Tesoro Corporation Announces 129% Increase in Fourth Quarter Earnings and Record 2006 Full Year Results

SAN ANTONIO--(BUSINESS WIRE)--Tesoro Corporation (NYSE:TSO) today reported record 2006 fourth quarter net income of $158 million, or $2.28 per share, and full year 2006 net income of $801 million, or $11.46 per share. Earnings for 2006 were almost $300 million ahead of last year.

Quarterly gross refining margin rose 16% compared to 2005 more than offsetting the lower throughput primarily caused by a turnaround at the Anacortes refinery. Quarterly refining operating income of $284 million was nearly $40 million more than a year ago. "Our knowledge and experience in optimizing our system continues to develop and our decisions around crude oil purchasing and clean product management are significantly improving earnings. Our management team is excited because we continue to find new opportunities to add value," said Bruce Smith, Chairman, President and CEO.

Heavy turnaround activity on the West Coast in the fourth quarter strengthened margins versus last year. Jet fuel demand strengthened during the quarter, leading to improved performance at our Alaska refinery. In addition, strong diesel demand in the mid-continent region contributed to the company's profitability in this region. Increasingly favorable dynamics in our Salt Lake City and Mandan refining markets are improving the balance of the company's earnings. "In 2005, these assets represented 19% of our total refining operating income. This year they contributed 26% as we have successfully and safely increased throughput and the production of clean fuels," said Smith.

Capital spending for the year was approximately $570 million of which $117 million was for turnaround expenditures. The company continues to reinvest cash flow to improve reliability, environmental compliance and operating income from our assets. EBITDA contributions from many of the projects initiated in 2006 are expected to be between $80-$125 million pre-tax in 2007.

Cash at the end of the year was $986 million as compared to $440 million on December 31, 2005. The ratio of debt-to-capitalization was 29% compared to 36% a year ago.

Board Declares Quarterly Dividend

Tesoro announced today that its Board of Directors has approved a regular quarterly cash dividend of $0.10 per share. The dividend is payable March 15, 2007 to shareholders of record as of March 1, 2007.

Public Invited to Listen to Analyst Conference Call via Internet

At 9:00 a.m. CST, Monday, January 29th, 2007 Tesoro will broadcast its conference call with analysts regarding fourth quarter 2006 results. Interested parties may listen to the live conference call over the Internet by logging on to Tesoro's Internet site at http://www.tsocorp.com.

Tesoro Corporation, a Fortune 150 Company, is an independent refiner and marketer of petroleum products. Tesoro operates six refineries in the western United States with a combined capacity of approximately 560,000 barrels per day. Tesoro's retail-marketing system includes over 450 branded retail stations, of which nearly 200 are company owned and operated under the Tesoro® and Mirastar® brands.