FOR IMMEDIATE RELEASE Contact: Greg Wright
(210) 283-2440
TESORO REPORTS ITS BEST RESULTS
IN MORE THAN A DECADE
San Antonio, Texas -- Jan. 30, 1996 -- Tesoro Petroleum Corporation
(NYSE:TSO) today announced 1995 net earnings applicable to common stock of $54.6
million, or $2.18 per share, compared with $13.0 million, or $.56 per share in
1994. Operating profit reached $105.9 million, compared with $64.4 million in
1994. These results represent the company's best performance in more than a
decade, and were achieved despite very difficult industry conditions that
prevailed through most of the year.
The 1995 results included an after-tax gain of approximately $33 million
($1.34 per share) from the sale of certain interests in the Bob West field in
south Texas, partially offset by charges of approximately $5 million ($.21 per
share) for employee terminations and restructuring and $3 million ($.11 per
share) for the early extinguishment of debt. The 1994 results included an $8.5
million ($.37 per share) refund from the resolution of a refining and marketing
tariff issue, partially offset by a $5 million ($.21 per share) charge for the
early extinguishment of debt. Excluding the gain on sale of Bob West field
interests, 1995 results were the best in five years.
"Achieving these results in the face of depressed natural gas and petroleum
refining industry conditions speaks loudly for the changes we have effected at
Tesoro," President and Chief Executive Officer Bruce Smith said. "Initiatives
within our core operations, coupled with company-wide efficiency measures and
lower debt levels, are expected to help continue Tesoro's improvements. Only a
small portion of the benefits we expect from these efforts was realized in 1995,
but they should have a much larger impact in 1996 and beyond."
Tesoro's enhanced 1995 results were primarily attributable to improvements
within its Exploration & Production (E&P) segment, specifically relating to
natural gas operations in south Texas. These operations benefited from
continued development of the Bob West field, despite natural gas market prices
that averaged almost 10 percent lower than in 1994. Excluding the gain from
sale of certain Bob West field interests earlier in the year, the segment's
operating profit rose 18 percent from 1994 to $76 million as total domestic and
Bolivian natural gas production increased 26 percent to an average of 133
million cubic feet per day.
The Refining & Marketing (R&M) segment had operating profit of $.7 million
in 1995, reflecting a strong recovery from more than $7 million of operating
losses through the first half of the year, when industry refining margins were
among the lowest in a decade. These results compare with a $2.4 million
operating profit in 1994.
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Stronger product prices and a more advantageous feedstock mix in the latter
part of 1995 helped to increase the refinery product spread to $3.47 per barrel
for the full year from just $2.89 per barrel for the first six months. The 1995
spread represented a 9 percent drop from the 1994 level of $3.83 per barrel.
However, throughput volume rose significantly in the second half of the year due
to the improved margins and feedstock mix, resulting in a 10 percent increase in
throughput for full-year 1995.
The R&M segment benefited from key initiatives to enhance profitability.
The vacuum tower that went into operation in December 1994 raised the refinery
product spread approximately $.80 per barrel from what it otherwise would have
been. The segment also began to benefit from expansion of its Alaska retail
gasoline market share, which grew from 29 percent in 1994 to 43 percent at
year-end 1995, along with product shipments to the Russian Far East. A larger
impact from these initiatives is expected in 1996.
The company's Marine Services segment, which includes operations previously
reported as Oil Field Supply and Distribution, was the only business area that
did not achieve significant improvements in its fundamental performance during
1995. This segment recorded a $4.4 million loss, compared with a loss of $2.3
million in 1994.
"During the latter part of 1995, we initiated a restructuring that will
refocus these operations, including the sale or closure of unprofitable sites
and the merger of the remaining assets with Coastwide Energy Services into a new
Marine Services segment, which we expect to complete in February," Smith said.
"This newly consolidated segment should achieve a strong market share along the
western Gulf Coast, with considerable efficiencies, resulting in a lean and very
profitable business."
For the fourth quarter of 1995, earnings applicable to common stock were
$8.6 million, or $.35 per share, compared with $15.3 million, or $.61 per share,
in the 1994 quarter. The 1995 fourth quarter results were negatively impacted
by a non-cash extraordinary charge of $2.9 million for the early retirement of
debt, while the 1994 quarter benefited from an $8.5 million refund from
settlement of an R&M tariff issue, partially offset by charges of approximately
$4 million related to environmental contingencies and other matters.
Fourth-quarter operating profit was $20.6 million, compared with $27.3 million
in the 1994 quarter. In addition to the tariff issue, the 1994 fourth-quarter
operating results benefited from Tennessee Gas Pipeline Company's election to
take higher volumes of gas under its contract to make up for reduced takes
during 1994's third quarter.
Tesoro Petroleum Corporation is a natural resource company engaged in
natural gas exploration and production, petroleum refining and marketing, and
wholesale marketing of fuel and lubricants.
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TESORO PETROLEUM CORPORATION
FINANCIAL AND OPERATING DATA
(CONDENSED AND UNAUDITED)
(In millions except per unit amounts)
Three Months Ended Years Ended
December 31, December 31,
------------------ ------------------
1995 1994 1995 1994
BUSINESS SEGMENT DATA
Gross Operating Revenues
Refining and Marketing:
Refined products . . . . . . . . . . . . . . . . . . $ 164.9 151.9 664.5 582.7
Other, including crude oil resales and merchandise . 17.4 11.5 106.5 104.3
Exploration and Production:
U.S. oil and gas <F1>. . . . . . . . . . . . . . . . 23.8 31.6 107.3 87.5
U.S. gas transportation <F1> . . . . . . . . . . . . 1.5 1.2 5.7 3.1
Bolivia. . . . . . . . . . . . . . . . . . . . . . . 2.6 3.1 11.7 13.2
Marine Services . . . . . . . . . . . . . . . . . . . 17.6 19.5 74.5 77.9
-------- -------- -------- --------
Total Gross Operating Revenues . . . . . . . . . . . $ 227.8 218.8 970.2 868.7
======== ======== ======== ========
Summary of Operations
Segment Operating Profit (Loss):
Refining and Marketing . . . . . . . . . . . . . . . $ 5.2 6.1 .7 2.4
Exploration and Production:
U.S. oil and gas<F2>. . . . . . . . . . . . . . . . 14.6 18.6 96.9 52.1
U.S. gas transportation . . . . . . . . . . . . . . 1.3 1.2 5.1 2.9
Bolivia . . . . . . . . . . . . . . . . . . . . . . 1.4 1.9 7.6 9.3
Marine Services. . . . . . . . . . . . . . . . . . . ( 1.9) ( .5) ( 4.4) ( 2.3)
-------- -------- -------- --------
Total Segment Operating Profit. . . . . . . . . . . 20.6 27.3 105.9 64.4
Corporate and Unallocated Costs:
General and administrative expenses. . . . . . . . . 4.0 4.2 16.4 14.7
Interest expense . . . . . . . . . . . . . . . . . . 4.8 4.7 20.9 18.7
Interest income . . . . . . . . . . . . . . . . . . ( 1.2) ( .9) ( 1.8) ( 2.5)
Other . . . . . . . . . . . . .9 2.0 8.5 7.4
-------- -------- -------- --------
Earnings Before Income Taxes and Extraordinary Item . 12.1 17.3 61.9 26.1
Income Tax Provision. . . . . . . . . . . . . . . . . .6 2.0 4.4 5.6
-------- -------- -------- --------
Earnings Before Extraordinary Item . . . . . . . . . 11.5 15.3 57.5 20.5
Extraordinary Loss on Extinguishment of Debt. . . . . ( 2.9) - ( 2.9) ( 4.8)
-------- -------- -------- --------
Net Earnings. . . . . . . . . . . . . . . . . . . . . 8.6 15.3 54.6 15.7
Dividend Requirements on Preferred Stock. . . . . . . - - - 2.7
-------- -------- -------- --------
Net Earnings Applicable to Common Stock . . . . . . . $ 8.6 15.3 54.6 13.0
======== ======== ======== ========
Average Outstanding Common & Common
Equivalent Shares . . . . . . . . . . . . . . . . . . 25.0 25.0 25.1 23.2
======== ======== ======== ========
Earnings Per Share
Earnings Before Extraordinary Item. . . . . . . . . . $ .46 .61 2.29 .77
Extraordinary Loss on Extinguishment of Debt. . . . . ( .11) - ( .11) ( .21)
-------- -------- -------- --------
Net Earnings . . . . . . . . . . . . . . . . . . . . $ .35 .61 2.18 .56
======== ======== ======== ========
Depreciation, Depletion and Amortization
Refining and Marketing . . . . . . . . . . . . . . . $ 3.1 2.6 11.9 10.4
Exploration and Production:
U.S. oil and gas . . . . . . . . . . . . . . . . . . 6.2 9.1 29.0 24.1
U.S. gas transportation. . . . . . . . . . . . . . . .1 .1 .3 .2
Bolivia. . . . . . . . . . . . . . . . . . . . . . . .3 - .3 -
Marine Services and Other . . . . . . . . . . . . . . .1 .3 1.1 1.3
-------- -------- -------- --------
Total Depreciation, Depletion and Amortization . . . $ 9.8 12.1 42.6 36.0
======== ======== ======== ========
Capital Expenditures
Refining and Marketing . . . . . . . . . . . . . . . $ 2.1 9.1 9.3 32.0
Exploration and Production:
U.S. oil and gas . . . . . . . . . . . . . . . . . . 8.7 16.7 49.4 60.4
U.S. gas transportation. . . . . . . . . . . . . . . .1 .1 .2 5.2
Bolivia. . . . . . . . . . . . . . . . . . . . . . . 3.8 - 3.8 -
Marine Services and Other . . . . . . . . . . . . . . .3 .4 1.2 2.0
-------- -------- -------- --------
Total Capital Expenditures . . . . . . . . . . . . . $ 15.0 26.3 63.9 99.6
======== ======== ======== ========
REFINING AND MARKETING
Refinery Throughput:
Barrels per day . . . . . . . . . . . . . . . . . . . 52,092 49,775 50,569 46,032
% Alaska North Slope crude oil. . . . . . . . . . . . 65% 60% 68% 59%
Refinery Production (Bbls/day):
Gasoline. . . . . . . . . . . . . . . . . . . . . . . 14,385 13,306 14,298 11,728
Middle distillates. . . . . . . . . . . . . . . . . . 22,151 19,489 21,140 18,839
Heavy oils and residual product . . . . . . . . . . . 15,222 16,615 14,516 15,118
Refinery fuel . . . . . . . . . . . . . . . . . . . . 1,785 1,846 2,042 1,776
-------- -------- -------- --------
Total Refinery Production . . . . . . . . . . . . . 53,543 51,256 51,996 47,461
======== ======== ======== ========
Refinery Operations - Product Spread ($/Bbl):
Yield value of products manufactured -
Gasoline . . . . . . . . . . . . . . . . . . . . . . $ 25.46 27.91 25.39 25.88
Middle distillates . . . . . . . . . . . . . . . . . $ 25.33 25.20 24.13 23.94
Heavy oils and residual product. . . . . . . . . . . $ 9.41 9.01 9.37 8.23
Average yield value of products manufactured. . . . . $ 20.89 20.72 20.35 19.48
Cost of raw materials . . . . . . . . . . . . . . . . 16.15 16.38 16.88 15.65
-------- -------- -------- --------
Product Spread. . . . . . . . .. . . . . . . . . . . 4.74 4.34 3.47 3.83
Operating costs. . . . . . . . .. . . . . . . . . . . 2.52 2.69 2.55 2.61
Depreciation . . . . . . . . . .. . . . . . . . . . . .50 .45 .51 .45
-------- -------- -------- --------
Net Refinery Margin . . . . . .. . . . . . . . . . . $ 1.72 1.20 .41 .77
======== ======== ======== ========
Total Product Sales (Bbls/day):
Gasoline. . . . . . . . . . . . . . . . . . . . . . . 21,451 21,970 24,526 23,191
Middle distillates. . . . . . . . . . . . . . . . . . 37,085 33,131 37,988 33,256
Heavy oils and residual product . . . . . . . . . . . 15,737 14,311 14,787 14,228
-------- -------- -------- --------
Total Product Sales Volumes. . . . . . . . . . . . . 74,273 69,412 77,301 70,675
======== ======== ======== ========
Gross Margin - Merchandise & Other ($ millions). . . . $ 3.0 3.4 12.3 13.1
======== ======== ======== ========
EXPLORATION AND PRODUCTION
United States
Natural Gas production, net (Mcf/day):
Spot market and other. . . . . . . . . . . . . . . . 82,929 90,009 94,668 65,841
Tennessee Gas contract <F3>. . . . . . . . . . . . . 15,367 26,353 19,822 17,955
-------- -------- -------- --------
Total Production . . . . . . . . . . . . . . . . 98,296 116,362 114,490 83,796
======== ======== ======== ========
Average natural gas sales price ($/Mcf)<F1>:
Spot market <F4> . . . . . . . . . . . . . . . . . . $ 1.51 1.43 1.34 1.48
Tennessee Gas contract <F3>. . . . . . . . . . . . . $ 8.64 8.13 8.41 7.93
Average. . . . . . . . . . . . . . . . . . . . . . . $ 2.63 2.94 2.57 2.86
Production cost ($/Mcf)<F1> . . . . . . . . . . . . . $ .25 .28 .29 .29
Total operating expense ($/Mcf) . . . . . . . . . . . $ .32 .36 .35 .37
Depletion ($/Mcf) . . . . . . . . . . . . . . . . . . $ .69 .85 .69 .79
Bolivia
Natural gas:
Production, net (Mcf/day). . . . . . . . . . . . . . 17,388 21,551 18,650 22,082
Sales price ($/Mcf). . . . . . . . . . . . . . . . . $ 1.25 1.14 1.28 1.20
Crude oil (condensate):
Production, net (Bbls/day) . . . . . . . . . . . . . 503 702 567 733
Sales price ($/Bbl). . . . . . . . . . . . . . . . . $ 14.22 13.67 14.39 13.28
Production cost ($/NeMcf) . . . . . . . . . . . . . . $ .07 .07 .07 .06
Total operating expense ($/NeMcf) . . . . . . . . . . $ .56 .50 .48 .41
EBITDA, CONSOLIDATED<F5> ($ millions) . . . . . . . . . $ 26.7 34.1 125.4 80.8
<FN>
<F1> Amounts previously reported have been changed to conform with the current presentation.
<F2> Operating profit from the Exploration and Production segment for the year ended December 31,
1995 included a gain of approximately $33 million from the sale of certain interests in the
Bob West Field.
<F3> As previously disclosed, the Company is involved in litigation with Tennessee Gas Pipeline Company.
<F4> Includes effects of the Company's natural gas price swaps which amounted to a gain of $.01
per Mcf for both the 1995 and 1994 years and a loss of $.09 per Mcf and gain of $.03 per Mcf
for the three months ended December 31, 1995 and 1994, respectively.
<F5> EBITDA represents earnings before extraordinary loss, interest expense, income taxes and
depreciation, depletion and amortization. EDITDA, while not purporting to reflect any
measure of the Company's operations or cash flow, is presented for additional analysis.