Tesoro Corp. (TSO, Financial) filed Quarterly Report for the period ended 2009-03-31.
Tesoro was founded in 1968 as a company primarily engaged in petroleum exploration and production. In 1969 Tesoro began operating Alaska?s first refinery near Kenai. Today Tesoro is a FORTUNE 500 company and one of the largest independent petroleum refiners and marketers in the Western United States. Tesoro Corp. has a market cap of $2.33 billion; its shares were traded at around $16.72 with a P/E ratio of 6.33 and P/S ratio of 0.08. The dividend yield of Tesoro Corp. stocks is 2.39%. Tesoro Corp. had an annual average earning growth of 20.1% over the past 10 years.
Our net earnings were $51 million ($0.37 per diluted share) for the three months ended March 31, 2009 (2009 Quarter), compared with a net loss of $82 million (($0.60) per diluted share) for the three months ended March 31, 2008 (2008 Quarter). The increase in net earnings during the 2009 Quarter was primarily due to the following:
Overview. Operating income for our refining segment increased to $177 million during the 2009 Quarter primarily due to significantly higher gross refining margin and lower operating expenses, partially offset by lower refining throughput. Our gross refining margin per barrel increased to $12.14 per barrel in the 2009 Quarter, compared to $6.54 per barrel in the 2008 Quarter reflecting higher industry margins for gasoline and heavy products. On the U.S. West Coast, industry gasoline margins benefited from heavy industry downtime combined with low gasoline inventories. We also benefited from smaller discounts on heavy products, such as fuel oil and petroleum coke, during the 2009 Quarter. Fuel oil prices averaged 79% of Alaska North Slope (ANS) crude oil during the 2008 Quarter versus 87% of ANS during the 2009 Quarter. The increase in industry gasoline and heavy products margins was partially offset by a sharp decline in industry diesel fuel margins as diesel fuel demand decreased and inventories increased. From January to March of 2009, as gasoline prices increased over diesel fuel, we shifted 5% of our production out of distillates into gasoline and other products. Our gross refining margin was also positively impacted as we increased our percentage of more cost advantaged heavy crude oil to total throughput to 34% during the 2009 Quarter from 30% during the 2008 Quarter reflecting completion of the delayed coker unit at our Golden Eagle refinery and improvement initiatives at our Hawaii refinery in 2008. During the 2008 Quarter, industry margins on the U.S. West Coast were negatively impacted as moderately rising product prices lagged rapidly rising crude oil prices. The rapid increase in crude oil prices was attributed in part to such factors as continued global demand growth, concerns over declining crude oil supplies and increasing investments in crude oil to hedge against the weakening U.S. dollar.
Gross Refining Margins. On an aggregate basis, our total gross refining margin increased to $585 million in the 2009 Quarter from $353 million in the 2008 Quarter, reflecting higher total gross refining margins in all of our regions. Our per-barrel gross refining margin in each of our regions was positively impacted by the increase in industry gasoline and heavy product margins described above. Our gross refining margin also increased during the 2009 Quarter over the 2008 Quarter due to the regional factors described below.
Refined Products Sales. Revenues from sales of refined products decreased 52% to $3 billion in the 2009 Quarter as compared to the 2008 Quarter, primarily due to significantly lower average refined product sales prices and lower refined product sales volumes. Our average product sales price decreased 47% to $56.40 per barrel in the 2009 Quarter as lower average crude oil prices during the 2009 Quarter put downward pressure on product prices. Total refined product sales averaged 589 Mbpd in the 2009 Quarter, a decrease of 55 Mbpd from the 2008 Quarter, primarily reflecting lower product demand.
Costs of Sales and Expenses. Our average costs of sales decreased 54% to $46 per barrel during the 2009 Quarter reflecting significantly lower average crude oil prices. Manufacturing and other operating expenses decreased to $316 million in the 2009 Quarter, compared to $356 million in the 2008 Quarter, primarily reflecting lower utility costs and refining throughput. Depreciation and amortization increased by $14 million during the 2009 Quarter reflecting several assets placed into service during 2008, including the $600 million delayed coker unit at the Golden Eagle refinery.
Read the The complete ReportTSO is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC, Charles Brandes of Brandes Investment.
Tesoro was founded in 1968 as a company primarily engaged in petroleum exploration and production. In 1969 Tesoro began operating Alaska?s first refinery near Kenai. Today Tesoro is a FORTUNE 500 company and one of the largest independent petroleum refiners and marketers in the Western United States. Tesoro Corp. has a market cap of $2.33 billion; its shares were traded at around $16.72 with a P/E ratio of 6.33 and P/S ratio of 0.08. The dividend yield of Tesoro Corp. stocks is 2.39%. Tesoro Corp. had an annual average earning growth of 20.1% over the past 10 years.
Highlight of Business Operations:
Our profitability is substantially determined by the difference between the price of refined products and the price of crude oil or refining industry margins. During April 2008 through March 2009, crude oil prices peaked at a record high in July 2008, and then fell sharply to a five-year low in December 2008. After crude oil prices peaked, recessionary concerns, declining global demand and the strengthening of the U.S. dollar resulted in a sharp decline in crude oil prices through the end of 2008. Crude oil prices stabilized in the 2009 first quarter as compared to 2008. The current economic recession, including historically high unemployment rates on the U.S. West Coast, has continued to negatively impact demand for refined products and put pressure on refining industry margins during the 2009 first quarter. However, the substantial decline in crude oil prices along with weaker demand resulted in significantly lower retail pump prices for gasoline during the 2009 first quarter as compared to 2008. In addition, in the 2009 first quarter the U.S. West Coast had heavy refining industry turnaround activity and historically low gasoline inventories. As a result, gasoline margins were unseasonably strong during the first quarter and improved significantly over fourth quarter margins. U.S. West Coast benchmark gasoline margins increased to an average of $17 per barrel during the first quarter from an average of $7 per barrel in the fourth quarter of 2008. Distillate margins weakened primarily due to declining global demand and excess inventories. U.S. West Coast benchmark diesel fuel margins declined to an average of $12 per barrel during the first quarter from an average of $19 per barrel in the fourth quarter of 2008.Our net earnings were $51 million ($0.37 per diluted share) for the three months ended March 31, 2009 (2009 Quarter), compared with a net loss of $82 million (($0.60) per diluted share) for the three months ended March 31, 2008 (2008 Quarter). The increase in net earnings during the 2009 Quarter was primarily due to the following:
Overview. Operating income for our refining segment increased to $177 million during the 2009 Quarter primarily due to significantly higher gross refining margin and lower operating expenses, partially offset by lower refining throughput. Our gross refining margin per barrel increased to $12.14 per barrel in the 2009 Quarter, compared to $6.54 per barrel in the 2008 Quarter reflecting higher industry margins for gasoline and heavy products. On the U.S. West Coast, industry gasoline margins benefited from heavy industry downtime combined with low gasoline inventories. We also benefited from smaller discounts on heavy products, such as fuel oil and petroleum coke, during the 2009 Quarter. Fuel oil prices averaged 79% of Alaska North Slope (ANS) crude oil during the 2008 Quarter versus 87% of ANS during the 2009 Quarter. The increase in industry gasoline and heavy products margins was partially offset by a sharp decline in industry diesel fuel margins as diesel fuel demand decreased and inventories increased. From January to March of 2009, as gasoline prices increased over diesel fuel, we shifted 5% of our production out of distillates into gasoline and other products. Our gross refining margin was also positively impacted as we increased our percentage of more cost advantaged heavy crude oil to total throughput to 34% during the 2009 Quarter from 30% during the 2008 Quarter reflecting completion of the delayed coker unit at our Golden Eagle refinery and improvement initiatives at our Hawaii refinery in 2008. During the 2008 Quarter, industry margins on the U.S. West Coast were negatively impacted as moderately rising product prices lagged rapidly rising crude oil prices. The rapid increase in crude oil prices was attributed in part to such factors as continued global demand growth, concerns over declining crude oil supplies and increasing investments in crude oil to hedge against the weakening U.S. dollar.
Gross Refining Margins. On an aggregate basis, our total gross refining margin increased to $585 million in the 2009 Quarter from $353 million in the 2008 Quarter, reflecting higher total gross refining margins in all of our regions. Our per-barrel gross refining margin in each of our regions was positively impacted by the increase in industry gasoline and heavy product margins described above. Our gross refining margin also increased during the 2009 Quarter over the 2008 Quarter due to the regional factors described below.
Refined Products Sales. Revenues from sales of refined products decreased 52% to $3 billion in the 2009 Quarter as compared to the 2008 Quarter, primarily due to significantly lower average refined product sales prices and lower refined product sales volumes. Our average product sales price decreased 47% to $56.40 per barrel in the 2009 Quarter as lower average crude oil prices during the 2009 Quarter put downward pressure on product prices. Total refined product sales averaged 589 Mbpd in the 2009 Quarter, a decrease of 55 Mbpd from the 2008 Quarter, primarily reflecting lower product demand.
Costs of Sales and Expenses. Our average costs of sales decreased 54% to $46 per barrel during the 2009 Quarter reflecting significantly lower average crude oil prices. Manufacturing and other operating expenses decreased to $316 million in the 2009 Quarter, compared to $356 million in the 2008 Quarter, primarily reflecting lower utility costs and refining throughput. Depreciation and amortization increased by $14 million during the 2009 Quarter reflecting several assets placed into service during 2008, including the $600 million delayed coker unit at the Golden Eagle refinery.
Read the The complete ReportTSO is in the portfolios of Kenneth Fisher of Fisher Asset Management, LLC, Charles Brandes of Brandes Investment.
