Tesoro Petroleum Inc fka TSO

[eastunder]

Tesoro Corporation Announces Second Quarter 2009 Results

Wednesday, July 29, 2009 16:14ET

SAN ANTONIO, Jul 29, 2009 (BUSINESS WIRE) -- Tesoro Corporation (NYSE:TSO) today reported a second quarter 2009 net loss of $45 million, or $0.33 per diluted share compared to net earnings of $4 million, or $0.03 per diluted share for the second quarter of 2008. Second quarter segment operating income was $11 million versus $74 million in the second quarter of 2008. The variance was primarily due to lower gross margins and decreased throughput, partially offset by lower operating costs.

The Company's realized gross margin of $8.52 per barrel (/bbl) decreased by $1.58/bbl from a year ago, although the Tesoro Index was $3/bbl lower. The Company reduced the amount of distillate it produced as West Coast distillate margins decreased by more than $22/bbl from a year ago, while gasoline margins increased more than $2/bbl from the 2008 second quarter. Narrowing price spreads between heavy and light crudes also reduced gross margins. During the second quarter, discounts for spot California heavy crudes were down 45%, as San Joaquin Valley Heavy traded $8/bbl below Alaska North Slope (ANS) versus a discount of $15/bbl a year ago. Discounts for South American heavy crudes also weakened as Oriente crude traded $7/bbl below ANS versus $13/bbl a year ago. Heavy crudes such as these represent almost 70% of our crude slate in the California region.

Total system throughput for the second quarter was 565 thousand barrels per day (mbpd), down 7% from the 2008 second quarter as a result of a full plant turnaround at Alaska, and planned maintenance at Golden Eagle. Additionally, in this economic environment, the Company continues to monitor throughput and inventory levels to meet lower product demand.

Direct manufacturing costs before depreciation and amortization were $238 million in the second quarter versus $257 million in the first quarter 2009. The difference is primarily attributable to lower energy costs. During the quarter, spot natural gas prices averaged $4 per million British thermal units (mmbtu), a decrease of 15% from a quarter ago.

For the second quarter 2009, capital expenditures were $173 million, including turnaround spending. We expect to spend less than our announced capital budget of $600 million dollars for the full year.

"As we began 2009, we were prepared for a very difficult year, and in the second quarter it arrived," said Bruce Smith, Chairman, President and CEO. "Declining industrial production, weak distillate demand and excess inventories have crushed distillate margins. Gasoline margins, which were strong in April, weakened in the quarter and dropped to half the April levels in July. Like other refiners, the most significant impact to our second quarter results was the narrowing of the heavy crude discount which has severely reduced overall coking capacity economics. The marginal economics of these units at our California refineries materially impacted the quarter.

"The outlook for the third quarter is that we expect to continue to see difficult market conditions. In July, record product inventories and narrow heavy-light crude oil differentials continued to hamper margins. We are prepared for this environment to persist. Already, we are seeing temporary closures and units running at less than full rates at a number of refineries. We remain committed to our 2009 goals of lowering our cash break-even costs, gaining sustainable improvements in our capture of available margins and funding our capital program through operating cash flow. We believe that our markets and assets continue to hold competitive advantages, and our management team is prepared for both the political and consumer-related challenges that may lie ahead," said Smith.

Board Declares Quarterly Dividend

Tesoro announced today that its Board of Directors has approved a regular quarterly cash dividend of $0.10 per share. The dividend is payable September 15, 2009 to shareholders of record as of September 1, 2009.

Financials continued at :

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