Tesoro profit widens in April

By Joe Carroll
Bloomberg News Service

CHICAGO — Tesoro Corp., the second-largest oil refiner on the West Coast, said earnings in April were triple what the company reported for the entire first quarter as profit margins widened. The company's shares surged to a record.

Per-share profit was about $1.20 last month as the gap between crude-oil costs and prices for gasoline and diesel widened, and plants that were idled for repairs returned to service, Chief Executive Bruce Smith told investors yesterday on a conference call. First-quarter profit dropped to $27.7 million, or 40 cents a share, from $50.4 million, or 75 cents.

Tesoro operates refineries in Hawai'i, California, Washington, Alaska, Utah and North Dakota. The refineries can process 553,500 barrels of crude oil a day.

Shares of San Antonio-based Tesoro jumped $2.05, or 5.2 percent, to an all-time closing high of $41.75 in New York Stock Exchange composite trading. The company yesterday morning announced a shareholder payout of 5 cents a share, the first dividend since Tesoro sold shares to the public in 1972.

Repairs to boilers and fuel-component units at Tesoro's Martinez, Calif., and Anacortes, Wash., refineries positioned the company to capitalize "at a time when we normally see growth in demand and concurrently higher margins," Smith said on the conference call.

The April results prompted Mark Flannery, an analyst at Credit Suisse First Boston, to boost his second-quarter profit estimate for Tesoro by 68 percent, to $2.20 a share. Flannery, who rates the company's shares at market weight, raised his full- year estimate by 26 percent, to $4.67 a share.

Smith spent $1.72 billion in the past 3 1/2 years acquiring refineries in the West and Great Plains.

West Coast gasoline prices have jumped 21 percent in the past year, touching an all-time high of $2.53 a gallon on April 22, according to the U.S. Energy Department. Refining margins in the region averaged $26.67 per barrel of oil processed last month, up 18 percent from a year earlier, according to data compiled by Bloomberg.

First-quarter sales rose 31 percent to $3.17 billion as higher fuel prices more than made up for a decline in production, Tesoro said in a statement.

Output dropped 4.4 percent from a year earlier to 494,800 barrels a day as repairs idled boilers and a hydrotreater and reformer at Martinez and Anacortes, which together account for 63 percent of the company's capacity.

"We're finished for the year" with refinery maintenance, Smith said on the conference call.

Chevron Corp., based in San Ramon, Calif., is the largest oil refiner on the West Coast.