) reported weak fourth-quarter 2013 earnings due to significantly
higher operating expenses and sharp drop in refining margins
across all operating regions.
Earnings per share (excluding special items) came in at 4 cents,
down 97.1% from the year-ago adjusted earnings of $1.38 and
substantially below the Zacks Consensus Estimate of 30 cents.
However, Tesoro reported revenues of $10,116.0 million, up 34.4%
from $7,525.0 million in the comparable quarter last year and
above the Zacks Consensus Estimate of $9,918.0 million. The
outperformance can be attributed to robust throughput volumes in
the refining segment.
For the year ended Dec 31, 2013, earnings per share of Tesoro
came in at $2.77, lagging the Zacks Consensus Estimate of $3.05
per share. The figure also fell sharply from the year-ago profit
of $6.38 per share.
Revenues for the year stood at $37,601 million as compared with
$29,809.0 million in fourth-quarter 2012.
Refining: The segment posted an operating income of $106.0
million, reflecting a steep decline from $344.0 million earned in
the year-earlier quarter due to lower margins and higher
Retail: The segment earned $24.0 million, down from $41.0 million
in the fourth quarter of 2012 owing to significant hike in
segment operating expenses.
Total refining throughput averaged 786 thousand barrels per day
(MBbl/d) compared with 532 MBbl/d in the prior-year quarter.
Overall throughput volumes in California (consisting of Martinez
and Los Angeles refineries) shot up 98.4% year over year to 494
MBbl/d. Throughput in Tesoro's Pacific Northwest (Alaska and
Washington) operation also increased 4.4% year over year to 167
Moreover, throughput volumes in Mid-Continent (North Dakota &
Utah) improved marginally by 1.6% year over year to 125 MBbl/d.
Gross refining margin witnessed a decrease of 37.5% year over
year to $9.45 per barrel.
In terms of different regions, refining margin decreased in
California (42.7% year over year to $6.08 per barrel), in
Mid-Continent (22.8% to $20.63 per barrel) and Pacific Northwest
(16.9% to $10.94 per barrel).
Realized Costs & Prices
Manufacturing costs before depreciation and amortization
increased 10.5% from the year-earlier level to $5.39 per barrel.
Total refined product sales averaged 905 MBbl/d, up 43.4% year
Average price realized on product sales decreased 5.1% year over
year to $112.95 per barrel and average cost per barrel decreased
2.8% to $105.22 per barrel.
Increased Operating Cost
Tesoro's operating cost for the quarter came in at $560.0
million, a significant increase of 50.5% from the year-ago
In the fourth-quarter 2013, Tesoro repurchased roughly $100.0
million worth shares.
The company has returned roughly $135.0 million to
stockholders in the fourth quarter of 2013, through share buyback
program and dividend payment.
WORLD FUEL SVCS (INT): Free Stock Analysis
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TESORO CORP (TSO): Free Stock Analysis Report
VALERO ENERGY (VLO): Free Stock Analysis
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Capital Expenditure & Balance Sheet
Tesoro's total capital spending during the fourth quarter was
$146.0 million (65.8% directed toward refining segment).
Moreover, the company spent $360.0 million for turnaround
As of Dec 31, 2013, Tesoro had $1,238.0 million cash on hand and
total debt of $2,829.0 million, representing a
debt-to-capitalization ratio (excluding capital leases associated
with discontinued operations) of 34.0%.
The company is planning to invest roughly $670.0 million in 2014.
Tesoro's turnaround cost during 2014 is expected to be $205.0
Tesoro currently retains a Zacks Rank #3 (Hold), implying that it
is expected to perform in line with the broader U.S. equity
market over the next one to three months.
Meanwhile, one can consider better-ranked players in the oil
refining and marketing sector like
Valero Energy Corp.
World Fuel Services Corp.
). All the stocks sport a Zacks Rank #2 (Buy).