Tesoro cites isle storm as factor in net loss
The fuel refining company says it lost about $30 million because of a power failure in Kapolei
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Tesoro Corp., which operates the largest of two refineries in Hawaii, said today its Kapolei facility had an operating loss of $86 million in the fourth quarter compared with profit of $19 million a year earlier due to narrowing processing margins and a storm-related power outage that disabled a catalytic reformer unit.
The unit, which produces gasoline at the refinery, was shut down for about six weeks and cost $10 million to repair.
Overall, San Antonio-based Tesoro said it had a net loss of $40 million, or 29 cents a share, compared with net income of $158 million, or $1.14, a year earlier.
Revenue rose 62.5 percent to $6.53 billion from $4.02 billion.
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STAR-BULLETIN / JULY 2007
A six-week shutdown of a catalytic reformer unit in Kapolei reduced quarterly results at Tesoro by about $30 million.
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Staff and wire reports
Tesoro Corp., the largest refiner in the western U.S., reported a fourth-quarter loss that was larger than some analysts estimated after a power failure disrupted operations at its plant in Hawaii and processing margins narrowed.
The San Antonio-based company said its refinery in Kapolei had a fourth-quarter pretax operating loss of $86 million, versus a profit of $19 million a year earlier.
A six-week shutdown of a catalytic reformer unit due to a heavy November storm reduced results by about $30 million, including $10 million in repair costs, the company said. The refinery, which can process as much as 95,000 barrels of oil a day, operated at reduced rates after being shut down Nov. 4 by a power outage during the storm.
"The loss was bigger than expected in Hawaii," said Roger Read, an analyst at Natixis Bleichroeder Inc. in New York.
Tesoro said finished-product prices in Hawaii did not reflect the rapidly rising cost and premiums paid for crude, which accounted for most of the quarter-to-quarter difference.
Overall, Tesoro had a net loss of $40 million, or 29 cents a share, compared with net income of $158 million, or $1.14, a year earlier. The loss was 19 cents wider than estimated by Read. The consensus estimate was 2 cents a share, according to analysts surveyed by Thomson Financial.
Revenue rose 62.5 percent to $6.53 billion from $4.02 billion.
"The company has made significant improvements in crude purchasing and product sales at all of our refineries with the exception of Hawaii, but lower benchmark margins in the Western United States overwhelmed these improvements and account for most of the quarter-to-quarter change," said Bruce Smith, chairman, president and chief executive of Tesoro. "In Hawaii, the disappointing financial results are due to a combination of factors and the company has developed an action plan to address the myriad issues there"
Among the key initiatives that Tesoro has undertaken in Hawaii, Smith said, are improved reliability, changes to the company's crude intake to reduce the amount of Asian light sweet crude oil, which has been selling at lofty premiums, and a greater focus on achieving better value for commercial products marketed in the state.
Tesoro's refining margin in Hawaii last quarter swung to a negative $7.42 a barrel versus a gain of $7.01 a barrel a year ago. The refining margin is the spread between the cost of crude oil and price of refined products.
The Campbell Industrial Park facility's yield, or the total number of barrels of refined products of gas, jet fuel, diesel fuel and heavy oils, fell 3.8 percent to 75,000 barrels a day from 78,000 barrels a day. The total throughput in Hawaii fell 3.9 percent to 74,000 barrels a day from 77,000 barrels a day.
In mid-January, Tesoro announced it would cut fuel production in Kapolei as much as 26 percent below capacity due to record crude-oil costs that were eroding profit margins.
Bloomberg News and Star-Bulletin reporter Dave Segal contributed to this report.