SAN ANTONIO » Tesoro Corp., which operates the larger of Hawaii's two refineries, said yesterday its net income tumbled 87 percent as lower energy prices cut away at margins.

The San Antonio-based company also said its seven refineries might run as low as 77 percent of their capacity of 665,000 barrels per day in the fourth quarter due to low demand for motor fuel and maintenance. The company said its Kapolei facility, which has a capacity of 94,000 barrels per day, will run between 60,000 and 70,000 bpd.

Tesoro said crude oil prices have climbed steadily since March, but gas prices have not matched the pace, hurting margins for refiners.

The company said lower margins for distillates and weaker discounts for heavy crudes especially hurt margins. However, West Coast spot gasoline prices improved during the quarter, softening the blow.

“;We continue to view the West Coast as an attractive market in which to do business, especially with the increasing stability in gasoline demand we are experiencing through our retail channels,”; said Chief Executive Officer Bruce Smith.

Earnings for the quarter ended Sept. 30 fell to $33 million, or 24 cents a share, compared with $259 million, or $1.86 a share, from the year-ago period.

Revenue declined 45 percent to $4.74 billion from $8.68 billion a year ago.

Tesoro's refining margin in Hawaii plunged last quarter to $1.05 a barrel from $12.15 a barrel a year ago, but the company said the Campbell Industrial Park facility was still cash-flow positive. The refining margin is the spread between the cost of crude oil and price of refined products.

The Hawaii refinery's yield, or the total number of barrels of refined products of gas, jet fuel, diesel fuel and heavy oils, fell 8.2 percent to 67,000 barrels a day from 73,000 barrels a day. The total throughput in Hawaii fell 8.3 percent to 66,000 barrels a day from 72,000 barrels a day.

Separately, Tesoro cut in half its dividend to 5 cents a share from 10 cents a share.

MONEY TALKS

Third-quarter net

$33 million

Year-earlier net

$259 million