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The Honolulu Advertiser

Posted on: Saturday, January 15, 2005

Tesoro shares fall 2.5% at NYSE

By Joe Carroll
Bloomberg News Service

NEW YORK — Shares of Tesoro Corp., which more than doubled in value last year, fell as much as 6.8 percent after the oil refiner indicated fourth-quarter profit was smaller than analysts expected.

Net income was about 5 cents to 10 cents a share in the quarter, San Antonio-based Tesoro said in a statement. The company was expected to earn 42 cents a share, the average estimate from 18 analysts surveyed by Thomson Financial.

Tesoro's shares fell 76 cents, or 2.5 percent, to $29.55 in New York Stock Exchange composite trading. The stock traded as low as $28.25, the lowest since Nov. 9. Tesoro shares reached a record $34.65 in October.

Costs related to work on oil-processing equipment at the company's largest refinery, the Golden Eagle plant in Martinez, Calif., cut fourth-quarter net income by 10 cents a share, Tesoro said. A unit at the plant that processes high-sulfur crude oil was idle from Sept. 6 to Oct. 31, forcing Tesoro to buy higher-priced, low-sulfur oil, spokeswoman Tara Payne said.

"This shows how much they rely on Golden Eagle, their big dog out there," said Bryan Caviness, an analyst at Fitch Inc., which rates Tesoro's debt at BB, two levels below investment grade. Reduced output from Golden Eagle "means they have to rely on capacity outside California, where margins are lower."

Chief Executive Bruce Smith almost tripled Tesoro's refining capacity in the past three years by acquiring plants. Tesoro bought the Golden Eagle refinery from Valero Energy Corp. in May 2002, six months after acquiring two plants from BP Plc.

Fourth-quarter profit was hurt by a power outage at a refinery in Hawai'i and by a smaller-than-expected gap in December between crude-oil costs and fuel prices, Tesoro said.