EXHIBIT 99.1
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FOR IMMEDIATE RELEASE
Contact:
Investors:
Scott Phipps, Manager, Investor Relations, (210) 283-2882
Scott Phipps, Manager, Investor Relations, (210) 283-2882
Media:
Natalie Silva, Manager, Public Relations, (210) 219-8189
Natalie Silva, Manager, Public Relations, (210) 219-8189
Tesoro Corporation Announces 129% Increase in
Fourth Quarter Earnings and Record 2006 Full Year Results
Fourth Quarter Earnings and Record 2006 Full Year Results
SAN ANTONIO – January 29, 2007-Tesoro Corporation (NYSE:TSO) today reported record 2006 fourth quarter net income of $158 million, or $2.28 per share, and full year 2006 net income of $801 million, or $11.46 per share. Earnings for 2006 were almost $300 million ahead of last year.
Quarterly gross refining margin rose 16% compared to 2005 more than offsetting the lower throughput primarily caused by a turnaround at the Anacortes refinery. Quarterly refining operating income of $284 million was nearly $40 million more than a year ago. “Our knowledge and experience in optimizing our system continues to develop and our decisions around crude oil purchasing and clean product management are significantly improving earnings. Our management team is excited because we continue to find new opportunities to add value,” said Bruce Smith, Chairman, President and CEO.
Heavy turnaround activity on the West Coast in the fourth quarter strengthened margins versus last year. Jet fuel demand strengthened during the quarter, leading to
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Tesoro Reports Fourth Quarter Results
Tesoro Reports Fourth Quarter Results
improved performance at our Alaska refinery. In addition, strong diesel demand in the mid-continent region contributed to the company’s profitability in this region. Increasingly favorable dynamics in our Salt Lake City and Mandan refining markets are improving the balance of the company’s earnings. “In 2005, these assets represented 19% of our total refining operating income. This year they contributed 26% as we have successfully and safely increased throughput and the production of clean fuels,” said Smith.
Capital spending for the year was approximately $570 million of which $117 million was for turnaround expenditures. The company continues to reinvest cash flow to improve reliability, environmental compliance and operating income from our assets. EBITDA contributions from many of the projects initiated in 2006 are expected to be between $80-$125 million pre-tax in 2007.
Cash at the end of the year was $986 million as compared to $440 million on December 31, 2005. The ratio of debt-to-capitalization was 29% compared to 36% a year ago.
Board Declares Quarterly Dividend
Tesoro announced today that its Board of Directors has approved a regular quarterly cash dividend of $0.10 per share. The dividend is payable March 15, 2007 to shareholders of record as of March 1, 2007.
Public Invited to Listen to Analyst Conference Call via Internet
At 9:00 a.m. CST Monday, January 29th, 2007 Tesoro will broadcast its conference call with analysts regarding fourth quarter 2006 results. Interested parties may listen to the live conference call over the Internet by logging on to Tesoro’s Internet
site athttp://www.tsocorp.com.
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Tesoro Reports Fourth Quarter Results
Tesoro Reports Fourth Quarter Results
Tesoro Corporation, a Fortune 150 Company, is an independent refiner and marketer of petroleum products. Tesoro operates six refineries in the western United States with a combined capacity of approximately 560,000 barrels per day. Tesoro’s retail-marketing system includes over 450 branded retail stations, of which nearly 200 are company owned and operated under the Tesoroâ and Mirastarâ brands.
This earnings release contains certain statements that are “forward-looking” statements concerning future cash flows and capital expenditures within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For more information concerning factors that could affect these statements see our annual report on Form 10-K and quarterly reports onForm 10-Q, filed with the Securities and Exchange Commission. We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date hereof.”
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TESORO CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions except per share amounts)
STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions except per share amounts)
Three Months Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Revenues | $ | 4,020 | $ | 4,360 | $ | 18,104 | $ | 16,581 | ||||||||
Costs and Expenses: | ||||||||||||||||
Costs of sales and operating expenses | 3,652 | 4,036 | 16,314 | 15,170 | ||||||||||||
Selling, general and administrative expenses (a) | 50 | 36 | 176 | 179 | ||||||||||||
Depreciation and amortization | 64 | 58 | 247 | 186 | ||||||||||||
Loss on asset disposals and impairments (b) | 7 | 10 | 50 | 19 | ||||||||||||
Operating Income | 247 | 220 | 1,317 | 1,027 | ||||||||||||
Interest and Financing Costs (c) | (17 | ) | (117 | ) | (77 | ) | (211 | ) | ||||||||
Interest Income and Other | 14 | 9 | 46 | 15 | ||||||||||||
Earnings Before Income Taxes | 244 | 112 | 1,286 | 831 | ||||||||||||
Income Tax Provision | 86 | 43 | 485 | 324 | ||||||||||||
Net Earnings | $ | 158 | $ | 69 | $ | 801 | $ | 507 | ||||||||
Net Earnings Per Share: | ||||||||||||||||
Basic | $ | 2.35 | $ | 1.00 | $ | 11.78 | $ | 7.44 | ||||||||
Diluted | $ | 2.28 | $ | 0.97 | $ | 11.46 | $ | 7.20 | ||||||||
Weighted Average Common Shares: | ||||||||||||||||
Basic | 67.3 | 68.8 | 68.0 | 68.1 | ||||||||||||
Diluted | 69.2 | 70.8 | 69.9 | 70.4 |
(a) | During 2005, the Company recorded stock-based and other compensation charges totaling $11 million related to the termination and retirement of certain executive officers. | |
(b) | During 2006, the Company recorded charges totaling $28 million related to the termination of the delayed coker project at our Washington refinery. | |
(c) | During the three months ended December 31, 2005, the Company incurred pretax charges of $92 million consisting of tender and redemption premiums and the write-off of unamortized debt issuance costs in connection with the refinancing of its 9 5/8% senior subordinated notes and 8% senior secured notes. In April 2005, the Company voluntarily prepaid the remaining $96 million outstanding principal balance of the senior secured term loans at a prepayment premium of 1%, which resulted in a pretax charge of $3 million consisting of the write-off of unamortized debt issuance costs and the 1% prepayment premium. |
NET EARNINGS ADJUSTED FOR SPECIAL ITEMS
(Unaudited)
(In millions except per share amounts)
(Unaudited)
(In millions except per share amounts)
Three Months Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Net Earnings — U.S. GAAP | $ | 158 | $ | 69 | $ | 801 | $ | 507 | ||||||||
Special Items, After-tax: | ||||||||||||||||
Delayed coker project termination costs (b) | — | — | 17 | — | ||||||||||||
Debt prepayment and financing costs (c) | — | 57 | — | 58 | ||||||||||||
Termination and retirement costs (a) | — | — | — | 6 | ||||||||||||
Net Earnings Adjusted for Special Items | $ | 158 | $ | 126 | $ | 818 | $ | 571 | ||||||||
Net Earnings Per Share — U.S. GAAP | $ | 2.28 | $ | 0.97 | $ | 11.46 | $ | 7.20 | ||||||||
Special Items Per Share, After-tax: | ||||||||||||||||
Delayed coker project termination costs (b) | — | — | 0.24 | — | ||||||||||||
Debt prepayment and financing costs (c) | — | 0.81 | — | 0.82 | ||||||||||||
Termination and retirement costs (a) | — | — | — | 0.09 | ||||||||||||
Net Earnings Per Share Adjusted for Special Items | $ | 2.28 | $ | 1.78 | $ | 11.70 | $ | 8.11 | ||||||||
Note: | The special items present information that the Company believes is useful to investors. The Company believes that the special items described above are not indicative of its core operations. |
TESORO CORPORATION
SELECTED OPERATING SEGMENT DATA
(Unaudited)
(In millions)
SELECTED OPERATING SEGMENT DATA
(Unaudited)
(In millions)
Three Months Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Operating Income (Loss) | ||||||||||||||||
Refining (b) | $ | 284 | $ | 247 | $ | 1,476 | $ | 1,194 | ||||||||
Retail | — | (1 | ) | (21 | ) | (31 | ) | |||||||||
Total Segment Operating Income | 284 | 246 | 1,455 | 1,163 | ||||||||||||
Corporate and Unallocated Costs (a) | (37 | ) | (26 | ) | (138 | ) | (136 | ) | ||||||||
Operating Income | 247 | 220 | 1,317 | 1,027 | ||||||||||||
Interest and Financing Costs (c) | (17 | ) | (117 | ) | (77 | ) | (211 | ) | ||||||||
Interest Income and Other | 14 | 9 | 46 | 15 | ||||||||||||
Earnings Before Income Taxes | $ | 244 | $ | 112 | $ | 1,286 | $ | 831 | ||||||||
Depreciation and Amortization | ||||||||||||||||
Refining | $ | 57 | $ | 51 | $ | 221 | $ | 160 | ||||||||
Retail | 4 | 4 | 16 | 17 | ||||||||||||
Corporate | 3 | 3 | 10 | 9 | ||||||||||||
Depreciation and Amortization | $ | 64 | $ | 58 | $ | 247 | $ | 186 | ||||||||
Capital Expenditures | ||||||||||||||||
Refining | $ | 159 | $ | 80 | $ | 401 | $ | 214 | ||||||||
Retail | 1 | 3 | 5 | 6 | ||||||||||||
Corporate | 7 | 9 | 47 | 42 | ||||||||||||
Capital Expenditures | $ | 167 | $ | 92 | $ | 453 | $ | 262 | ||||||||
BALANCE SHEET DATA
(Unaudited)
(Dollars in millions)
(Unaudited)
(Dollars in millions)
December 31, | December 31, | |||||||
2006 | 2005 | |||||||
Cash and Cash Equivalents | $ | 986 | $ | 440 | ||||
Total Assets | $ | 5,904 | $ | 5,097 | ||||
Total Debt | $ | 1,046 | $ | 1,047 | ||||
Total Stockholders’ Equity | $ | 2,505 | $ | 1,887 | ||||
Total Debt to Capitalization Ratio | 29 | % | 36 | % |
TESORO CORPORATION
OPERATING DATA
(Unaudited)
OPERATING DATA
(Unaudited)
Three Months Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
REFINING SEGMENT | ||||||||||||||||
Total Refining Segment | ||||||||||||||||
Throughput (thousand barrels per day) | ||||||||||||||||
Heavy crude | 239 | 267 | 261 | 265 | ||||||||||||
Light crude | 249 | 259 | 250 | 245 | ||||||||||||
Other feedstocks | 13 | 15 | 18 | 20 | ||||||||||||
Total Throughput | 501 | 541 | 529 | 530 | ||||||||||||
Yield (thousand barrels per day) | ||||||||||||||||
Gasoline and gasoline blendstocks | 225 | 249 | 245 | 248 | ||||||||||||
Jet fuel | 61 | 69 | 68 | 68 | ||||||||||||
Diesel fuel | 118 | 127 | 121 | 118 | ||||||||||||
Heavy oils, residual products, internally produced fuel and other | 115 | 117 | 115 | 115 | ||||||||||||
Total Yield | 519 | 562 | 549 | 549 | ||||||||||||
Refining Margin ($/throughput bbl) (d) | ||||||||||||||||
Gross | $ | 12.95 | $ | 11.19 | $ | 13.82 | $ | 11.81 | ||||||||
Manufacturing cost before depreciation and amortization (d) | $ | 3.88 | $ | 3.77 | $ | 3.57 | $ | 3.48 | ||||||||
Segment Operating Income ($ millions) | ||||||||||||||||
Gross refining margin (after inventory changes) (e) | $ | 592 | $ | 543 | $ | 2,631 | $ | 2,246 | ||||||||
Expenses | ||||||||||||||||
Manufacturing costs | 179 | 188 | 689 | 673 | ||||||||||||
Other operating expenses | 56 | 46 | 178 | 182 | ||||||||||||
Selling, general and administrative | 10 | 6 | 26 | 27 | ||||||||||||
Depreciation and amortization (f) | 57 | 51 | 221 | 160 | ||||||||||||
Loss on asset disposals and impairments | 6 | 5 | 41 | 10 | ||||||||||||
Segment Operating Income | $ | 284 | $ | 247 | $ | 1,476 | $ | 1,194 | ||||||||
Product Sales (thousand barrels per day) (g) | ||||||||||||||||
Gasoline and gasoline blendstocks | 268 | 292 | 280 | 294 | ||||||||||||
Jet fuel | 88 | 99 | 91 | 101 | ||||||||||||
Diesel fuel | 120 | 137 | 128 | 139 | ||||||||||||
Heavy oils, residual products and other | 88 | 76 | 87 | 75 | ||||||||||||
Total Product Sales | 564 | 604 | 586 | 609 | ||||||||||||
Product Sales Margin ($/barrel) (g) | ||||||||||||||||
Average sales price | $ | 72.93 | $ | 72.91 | $ | 81.26 | $ | 70.20 | ||||||||
Average costs of sales | 61.95 | 64.48 | 69.42 | 60.28 | ||||||||||||
Product Sales Margin | $ | 10.98 | $ | 8.43 | $ | 11.84 | $ | 9.92 | ||||||||
(d) | Management uses gross refining margin per barrel to evaluate performance, allocate resources and compare profitability to other companies in the industry. Gross refining margin per barrel is calculated by dividing gross refining margin before inventory changes by total refining throughput and may not be calculated similarly by other companies. Management uses manufacturing costs per barrel to evaluate the efficiency of refinery operations and allocate resources. Manufacturing costs per barrel may not be comparable to similarly titled measures used by other companies. Investors and analysts use these financial measures to help analyze and compare companies in the industry on the basis of operating performance. These financial measures should not be considered as alternatives to segment operating income, revenues, costs of sales and operating expenses or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States of America. | |
(e) | Gross refining margin is revenues less costs of refining feedstocks, purchased products, transportation and distribution. Gross refining margin approximates total refining segment throughput times gross refining margin per barrel, adjusted for changes in refined product inventory due to selling a volume and mix of product that is different than actual volumes manufactured. Also includes the effect of intersegment sales to the retail segment at prices which approximate market. | |
(f) | Includes manufacturing depreciation and amortization per throughput barrel of approximately $1.17 and $0.95 for the three months ended December 31, 2006 and 2005, respectively, and $1.06 and $0.75 for the years ended December 31, 2006 and 2005, respectively. | |
(g) | Sources of total product sales include products manufactured at the refineries, products drawn from inventory balances and products purchased from third parties. Total product sales margin includes margins on sales of manufactured and purchased products and the effects of inventory changes. Total product sales were reduced by 18 Mbpd and 23 Mbpd in the three months and year ended December 31, 2006, respectively, as a result of recording certain purchases and sales transactions with the same counterparty on a net basis beginning in the 2006 first quarter upon adoption of EITF Issue No. 04-13, “Accounting for Purchases and Sales of Inventory with the Same Counterparty.” |
TESORO CORPORATION
OPERATING DATA
(Unaudited)
OPERATING DATA
(Unaudited)
Three Months Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Refining By Region | ||||||||||||||||
California (h) | ||||||||||||||||
Throughput (thousand barrels per day) | ||||||||||||||||
Heavy crude | 153 | 157 | 153 | 151 | ||||||||||||
Light crude | 5 | 4 | 3 | 6 | ||||||||||||
Other feedstocks | 8 | 9 | 9 | 8 | ||||||||||||
Total Throughput | 166 | 170 | 165 | 165 | ||||||||||||
Yield (thousand barrels per day) | ||||||||||||||||
Gasoline and gasoline blendstocks | 95 | 95 | 96 | 93 | ||||||||||||
Diesel fuel | 55 | 54 | 49 | 49 | ||||||||||||
Heavy oils, residual products, internally produced fuel and other | 26 | 32 | 30 | 31 | ||||||||||||
Total Yield | 176 | 181 | 175 | 173 | ||||||||||||
Refining Margin ($/throughput bbl) | ||||||||||||||||
Gross | $ | 18.15 | $ | 15.05 | $ | 19.51 | $ | 17.88 | ||||||||
Manufacturing cost before depreciation and amortization | $ | 5.50 | $ | 6.07 | $ | 5.57 | $ | 5.56 | ||||||||
Pacific Northwest (Alaska & Washington) (h) | ||||||||||||||||
Throughput (thousand barrels per day) | ||||||||||||||||
Heavy crude | 60 | 82 | 81 | 85 | ||||||||||||
Light crude | 82 | 88 | 81 | 78 | ||||||||||||
Other feedstocks | 2 | 3 | 5 | 8 | ||||||||||||
Total Throughput | 144 | 173 | 167 | 171 | ||||||||||||
Yield (thousand barrels per day) | ||||||||||||||||
Gasoline and gasoline blendstocks | 49 | 72 | 67 | 74 | ||||||||||||
Jet fuel | 31 | 30 | 31 | 31 | ||||||||||||
Diesel fuel | 19 | 28 | 27 | 25 | ||||||||||||
Heavy oils, residual products, internally produced fuel and other | 48 | 47 | 47 | 46 | ||||||||||||
Total Yield | 147 | 177 | 172 | 176 | ||||||||||||
Refining Margin ($/throughput bbl) | ||||||||||||||||
Gross | $ | 10.44 | $ | 7.80 | $ | 11.61 | $ | 9.68 | ||||||||
Manufacturing cost before depreciation and amortization | $ | 3.57 | $ | 2.97 | $ | 2.88 | $ | 2.74 | ||||||||
Mid-Pacific (Hawaii) (h) | ||||||||||||||||
Throughput (thousand barrels per day) | ||||||||||||||||
Heavy crude | 26 | 28 | 27 | 29 | ||||||||||||
Light crude | 51 | 62 | 58 | 54 | ||||||||||||
Total Throughput | 77 | 90 | 85 | 83 | ||||||||||||
Yield (thousand barrels per day) | ||||||||||||||||
Gasoline and gasoline blendstocks | 17 | 23 | 20 | 20 | ||||||||||||
Jet fuel | 19 | 28 | 26 | 26 | ||||||||||||
Diesel fuel | 12 | 13 | 13 | 12 | ||||||||||||
Heavy oils, residual products, internally produced fuel and other | 30 | 27 | 27 | 26 | ||||||||||||
Total Yield | 78 | 91 | 86 | 84 | ||||||||||||
Refining Margin ($/throughput bbl) | ||||||||||||||||
Gross | $ | 6.33 | $ | 8.56 | $ | 6.59 | $ | 6.25 | ||||||||
Manufacturing cost before depreciation and amortization | $ | 2.23 | $ | 1.61 | $ | 1.84 | $ | 1.85 |
(h) | The Company experienced reduced throughput and yield levels during scheduled maintenance turnarounds for the following refineries and periods: the Washington refinery during the 2006 fourth quarter; the Alaska refinery during the 2006 second quarter; the California refinery during the 2006 first quarter; the Hawaii refinery during the 2005 second quarter; and the California and Washington refineries during the 2005 first quarter. |
TESORO CORPORATION
OPERATING DATA
(Unaudited)
OPERATING DATA
(Unaudited)
Three Months Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
Mid-Continent (North Dakota & Utah) | ||||||||||||||||
Throughput (thousand barrels per day) | ||||||||||||||||
Light crude | 111 | 105 | 108 | 107 | ||||||||||||
Other feedstocks | 3 | 3 | 4 | 4 | ||||||||||||
Total Throughput | 114 | 108 | 112 | 111 | ||||||||||||
Yield (thousand barrels per day) | ||||||||||||||||
Gasoline and gasoline blendstocks | 64 | 59 | 62 | 61 | ||||||||||||
Jet fuel | 11 | 11 | 11 | 11 | ||||||||||||
Diesel fuel | 32 | 32 | 32 | 32 | ||||||||||||
Heavy oils, residual products, internally produced fuel and other | 11 | 11 | 11 | 12 | ||||||||||||
Total Yield | 118 | 113 | 116 | 116 | ||||||||||||
Refining Margin ($/throughput bbl) | ||||||||||||||||
Gross | $ | 12.64 | $ | 12.70 | $ | 14.16 | $ | 10.10 | ||||||||
Manufacturing cost before depreciation and amortization | $ | 3.02 | $ | 3.25 | $ | 2.96 | $ | 2.73 | ||||||||
TESORO CORPORATION
OPERATING DATA
(Unaudited)
OPERATING DATA
(Unaudited)
Three Months Ended | Years Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2006 | 2005 | 2006 | 2005 | |||||||||||||
RETAIL SEGMENT | ||||||||||||||||
Number of Stations (end of period) | ||||||||||||||||
Company-operated | 194 | 210 | 194 | 210 | ||||||||||||
Branded jobber/dealer | 266 | 268 | 266 | 268 | ||||||||||||
Total Stations | 460 | 478 | 460 | 478 | ||||||||||||
Average Stations (during period) | ||||||||||||||||
Company-operated | 194 | 210 | 204 | 213 | ||||||||||||
Branded jobber/dealer | 264 | 270 | 261 | 281 | ||||||||||||
Total Average Retail Stations | 458 | 480 | 465 | 494 | ||||||||||||
Fuel Sales (millions of gallons) | ||||||||||||||||
Company-operated | 59 | 59 | 248 | 258 | ||||||||||||
Branded jobber/dealer | 48 | 41 | 186 | 191 | ||||||||||||
Total Fuel Sales | 107 | 100 | 434 | 449 | ||||||||||||
Fuel Margin ($/gallon) (i) | $ | 0.19 | $ | 0.27 | $ | 0.17 | $ | 0.16 | ||||||||
Merchandise Sales ($ millions) | $ | 33 | $ | 34 | $ | 141 | $ | 138 | ||||||||
Merchandise Margin ($ millions) | $ | 9 | $ | 9 | $ | 38 | $ | 36 | ||||||||
Merchandise Margin % | 27 | % | 26 | % | 27 | % | 26 | % | ||||||||
Segment Operating Income (Loss) ($ millions) | ||||||||||||||||
Gross Margins | ||||||||||||||||
Fuel (j) | $ | 20 | $ | 26 | $ | 72 | $ | 71 | ||||||||
Merchandise and other non-fuel margin | 10 | 10 | 41 | 39 | ||||||||||||
Total Gross Margins | 30 | 36 | 113 | 110 | ||||||||||||
Expenses | ||||||||||||||||
Operating expenses | 20 | 22 | 87 | 90 | ||||||||||||
Selling, general and administrative | 6 | 6 | 25 | 25 | ||||||||||||
Depreciation and amortization | 4 | 4 | 16 | 17 | ||||||||||||
Loss on asset disposals and impairments | — | 5 | 6 | 9 | ||||||||||||
Segment Operating Income (Loss) | $ | — | $ | (1 | ) | $ | (21 | ) | $ | (31 | ) | |||||
(i) | Management uses fuel margin per gallon to compare profitability to other companies in the industry. Investors and analysts use fuel margin per gallon to help analyze and compare companies in the industry on the basis of operating performance. Fuel margin per gallon is calculated by dividing fuel gross margin by fuel sales volumes. Fuel margin per gallon may not be calculated similarly by other companies. | |
(j) | Includes the effect of intersegment purchases from the refining segment at prices which approximate market. |