) swung back to profit in the fourth quarter of 2012 compared to
a net loss a year earlier on the back of higher margins and a
significant crude oil differentials advantage.
Earnings per share (excluding special items) came in at $1.34,
missing the Zacks Consensus Estimate of $1.38 but improving
significantly from the year-ago adjusted loss of 87 cents.
The San Antonio, Texas-based firm reported revenue of $8,273.0
million for the three-month period ending Dec 31. This was 15.4%
above our projection and was also up 7.3% year over year on the
back of higher throughput and solid refining margins.
: Tesoro's Refining segment posted an operating income of $106
million against loss of $123 million in the year-earlier quarter.
The improvement can be attributed to higher refinery throughput
: The Retail unit earned $44 million during the December quarter,
up from $27 million in the fourth quarter of 2011. The growth was
aided by higher fuel margins.
Total refining throughput averaged 604 thousand barrels per day
(MBbl/d) compared with 567 MBbl/d in the year-ago quarter.
Overall throughput volumes in California (consisting of the
Golden Eagle and Los Angeles refineries), Pacific Northwest
(Alaska and Washington) and the Mid-Continent (North Dakota &
Utah) increased 3.3%, 15.1% and 7.0% year over year to 249
MBbl/d, 160 MBbl/d and 123 MBbl/d, respectively.
However, throughput in the company's Mid-Pacific (Hawaii)
operations remained unchanged from the fourth quarter of 2011 at
Gross refining margin saw a robust increase of 136.7% year over
year to $14.25 per barrel.
In terms of different regions, refining margin increased in
California (by 547.7% year over year to $11.14 per barrel), in
Mid-Pacific (by 182.4% to $3.57 per barrel), in Pacific Northwest
(by 125.2% to $13.42 per barrel) and Mid-Continent (by 30.4% to
$27.88 per barrel).
Realized Costs & Prices
Manufacturing costs before depreciation and amortization fell
6.6% from the year-earlier level to $4.70 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 694
MBbl/d, up 2.2% year over year. Average price realized on product
sales decreased 2.8% year over year to $115.72 per barrel and
average cost per barrel also decreased 6.8% to $105.18 per
Capital Expenditure & Balance Sheet
Tesoro's total capital spending during the quarter under review
was $176 million (82% directed toward refining segment). The
company informed that it expects capital spending for 2013 at
around $530 million, together with turnaround spending of around
As of Dec 31, 2012, Tesoro had $1,639.0 million cash on hand and
total debt of $1,590.0 million, representing a
debt-to-capitalization ratio of 25%.
Tesoro announced a 33.0% increase in its quarterly dividend to 20
cents per share, or 80 cents per share annualized. The dividend
is payable on Mar 15, 2013 to shareholders of record on Feb 28.
The company 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.
Management at Tesoro is paying greater attention to improving
business processes, reducing operating costs, enhancing the
integration of the refining portfolio and investing in organic
growth. Tesoro is involved with a number of high-return projects
that are expected to be cost effective. These projects will not
only boost the company's competitive position among its peer
group, but will also provide significant earnings and cash flow
However, the inherent volatility of the refining business reduces
the accuracy and reliability of long-term earnings and revenue
estimates. Additionally, results are exposed to unplanned
shut-downs that may have a lingering impact.
But there are certain other companies in the oil refining and
marketing industry that are expected to perform well in the
coming one to three months. These include
CVR Energy Inc.
) with a Zacks Rank #1 (Strong Buy), and
Alon USA Energy, Inc.
) with Zacks Rank #2 (Buy).
ALON USA ENERGY (ALJ): Free Stock Analysis
CVR ENERGY INC (CVI): Free Stock Analysis
HOLLYFRONTIER (HFC): Free Stock Analysis
TESORO CORP (TSO): Free Stock Analysis Report
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