Exhibit 99.1
Tesoro Corporation Announces Second Quarter Results;
Achieves Year-End Debt Target Early
SAN ANTONIO--(BUSINESS WIRE)--Aug. 7, 2007--Tesoro Corporation
(NYSE:TSO) today reported record second quarter net income of $443
million, or $3.17 per share, compared to $326 million, or $2.33 per
share in the second quarter of 2006. Year-to-date net income totaled
$559 million, or $4.02 per share, which is $190 million or 51% ahead
of 2006.
Year-to-date refinery operating income has surpassed one billion
dollars compared to $718 million in the same period last year. The
improvement is primarily attributable to increases in throughput and
clean product margins. The Company achieved 91% utilization rates for
the second quarter, excluding results from the Los Angeles refinery.
"While the addition of the Los Angeles refinery positively impacts our
year over year comparisons, approximately 90% of our second quarter
earnings growth was from our existing system," said Bruce Smith,
Tesoro's Chairman, President and CEO. "It was a busy quarter for the
company. We successfully integrated the new Shell and USA retail
assets, integrated the Los Angeles refinery and completed two
turnarounds at the facility. Now that Los Angeles has finished its
scheduled maintenance for the year, we expect the refinery to run at
higher throughput rates and to capture a greater percentage of the
available margin than we recorded in the second quarter," said Smith.
Capital expenditures for the year are expected to remain at $900
million. In 2007, the Company has completed the Amorco wharf crude oil
blending project at Golden Eagle, installed the new diesel
desulphurization unit in Alaska, and upgraded the catalytic cracker
unit at Salt Lake City. In the third quarter the Company expects to
increase the sulfur handling capabilities of the Anacortes refinery,
thereby increasing the amount of sour crude the refinery can process.
The Golden Eagle coker modification project is on budget and on track
to be completed in the first quarter of 2008.
At the end of June, the Company's debt to capitalization was 37%.
By August 3rd the Company repaid all outstanding borrowings on our
revolving line of credit. Including the debt repayments subsequent to
the quarter, our pro-forma debt to capitalization ratio would have
been 33% at June 30, 2007. "One of our main goals this year was to
reduce our debt-to-capitalization ratio to below 40% by year end,
which we achieved almost six months early. The Company does not have
additional debt that can be repaid, so cash flow will now be directed
towards organic capital projects. We believe these programs offer the
opportunity to continue to substantially increase shareholder value,"
said Smith.
Los Angeles Refinery Update
Operating income from the Los Angeles refinery was $23 million for
the 51 days in the second quarter the Company held operational control
and includes $30 million negative impact associated with building
inventory to required levels. Throughput and yield averages over the
51 days of operation were 89 thousand barrels-per-day (bpd) and 103
thousand bpd, respectively. "We are enthused by the results we've seen
in our first few months of operations, even with the extensive
maintenance we have completed," said Smith. "While we understand there
is work to be done, we are confident in the team we have assembled to
execute our capital program." As previously disclosed, the Company
plans to spend a billion dollars in capital at the refinery over the
next four to five years to improve operations, increase throughput and
fulfill environmental regulations.
"Synergistic benefits from the acquisition, which we expect to be
$100 million in the first twelve months of operations, are being
achieved as planned. In terms of feedstocks, we are seeing benefits in
both the grades of crude oil and shipping costs. Additionally, the
trading and supply team is finding greater flexibility in optimizing
intermediate products such as naphtha and reformate around our west
coast assets. I expect our team to continue uncovering opportunities
that unlock the earnings power of the system we have put together,"
said Smith.
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 September 17th, 2007 to shareholders of record as of September
3rd, 2007.
Public Invited to Listen to Analyst Conference Call via Internet
At 9:30 a.m., CDT, Tuesday, August 7th, 2007, Tesoro will
broadcast, live, its conference call with analysts regarding second
quarter 2007 results. Interested parties may listen to the live
conference call over the Internet by logging on to Tesoro's Internet
site at http://www.tsocorp.com.
Tesoro Corporation, a Fortune 150 Company, is an independent
refiner and marketer of petroleum products. Tesoro, through its
subsidiaries, operates seven refineries in the western United States
with a combined capacity of approximately 660,000 barrels per day.
Tesoro's retail-marketing system includes over 890 branded retail
stations, of which over 450 are company operated under the Tesoro(R),
Shell(R), Mirastar(R) and USA(R) brands.
This earnings release contains certain statements that are
"forward-looking" statements concerning the market environment, and
our expectations on 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 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 CORPORATION
STATEMENTS OF CONSOLIDATED OPERATIONS
(Unaudited)
(In millions except per share amounts)
Three Months Six Months
Ended Ended
June 30, June 30,
-------------- --------------
2007 2006 2007 2006
------ ------ ------ ------
Revenues $ 5,604 $ 4,929 $ 9,480 $ 8,806
Costs and Expenses:
Costs of sales and operating expenses 4,710 4,276 8,258 7,965
Selling, general and administrative
expenses 73 45 142 85
Depreciation and amortization 89 60 158 120
Loss on asset disposals and
impairments 3 5 5 12
------ ------ ------ ------
Operating Income 729 543 917 624
Interest and Financing Costs (30) (21) (47) (41)
Interest Income and Other 11 7 25 17
------ ------ ------ ------
Earnings Before Income Taxes 710 529 895 600
Income Tax Provision 267 203 336 231
------ ------ ------ ------
Net Earnings $ 443 $ 326 $ 559 $ 369
====== ====== ====== ======
Net Earnings Per Share:
Basic $ 3.26 $ 2.40 $ 4.13 $ 2.70
Diluted $ 3.17 $ 2.33 $ 4.02 $ 2.63
Weighted Average Common Shares:
Basic 135.7 136.0 135.4 136.5
Diluted 139.6 139.8 139.2 140.5
- ---------------------------------------
Note: Amounts include the results of operations of our Shell and USA
Petroleum acquisitions since their acquisition dates in May 2007.
Share and per share data for both periods presented reflect the
effect of a two-for-one stock split effected in the form of a stock
dividend which was distributed on May 29, 2007.
TESORO CORPORATION
SELECTED OPERATING SEGMENT DATA
(Unaudited)
(In millions)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Operating Income (Loss)
Refining $ 791 $ 593 $ 1,047 $ 718
Retail - (12) (11) (24)
-------- -------- -------- --------
Total Segment Operating Income 791 581 1,036 694
Corporate and Unallocated Costs (62) (38) (119) (70)
-------- -------- -------- --------
Operating Income 729 543 917 624
Interest and Financing Costs (30) (21) (47) (41)
Interest Income and Other 11 7 25 17
-------- -------- -------- --------
Earnings Before Income
Taxes $ 710 $ 529 $ 895 $ 600
======== ======== ======== ========
Depreciation and Amortization
Refining $ 79 $ 54 $ 141 $ 108
Retail 7 4 11 8
Corporate 3 2 6 4
-------- -------- -------- --------
Depreciation and
Amortization $ 89 $ 60 $ 158 $ 120
======== ======== ======== ========
-
Capital Expenditures
Refining $ 176 $ 88 $ 307 $ 143
Retail 1 - 2 1
Corporate 12 6 20 8
-------- -------- -------- --------
Capital Expenditures $ 189 $ 94 $ 329 $ 152
======== ======== ======== ========
BALANCE SHEET DATA
(Unaudited)
(Dollars in millions)
June 30, December 31,
2007 (a) 2006
------------ ------------
Cash and Cash Equivalents $ 169 $ 986
Total Assets $ 8,224 $ 5,904
Total Debt $ 1,787 $ 1,046
Total Stockholders' Equity $ 3,077 $ 2,502
Total Debt to Capitalization Ratio (b) 37% 29%
- ---------------------------------------------
(a) The purchase price of the Shell and USA assets, both acquired in
May 2007, have been preliminarily allocated to the assets and
liabilities acquired based upon their fair market values at the date
of acquisition. The allocations remain subject to change.
(b) Assuming the repayments on the revolving credit facility in July
and August 2007 totaling $250 million had occurred during the 2007
second quarter, the Company's debt and debt to capitalization ratio
on a pro forma basis would have been $1,537 million and 33% as of
June 30, 2007, respectively.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2007 2006 2007 2006
-------- -------- -------- --------
REFINING SEGMENT
Total Refining Segment
Throughput (thousand barrels
per day)
Heavy crude 306 288 268 266
Light crude 275 236 246 236
Other feedstocks 31 20 25 18
-------- -------- -------- --------
Total Throughput 612 544 539 520
======== ======== ======== ========
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 299 257 246 246
Jet fuel 75 66 69 67
Diesel fuel 140 129 122 114
Heavy oils, residual products,
internally produced fuel and
other 128 113 123 114
-------- -------- -------- --------
Total Yield 642 565 560 541
======== ======== ======== ========
Refining Margin ($/throughput
bbl) (c)
Gross $ 21.76 $ 17.88 $ 17.92 $ 13.44
Manufacturing cost before
depreciation and amortization $ 4.11 $ 3.36 $ 4.26 $ 3.55
Segment Operating Income ($
millions)
Gross refining margin (after
inventory changes) (d) $ 1,168 $ 858 $ 1,733 $ 1,253
Expenses
Manufacturing costs 229 166 416 335
Other operating expenses 58 38 108 77
Selling, general and
administrative 8 5 16 10
Depreciation and amortization
(e) 79 54 141 108
Loss on asset disposals and
impairments 3 2 5 5
--------- -------- -------- --------
Segment Operating Income $ 791 $ 593 $ 1,047 $ 718
======== ======== ======== ========
Refined Product Sales (thousand
barrels per day) (f)
Gasoline and gasoline
blendstocks 326 279 289 275
Jet fuel 91 90 90 90
Diesel fuel 138 133 126 129
Heavy oils, residual products
and other 99 82 93 82
-------- -------- -------- --------
Total Refined Product
Sales 654 584 598 576
======== ======== ======== ========
Refined Product Sales Margin
($/barrel) (f)
Average sales price $ 90.92 $ 90.45 $ 84.12 $ 82.06
Average costs of sales 72.05 74.24 68.49 70.09
-------- -------- -------- --------
Refined Product Sales Margin $ 18.87 $ 16.21 $ 15.63 $ 11.97
======== ======== ======== ========
- ---------------------------------
(c) 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 is calculated by dividing
manufacturing costs by total refining throughput and 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.
(d) Gross refining margin is calculated as revenues less costs of
feedstocks, purchased refined 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.
The adjustment for changes in refined product inventory resulted in a
decrease in gross refining margin of $43 million and $27 million for
the three months ended June 30, 2007 and 2006, respectively, and $14
million and $13 million for the six months ended June 30, 2007 and
2006, respectively. Gross refining margin also includes the effect of
intersegment sales to the retail segment at prices which approximate
market.
(e) Includes manufacturing depreciation and amortization per
throughput barrel of approximately $1.34 and $1.01 for the three
months ended June 30, 2007 and 2006, respectively, and $1.36 and
$1.06 for the six months ended June 30, 2007 and 2006, respectively.
(f) Sources of total refined product sales include products
manufactured at the refineries and products purchased from third
parties. Total refined product sales margin includes margins on sales
of manufactured and purchased refined products and the effects of
inventory changes.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2007 2006 2007 2006
-------- -------- -------- --------
Refining By Region
California (Golden Eagle and Los
Angeles) (g)(h)
Throughput (thousand barrels
per day)
Heavy crude 191 161 150 150
Light crude 10 - 5 2
Other feedstocks 17 8 10 8
-------- -------- -------- --------
Total Throughput 218 169 165 160
======== ======== ======== ========
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 128 100 85 95
Jet fuel 8 - 4 -
Diesel fuel 56 50 43 43
Heavy oils, residual products,
internally produced fuel and
other 43 29 43 32
-------- -------- -------- --------
Total Yield 235 179 175 170
======== ======== ======== ========
Refining Margin ($/throughput
bbl)
Gross $ 27.87 $ 26.28 $ 24.65 $ 20.16
Manufacturing cost before
depreciation and amortization $ 6.93 $ 5.56 $ 7.83 $ 5.80
Pacific Northwest (Alaska &
Washington) (g)
Throughput (thousand barrels
per day)
Heavy crude 81 97 89 91
Light crude 104 73 83 69
Other feedstocks 9 7 11 6
-------- -------- -------- --------
Total Throughput 194 177 183 166
======== ======== ======== ========
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 85 75 80 70
Jet fuel 33 29 30 29
Diesel fuel 37 32 34 26
Heavy oils, residual products,
internally produced fuel and
other 47 47 45 46
-------- -------- -------- --------
Total Yield 202 183 189 171
======== ======== ======== ========
Refining Margin ($/throughput
bbl)
Gross $ 19.03 $ 15.80 $ 16.30 $ 11.82
Manufacturing cost before
depreciation and amortization $ 2.68 $ 2.41 $ 2.80 $ 2.76
Mid-Pacific (Hawaii)
Throughput (thousand barrels
per day)
Heavy crude 34 30 29 25
Light crude 53 56 56 61
-------- -------- -------- --------
Total Throughput 87 86 85 86
======== ======== ======== ========
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 21 21 21 22
Jet fuel 24 27 25 28
Diesel fuel 16 13 15 13
Heavy oils, residual products,
internally produced fuel and
other 27 26 25 25
-------- -------- -------- --------
Total Yield 88 87 86 88
======== ======== ======== ========
Refining Margin ($/throughput
bbl)
Gross $ 6.74 $ 7.32 $ 5.42 $ 5.28
Manufacturing cost before
depreciation and amortization $ 1.90 $ 1.77 $ 1.97 $ 1.66
-
- ---------------------------------
(g) The Company experienced reduced throughput and yield levels during
scheduled maintenance turnarounds for the Los Angeles refinery during
the 2007 second quarter, the Golden Eagle refinery during the 2007
and 2006 first quarters, the Utah refinery during the 2007 first
quarter, and the Alaska refinery during the 2006 second quarter.
(h) Volumes and margins for 2007 include amounts for the Los Angeles
refinery since acquisition on May 10, 2007, averaged over the periods
presented. Throughput and yield averaged over the 51 days of
operation were 89,000 bpd and 103,000 bpd, respectively.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2007 2006 2007 2006
-------- --------- -------- --------
Mid-Continent (North Dakota &
Utah) (g)
Throughput (thousand barrels per
day)
Light crude 108 107 102 104
Other feedstocks 5 5 4 4
-------- --------- -------- --------
Total Throughput 113 112 106 108
======== ========= ======== ========
Yield (thousand barrels per day)
Gasoline and gasoline
blendstocks 65 61 60 59
Jet fuel 10 10 10 10
Diesel fuel 31 34 30 32
Heavy oils, residual products,
internally produced fuel and
other 11 11 10 11
-------- --------- -------- --------
Total Yield 117 116 110 112
======== ========= ======== ========
Refining Margin ($/throughput
bbl)
Gross $ 27.49 $ 17.32 $ 20.88 $ 12.93
Manufacturing cost before
depreciation and amortization $ 2.84 $ 2.75 $ 3.08 $ 2.95
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2007 2006 2007 2006
-------- -------- -------- --------
RETAIL SEGMENT
Number of Stations (end of
period)
Company-operated 453 210 453 210
Branded jobber/dealer 438 257 438 257
-------- -------- -------- --------
Total Stations 891 467 891 467
======== ======== ======== ========
Average Stations (during period)
Company-operated 353 210 273 210
Branded jobber/dealer 361 256 315 259
-------- -------- -------- --------
Total Average Retail Stations 714 466 588 469
======== ======== ======== ========
Fuel Sales (millions of gallons)
Company-operated 187 64 244 123
Branded jobber/dealer 57 47 104 87
-------- -------- -------- --------
Total Fuel Sales 244 111 348 210
======== ======== ======== ========
Fuel Margin ($/gallon) (i) $ 0.15 $ 0.10 $ 0.14 $ 0.12
Merchandise Sales ($ millions) $ 53 $ 38 $ 84 $ 70
Merchandise Margin ($ millions) $ 13 $ 10 $ 21 $ 18
Merchandise Margin % 25% 26% 25% 26%
Segment Operating Income (Loss)
($ millions)
Gross Margins
Fuel (j) $ 37 $ 11 $ 49 $ 26
Merchandise and other non-fuel
margin 17 11 25 20
-------- -------- -------- --------
Total Gross Margins 54 22 74 46
Expenses
Operating expenses 41 23 61 45
Selling, general and
administrative 6 6 13 12
Depreciation and amortization 7 4 11 8
Loss on asset disposals and
impairments - 1 - 5
-------- -------- -------- --------
Segment Operating Income
(Loss) $ - $ (12) $ (11) $ (24)
======== ======== ======== ========
- ---------------------------------
(i) Management uses fuel margin per gallon to compare profitability to
other companies in the industry. Fuel margin per gallon is calculated
by dividing fuel gross margin by fuel sales volume and may not be
calculated similarly by other companies. Investors and analysts use
fuel margin per gallon to help analyze and compare companies in the
industry on the basis of operating performance. This financial
measure should not be considered as an alternative to segment
operating income and revenues or any other measure of financial
performance presented in accordance with accounting principles
generally accepted in the United States of America.
(j) Includes the effect of intersegment purchases from the refining
segment at prices which approximate market.
CONTACT: Tesoro Corporation, San Antonio
Investors:
Scott Phipps, 210-283-2882
Manager, Investor Relations
or
Media:
Sarah Simpson, 210-283-2374
Vice President, Corporate Communications