 - 195
Mid-Continent 400 - 420
Consolidated 1,015 - 1,070
   
Manufacturing Cost ($/throughput barrel)  
California $ 7.45 - 7.70
Pacific Northwest $ 3.70 - 3.95
Mid-Continent $ 4.60 - 4.85
Consolidated $ 5.65 - 5.90
   
Corporate/System ($ millions)  
Marketing depreciation and amortization $ 25 - 30
Logistics depreciation and amortization $ 80 - 85
Refining depreciation and amortization $ 175 - 180
Corporate and other depreciation and amortization $ 5 - 10
Corporate expense (before depreciation, but includes approximately $20 million of expected transaction costs) $ 165 - 175
Interest expense (before interest income) $ 95 - 105
Noncontrolling interest $ 60 - 70


Non-GAAP Measures

Our management uses certain "non-GAAP" performance measures to analyze operating segment performance and "non-GAAP" financial measures to evaluate past performance and prospects for the future to supplement our GAAP financial information presented in accordance with accounting principles generally accepted in the United States of America ("U.S. GAAP"). These financial and operational non-GAAP measures are important factors in assessing our operating results and profitability and include:

  • EBITDA-U.S. GAAP-based net earnings before interest, income taxes, and depreciation and amortization expenses;
  • Segment EBITDA-a segment's U.S. GAAP operating income before depreciation and amortization expenses plus equity in earnings (loss) of equity method investments and other income (expense), net;
  • Fuel margin-the difference between total marketing revenues and marketing cost of fuels and other;
  • Fuel margin per gallon-fuel margin divided by our total fuel sales volumes in gallons;
  • Merchandise margin-the difference between merchandise sales and purchases of merchandise;
  • Merchandise margin percentage-merchandise margin divided by merchandise sales;
  • Average margin on NGL sales per barrel-the difference between the NGL sales revenues and the amounts recognized as NGL expenses divided by our NGL sales volumes in barrels presented in Mbpd multiplied by 1,000 and multiplied by the number of days in the period, (92 days for both the three months ended December 31, 2017 and 2016, 365 days for the year ended December 31, 2017 and 366 days for the year ended December 31, 2016);
  • Refining margin-the difference between total refining revenues minus total cost of materials and other;
  • Refining margin per throughput barrel-refining margin divided by our total refining throughput in barrels multiplied by 1,000 and multiplied by the number of days in the period as stated above;
  • Manufacturing costs (excluding depreciation and amortization) per throughput barrel-manufacturing costs divided by our total refining throughput in barrels multiplied by 1,000 and multiplied by the number of days in the period as stated above (representing direct operating expenses incurred by our Refining segment for the production of refined products);
  • Total debt excluding Andeavor Logistics-our consolidated Andeavor debt less all debt owed by Andeavor Logistics (net of unamortized debt issuance costs); and
  • Total liquidity-the capacity under the Andeavor Revolving Credit Facility plus consolidated cash and cash equivalents less Andeavor Logistics' cash and cash equivalents.

We present these measures because we believe they may help investors, analysts, lenders and ratings agencies analyze our results of operations and liquidity in conjunction with our U.S. GAAP results, including but not limited to:

  • our operating performance as compared to other publicly traded companies in the refining, logistics and marketing industries, without regard to historical cost basis or financing methods;
  • our ability to incur and service debt and fund capital expenditures; and
  • the viability of acquisitions and other capital expenditure projects and the returns on investment of various investment opportunities.

Management also uses these measures to assess internal performance. Non-GAAP measures have important limitations as analytical tools, because they exclude some, but not all, items that affect net earnings and operating income. These measures should not be considered substitutes for their most directly comparable U.S. GAAP financial measures. See "Non-GAAP Reconciliations" below for reconciliations between non-GAAP measures and their most directly comparable U.S. GAAP measures.

Items Impacting Comparability


During 2017, we revised the title of certain of our financial statement line items to avoid any misperception that the amounts included are equivalent to financial information presented in accordance with U.S. GAAP. The underlying financial information has not changed from what we have previously disclosed. See our discussion under "Non-GAAP Measures" for additional information about the financial measures we use to analyze our operations.

On June 1, 2017, we closed the Western Refining Acquisition. Our results include the operations from Western Refining for the period of June 1, 2017 to December 31, 2017 and thus prior periods may not be comparable. With the Western Refining Acquisition, we have updated our segments to reflect the results and operations of Western Refining and WNRL. Our Marketing segment reflects our expanded marketing business that, combined with Western Refining, now consists of expanded wholesale marketing operations and over 3,250 retail stores marketed under multiple well-known fuel brands including ARCO®, SUPERAMERICA®, Shell®, Exxon(TM), Mobil(TM), Conoco®, Tesoro®, USA Gasoline(TM) and Giant®. Our renamed Logistics segment includes the results of Andeavor Logistics, excluding the Wholesale business. We now report the Logistics segment's results for the combined Terminalling and Transportation and Gathering and Processing business lines. Our Refining segment reports the results of our refining system that now consists of ten refineries in the western and mid-continent United States with a combined capacity of approximately 1.2 million barrels per day. The Refining segment includes the results from Andeavor's existing Refining segment along with the Refining business contributed in the Western Refining Acquisition.



Andeavor
Condensed Consolidated Balance Sheets (Unaudited) (In millions)


  December 31, 2017   December 31, 2016
Assets      
Current Assets      
Cash and cash equivalents (Andeavor Logistics: $75 and $688, respectively) $ 543     $ 3,295  
Receivables, net of allowance for doubtful accounts 1,961     1,108  
Inventories 3,630     2,640  
Prepayments and other current assets 749     371  
Total Current Assets 6,883     7,414  
Property, Plant and Equipment, Net (Andeavor Logistics: $5,413 and $3,444, respectively) 14,742     9,976  
Other Noncurrent Assets, Net (Andeavor Logistics: $2,251 and $1,478, respectively) 6,948     3,008  
Total Assets $ 28,573     $ 20,398  
       
Liabilities and Equity      
Current Liabilities      
Accounts payable $ 3,330     $ 2,032  
Current maturities of debt 17     465  
Other current liabilities 1,654     1,057  
Total Current Liabilities 5,001     3,554  
Deferred Income Taxes 1,591     1,428  
Debt, Net of Unamortized Issuance Costs (Andeavor Logistics: $4,127 and $4,053, respectively) 7,668     6,468  
Other Noncurrent Liabilities 898     821  
Total Equity 13,415     8,127  
Total Liabilities and Equity $ 28,573     $ 20,398  


Andeavor
Results of Consolidated Operations (Unaudited) (In millions, except per share amounts)


  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Revenues $ 10,652     $ 6,652     $ 34,975     $ 24,582  
Costs and Expenses:              
Cost of materials and other (excluding items shown separately below) 9,087     5,533     28,480     19,658  
Lower of cost or market inventory valuation adjustment -     (123 )   -     (359 )
Operating expenses (excluding depreciation and amortization) 890     680     3,182     2,541  
Depreciation and amortization expenses 282     218     1,021     851  
General and administrative expenses 190     118     742     401  
Loss on asset disposals and impairments 45     2     25     9  
Operating Income 158     224     1,525     1,481  
Interest and financing costs, net (166 )   (84 )   (439 )   (274 )
Equity in earnings of equity method investments 9     1     23     13  
Other income (expense), net (4 )   25     6     57  
Earnings (Loss) Before Income Taxes (3 )   166     1,115     1,277  
Income tax expense (benefit) (911 )   65     (560 )   427  
Net Earnings From Continuing Operations 908     101     1,675     850  
Earnings from discontinued operations, net of tax -     -     8     10  
Net Earnings 908     101     1,683     860  
Less: Net earnings from continuing operations attributable to noncontrolling interest 29     23     155     126  
Net Earnings Attributable to Andeavor $ 879     $ 78     $ 1,528     $ 734  
               
Net Earnings Attributable to Andeavor              
Continuing operations $ 879     $ 78     $ 1,520     $ 724  
Discontinued operations -     -     8     10  
Total $ 879     $ 78     $ 1,528     $ 734  
               
Net Earnings per Share - Basic              
Continuing operations $ 5.66     $ 0.67     $ 10.85     $ 6.11  
Discontinued operations -     -     0.06     0.08  
Total $ 5.66     $ 0.67     $ 10.91     $ 6.19  
Weighted average common shares outstanding - Basic 155.2   116.8   140.1   118.5
               
Net Earnings per Share - Diluted              
Continuing operations $ 5.61     $ 0.66     $ 10.75     $ 6.04  
Discontinued operations -     -     0.06     0.08  
Total $ 5.61     $ 0.66     $ 10.81     $ 6.12  
Weighted average common shares outstanding - Diluted 156.6   118.2   141.3   119.9


Andeavor
Selected Segment Operating Data (Unaudited) (In millions)


  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Earnings (Loss) Before Income Taxes              
Marketing $ 236     $ 169     $ 788     $ 830  
Logistics 195     123     665     487  
Refining (56 )   43     785     535  
Total Segment Operating Income 375     335     2,238     1,852  
Corporate and unallocated costs (208 )   (111 )   (713 )   (371 )
Intersegment eliminations (9 )   -     -     -  
Operating Income 158     224     1,525     1,481  
Interest and financing costs, net (166 )   (84 )   (439 )   (274 )
Equity in earnings of equity method investments 9     1     23     13  
Other income (expense), net (4 )   25     6     57  
Earnings (Loss) Before Income Taxes $ (3 )   $ 166     $ 1,115     $ 1,277  
Depreciation and Amortization Expenses              
Marketing $ 19     $ 13     $ 68     $ 49  
Logistics 70     51     276     190  
Refining 173     148     647     588  
Corporate 11     6     30     24  
Intersegment eliminations 9     -     -     -  
Total Depreciation and Amortization Expenses $ 282     $ 218     $ 1,021     $ 851  
Segment EBITDA              
Marketing $ 255     $ 192     $ 856     $ 889  
Logistics 267     177     954     696  
Refining 120     205     1,447     1,163  
Total Segment EBITDA $ 642     $ 574     $ 3,257     $ 2,748  
Capital Expenditures              
Marketing $ 42     $ 12     $ 73     $ 34  
Logistics 84     92     237     273  
Refining 294     166     844     519  
Corporate 42     54     199     122  
Total Capital Expenditures $ 462     $ 324     $ 1,353     $ 948  
Turnaround Expenditures and Branding Costs              
Turnarounds and catalysts $ 125     $ 101     $ 548     $ 334  
Marketing branding 17     25     76     80  
Total Turnaround Expenditures and Marketing Branding Costs $ 142     $ 126     $ 624     $ 414  


Andeavor
Reconciliation of Amounts Reported Under U.S. GAAP (Unaudited) (In millions)


  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Reconciliation of Net Earnings to EBITDA              
Net Earnings $ 908     $ 101     $ 1,683     $ 860  
Depreciation and amortization expenses 282     218     1,021     851  
Interest and financing costs, net 166     84     439     274  
Income tax expense (benefit) (911 )   65     (560 )   427  
EBITDA $ 445     $ 468     $ 2,583     $ 2,412  

Reconciliation of Marketing Segment Operating Income to Marketing Segment EBITDA              
Marketing Segment Operating Income $ 236     $ 169     $ 788     $ 830  
Depreciation and amortization expenses 19     13     68     49  
Other income, net -     10     -     10  
Segment EBITDA $ 255     $ 192     $ 856     $ 889  
               
Reconciliation of Logistics Segment Operating Income to Logistics Segment EBITDA              
Logistics Segment Operating Income $ 195     $ 123     $ 665     $ 487  
Depreciation and amortization expenses 70     51     276     190  
Equity in earnings of equity method investments 2     3     10     13  
Other income, net -     -     3     6  
Segment EBITDA $ 267     $ 177     $ 954     $ 696  
               
Reconciliation of Refining Segment Operating Income (Loss) to Refining Segment EBITDA              
Refining Segment Operating Income (Loss) $ (56 )   $ 43     $ 785     $ 535  
Depreciation and amortization expenses 173     148     647     588  
Equity in earnings (loss) of equity method investments 6     (2 )   13     -  
Other income (expense), net (3 )   16     2     40  
Segment EBITDA $ 120     $ 205     $ 1,447     $ 1,163  


Andeavor
Other Summary Financial Information (Unaudited) (In millions)


Western Refining Acquisition - Summary of Integration, Acquisition and Deal-Related Costs (Consolidated)
  Three Months Ended   Cumulative Total
  December 31, 2017   September 30, 2017   June 30, 2017   March 31, 2017   December 31, 2016  
General and administrative expenses $ 11     $ 32     $ 124     $ 16     $ 3     $ 186  
Interest and financing costs, net -     -     11     17     21     49  
Total Before Income Taxes $ 11     $ 32     $ 135     $ 33     $ 24     $ 235  

Components of Cash Flows  
  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Cash Flows From (Used in):              
Operating activities $ 429     $ 103     $ 1,630     $ 1,304  
Investing activities (470 )   (297 )   (2,443 )   (1,317 )
Financing activities 56     2,102     (1,939 )   2,366  
Increase (Decrease) in Cash and Cash Equivalents $ 15     $ 1,908     $ (2,752 )   $ 2,353  

Other Financial Information  
  December 31, 2017   December 31, 2016
Total market value of Andeavor Logistics units held by Andeavor (a) $ 5,907     $ 1,730  

Cash Distributions Received From Andeavor Logistics and WNRL (b):
  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
For common units held $ 126     $ 29     $ 237     $ 108  
For general partner units held -     42     131     137  
Total Cash Distributions Received from Andeavor Logistics and WNRL $ 126     $ 71     $ 368     $ 245  

(a)   Represents market value of 127,889,386 common units and 34,055,042 common units held by Andeavor at December 31, 2017 and December 31, 2016, respectively. The market values were $46.19 and $50.81 per unit based on the closing unit price at December 31, 2017 and December 31, 2016, respectively.
(b)   Represents distributions received from Andeavor Logistics and WNRL during the three months and years ended December 31, 2017 and 2016 on common units and general partner units held by Andeavor.


Andeavor
Segment Operating Data and Results (Unaudited) ($ in millions, except cents per gallon and percentages)


      Three Months Ended
December 31,
  Year Ended
December 31,
Marketing Segment     2017   2016   2017   2016
Revenues   $ 6,019     $ 3,932     $ 21,513     $ 15,490  
Expenses                
Cost of fuels and other (excluding items shown separately below)   5,582     3,667     20,122     14,292  
Operating expenses (excluding depreciation and amortization)   171     77     511     298  
Depreciation and amortization expenses   19     13     68     49  
Selling, general and administrative expenses   10     5     23     17  
Loss on asset disposals   1     1     1     4  
Segment Operating Income   $ 236     $ 169     $ 788     $ 830  
Fuel Sales (millions of gallons)                
Retail     480     291     1,610     1,178  
Branded     872     845     3,458     3,372  
Total Retail and Branded     1,352     1,136     5,068     4,550  
Unbranded     1,542     1,045     5,405     4,329  
Total Fuel Sales     2,894     2,181     10,473     8,879  
Marketing Margin                  
Retail and Branded fuel margin     $ 320     $ 223     $ 1,058     $ 1,061  
Unbranded fuel margin     36     27     110     69  
Total Fuel Margin (c)     356     250     1,168     1,130  
Merchandise margin (c)     47     1     127     8  
Other margin     34     14     96     60  
Total Convenience Margin     81     15     223     68  
Total Marketing Margin (c)     $ 437     $ 265     $ 1,391     $ 1,198  
                   
Fuel Margin (¢/gallon) (c)            
Retail and Branded Fuel Margin     23.4 ¢   19.6 ¢   20.9 ¢   23.3 ¢
Unbranded Fuel Margin     2.5 ¢   2.5 ¢   2.0 ¢   1.6 ¢
Total Fuel Margin     12.2 ¢   11.4 ¢   11.2 ¢   12.7 ¢
                   
Merchandise Margin % (c)     26.0 %   31.3 %   27.1 %   34.4 %
                   
Number of Branded Stores (at the end of the period)       December 31, 2017   December 31, 2016
Company operated             524     -  
MSO-operated             561     594  
Total Retail Stores             1,085     594  
Jobber/Dealer operated             2,170     1,898  
Total Retail and Branded Stores           3,255     2,492  

(c)   Management uses fuel margin and fuel margin per gallon to compare fuel results and merchandise margin and merchandise margin percentage to compare retail results to other companies in the industry. There are a variety of ways to calculate fuel margin, fuel margin per gallon, merchandise margin and merchandise margin percentage. Different companies may calculate these measures in different ways. Refer to "Non-GAAP Measures" and "Non-GAAP Reconciliations" for further information regarding these non-GAAP measures. Fuel margin and fuel margin per gallon include the effect of intersegment purchases from the Refining segment.


Andeavor
Segment Operating Data and Results (Unaudited) ($ in millions, except per barrel amounts, per Mbpd, and per MMBtu)


  Three Months Ended
December 31,
  Year Ended
December 31,
Logistics Segment

 
2017   2016   2017   2016
Revenues              
Terminalling and transportation              
Terminalling $ 196     $ 135     $ 688     $ 480  
Pipeline transportation 33     32     130     125  
Other revenues 9     -     18     -  
Gathering and processing              
NGL sales (e) 115     25     369     103  
Gas gathering and processing 81     66     333     264  
Crude oil and water gathering 81     33     228     133  
Pass-thru and other revenue 45     28     165     115  
Logistics Revenues (d) 560     319     1,931     1,220  
Expenses              
Terminalling and transportation              
Operating expenses (excluding depreciation and amortization) (g) 77     50     257     193  
Gathering and processing              
NGL expense (excluding items shown separately below) (e)(f) 86     -     265     2  
Operating expenses (excluding depreciation and amortization) (g) 90     70     357     249  
Depreciation and amortization expenses 70     51     276     190  
General and administrative expenses (g) 42     24     135     95  
(Gain) loss on asset disposals and impairments -     1     (24 )   4  
Segment Operating Income $ 195     $ 123     $ 665     $ 487  
               
Terminalling and transportation              
Terminalling throughput (Mbpd) 1,671     992     1,428     984  
Average terminalling revenue per barrel (h) $ 1.27     $ 1.48     $ 1.32     $ 1.33  
Pipeline transportation throughput (Mbpd) 946     874     902     868  
Average pipeline transportation revenue per barrel (h) $ 0.39     $ 0.39     $ 0.40     $ 0.39  
Gathering and processing              
NGL sales (Mbpd) (i) 11.4     7.1     8.3     7.5  
Average margin on NGL sales per barrel (e)(f)(h) $ 28.10     $ 36.95     $ 34.77     $ 36.59  
Gas gathering and processing throughput (thousands of MMBtu/d) 988     871     963     879  
Average gas gathering and processing revenue per MMBtu (h) $ 0.89     $ 0.82     $ 0.95     $ 0.82  
Crude oil and water gathering volume (Mbpd) 327     218     296     212  
Average crude oil and water gathering revenue per barrel (h) $ 2.68     $ 1.68     $ 2.11     $ 1.72  

(d)   Included in our Refining segment's cost of materials and other were Logistics segment revenues for services provided to our Refining segment of $311 million and $194 million for the three months ended December 31, 2017 and 2016, respectively, and $1.0 billion and $715 million for the year ended December 31, 2017 and 2016, respectively. These amounts are eliminated upon consolidation.
(e)   For the three months ended December 31, 2017, the Logistics segment had 25.6 Mbpd of gross natural gas liquids ("NGL") sales under percent of proceeds ("POP") and keep-whole arrangements. Our Logistics segment retained 11.4 Mbpd under these arrangements. For the year ended December 31, 2017, Logistics had 22.2 Mbpd of NGL sales under POP and keep-whole arrangements. Our Logistics segment retained 8.3 Mbpd under these arrangements. The difference between gross sales barrels and barrels retained is reflected in NGL expense resulting from the gross presentation required for the POP arrangements associated with the North Dakota Gathering and Processing Assets.
(f)    Included in NGL expense for the year ended December 31, 2017 were approximately $2 million of crude costs related to crude oil volumes obtained in connection with the North Dakota Gathering and Processing Assets acquisition. The corresponding revenues were recognized in pass-thru and other revenue. As such, the calculation of the average margin on NGL sales per barrel for the year ended December 31, 2017 excludes this amount.
(g)   Our Logistics segment operating expenses and general and administrative expenses include amounts billed by Andeavor for services provided to Andeavor Logistics under various operational contracts. Amounts billed by Andeavor included in operating expenses totaled $54 million and $83 million for the three months ended December 31, 2017 and 2016, respectively, and $186 million and $190 million for the years ended December 31, 2017 and 2016, respectively. The net amounts billed include reimbursements of $4 million and $5 million for the three months ended December 31, 2017 and 2016, respectively, and $16 million and $17 million for the years ended December 31, 2017 and 2016, respectively. Amounts billed by Andeavor included in general and administrative expenses totaled $20 million and $17 million for the three months ended December 31, 2017 and 2016, respectively, and $82 million and $69 million for the years ended December 31, 2017 and 2016, respectively. All of these amounts are eliminated upon consolidation. Those expenses with third-parties related to the transportation of crude oil and refined products related to Andeavor's sale of those refined products during the ordinary course of business are reclassified to cost of materials and other in our statements of consolidated operations upon consolidation.
(h)   Our Logistics segment uses average margin per barrel, average revenue per MMBtu, average margin per gallon and average revenue per barrel to evaluate performance and compare profitability to other companies in the industry.
·       Average margin on NGL sales per barrel-calculated as the difference between the NGL sales revenues and the amounts recognized as NGL expense divided by our NGL sales volumes. Refer to "Non-GAAP Measures" and "Non-GAAP Reconciliations" for further information regarding these non-GAAP measures;
·       Average gas gathering and processing revenue per Million British thermal units ("MMBtu")-calculated as total gathering and processing fee-based revenue divided by total gas gathering throughput;
·       Average terminalling revenue per barrel-calculated as total terminalling revenue divided by total terminalling throughput;
·       Average pipeline transportation revenue per barrel-calculated as total pipeline transportation revenue divided by total pipeline transportation throughput; and
·       Average crude oil and water gathering revenue per barrel-calculated as total crude oil and water gathering fee-based revenue divided by total crude oil and water gathering throughput.
There are a variety of ways to calculate these measures; other companies may calculate these in a different way.
(i)     Volumes represent barrels sold under Logistics' keep-whole arrangements, net barrels retained under its POP arrangements and other associated products.


Andeavor
Segment Operating Data and Results (Unaudited) ($ in millions, except per barrel amounts)


  Three Months Ended
December 31,
  Year Ended
December 31,
Refining Segment 2017   2016   2017   2016
Revenues              
Refined products (j) $ 8,551     $ 5,779     $ 29,572     $ 21,213  
Crude oil resales and other 917     333     2,009     1,043  
Refining Revenues 9,468     6,112     31,581     22,256  
Refining Cost of Materials and Expense
Cost of materials and other (excluding items shown separately below) (d) 8,681     5,504     27,741     19,469  
Lower of cost or market adjustments -     (123 )   -     (359 )
Operating expenses (excluding depreciation and amortization):              
Manufacturing costs (k) 544     419     1,954     1,591  
Other operating expenses 121     122     438     429  
Total operating expenses 665     541     2,392     2,020  
Depreciation and amortization expenses 173     148     647     588  
General and administrative expenses 1     (2 )   8     2  
Loss on asset disposals and impairments 4     1     8     1  
Segment Operating Income (Loss) $ (56 )   $ 43     $ 785     $ 535  
               
Refining margin (l) $ 787     $ 731     $ 3,840     $ 3,146  
Refining margin ($/throughput barrel) (l) $ 7.62     $ 9.45     $ 10.55     $ 10.42  
Manufacturing costs (excluding depreciation and amortization) per throughput barrel (k)(l) $ 5.28     $ 5.43     $ 5.37     $ 5.27  
               
Total Refining Segment              
Throughput (Mbpd)              
Heavy crude 188     178     181     176  
Light crude 858     607     750     598  
Other feedstocks 76     56     66     51  
Total Throughput 1,122     841     997     825  
Yield (Mbpd)              
Gasoline and gasoline blendstocks 605     457     522     451  
Diesel fuel 284     209     238     189  
Jet fuel 139     124     132     118  
Other 105     108     111     122  
Total Yield 1,133     898     1,003     880  
Refined Product Sales (Mbpd) (m)              
Gasoline and gasoline blendstocks 671     510     624     523  
Diesel fuel 273     159     242     210  
Jet fuel 157     228     154     149  
Other 134     96     134     102  
Total Refined Product Sales 1,235     993     1,154     984  

(j)     Refined product sales include intersegment sales to our Marketing segment of $4.0 billion and $3.5 billion for the three months ended December 31, 2017 and 2016, respectively, and $15.9 billion and $13.7 billion for the years ended December 31, 2017 and 2016, respectively.
(k)   Manufacturing costs represent direct operating expenses incurred by our Refining segment for the production of refined products.
(l)     Management uses various measures to evaluate performance and efficiency and to compare profitability to other companies in the industry, including refining margin, refining margin per throughput barrel and manufacturing costs before depreciation and amortization expenses per throughput barrel. Refer to "Non-GAAP Measures" and "Non-GAAP Reconciliations" for further information regarding these non-GAAP measures.
(m)  Sources of total refined product sales include refined products manufactured at our refineries and refined products purchased from third parties. Total refined product sales include sales of manufactured and purchased refined products. Refined product sales include all sales through our Marketing segment as well as in bulk markets and exports through our Refining segment.


Andeavor
Segment Operating Data and Results (Unaudited) ($ in millions, except per barrel and per Mbpd amounts)


  Three Months Ended
December 31,
  Year Ended
December 31,
Refining By Region 2017   2016   2017   2016
California (Martinez and Los Angeles)              
Revenues              
Refined products (j) $ 4,246     $ 3,873     $ 16,346     $ 14,231  
Crude oil resales and other 117     155     413     312  
Regional Revenue 4,363     4,028     16,759     14,543  
Refining Cost of Materials and Expenses
Cost of materials and other (excluding items shown separately below) 4,071     3,595     14,831     12,671  
Lower of cost or market adjustments -     (82 )   -     (236 )
Operating expenses (excluding depreciation and amortization):              
Manufacturing costs (l) 295     296     1,166     1,119  
Other operating expenses 71     69     252     210  
Total operating expenses 366     365     1,418     1,329  
Depreciation and amortization expenses 94     95     379     375  
General and administrative expenses -     (2 )   5     1  
Loss on asset disposals 3     -     7     -  
Operating Income (Loss) $ (171 )   $ 57     $ 119     $ 403  
               
Refining margin (l) $ 292     $ 515     $ 1,928     $ 2,108  
Refining margin per throughput barrel (m) $ 5.86     $ 10.74     $ 10.10     $ 11.36  
Manufacturing costs (excluding depreciation and amortization) per throughput barrel (l)(m) $ 5.92     $ 6.17     $ 6.11     $ 6.02  
Capital expenditures $ 125     $ 98     $ 383     $ 286  
               
Throughput (Mbpd)              
Heavy crude 149     172     156     170  
Light crude 344     317     325     304  
Other feedstocks 49     32     42     33  
Total Throughput 542     521     523     507  
               
Yield (Mbpd)              
Gasoline and gasoline blendstocks 300     300     284     294  
Diesel fuel 132     131     118     113  
Jet fuel 69     75     71     71  
Other 52     61     62     74  
Total Yield 553     567     535     552  

Andeavor
Segment Operating Data and Results (Unaudited) ($ in millions, except per barrel amounts)


  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Pacific Northwest (Washington and Alaska)              
Revenues              
Refined products (j) $ 1,300     $ 1,096     $ 4,872     $ 4,030  
Crude oil resales and other 88     51     258     226  
Regional Revenue 1,388     1,147     5,130     4,256  
Refining Cost of Materials and Expenses
Cost of materials and other (excluding items shown separately below) 1,311     1,047     4,570     3,825  
Lower of cost or market adjustments -     (24 )   -     (84 )
Operating expenses (excluding depreciation and amortization):              
Manufacturing costs (l) 72     68     277     258  
Other operating expenses 21     22     80     65  
Total operating expenses 93     90     357     323  
Depreciation and amortization expenses 26     27     106     96  
General and administrative expenses -     -     -     1  
Operating Income (Loss) $ (42 )   $ 7     $ 97     $ 95  
               
Refining margin (l) $ 77     $ 124     $ 560     $ 515  
Refining margin per throughput barrel (m) $ 4.43     $ 7.13     $ 8.20     $ 7.77  
Manufacturing costs (excluding depreciation and amortization) per throughput barrel (l)(m) $ 4.14     $ 3.97     $ 4.06     $ 3.90  
Capital expenditures $ 38     $ 29     $ 141     $ 125  
               
Throughput (Mbpd)              
Heavy crude 12     6     9     6  
Light crude 163     165     163     162  
Other feedstocks 14     18     15     13  
Total Throughput 189     189     187     181  
               
Yield (Mbpd)              
Gasoline and gasoline blendstocks 83     82     81     80  
Diesel fuel 35     39     34     35  
Jet fuel 38     37     39     35  
Other 30     37     30     37  
Total Yield 186     195     184     187  

Andeavor
Segment Operating Data and Results (Unaudited) ($ in millions, except per barrel amounts)


  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Mid-Continent (North Dakota, Utah, New Mexico, Texas, and Minnesota)              
Revenues              
Refined products (j) $ 3,005     $ 810     $ 8,354     $ 2,952  
Crude oil resales and other 712     127     1,338     505  
Regional Revenue 3,717     937     9,692     3,457  
Refining Cost of Materials and Expenses
Cost of materials and other (excluding items shown separately below) 3,299     862     8,340     2,973  
Lower of cost or market adjustments -     (17 )   -     (39 )
Operating expenses (excluding depreciation and amortization):              
Manufacturing costs (l) 177     55     511     214  
Other operating expenses 29     31     106     154  
Total operating expenses 206     86     617     368  
Depreciation and amortization expenses 53     26     162     117  
General and administrative expenses 1     -     3     -  
Loss on asset disposals 1     1     1     1  
Operating Income (Loss) $ 157     $ (21 )   $ 569     $ 37  
               
Refining margin (l) $ 418     $ 92     $ 1,352     $ 523  
Refining margin per throughput barrel (m) $ 11.62     $ 7.58     $ 12.91     $ 10.43  
Manufacturing costs (excluding depreciation and amortization) per throughput barrel (l)(m) $ 4.92     $ 4.57     $ 4.88     $ 4.29  
Capital expenditures $ 131     $ 39     $ 320     $ 108  
               
Throughput (Mbpd)              
Heavy Crude 27     -     16     -  
Light crude 351     125     262     132  
Other feedstocks 13     6     9     5  
Total Throughput 391     131     287     137  
               
Yield (Mbpd)              
Gasoline and gasoline blendstocks 222     75     157     77  
Diesel fuel 117     39     86     41  
Jet fuel 32     12     22     12  
Other 23     10     19     11  
Total Yield 394     136     284     141  



Non-GAAP Reconciliations

Fuel Margin and Merchandise Margin Calculation ($ in millions, except cents per gallon and percent)


  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Segment Operating Income $ 236     $ 169     $ 788     $ 830  
Add back:              
Operating expenses 171     77     511     298  
Depreciation and amortization expenses 19     13     68     49  
Selling, General and administrative expenses 10     5     23     17  
Loss on asset disposals 1     1     1     4  
Marketing Margin $ 437     $ 265     $ 1,391     $ 1,198  
               
Revenues              
Retail and Branded fuel sales $ 3,147     $ 2,226     $ 11,217     $ 8,863  
Unbranded fuel sales 2,656     1,686     9,727     6,542  
Total fuel sales 5,803     3,912     20,944     15,405  
Merchandise 182     6     456     25  
Other sales 34     14     113     60  
Total Revenues 6,019     3,932     21,513     15,490  
Cost of Fuel and Other (excluding depreciation and amortization)              
Retail and Branded fuel costs 2,827     2,003     10,159     7,802  
Unbranded fuel costs 2,620     1,659     9,617     6,473  
Total fuel costs 5,447     3,662     19,776     14,275  
Purchases of merchandise 135     5     329     17  
Other costs -     -     17     -  
Total Cost of Fuel and Other 5,582     3,667     20,122     14,292  
Marketing Margin              
Retail and Branded fuel margin 320     223     1,058     1,061  
Unbranded fuel margin 36     27     110     69  
Total fuel margin 356     250     1,168     1,130  
Merchandise margin 47     1     127     8  
Other margin 34     14     96     60  
Total Convenience Margin 81     15     223     68  
Marketing Margin $ 437     $ 265     $ 1,391     $ 1,198  
Merchandise Margin Percentage (n) 26.0 %   31.3 %   27.1 %   34.4 %
Fuel Sales (millions of gallons)              
Retail and Branded fuel sales 1,352     1,136     5,068     4,550  
Unbranded fuel sales 1,542     1,045     5,405     4,329  
Total Fuel Sales 2,894     2,181     10,473     8,879  
               
Retail and Branded Fuel Margin (¢/gallon) (n) 23.4 ¢   19.6 ¢   20.9 ¢   23.3 ¢
Unbranded Fuel Margin (¢/gallon) (n) 2.5 ¢   2.5 ¢   2.0 ¢   1.6 ¢
Total Fuel Margin (¢/gallon) (n) 12.2 ¢   11.4 ¢   11.2 ¢   12.7 ¢

(n)   Amounts may not recalculate due to rounding of dollar and volume information.



Average Margin on NGL Sales Per Barrel Calculation (in millions, except per barrel amounts and days)


  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Segment Operating Income $ 195     $ 123     $ 665     $ 487  
Add back:              
Operating expenses 167     120     614     442  
Depreciation and amortization expenses 70     51     276     190  
General and administrative expenses 42     24     135     95  
(Gain) loss on asset disposals and impairments -     1     (24 )   4  
Other commodity purchases -     -     2     -  
Subtract:              
Terminalling revenues (196 )   (135 )   (688 )   (480 )
Pipeline transportation revenues (33 )   (32 )   (130 )   (125 )
Other terminalling revenues (9 )   -     (18 )   -  
Gas gathering and processing revenues (81 )   (66 )   (333 )   (264 )
Crude oil gathering revenues (81 )   (33 )   (228 )   (133 )
Pass-thru and other revenues (45 )   (28 )   (165 )   (115 )
Margin on NGL Sales $ 29     $ 25     $ 106     $ 101  
Divided by Total Volumes for the Period:              
NGLs sales volumes (Mbpd) 11.4     7.1     8.3     7.5  
Number of days in the period 92     92     365     366  
Total volumes for the period (thousands of barrels)
  (o)
1,049     653     3,030     2,745  
Average Margin on NGL Sales per Barrel (n) $ 28.10     $ 36.95     $ 34.77     $ 36.59  

Refining Margin Per Throughput Barrel Calculation (in millions, except per barrel amounts and days)


  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Segment Operating Income (Loss) $ (56 )   $ 43     $ 785     $ 535  
Add back:              
Manufacturing costs (excluding depreciation and amortization) 544     419     1,954     1,591  
Other operating expenses (excluding depreciation and amortization) 121     122     438     429  
Depreciation and amortization expenses 173     148     647     588  
General and administrative expenses 1     (2 )   8     2  
Loss on asset disposals and impairments 4     1     8     1  
Refining Margin $ 787     $ 731     $ 3,840     $ 3,146  
Divided by Total Volumes:              
Total refining throughput (Mbpd) 1,122     841     997     825  
Number of days in the period 92     92     365     366  
Total volumes for the period (millions of barrels) (n) 103.3     77.4     363.7     301.9  
Refining Margin per Throughput Barrel (n) $ 7.62     $ 9.45     $ 10.55     $ 10.42  




Refining Margin Per Throughput Barrel Calculation by Region (in millions, except per barrel amounts and days)


  California
(Los Angeles and Martinez)
  Pacific Northwest (Washington and Alaska)   Mid-Continent
(Texas, Minnesota, North Dakota, Utah and New Mexico)
  Three Months Ended December 31,
  2017   2016   2017   2016   2017   2016
Segment Operating Income (Loss) $ (171 )   $ 57     $ (42 )   $ 7     $ 157     $ (21 )
Add back:                      
Manufacturing costs (excluding depreciation and amortization) 295     296     72     68     177     55  
Other operating expenses (excluding depreciation and amortization) 71     69     21     22     29     31  
Depreciation and amortization expenses 94     95     26     27     53     26  
General and administrative expenses -     (2 )   -     -     1     -  
Loss on asset disposals and impairments 3     -     -     -     1     1  
Refining Margin $ 292     $ 515     $ 77     $ 124     $ 418     $ 92  
Divided by Total Volumes:                      
Total refining throughput (Mbpd) 542     521     189     189     391     131  
Number of days in the period 92     92     92     92     92     92  
Total volumes for the period (millions of barrels) (n) 49.8     47.9     17.4     17.4     36.1     12.1  
Refining Margin per Throughput Barrel (n) $ 5.86     $ 10.74     $ 4.43     $ 7.13     $ 11.62     $ 7.58  

Refining Margin Per Throughput Barrel Calculation by Region (in millions, except per barrel amounts and days)


  California
(Los Angeles and Martinez)
  Pacific Northwest (Washington and Alaska)   Mid-Continent
(Texas, Minnesota, North Dakota, Utah and New Mexico)
  Year Ended December 31,
  2017   2016   2017   2016   2017   2016
Segment Operating Income $ 119     $ 403     $ 97     $ 95     $ 569     $ 37  
Add back:                      
Manufacturing costs (excluding depreciation and amortization) 1,166     1,119     277     258     511     214  
Other operating expenses (excluding depreciation and amortization) 252     210     80     65     106     154  
Depreciation and amortization expenses 379     375     106     96     162     117  
General and administrative expenses 5     1     -     1     3     -  
Loss on asset disposals and impairments 7     -     -     -     1     1  
Refining Margin $ 1,928     $ 2,108     $ 560     $ 515     $ 1,352     $ 523  
Divided by Total Volumes:                      
Total refining throughput (Mbpd) 523     507     187     181     287     137  
Number of days in the period 365     366     365     366     365     366  
Total volumes for the period (millions of barrels) (n) 191.0     185.7     68.4     66.3     104.4     49.9  
Refining Margin per Throughput Barrel (n) $ 10.10     $ 11.36     $ 8.20     $ 7.77     $ 12.91     $ 10.43  



Manufacturing Costs (Excluding Depreciation and Amortization) Per Throughput Barrel Calculation
(in millions, except per barrel amounts and days)


  Three Months Ended
December 31,
  Year Ended
December 31,
  2017   2016   2017   2016
Total Refining Segment operating expenses (excluding depreciation and amortization) $ 665     $ 541     $ 2,392     $ 2,020  
Subtract:              
Other operating expenses (excluding depreciation and amortization) (121 )   (122 )   (438 )   (429 )
Manufacturing Costs (excluding depreciation and amortization) $ 544     $ 419     $ 1,954     $ 1,591  
Divided by Total Volumes:              
Total refining throughput (Mbpd) 1,122     841     997     825  
Number of days in the period 92     92     365     366  
Total volumes for the period (millions of barrels) (n) 104.9     80.4     348.2     299.9  
Manufacturing Costs (excluding depreciation and amortization) per Throughput Barrel (n) $ 5.28     $ 5.43     $ 5.37     $ 5.27  

Manufacturing Costs (Excluding Depreciation and Amortization) Per Throughput Barrel Calculation by Region
(in millions, except per barrel amounts and days)


  California
(Los Angeles and Martinez)
  Pacific Northwest (Washington and Alaska)   Mid-Continent
(Texas, Minnesota, North Dakota, Utah and New Mexico)
  Three Months Ended December 31,
  2017   2016   2017   2016   2017   2016
Total operating expenses $ 366     $ 365     $ 93     $ 90     $ 206     $ 86  
Subtract:                      
Other operating expenses (excluding depreciation and amortization) (71 )   (69 )   (21 )   (22 )   (29 )   (31 )
Manufacturing Costs (excluding depreciation and amortization) $ 295     $ 296     $ 72     $ 68     $ 177     $ 55  
Divided by Total Volumes:                      
Total refining throughput (Mbpd) 542     521     189     189     391     131  
Number of days in the period 92     92     92     92     92     92  
Total volumes for the period (millions of barrels) (n) 49.8     47.9     17.4     17.4     36.1     12.1  
Manufacturing Costs (excluding depreciation and amortization) per Throughput Barrel (n) $ 5.92     $ 6.17     $ 4.14     $ 3.97     $ 4.92     $ 4.57  



Manufacturing Costs (Excluding Depreciation and Amortization) Per Throughput Barrel Calculation by Region
(in millions, except per barrel amounts and days)


  California
(Los Angeles and Martinez)
  Pacific Northwest (Washington and Alaska)   Mid-Continent
(Texas, Minnesota, North Dakota, Utah and New Mexico)
  Year Ended December 31,
  2017   2016   2017   2016   2017   2016
Total operating expenses $ 1,418     $ 1,329     $ 357     $ 323     $ 617     $ 368  
Subtract:                      
Other operating expenses (excluding depreciation and amortization) (252 )   (210 )   (80 )   (65 )   (106 )   (154 )
Manufacturing Costs (excluding depreciation and amortization) $ 1,166     $ 1,119     $ 277     $ 258     $ 511     $ 214  
Divided by Total Volumes:                      
Total refining throughput (Mbpd) 523     507     187     181     287     137  
Number of days in the period 365     366     365     366     365     366  
Total volumes for the period (millions of barrels) (n) 191.0     185.7     68.4     66.3     104.4     49.9  
Manufacturing Costs (excluding depreciation and amortization) per Throughput Barrel (n) $ 6.11     $ 6.02     $ 4.06     $ 3.90     $ 4.88     $ 4.29  

Total Debt Excluding Andeavor Logistics (in millions)



  December 31,
  2017   2016
Total debt excluding Andeavor Logistics:      
Andeavor consolidated debt (q) $ 7,685     $ 6,933  
Andeavor Logistics debt (q) 4,128     4,054  
Andeavor Total Debt Excluding Andeavor Logistics (q) $ 3,557     $ 2,879  

(q)   Shown net of unamortized issuance costs.


Total Liquidity (in millions)



  December 31,
  2017   2016
Andeavor Revolving Credit Facility - available capacity $ 2,934     $ 1,996  
Add: Cash and cash equivalents 543     3,295  
Less: Andeavor Logistics' cash and cash equivalents (75 )   (688 )
Total Liquidity $ 3,402     $ 4,603  


 Andeavor
Reconciliation of Amounts Reported Under U.S. GAAP (Unaudited) (in millions)


  Reconciliation of Projected Annual
Segment EBITDA Contribution
(in millions) Wamsutter Pipeline System Acquisition   Anacortes Logistics Assets Acquisition   Permian Gathering Projects   Permian Systems
2020E
Projected Logistics Segment Operating Income Contribution $ 14-18 $ 45-50 $  3-4 $ 150  
Add: Projected depreciation and amortization expense   6     5     1     50  
Projected Segment EBITDA Contribution $   20-24 $ 50-55 $ 4-5 $ 200  

  Andeavor Growth Strategy Projected EBITDA 2018E-2020E
(in millions) Western Synergies Strategic Refining Capital Projects Marketing Segment Growth Logistics Segment Growth Refining Segment Growth Total
Projected Net Earnings $ 320   $ 92   $ 175   $ 330   $ 88   $ 1,005  
Add: Projected depreciation and amortization expense -   33   20   80   32   165  
Add: Projected interest and financing costs, net -   -   -   20   -   20  
Add: Projected income tax expense -   50   105   -   55   210  
Projected Annual EBITDA $ 320   $ 175   $ 300   $ 430   $ 175   $ 1,400  

  Projected EBITDA 2020E
(in millions) LA Refinery Integration and Compliance Project Refining LA Refinery Integration and Compliance Project Logistics LA Refinery Integration and Compliance Project Total
Projected Net Earnings $ 57   $ 8   $ 65  
Add: Projected depreciation and amortization expense 13   7   20  
Add: Projected interest and financing costs, net -   5   5  
Add: Projected income tax expense 35   -   35  
Projected Annual EBITDA $ 105   $ 20   $ 125  

Andeavor
Fourth Quarter 2017 Impacts (Unaudited)*

Refining Margin Impacts ($ millions) Income/(Expense)  
Product Inventory Build Ahead of 2018 Turnarounds $ (50 )
Crude Hedge & Inventory Impacts (50 )
Crude Differential Impacts (primarily Canadian) (35 )
Clean Product Yield and Maintenance Cost, net (25 )
Total $ (160 )
   
Other Items ($ millions) Income/(Expense)  
Federal tax reform impact $ 918  
ANDX debt refinancing charges (before noncontrolling interest) (77 )
Impairment of all Vancouver Energy assets (40 )
Refining Other Operating Expense (litigation reserves, environmental, insurance, benefit plans) (25 )
Acquisition Costs related to Andeavor Logistics' acquisition of WNRL and IDR Buy-In (23 )
Integration costs related to Western acquisition (11 )
Total $ 742  

*All items are on a pre-tax basis except Federal tax reform impact