) declared upbeat first-quarter 2012 results, reflecting strong
operations and efficient execution of strategic initiatives along
with benefits from high-return capital programs.
The company reported earnings per share of 39 cents, breezing
past the Zacks Consensus Estimate of 27 cents. However, comparing
year over year, the result dropped 47.3% from 74 cents.
The company reported revenue of $7,820.0 million for the
three-month period, up 19.8% from the prior-year figure of $6,526.0
million. The result was 14.7% above our projection.
Tesoro's Refining segment posted quarterly operating income of $194
million, against $303 million in the year-earlier quarter. The
decline was due to turnaround activity in California.
The Retail unit experienced an operating loss of $4 million during
the three-month period, compared with a profit of $2 million in the
first quarter of 2011.
Total refining throughput averaged 529 thousand barrels per day
(MBbl/d) in the first quarter, down from 561 MBbl/d in the year-ago
quarter, aided by weak performances in some of the regions.
California (Golden Eagle and Los Angeles) registered a
year-over-year decline of 23.8%, while the Pacific Northwest
(Alaska and Washington) output shot up 14.8%. Throughput in the
company's Mid-Pacific (Hawaii) region decreased 2.9%, while that of
the Mid-Continent (North Dakota & Utah) improved 8.3%.
Gross refining margin plunged 15.2% year over year to $12.15 per
barrel. In terms of different regions, refining margin was down
approximately 52.1% in California at $7.98 per barrel and 3.2% in
the Pacific Northwest at $12.96 per barrel.
In the Mid-Pacific, gross refining margin was $2.07 per barrel
versus a negative figure of $3.05 per barrel in first quarter 2011.
The Mid-Continent region experienced 13.2% year-over-year growth in
the gross refining margin at $23.51 per barrel.
Realized Costs & Prices
Manufacturing costs before depreciation and amortization
decreased 4.8% from the year-earlier level to $4.97 per barrel, in
keeping with Tesoro's stated objectives of reducing operating costs
and increasing throughput rates.
Total refined product sales during the quarter averaged 657
MBbl/d, up 6.8% year over year. The average price realized on
product sales increased 12.5% year over year to $127.11 per barrel.
Average cost per barrel was also up 17.8% from the first quarter of
2011 at $117.75 per barrel.
Capital Expenditure & Balance Sheet
During the quarter, Tesoro's total capital spending was $102
million (excluding retail acquisition), of which 89% was targeted
toward the refining segment. Turnaround spending for the year was
As of March 31, 2012, Tesoro had $710 million cash on hand and
total debt of $1,674.0 million, representing a
debt-to-capitalization ratio of 29.2%.
For the second quarter, total throughput is projected at around
Tesoro expects capital expenditure for 2012 to be around $670
million, together with a turnaround spending of around $300
During the quarter, Tesoro completed the acquisition of 49
Albertson's Fuel Express retail stations from
). With total fuel sales of about 5 million barrels per day, the
facilities are spread across Washington, Oregon, California,
Nevada, Idaho, Utah and Wyoming.
San Antonio, Texas-based Tesoro enjoys the scale and
diversification benefits afforded by its portfolio of seven
refineries. . In the near term, the company stands to benefit from
management's focus on balance sheet improvement and investment
However, Tesoro remains exposed to the risk of a tardy U.S.
economic growth and weak product demand. Its lack of geographic
diversification and excessive dependence on the West Coast market
will further limit the ability to generate positive earnings
surprises. Hence, we expect Tesoro shares to perform in line with
the broader market and maintain our long-term Neutral
Tesoro currently retains a Zacks #3 Rank (short-term Hold
SUPERVALU INC (SVU): Free Stock Analysis Report
TESORO CORP (TSO): Free Stock Analysis Report
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