FOR IMMEDIATE RELEASE Contact: Greg Wright
(210) 283-2440
TESORO'S RESERVES AND
1996 CAPITAL BUDGET ANNOUNCED
San Antonio, Texas -- Jan. 30, 1996 -- Tesoro Petroleum Corporation
(NYSE:TSO) today announced its Exploration & Production (E&P) segment added
natural gas reserves at about double its total production level during 1995,
although year-end proved reserves were lower due to property sales. The company
also announced its 1996 capital budget, the bulk of which is directed at E&P.
In 1995, Tesoro added 96 billion cubic feet-equivalent (Bcfe) of proved
reserves, virtually all of which were natural gas in south Texas. These
additions, including revisions of prior estimates, replaced 193 percent of
overall net production of 49.8 Bcfe, of which 8 Bcfe were produced in Bolivia.
Focusing on Tesoro's south Texas operations, the company replaced 230 percent of
net domestic production, which totaled 41.8 Bcfe during 1995. Without
revisions, Tesoro added 50.2 Bcfe of domestic proved reserves, for a 120 percent
domestic replacement rate.
Tesoro's domestic proved reserve additions in 1995 were achieved at low
cost, bringing its three-year finding cost to $.70 per thousand cubic
feet-equivalent, which is among the lowest in the industry. These additions
were realized with an 85 percent domestic drilling-success rate during 1995,
reflecting 100 percent success on 17 development wells (9.71 net) and 56 percent
success on nine exploratory wells (3.63 net).
For the year, Tesoro's net proved domestic reserves declined 18 percent due
to the recent sale of certain Bob West field interests, which accounted for
approximately 77 Bcfe of net proved reserves. Tesoro ended the year with 106.4
Bcfe of domestic net proved reserves, compared with 129.1 Bcfe at year-end 1994.
"Our domestic drilling program had a very successful year," Tesoro E&P
President Robert Oliver said. "Even though we sold properties containing about
77 Bcfe and produced about 42 Bcfe, our year-end domestic reserves were down
less than 23 Bcfe. Looking ahead, we expect to derive significant benefits from
the recent sale of some of our Bob West field interests. Aside from greatly
strengthening our financial position, proceeds from the sale are enabling us to
move forward with
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high-potential drilling opportunities outside the Bob West field. During 1995,
on a minimal exploration budget of less than $8 million, we participated in nine
exploratory wells in other parts of south Texas, with a 56 percent success rate.
Included in these numbers is our Longoria No.1 well, which represents a major
new discovery that we named the Tea Jay field. We expect to accelerate this
domestic drilling program in 1996."
Oliver noted that potentially major enhancements also are on the horizon
for Tesoro's Bolivian operations. Passage of a new hydrocarbons law in Bolivia,
expected by mid-year, would significantly boost Tesoro's proved reserves due
solely to a resulting extension of the company's contracts of operation. In
addition, proposed pipeline projects in the region are moving forward, which
would open up significant new markets for Tesoro's production.
"We have discovered five fields on our 1.3 million acres under contract in
Bolivia, with another prospect currently drilling," Oliver said. "Two of these
fields are shut in and the other three could produce at much higher levels if we
had access to sufficient markets. We fully expect our Bolivian operations to go
from being a static asset to a very dynamic asset within the next few years."
Tesoro completed one well (.73 net) in Bolivia during 1995, discovering the
new Palo Marcado natural gas field, which has estimated gross potential reserves
of more than 250 Bcfe. However, until the new hydrocarbon law is approved and
the contracts are extended, no proved reserves can be attributable to this
success. As a result, Tesoro's Bolivian reserves fell 8 percent to 98.0 Bcfe
from year-end 1994.
Capital Expenditures
Tesoro plans company-wide 1996 capital expenditures of approximately $51
million, compared with $64 million in 1995. The E&P segment accounts for almost
$41 million, or 80 percent, of the budgeted expenditures, compared with $53
million, or 84 percent, in 1995. Spending for Tesoro's Refining & Marketing
(R&M) segment in 1996 is expected to be approximately $9 million, about the same
as in 1995.
The E&P segment's 1995 capital expenditures included $49 million for
domestic operations and $4 million in Bolivia. The 1996 E&P budget calls for
$36 million of domestic expenditures and approximately $5 million in Bolivia,
where the current drilling program includes two exploratory
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wells, one of which is now drilling. Planned domestic expenditures include $21
million for exploration, development and acquisition outside the Bob West field,
reflecting a 100 percent increase. Expenditures for Bob West field development,
on the other hand, are budgeted at $15 million, down from about $39 million in
1995. Tesoro expects to substantially complete its development of this field
during 1996.
"Our drilling focus has definitely shifted away from the development of
this one field, which accounted for 80 percent of domestic E&P capital spending
in 1995 but only 40 percent of planned 1996 expenditures," Oliver said.
"However, we plan to remain in the same general area of south Texas within the
Wilcox trend, capitalizing on the expertise we've developed in the region. The
outstanding exploratory success we recorded during 1995 gives us additional
confidence in the drilling prospects we have targeted for 1996."
Approximately 15 percent of the R&M segment's $9 million 1996 capital
budget is earmarked for the installation of facilities that will allow the
company to begin producing and marketing asphalt in Alaska, where Tesoro hopes
to capture a 20 percent market share by year-end. The remainder of the planned
expenditures is targeted primarily toward maintenance and upgrades at Tesoro's
refinery and 7-Eleven convenience stores in Alaska, roughly the same as in 1995.
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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