Tesoro net more than doubles in 4th quarter
Its Hawaii throughput declined in the quarter
Tesoro Corp., operator of the largest refinery in Hawaii, said yesterday that strong refining margins companywide helped more than double its fourth-quarter net income even as revenue declined.
However, its Campbell Industrial Park facility, which shut down on Oahu for two days due to the blackout triggered by the Oct. 15 earthquakes, saw its refining margin -- the spread between the cost of crude oil and price of refined products -- decrease from a year earlier.
The total number of barrels of refined products of gas, jet fuel, diesel fuel and heavy oils at the Hawaii facility fell 14.4 percent to 77,000 daily barrels from 90,000 daily barrels while the refining margin decreased to $6.33 a barrel from $8.56 a barrel.
"Most margin realizations for the quarter were in line with historical averages, but the reduced capture rate in the Pacific Northwest is primarily due to the refinery turnaround in Anacortes (Wash.), which because of the severe weather in the area, took eight days later than planned," Chief Financial Officer Greg Wright. "In addition, throughput in Hawaii was lower due to some unplanned down time."
In the first quarter, Wright said he expects the throughput at the Hawaii facility to increase to 85,000 to 90,000 barrels a day.
Tesoro Hawaii spokesman Nathan Hokama said the earthquakes contributed to the lower throughput last quarter.
"We were able to resume refinery operations a few days following the earthquake in October, but as a result of the earthquake, we had to make some repairs to refining units and conduct maintenance activities such as changing out catalysts, so we were not able to process crude at the usual rate," he said.
The San Antonio-based company also said its board approved agreements for the company to buy a 100,000-barrels-a day Los Angeles refinery, Wilmington Products Terminal, and about 250 Southern California Shell-branded retail sites from Shell Oil Products US for $1.63 billion, plus the value of petroleum inventory at the time of closing, which at current prices, would be $180 to $200 million.
Tesoro signed a long-term agreement to continue operating the retail sites under the Shell brand and said the transaction will close in the second quarter, pending regulatory approval.
"It really just completes the Pacific Rim strategy that we have had," said Bruce Smith, chairman and chief executive. "This just fits into the rest of our system just perfectly."
Smith said Tesoro doesn't have a refinery with the Los Angeles facility's complexity and processing capability.
The Los Angeles refinery processes heavy, sour crude.
Also yesterday, the board approved a dividend of 10 cents a share that will be payable March 15 to shareholders of record as of March 1.
Overall, Tesoro's net income soared 129 percent to a record $158 million, or $2.28 a share, from $69 million, or 97 cents a share, a year ago as its gross refining margin increased 15.7 percent to $12.95 a barrel from $11.19 a barrel a year ago.
Analysts expected Tesoro to earn $1.91 a share.
The earnings surprise sent the stock soaring $4.73, or 6.4 percent, to a 52-week high of $78.55 on the New York Stock Exchange.
Revenue fell 7.8 percent to $4 billion from $4.4 billion. Operating expenses and sales costs decreased 9.5 percent to $3.7 billion from $4 billion.
"Our knowledge and experience in optimizing our system continues to develop, and our decisions around crude oil purchasing and clean product management are significantly improving earnings," Smith said
For the year, net income jumped 58 percent to $801 million, or $11.46 a share, from $507 million, or $7.20 a share, in 2005. Revenue rose 9.2 percent to $18.1 billion from $16.6 billion.
Tesoro ended the quarter with nearly $1 billion in cash.