EXHIBIT 99.1
[TESORO LOGO]
FOR IMMEDIATE RELEASE
CONTACTS:
JOHN ROBERTSON (INVESTOR RELATIONS)
(210) 283-2687
TARA FORD, (MEDIA)
(210) 283-2676
TESORO PETROLEUM ANNOUNCES $500 MILLION DEBT REDUCTION PROGRAM
SAN ANTONIO - JUNE 18, 2002 - Tesoro Petroleum Corporation
(NYSE:TSO) today announced plans that outline the Company's goal of reducing its
debt by $500 million by the end of 2003. "Our first priority is to strengthen
our balance sheet - immediately," said Bruce A. Smith, Chairman, President and
CEO of Tesoro. "Over the past six weeks I have worked with my senior management
team and we have developed a plan to reduce debt by $500 million by the end of
2003." The overall debt reduction goal is focused on several strategic
initiatives that have been instituted at the Company:
o Working capital optimization program
o Cost reduction program
o Asset sales
o Reducing capital programs
o Synergies from the Golden Eagle acquisition
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"Having accomplished our targeted growth objective, we will now focus on fully
optimizing our existing system by improving returns, reducing our cost structure
and limiting the amount of capital required to run the business. As a first
step, we are targeting a reduction in our working capital requirements by $50
million by the end of 2002. The bulk of this reduction will be through the
rationalization of both feedstock and finished product inventories," Smith said.
"We have already made great strides in achieving our goal during this quarter
alone."
The cost reduction program initiated by Tesoro's senior management involves
various efficiency and cost rationalization programs with the goal of
permanently reducing costs in manufacturing, retail and overhead. "I have set a
goal of achieving $10 million in permanent improvements by the end of this year
and an additional $65 million of improvements for 2003. These improvements are
based on our current overall cost structure of more than $1 billion - so I am
confident that we can meet or exceed these goals," added Smith.
Tesoro will divest assets as part of its debt reduction program. In addition to
the previously announced review of its Marine Services operations, the assets
under review include the crude and product pipeline systems around the North
Dakota refinery and selected retail sites including the recently acquired Beacon
stations in California. "We are sending out the initial bid proposals this week
for our pipeline assets," said Smith. "We are actively preparing bid packages
around our targeted retail assets and expect to deliver those packages in the
next few weeks. Our goal is to generate net proceeds of around $200 million
through our asset divestiture program - all of which should occur this year."
The Company also announced that it is further reducing its capital program to
$250 million for both 2002 and 2003, including turnaround costs. This represents
a total reduction of more than $200 million from Tesoro's original budget. "We
have gone
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through a detailed analysis of our capital budget and have rationalized every
dollar we are spending for our capital program," Smith stated. "The reduction in
our estimated capital budget was achieved without the compromise of our
environmental and safety commitments."
The final initiative announced today is the anticipated synergies received from
the Golden Eagle acquisition. The Company expects to achieve $10 million in
synergies this year and an additional $25 million in 2003. "I am very excited
about the potential synergies we can achieve due to our latest acquisition. Our
original short-list of improvements has more than tripled in number through
discussions with the management group at the Golden Eagle refinery," commented
Smith. "I am confident that we can meet and exceed our improvement goals from
this acquisition as we integrate these assets into our current asset base."
SECOND QUARTER FORECAST
"The margin environment has improved dramatically from the lows experienced
through mid-May and, assuming a continuation of the current margin environment,
we expect second quarter financial results to be better than the current analyst
consensus of a loss of 32 cents per share. We currently have no borrowings on
our revolving credit agreement and have cash invested. Accordingly we expect to
meet all our credit agreement tests and to have no borrowings on our revolver at
the end of the quarter," said Smith.
Tesoro Petroleum Corporation, a Fortune 500 Company, is an independent
refiner and marketer of petroleum products and provider of marine logistics
services. Tesoro operates six refineries in the western United States with a
combined capacity of nearly 560,000 barrels per day. Tesoro's growing retail
marketing system includes more than 750 branded retail stations, of which
approximately 250 are company owned and operated under the Tesoro(R) and
Mirastar(R) brands.
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This news release contains certain statements that are "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. These forward-looking
statements contain projections as to financial results, the expected effects of
the company's strategic initiatives including cost controls, asset divestitures,
working capital optimization, capital expenditures, credit agreement tests and
borrowings, the expected synergies from the Golden Eagle acquisition on future
earnings, cash flows and liquidity. Factors which may cause actual results to
differ from those forward-looking statements include, changes in general
economic conditions, disruptions due to equipment interruptions or failure at
Tesoro or third-party facilities, regulators approval of asset divestitures and
other factors beyond Tesoro's control. For more information concerning factors
that could cause such a difference, see Tesoro's annual report on Form 10-K and
other of Tesoro's reports filed with the Securities and Exchange Commission.
Tesoro undertakes 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 Tesoro becomes aware of, after the date
hereof.
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