Exhibit 99.1
Tesoro Corporation Announces Third Quarter Results
SAN ANTONIO--(BUSINESS WIRE)--Nov. 1, 2007--Tesoro Corporation
(NYSE:TSO) today reported net income of $47 million, or $0.34 per
share in the third quarter of 2007, compared to $274 million, or $1.96
per share in the third quarter of 2006. Year-to-date net income
totaled $606 million, or $4.35 per share versus $643 million, or $4.58
per share a year ago.
Quarterly benchmark crack spreads in the West Coast and Pacific
Northwest regions were down 28% and 34%, respectively from a year ago.
Consequently, refining margins during the quarter of $9.09 per
throughput barrel were $6.16 below those in the third quarter of 2006.
"The industry experienced a significant increase in crude prices
in the third quarter, while product prices rose at a much slower
rate," said Bruce Smith, Tesoro's Chairman, President and CEO. "These
market fundamentals were the single biggest impact to our quarterly
earnings versus last year. The lower margin environment and rapid rise
in crude price also negatively impacted other segments of our
business, including marketing and our long haul crude hedge program,"
said Smith. The reduction to refinery margins from the realized and
unrealized third quarter hedge program was $28 million.
Operationally, the company reported throughput of 654 thousand
barrels per day (mbpd) for the quarter. Overall refinery utilization
was good, although the company did experience some unplanned downtime
at our Anacortes and Golden Eagle refineries. Throughput for the
quarter at the Golden Eagle refinery was 11 mbpd lower than a year ago
and is associated with work performed on the coker and other
downstream units. This also increased feedstock cost and reduced clean
product production.
The Amorco wharf project, completed during the quarter at a cost
of $26 million, offset a portion of the impact of the coker downtime
by providing improved crude flexibility allowing increased utilization
of other conversion units. The project contribution is estimated at
$11 million for the quarter. The sulfur handling unit project at
Anacortes was completed during the quarter and will allow for twice
the refinery's historic sour crude throughput.
Capital expenditures for the year are expected to remain at $900
million. As of today, the company has completed substantially all of
the major income improvement projects associated with the 2007 capital
program. "As we move into 2008, shareholders should continue to expect
to see our discretionary capital program focused on reliability
improvements and cost savings initiatives. Our successful execution of
the 2007 capital program serves as the foundation for continued
capital stewardship of free cash flow going forward," said Smith.
Los Angeles Refinery Update
Throughput at the refinery, including feedstocks, was 110 mbpd.
Gross refining margin and direct operating expense for the quarter
were $8.61 and $5.77 per barrel, respectively.
"Throughput and product yields are currently ahead of our early
expectations," said Smith. "While market fundamentals in the quarter
of historically low crack spreads and rapidly rising crude cost
impacted the refinery's profitability, we are pleased with our
operational performance. As we move forward, we expect to realize
additional benefits in exiting supply contracts, supply
diversification and enhancing existing logistics," said Smith.
Retail Operations Update
Retail operating income during the quarter was $4 million
including an impairment of $6 million for certain retail sites. Volume
and margins for the newly acquired Shell and USA brand sites were in
line with expectations. Additional USA brand expenses to improve
operating standards, store enhancements and security are expected to
impact earnings for the next three quarters. "We have high
expectations for the USA brand, and to meet our company's long-term
strategy around retail, we need to make additional investments. Our
retail strategy is a selective process aimed at matching each
refinery's production with its distribution needs. The addition of the
acquired retail assets has allowed us to achieve a more optimum
channel of trade balance," 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 December 17th, 2007 to shareholders of record as of December
3rd, 2007.
Public Invited to Listen to Analyst Conference Call via Internet
At 9:30 a.m., CDT, Thursday, November 1st, 2007, Tesoro will
broadcast, live, its conference call with analysts regarding third
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 900 branded retail
stations, of which over 445 are company operated under the Tesoro(R) ,
Shell(R), Mirastar(R) and USA(R) Gasoline brands.
This earnings release contains certain statements that are
"forward-looking" statements concerning the market environment, and
our expectations on about operating enhancements 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 Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Revenues $ 5,902 $ 5,278 $ 15,382 $ 14,084
Costs and Expenses:
Costs of sales and operating
expenses 5,651 4,697 13,909 12,662
Selling, general and
administrative expenses 47 41 189 126
Depreciation and amortization 97 63 255 183
Loss on asset disposals and
impairments 8 31 13 43
-------- -------- -------- --------
Operating Income 99 446 1,016 1,070
Interest and Financing Costs (28) (19) (75) (60)
Interest Income and Other 4 15 29 32
-------- -------- -------- --------
Earnings Before Income Taxes 75 442 970 1,042
Income Tax Provision 28 168 364 399
-------- -------- -------- --------
Net Earnings $ 47 $ 274 $ 606 $ 643
======== ======== ======== ========
Net Earnings Per Share:
Basic $ 0.35 $ 2.01 $ 4.47 $ 4.71
Diluted $ 0.34 $ 1.96 $ 4.35 $ 4.58
Weighted Average Common
Shares:
Basic 135.9 136.2 135.6 136.4
Diluted 139.6 139.8 139.4 140.3
- -----------------------------
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 Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2007 2006 2007 2006
------ ----- ------ -----
Operating Income (Loss)
Refining $ 132 $ 474 $ 1,179 $1,192
Retail 4 3 (7) (21)
------ ----- ------ -----
Total Segment Operating Income 136 477 1,172 1,171
Corporate and Unallocated Costs (37) (31) (156) (101)
------ ----- ------ -----
Operating Income 99 446 1,016 1,070
Interest and Financing Costs (28) (19) (75) (60)
Interest Income and Other 4 15 29 32
------ ----- ------ -----
Earnings Before Income Taxes $ 75 $ 442 $ 970 $1,042
====== ===== ====== =====
Depreciation and Amortization
Refining $ 86 $ 56 $ 227 $ 164
Retail 8 4 19 12
Corporate 3 3 9 7
------ ----- ------ -----
Depreciation and Amortization $ 97 $ 63 $ 255 $ 183
====== ===== ====== =====
Capital Expenditures
Refining $ 182 $ 99 $ 489 $ 242
Retail 1 3 3 4
Corporate 12 32 32 40
------ ----- ------ -----
Capital Expenditures $ 195 $ 134 $ 524 $ 286
====== ===== ====== =====
BALANCE SHEET DATA
(Unaudited)
(Dollars in millions)
September 30, December 31,
2007 (a) 2006
------------- --------------
Cash and Cash Equivalents $ 103 $ 986
Total Assets $ 7,995 $ 5,904
Total Debt $ 1,539 $ 1,046
Total Stockholders' Equity $ 3,122 $ 2,502
Total Debt to Capitalization Ratio 33% 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.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2007 2006 2007 2006
-------- -------- -------- -------
REFINING SEGMENT
Total Refining Segment
Throughput (thousand
barrels per day)
Heavy crude 331 274 289 269
Light crude 292 277 262 250
Other feedstocks 31 23 29 19
-------- -------- -------- -------
Total Throughput 654 574 580 538
======== ======== ======== =======
Yield (thousand barrels
per day)
Gasoline and gasoline
blendstocks 316 262 269 251
Jet fuel 88 75 76 70
Diesel fuel 137 139 127 123
Heavy oils, residual
products, internally
produced fuel
and other 141 117 132 115
-------- -------- -------- -------
Total Yield 682 593 604 559
======== ======== ======== =======
Refining Margin
($/throughput bbl) (b)
Gross $ 9.09 $ 15.25 $ 14.49 $ 14.09
Manufacturing cost
before depreciation and
amortization $ 4.12 $ 3.32 $ 4.19 $ 3.47
Segment Operating Income
($ millions)
Gross refining margin
(after inventory
changes) (c) $ 543 $ 786 $ 2,276 $ 2,039
Expenses
Manufacturing costs 248 175 664 510
Other operating
expenses 67 45 175 122
Selling, general and
administrative 9 6 25 16
Depreciation and
amortization (d) 86 56 227 164
Loss on asset disposals
and impairments 1 30 6 35
-------- -------- -------- -------
Segment Operating
Income $ 132 $ 474 $ 1,179 $ 1,192
======== ======== ======== =======
Refined Product Sales
(thousand barrels per
day) (e)
Gasoline and gasoline
blendstocks 347 301 308 284
Jet fuel 101 96 93 92
Diesel fuel 145 136 133 131
Heavy oils, residual
products and other 98 93 95 86
-------- -------- -------- -------
Total Refined
Product Sales 691 626 629 593
======== ======== ======== =======
Refined Product Sales
Margin ($/barrel) (e)
Average sales price $ 88.68 $ 87.33 $ 85.81 $ 83.94
Average costs of sales 80.65 74.95 72.99 71.82
-------- -------- -------- -------
Refined Product Sales
Margin $ 8.03 $ 12.38 $ 12.82 $ 12.12
======== ======== ======== =======
- --------------------------
(b)Management uses gross refining margin per barrel to evaluate
performance 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.
(c)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 $5
million and $19 million for the three months ended September 30,
2007 and 2006, respectively, and $19 million and $32 million for
the nine months ended September 30, 2007 and 2006, respectively.
Gross refining margin also includes the effect of intersegment
sales to the retail segment at prices which approximate market.
(d)Includes manufacturing depreciation and amortization per throughput
barrel of approximately $1.35 and $0.97 for the three months ended
September 30, 2007 and 2006, respectively, and $1.35 and $1.03 for
the nine months ended September 30, 2007 and 2006, respectively.
(e)Sources of total refined product sales include products
manufactured at the refineries and products purchased from third
parties. Total refined product sales margin includes margins on
sales of manufactured and purchased refined products and the
effects of inventory changes.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- ------------------
2007 2006 2007 2006
--------- -------- -------- --------
Refining By Region
California (Golden Eagle
and Los Angeles) (f)(g)
Throughput (thousand
barrels per day)
Heavy crude 232 160 177 153
Light crude 19 4 10 3
Other feedstocks 21 9 16 8
--------- -------- -------- --------
Total Throughput 272 173 203 164
========= ======== ======== ========
Yield (thousand barrels
per day)
Gasoline and gasoline
blendstocks 156 97 109 96
Jet fuel 18 - 9 -
Diesel fuel 61 54 49 46
Heavy oils, residual
products, internally
produced fuel and other 54 31 49 32
--------- -------- -------- --------
Total Yield 289 182 216 174
========= ======== ======== ========
Refining Margin
($/throughput bbl)
Gross $ 11.26 $ 19.65 $ 18.34 $ 19.98
Manufacturing cost
before depreciation and
amortization $ 6.15 $ 5.23 $ 6.99 $ 5.59
Pacific Northwest (Alaska
& Washington) (f)
Throughput (thousand
barrels per day)
Heavy crude 77 82 85 88
Light crude 103 103 90 81
Other feedstocks 5 8 9 6
--------- -------- -------- --------
Total Throughput 185 193 184 175
========= ======== ======== ========
Yield (thousand barrels
per day)
Gasoline and gasoline
blendstocks 75 79 78 73
Jet fuel 37 36 33 31
Diesel fuel 31 37 33 30
Heavy oils, residual
products, internally
produced fuel and other 47 46 46 46
--------- -------- -------- --------
Total Yield 190 198 190 180
========= ======== ======== ========
Refining Margin
($/throughput bbl)
Gross $ 5.45 $ 12.15 $ 12.61 $ 11.94
Manufacturing cost
before depreciation and
amortization $ 2.84 $ 2.56 $ 2.82 $ 2.69
Mid-Pacific (Hawaii)
Throughput (thousand
barrels per day)
Heavy crude 22 32 27 28
Light crude 59 57 57 59
--------- -------- -------- --------
Total Throughput 81 89 84 87
========= ======== ======== ========
Yield (thousand barrels
per day)
Gasoline and gasoline
blendstocks 18 21 20 21
Jet fuel 23 27 24 28
Diesel fuel 14 14 15 14
Heavy oils, residual
products, internally
produced fuel and other 28 28 26 26
--------- -------- -------- --------
Total Yield 83 90 85 89
========= ======== ======== ========
Refining Margin
($/throughput bbl)
Gross $ 0.11 $ 9.31 $ 3.68 $ 6.67
Manufacturing cost
before depreciation and
amortization $ 2.12 $ 1.85 $ 2.02 $ 1.73
-
- ----------------------------
(f)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.
(g)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 143 days
of operation were 107,000 bpd and 116,000 bpd, respectively.
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2007 2006 2007 2006
-------- -------- -------- --------
Mid-Continent (North Dakota &
Utah) (f)
Throughput (thousand barrels
per day)
Light crude 111 113 105 107
Other feedstocks 5 6 4 5
-------- -------- -------- --------
Total Throughput 116 119 109 112
======== ======== ======== ========
Yield (thousand barrels per
day)
Gasoline and gasoline
blendstocks 67 65 62 61
Jet fuel 10 12 10 11
Diesel fuel 31 34 30 33
Heavy oils, residual
products, internally
produced fuel and other 12 12 11 11
-------- -------- -------- --------
Total Yield 120 123 113 116
======== ======== ======== ========
Refining Margin
($/throughput bbl)
Gross $ 16.82 $ 17.84 $ 19.43 $ 14.69
Manufacturing cost before
depreciation and
amortization $ 2.81 $ 2.90 $ 2.98 $ 2.93
TESORO CORPORATION
OPERATING DATA
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
------------------ -----------------
2007 2006 2007 2006
-------- -------- -------- -------
RETAIL SEGMENT
Number of Stations (end of
period)
Company-operated 449 194 449 194
Branded jobber/dealer 453 262 453 262
-------- -------- -------- -------
Total Stations 902 456 902 456
======== ======== ======== =======
Average Stations (during
period)
Company-operated 451 202 333 207
Branded jobber/dealer 446 260 359 260
-------- -------- -------- -------
Total Average Retail
Stations 897 462 692 467
======== ======== ======== =======
Fuel Sales (millions of
gallons)
Company-operated 311 66 555 189
Branded jobber/dealer 71 51 175 138
-------- -------- -------- -------
Total Fuel Sales 382 117 730 327
======== ======== ======== =======
Fuel Margin ($/gallon) (h) $ 0.16 $ 0.22 $ 0.15 $ 0.16
Merchandise Sales ($
millions) $ 62 $ 38 $ 146 $ 108
Merchandise Margin ($
millions) $ 17 $ 11 $ 38 $ 29
Merchandise Margin % 27% 29% 26% 27%
Segment Operating Income
(Loss) ($ millions)
Gross Margins
Fuel (i) $ 61 $ 26 $ 110 $ 52
Merchandise and other non-
fuel margin 23 11 48 31
-------- -------- -------- -------
Total Gross Margins 84 37 158 83
Expenses
Operating expenses 61 22 122 67
Selling, general and
administrative 4 7 17 19
Depreciation and
amortization 8 4 19 12
Loss on asset disposals and
impairments 7 1 7 6
-------- -------- -------- -------
Segment Operating Income
(Loss) $ 4 $ 3 $ (7) $ (21)
======== ======== ======== =======
- --------------------------------
(h)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.
(i)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:
Natalie Silva, 210-283-2729
Manager, Press Relations