Acquisitions and lower
operating margins
leave Tesoro at a loss

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By Russ Lynch
rlynch@starbulletin.com

Tesoro Petroleum Corp., owner of Hawaii's largest oil refinery and 36 gasoline stations in the islands, today reported a first-quarter net loss of $55.6 million, or $1.15 a share, compared to a year-earlier profit of $21.7 million, or 52 cents a share.

Pretax charges of about $12 million, mostly to do with acquisitions, cut into the latest quarter's results, which were already down on the operating side, said the company, which is headquartered in San Antonio, Texas. First-quarter revenues of $1.24 billion were up 0.8 percent from $1.23 billion.

"Weak margins in all of our business units, scheduled downtime at our Washington refinery, and financing and integration costs associated with the Golden Eagle assets caused the quarter to be weaker than last year," said Bruce A. Smith, Tesoro chairman, president and CEO. The company acquired the 168,000 barrel-per-day Golden Eagle refinery and 70 retail sites in the San Francisco area for $1.1 billion.

"Because of our acquisition growth, our retail network sold nearly three times the fuel sold in the first quarter of last year. A dismal margin environment, however, resulted in an operating loss for the quarter," he said.

Tesoro, which operates five refineries in Western states and more than 600 retail stations, entered the Hawaii market in March 1999 when it bought BHP Hawaii, including its West Oahu refinery and the BHP Gas Express stations for $325 million.

The Hawaii refinery processed 82,000 barrels of crude oil a day in the latest quarter, down 5.4 percent from 86,700 in the year-earlier quarter.