EXHIBIT 99.1
Tesoro Reports Second Quarter Earnings
SAN ANTONIO--(BUSINESS WIRE)--Aug. 4, 2004--Tesoro Petroleum
Corporation (NYSE:TSO) today reported record net earnings of $213.1
million, or $3.11 per share, for the second quarter of 2004 compared
to a net loss of $7.0 million, or $0.11 per share, for the second
quarter of 2003. Results for the second quarter of 2003 include an
after-tax charge of $21.0 million, or $0.33 per share to write-off the
unamortized debt issuance costs of the company's previous credit
facility.
For the first half of 2004, the company reported net earnings of
$263.5 million, or $3.88 per share, compared to net earnings of $13.4
million, or $0.21 per share, for the first six months of 2003. Results
for the first half of 2003 include after-tax charges of $26.7 million,
or $0.41 per share, to write-off costs related to the company's
previous credit facility along with early retirement and severance
costs.
"During the quarter, below-average product inventories and strong
finished product demand pushed industry refining margins to
above-average levels. Our ability to capture the margin strength and
increase profitability was due to better business execution," said
Bruce A. Smith, Chairman, President and CEO of Tesoro. "In fact, our
ability to safely and reliably increase our refining throughput rates
has been a critical factor in the financial success we have achieved
so far in 2004."
As previously announced, the company prepaid the remaining $297.5
million balance of its 9% Senior Subordinated Notes, due 2008, on July
1, 2004. Total debt after the July 1st prepayment was approximately
$1.3 billion, a reduction of about $800 million from the $2.1 billion
in debt after the Golden Eagle acquisition in May of 2002. "We ended
the quarter with a cash balance of over $423 million resulting in a
net debt to net capitalization ratio of 49%. On July 1st we used a
portion of that cash to prepay the 9% debt," added Smith.
"The fact that we have reduced debt by nearly 40% in slightly more
than two years confirms our expectations as we built our refining
system. Today, we are even more optimistic about our ability to
continue to further optimize the system. The combination of internal
initiatives, a strong industry environment and a disciplined focus on
capital spending should give shareholders improved value as free cash
flow per share continues to improve," stated Smith.
Public Invited to Listen to Analyst Conference Call via Internet
At 10 a.m., CT, Wednesday, August 4, 2004 Tesoro will broadcast,
live, its conference call with analysts regarding second quarter 2004
results. Interested parties may listen to the live conference call
over the Internet by logging on to Tesoro's Internet site at
http://www.tesoropetroleum.com and clicking on the "What's New"
section.
Tesoro Petroleum Corporation, a Fortune 500 Company, is an
independent refiner and marketer of petroleum products. Tesoro
operates six refineries in the western United States with a combined
capacity of nearly 560,000 barrels per day. Tesoro's retail-marketing
system includes approximately 550 branded retail stations, of which
over 200 are company operated under the Tesoro(R) and Mirastar(R)
brands.
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 concern the company's
expectation of continuing strong industry conditions, capital spending
and free cash flow. Factors which can cause actual results to differ
from these forward-looking statements include: changes in general
economic conditions, the timing and extent of changes in demand for
refined products, availability and cost of crude oil, other feedstocks
or refined products, throughput and yield levels, disruptions due to
equipment interruptions or failure at our or third-party facilities,
political developments and other factors beyond our control. For more
information concerning these factors and other factors that could
cause such a difference, see our annual report on Form 10-K and
quarterly reports on Form 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.
TESORO PETROLEUM CORPORATION
STATEMENT OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions except per share amounts)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- ------------------
2004 2003 (a) 2004 2003 (a)
--------- --------- -------- --------
Revenues $ 3,155.0 $ 2,116.4 $5,584.9 $4,402.5
Costs and Expenses:
Costs of sales and
operating expenses 2,679.3 1,979.6 4,914.0 4,110.7
Selling, general and
administrative expenses
(b) 38.7 32.1 69.7 70.4
Depreciation and
amortization 37.8 36.7 74.8 73.7
Loss on asset sales and
impairments 3.5 0.9 4.1 1.1
--------- --------- -------- --------
Operating Income 395.7 67.1 522.3 146.6
Interest and Financing
Costs, Net (c) (40.2) (78.2) (83.1) (125.2)
--------- --------- -------- --------
Earnings (Loss) Before
Income Taxes 355.5 (11.1) 439.2 21.4
Income Tax Provision
(Benefit) 142.4 (4.1) 175.7 8.0
--------- --------- -------- --------
Net Earnings (Loss) $ 213.1 $ (7.0) $ 263.5 $ 13.4
========= ========= ======== ========
Net Earnings (Loss) Per
Share:
Basic $ 3.26 $ (0.11) $ 4.04 $ 0.21
Diluted $ 3.11 $ (0.11) $ 3.88 $ 0.21
Weighted Average Common
Shares:
Basic 65.3 64.6 65.2 64.6
Diluted (d) 68.6 64.6 68.0 64.8
(a) The 2003 results include the marine services operations, which
were sold in December 2003.
(b) Includes stock-based compensation for stock options and other
stock-based awards totaling $3.7 million and $5.7 million during
the three months and six months ended June 30, 2004, respectively.
The fair value method of accounting for stock options was adopted
on January 1, 2004 and, therefore, compensation expense associated
with stock options was not recorded during 2003. No other
stock-based compensation was recorded during 2003.
(c) During the six months ended June 30, 2004 the Company recorded
charges of $2.0 million for financing costs related to amending
both the 8% senior secured notes and the senior secured term
loans. During the three months ended June 30, 2003 the Company
wrote-off $33.3 million of unamortized debt issuance costs related
to voluntary prepayments of debt and the replacement of the
Company's previous credit facility with a new credit agreement and
term debt.
(d) The assumed conversion of common stock equivalents produced
anti-dilutive results for the three months ended June 30, 2003 and
therefore was not included in the dilutive calculations.
TESORO PETROLEUM CORPORATION
SELECTED OPERATING SEGMENT DATA
(Unaudited)
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2004 2003 2004 2003
-------- -------- ------- --------
Operating Income (Loss)
Refining $ 427.5 $ 72.3 $ 579.1 $ 181.5
Retail (1.5) 10.3 (5.7) 2.2
Marine Services (a) - 1.7 - 2.8
-------- -------- ------- --------
Total Segment Operating
Income 426.0 84.3 573.4 186.5
Corporate and Unallocated
Costs (e) (26.8) (16.3) (47.0) (38.8)
Loss on Asset Sales and
Impairments (3.5) (0.9) (4.1) (1.1)
-------- -------- ------- --------
Operating Income 395.7 67.1 522.3 146.6
Interest and Financing Costs,
Net (c) (40.2) (78.2) (83.1) (125.2)
-------- -------- ------- --------
Earnings (Loss) Before
Income Taxes $ 355.5 $ (11.1) $ 439.2 $ 21.4
======== ======== ======= ========
Depreciation and Amortization
Refining $ 31.8 $ 29.6 $ 62.8 $ 59.4
Retail 4.4 5.0 8.8 10.0
Marine Services (a) - 0.7 - 1.4
Corporate 1.6 1.4 3.2 2.9
-------- -------- ------- --------
Depreciation and
Amortization $ 37.8 $ 36.7 $ 74.8 $ 73.7
======== ======== ======= ========
Capital Expenditures
Refining $ 28.8 $ 15.4 $ 43.3 $ 42.4
Retail 0.9 0.1 1.0 0.3
Marine Services (a) - 0.1 - 0.4
Corporate 1.7 0.3 2.0 0.5
-------- -------- ------- --------
Capital Expenditures $ 31.4 $ 15.9 $ 46.3 $ 43.6
======== ======== ======= ========
(e) Corporate and unallocated costs for the six months ended June 30,
2003 include charges of $4.7 million in reorganization costs,
primarily a non-cash charge for voluntary early retirement
benefits and severance payments. An additional $4.3 million of
reorganization costs were charged to the operating segments during
2003, including $2.6 million in refining, $1.3 million in retail
and $0.4 million in marine services.
BALANCE SHEET DATA
(Unaudited)
(Dollars in millions)
June 30, December 31,
2004 2003
--------- -------------
Cash and Cash Equivalents $ 423.3 $ 77.2
Total Assets $ 4,298.3 $ 3,661.3
Total Debt (f) $ 1,611.5 $ 1,608.8
Total Stockholders' Equity $ 1,242.0 $ 965.4
Total Debt to Capitalization Ratio 56% 62%
Total Debt (f) $ 1,611.5 $ 1,608.8
Less: Cash and Cash Equivalents $ 423.3 $ 77.2
--------- -------------
Net Debt (g) $ 1,188.2 $ 1,531.6
Total Stockholders' Equity $ 1,242.0 $ 965.4
--------- -------------
Net Capitalization (g) $ 2,430.2 $ 2,497.0
Net Debt to Net Capitalization Ratio (g) 49% 61%
(f) On July 1, 2004 Tesoro voluntarily prepaid the remaining $297.5
million outstanding principal amount of its 9% senior subordinated
notes at a call premium of 3%.
(g) Net debt represents total debt less cash and cash equivalents. Net
capitalization represents the total of net debt and total
stockholders' equity. The Company believes net debt to net
capitalization is useful in measuring financial leverage at June
30, 2004 because a significant portion of cash at the end of the
quarter was used to prepay the 9% senior subordinated notes as
discussed in note (f) above. Net debt to net capitalization should
not be considered as an alternative to debt to capitalization or
any measure of financial leverage presented in accordance with
accounting principles generally accepted in the United States of
America. Net debt to net capitalization may not be comparable to
similarly titled measures used by other companies.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2004 2003 2004 2003
-------- -------- ------- --------
REFINING SEGMENT
Total Refining Segment
Throughput (thousand barrels
per day)
Heavy crude 290.5 290.9 281.2 286.9
Light crude 225.6 189.1 218.6 178.4
Other feedstocks 21.7 17.2 17.9 15.6
-------- -------- ------ --------
Total Throughput 537.8 497.2 517.7 480.9
======== ======== ====== ========
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 261.8 247.5 253.8 238.7
Jet fuel 64.0 55.5 64.1 56.0
Diesel fuel 115.8 107.3 109.6 102.5
Heavy oils, residual
products, internally
produced fuel and other 115.1 104.5 109.7 102.3
-------- -------- ------ --------
Total Yield 556.7 514.8 537.2 499.5
======== ======== ====== ========
Refining Margin ($/throughput
bbl) (h)
Gross $ 13.20 $ 5.92 $10.50 $ 6.40
Manufacturing cost before
depreciation and
amortization (i) $ 2.83 $ 2.80 $ 2.85 $ 2.85
Segment Operating Income
($ millions)
Gross refining margin (after
inventory changes) (j) $ 639.0 $ 267.7 $987.0 $ 562.5
Expenses
(k)
Manufacturing costs 138.3 126.5 268.8 247.8
Other operating expenses 35.0 32.5 64.5 58.9
Selling, general and
administrative 6.4 6.8 11.8 14.9
Depreciation and
amortization (l) 31.8 29.6 62.8 59.4
-------- -------- ------ --------
Segment Operating
Income $ 427.5 $ 72.3 $579.1 $ 181.5
======== ======== ====== ========
Product Sales (thousand
barrels per day) (m)
Gasoline and gasoline
blendstocks 307.7 291.7 298.5 280.9
Jet fuel 86.3 79.2 82.9 83.2
Diesel fuel 139.4 128.5 129.6 126.0
Heavy oils, residual products
and other 76.2 76.9 76.1 69.9
-------- -------- ------ --------
Total Product Sales 609.6 576.3 587.1 560.0
======== ======== ====== ========
Product Sales Margin
($/barrel) (m)
Average sales price $ 54.38 $ 37.20 $49.86 $ 39.80
Average costs of sales 42.79 32.18 40.44 34.31
-------- -------- ------ --------
Product Sales
Margin $ 11.59 $ 5.02 $ 9.42 $ 5.49
======== ======== ====== ========
(h) Management uses gross refining margin per barrel to compare
profitability to other companies in the industry. Gross refining
margin per barrel is calculated by dividing gross refining margin
by total refining throughput and may not be calculated similarly
by other companies.
(i) Management uses manufacturing costs per barrel to evaluate the
efficiency of refinery operations. Manufacturing costs per barrel
may not be comparable to similarly titled measures used by other
companies.
(j) Gross refining margin is revenues less cost of refining feedstock,
which 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.
(k) Includes $2.6 million for voluntary early retirement benefits and
severance payments during the six months ended June 30, 2003.
(l)Includes manufacturing depreciation and amortization per throughput
barrel of approximately $0.57 and $0.58 for the three months ended
June 30, 2004 and 2003, respectively, and $0.59 and $0.60 for the
six months ended June 30, 2004 and 2003, respectively.
(m) Sources of total product sales include products manufactured at
the refineries, products drawn from inventory balances and
products purchased from third parties. Total product sales margin
includes margins on sales of manufactured and purchased products
and the effects of inventory changes.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
--------- ------- ------- -------
Refining By Region
California
Throughput (thousand barrels per
day)
Heavy crude 146.8 150.7 145.5 150.3
Light crude 1.0 - 2.5 1.9
Other feedstocks 14.1 8.2 9.5 6.2
--------- ------- ------- -------
Total Throughput 161.9 158.9 157.5 158.4
========= ======= ======= =======
Yield (thousand barrels per day)
Gasoline and gasoline
blendstocks 102.6 100.8 100.2 100.9
Diesel fuel 41.4 39.3 39.1 39.5
Heavy oils, residual products,
internally produced fuel
and other 27.1 27.4 27.6 27.4
--------- ------- ------- -------
Total Yield 171.1 167.5 166.9 167.8
========= ======= ======= =======
Refining Margin ($/throughput
bbl)
Gross $ 19.51 $ 9.08 $ 15.42 $ 9.81
Manufacturing cost before
depreciation and amortization $ 4.63 $ 4.58 $ 4.62 $ 4.43
Pacific Northwest (Alaska &
Washington) (n)
Throughput (thousand barrels per
day)
Heavy crude 92.5 87.8 88.5 83.7
Light crude 80.4 71.2 76.6 67.1
Other feedstocks 2.6 5.2 3.9 6.2
--------- ------- ------- -------
Total Throughput 175.5 164.2 169.0 157.0
========= ======= ======= =======
Yield (thousand barrels per day)
Gasoline and gasoline
blendstocks 74.3 75.1 71.8 70.7
Jet fuel 30.0 24.6 29.3 24.8
Diesel fuel 28.2 26.6 27.5 24.8
Heavy oils, residual products,
internally produced fuel
and other 47.5 42.9 45.0 41.9
--------- ------- ------- -------
Total Yield 180.0 169.2 173.6 162.2
========= ======= ======= =======
Refining Margin ($/throughput
bbl)
Gross $ 11.98 $ 4.93 $ 9.32 $ 5.53
Manufacturing cost before
depreciation and amortization $ 2.32 $ 1.99 $ 2.35 $ 2.21
Mid-Pacific (Hawaii)
Throughput (thousand barrels per
day)
Heavy crude 51.2 52.4 47.2 52.9
Light crude 34.0 23.3 37.6 22.6
--------- ------- ------- -------
Total Throughput 85.2 75.7 84.8 75.5
========= ======= ======= =======
Yield (thousand barrels per day)
Gasoline and gasoline
blendstocks 21.5 17.5 22.3 17.6
Jet fuel 24.0 22.2 24.4 22.8
Diesel fuel 13.3 14.2 14.2 13.4
Heavy oils, residual products,
internally produced fuel
and other 27.6 22.7 25.3 22.8
--------- ------- ------- -------
Total Yield 86.4 76.6 86.2 76.6
========= ======= ======= =======
Refining Margin ($/throughput
bbl)
Gross $ 7.63 $ 2.21 $ 6.09 $ 2.68
Manufacturing cost before
depreciation and amortization $ 1.44 $ 1.42 $ 1.38 $ 1.41
(n) Throughput and yield levels were reduced in the 2003 second
quarter during a scheduled maintenance turnaround at the Alaska
refinery.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ----------------
2004 2003 2004 2003
--------- ------- ------- -------
Mid-Continent (North Dakota &
Utah) (o)
Throughput (thousand barrels per
day)
Light crude 110.2 94.6 101.9 86.8
Other feedstocks 5.0 3.8 4.5 3.2
--------- ------- ------- -------
Total Throughput 115.2 98.4 106.4 90.0
========= ======= ======= =======
Yield (thousand barrels per day)
Gasoline and gasoline
blendstocks 63.4 54.1 59.5 49.5
Jet fuel 10.0 8.7 10.4 8.4
Diesel fuel 32.9 27.2 28.8 24.8
Heavy oils, residual products,
internally produced fuel
and other 12.9 11.5 11.8 10.2
--------- ------- ------- -------
Total Yield 119.2 101.5 110.5 92.9
========= ======= ======= =======
Refining Margin ($/throughput
bbl)
Gross $ 10.28 $ 5.29 $ 8.57 $ 5.03
Manufacturing cost before
depreciation and amortization $ 2.09 $ 2.31 $ 2.21 $ 2.38
(o) Throughput and yield levels were reduced in the 2003 first quarter
during a scheduled maintenance turnaround at the Utah refinery.
TESORO PETROLEUM CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
2004 2003 2004 2003
--------- ------- ------- -------
RETAIL SEGMENT
Number of Stations (end of
period)
Company-operated 223 228 223 228
Branded jobber/dealer 317 345 317 345
--------- ------- ------- -------
Total Stations 540 573 540 573
========= ======= ======= =======
Average Stations (during period)
Company-operated 223 229 224 230
Branded jobber/dealer 320 349 323 354
--------- ------- ------- -------
Total Average Retail Stations 543 578 547 584
========= ======= ======= =======
Fuel Sales (millions of gallons)
Company-operated 72.9 79.6 142.5 156.7
Branded jobber/dealer 55.9 70.6 109.2 137.2
--------- ------- ------- -------
Total Fuel Sales 128.8 150.2 251.7 293.9
========= ======= ======= =======
Fuel Margin ($/gallon) (p) $ 0.14 $ 0.21 $ 0.14 $ 0.16
Merchandise Sales ($ millions) $ 32.5 $ 29.6 $ 60.7 $ 54.5
Merchandise Margin ($ millions) $ 9.1 $ 8.0 $ 16.4 $ 14.2
Merchandise Margin % 28% 27% 27% 26%
Segment Operating Income (Loss)
($ millions)
Gross Margins
Fuel (q) $ 18.4 $ 31.8 $ 35.9 $ 48.2
Merchandise and other non-fuel
margin 10.0 9.1 18.2 16.4
--------- ------- ------- -------
Total Gross Margins 28.4 40.9 54.1 64.6
Expenses (r)
Operating expenses 18.3 17.0 36.8 35.4
Selling, general and
administrative 7.2 8.6 14.2 17.0
Depreciation and amortization 4.4 5.0 8.8 10.0
--------- ------- ------- -------
Segment Operating Income
(Loss) $ (1.5) $ 10.3 $ (5.7) $ 2.2
========= ======= ======= =======
(p) 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. Management uses fuel
margin per gallon to compare profitability to other companies in
the industry.
(q) Includes the effect of intersegment purchases from the refining
segment at prices which approximate market.
(r) Includes $1.3 million for voluntary early retirement benefits and
severance payments during the six months ended June 30, 2003.
CONTACT: Tesoro Petroleum Corporation, San Antonio
Investors:
John Robertson, 210-283-2687
or
Media:
Tara Payne, 210-283-2676