Tesoro Corp.'s third-quarter earnings plunged 87 percent as it earned less off its refining operations, including those in Hawaii.

The operator of Hawaii's largest refinery and six others on the Mainland said it earned $33 million, or 24 cents a share.

That compared with year-earlier profit of $259 million, or $1.86 a share.

San Antonio-based Tesoro had been expected to report lower earnings given a projected decline in gross margins and economic sluggishness that's sapped fuel purchases.

Revenue fell to $4.74 billion from $8.68 billion a year earlier, while profit margins shrank.

The Hawaii refinery once again had the lowest profit margins of Tesoro's four operating regions.

The company reported gross refining margin, or revenue minus costs that include crude oil, transportation and distribution, fell to $1.05 per throughput barrel from $12.15 a year earlier.

The refinery processed 66,000 barrels a day, or 6,000 less than a year earlier.

The Oahu facility can process up to 94,000 barrels a day and financial analysts yesterday again queried Tesoro executives on a conference call about their plans for it.

The company said the poor Hawaii performance occurred because of a lag between rising crude oil costs and contracts it has to supply fuel at lower prices.

Tesoro also noted it refined a lot of lighter crude oil here during the quarter versus the heavier crudes that cost less.

The company forecast it will again process between 60,000 and 70,000 barrels daily in Hawaii during the fourth quarter.

Tesoro said overall it continues to look for ways to improve its cost structure and that it built up $255 million in cash during the quarter.

The company also cut its dividend to 5 cents a share. It had been 10 cents.

Tesoro's third quarter profit of 24 cents a share beat Wall Street estimates of 5 cents a share.

Its stock closed down 3 cents at $13.94 yesterday.