) reported better-than-expected second quarter 2013 results on
the back of higher throughput.
Earnings per share (excluding special items) came in at $1.56,
beating the Zacks Consensus Estimate of $1.43.
However, the results fell 42.2% year over year (from $2.70 to
$1.56) due to significantly lower refining margins and turnaround
Tesoro reported revenues of $8,897.0 million for the three-month
period ended Jun 30. This was 15.9% above our projection and was
up 21.3% year over year.
The segment posted an operating income of $395.0 million,
reflecting a decrease from $610.0 million in the year-earlier
quarter. Significant increase in manufacturing expenses hurt the
The unit earned $25.0 million during the June quarter, down from
$72.0 million earned in the second quarter of 2012. Substantial
rise in operating costs affected the result.
Total refining throughput averaged 624 thousand barrels per day
(MBbl/d) compared with 523 MBbl/d in the year-ago quarter.
Overall throughput volumes in California (consisting of Martinez
and Los Angeles refineries) increased 39.6% year over year to 374
MBbl/d. However, throughput volumes in the Mid-Continent (North
Dakota & Utah) decreased 7.1% year over year to 104 MBbl/d.
Moreover, throughput in Tesoro's Pacific Northwest (Alaska and
Washington) operation increased 2.1% year over year to 146
Gross refining margin saw a decrease of 26.4% year over year to
$15.42 per barrel.
In terms of different regions, refining margin decreased in
California (1.1% year over year to $13.05 per barrel), in
Mid-Continent (29.1% to $27.32 per barrel) and Pacific Northwest
(40.3% to $12.92 per barrel).
Realized Costs & Prices
Manufacturing costs before depreciation and amortization
increased 10.7% from the year-earlier level to $5.39 per barrel
owing to refinery maintenance activities.
Total refined product sales during the quarter averaged 748
MBbl/d, up 20.5% year over year.
Average price realized on product sales decreased 6.9% year
over year to $115.93 per barrel and average cost per barrel also
decreased 5.0% to $104.55 per barrel.
DRIL-QUIP INC (DRQ): Free Stock Analysis
FERRELLGAS -LP (FGP): Free Stock Analysis
RANGE RESOURCES (RRC): Free Stock Analysis
TESORO CORP (TSO): Free Stock Analysis Report
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Capital Expenditure & Balance Sheet
Tesoro's total capital spending during the quarter under review
was $170.0 million (91.8% directed toward refining segment). The
company increased its projected capital spending for 2013 by
$130.0 million to $690.0 million. Tesoro also increased its
expected turnaround spending for 2013 by $90 million to $400
As of Jun 30, 2013, Tesoro had $428.0 million cash on hand and
total debt of $3,367.0 million, representing a
debt-to-capitalization ratio (excluding capital leases associated
with discontinued operations) of 39%.
Dividend & Share Repurchases
Tesoro announced its quarterly dividend of 25 cents per share
($1.0 per share annualized) representing a sequential hike of
25%. The dividend will be paid on Sep 13, 2013 to shareholders of
record on Aug 30.
Moreover, Tesoro returned roughly $100.0 million to shareholders
by purchasing more than 1.8 million of its shares during the
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 look at other firms in the energy sector like
Ferrellgas Partners LP
Range Resources Corporation
) that offer value. All these firms sport a Zacks Rank #1 (Strong