Tesoro’s net plunges in third quarter
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Tesoro Corp. said yesterday its third-quarter earnings plunged 82.8 percent due to sharply narrow refining margins.
The operator of Hawaii's largest refinery had net income of $47 million compared with $274 million a year ago. Revenue increased 11.8 percent to $5.9 billion from $5.3 billion.
On Oahu, the refining margin at the Campbell Industrial Park facility fell 98.8 percent to 11 cents a barrel from $9.31 a barrel.
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Tesoro Corp., which operates the larger of the two oil refineries in Hawaii, said yesterday its overall third-quarter net income plummeted 82.8 percent after refining margins plunged.
Third-quarter net: $47 million|
Year-earlier net: $274 million
The San Antonio-based company's refining margin fell 98.8 percent at its Campbell Industrial Park facility on Oahu to 11 cents a barrel from $9.31 a barrel a year ago. Its yield, or the total number of barrels of refined products of gas, jet fuel, diesel fuel and heavy oils at the Oahu facility, decreased 7.8 percent to 83,000 daily barrels a day from 90,000 barrels a day. Its throughput in Hawaii fell 9 percent to 81,000 barrels a day from 89,000 barrels a day.
William Finnerty, Tesoro's executive vice president and chief operating officer, attributed the plunge in its Hawaii refining margin to lagging price provisions on some of its contracts that didn't keep up with soaring prices for the type of crude oil the Kapolei plant uses.
"Asian sweet crude realized a higher premium due to the strong demand for low-sulfur fuel following the plant closures in Japan after the earthquake," he said in a conference call with analysts.
Some of the pressures on margins in Hawaii will continue into 2008, Finnerty said.
The company said last month it plans to install equipment on its refineries in Hawaii and three other locations next year that will allow it to process high-sulfur crude oil.
Overall, Tesoro's refining margin -- the difference between what it pays for crude oil and what it gets for refined products like gasoline -- declined 40.4 percent to $9.09 a barrel from $15.25 a barrel a year ago. Its total throughput rose 13.9 percent to 654,000 barrels a day versus 574,000 barrels a day while its yield increased 15 percent to 682,000 from 593,000.
Net income fell to $47 million, or 34 cents a share from $274 million, or $1.96 a share, a year ago. Analysts were expecting 85 cents a share.
Tesoro's stock fell $3.24, or 5.4 percent, to close at $57.29 yesterday.
Revenue at its seven refineries in the western United States rose 11.8 percent to $5.9 billion.
"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 chief executive.