Oil refining company Tesoro Corporation (TSO) Monday reported a sharp decline in net profit for the third quarter, hurt by lower refining margins and a decline in throughput amid a comparatively weak commodity price environment. The company also lowered its quarterly cash dividend to $0.05 per share from the regular $0.10 per share.
For the third quarter of fiscal 2009, the San Antonio, Texas-based company's net earnings were $33 million or $0.24 per share compared to $259 million or $1.86 per share in the prior-year period.
On an average, 19 analysts polled by Thomson Reuters expected Tesoro to earn $0.01 per share for the quarter. Analysts' estimates typically exclude special items.
Revenues for the quarter plunged to $4.74 billion from $8.68 billion in the third quarter of fiscal 2008. Analysts expected the company to generate revenues of $4.71 billion for the quarter.
Tesoro operates seven refineries in Western US with a combined rated crude oil capacity of nearly 664 thousand barrels per day. The company has two segments: refining and retail. The refining segment processes both heavy and light crude oils and produces primarily gasoline and gasoline blendstocks, jet fuel, diesel fuel, and heavy fuel oils. It also manufactures other refined products, including liquefied petroleum gas, petroleum coke and asphalt.
The company's retail-marketing system includes over 870 branded retail gas stations, of which more than 380 are company-operated under Tesoro, Shell, Mirastar and USA Gasoline brands.
Segment operating income for the third quarter plunged to $137 million from $510 million in the corresponding period prior year, negatively impacted by lower gross margins. The company's realized gross margin was down $7.10 per barrel from the prior year's $9.59 per barrel, due to lower margins for distillates and narrowing differentials for heavy crudes.
Refining segment operating income for the quarter fell sharply to $84 million from $476 million last year. Retail segment operating income increased to $53 million from $34 million in the prior-year quarter.
Refined product sales margin for the period was $7.24 per barrel versus $13.38 per barrel, as average sales price declined to $83.71 from $131.21 in the third quarter of 2008. Total refined product sales margin includes margins on sales of manufactured and purchased refined products and effects of inventory changes.
During the three-month period, Tesoro had a one-time loss of $3 million with regard to foreign currency exchange. Costs of sales and operating expenses for the quarter declined to $4.49 billion from $8.05 billion, and selling, general and administrative expenses were $55 million versus $68 million in the 2008-year period. Loss on asset disposals and impairments for the period narrowed to $4 million from $14 million a year earlier.
Total system throughput for the period was down 9% to 564 thousand barrels per day from 622 thousand barrels per day last year.
Chairman, president and chief executive officer Bruce Smith said, "Although economic concerns persist in light of high unemployment rates and weak industrial activity, the West Coast region has remained in better balance to current demand as gasoline and diesel inventories remain near their 5-year average."
In the preceding second quarter, Tesoro had reported a net loss of $45 million or $0.33 per share compared to an earnings of $4 million or $0.03 per share last year. Net revenues for the quarter had declined to $4.18 billion from $8.89 billion in the second quarter of fiscal 2008.
For the nine-month period, net earnings plummeted to $39 million or $0.28 per share from $181 million or $1.30 per share in the same period last year. Year-to-date revenues were $12.20 billion versus $24.18 billion in the prior year.
Capital expenditures for the quarter were $109 million, including turnaround spending. The company said it anticipates to spend less than announced capital budget of $600 million for the full year, including $40 million for income improvement projects. Tesoro's initial 2010 capital budget estimate was $675 million, including nearly $50 million for income improvement projects.
The board said that the reduced quarterly cash dividend of $0.05 per share is payable on December 15, 2009 to shareholders of record as of December 1st, 2009.
Among rivals, oil giant Exxon Mobil Corp. (XOM) on October 29 reported a plunge in its third-quarter profit, impacted by lower commodity prices and weak product margins. The Irving, Texas-based company's attributable net income was $4.73 billion or $0.98 per share compared with $14.83 billion or $2.85 per share last year. Total revenues and other income were down 40% to $82.26 billion from $137.74 billion in the prior-year quarter.
Another peer, Valero Energy Corp. (VLO) last week said that its loss widened in the third quarter as it recorded a significant loss contingency accrual. The contingency accrual is related to a dispute on certain issues between Valero and the Government of Aruba. The San-Antonio, Texas-based company's loss for the quarter was $629 million or $1.12 per share, compared with a profit of $1.15 billion or $2.18 per share a year ago. Operating revenues declined to $19.5 billion from $35.9 billion in the same quarter last year.
In Monday's regular trading session, TSO is currently trading on the New York Stock Exchange at $13.62 per share down $0.35 or 2.51% on a volume of over 6 million shares. In the past 52-week period, the company's shares have been trading in a range of $6.71 to $19.16.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.