Tesoro Corp. is planning a number of changes for its 95,000-barrel Campbell Industrial Park refinery after the facility's losses pulled the San Antonio, Texas-based company into the red during the fourth quarter.

Tesoro executives told investors and analysts on a conference call yesterday that they've been concerned about the profitability of the refinery and have come up with a plan to boost profitability at the plant. The improvements include giving itself more flexibility in operations and the types of crude oil that can be refined.

"We're deeply concerned about the situation in Hawai'i and have an array of initiatives to address every aspect of that operation," said William Finnerty, Tesoro chief operating officer, during the discussion.

"While some of these improvements will take time, others are expected to more quickly impact Hawai'i's performance."

Tesoro, operator of seven refineries including Hawai'i's largest, posted a fourth-quarter loss, saying its Campbell Industrial Park refinery sustained an $86 million pretax operating loss. A year earlier it had reported a $19 million profit for Hawai'i.

The Hawai'i losses pulled down the entire company's results, and Tesoro reported it swung to a net loss of $40 million, or 29 cents a share, from a net profit a year earlier of $158 million, or $1.17 a share.

The average forecast of 20 analysts surveyed by Bloomberg LP was for a slight loss. Tesoro's stock price fell 3.7 percent to $38.90 on the news.

Tesoro Chairman, President and Chief Executive Officer Bruce Smith said the company is taking a number of steps to boost future results, including "achieving a better value for commercial products marketed in Hawai'i."

"In 2008, we look forward to completing several income-producing projects, realizing additional synergies associated with the addition of Los Angeles and improving profitability in Hawai'i," said Smith in a press statement yesterday.

Chi Chow, a financial analyst with Tristone Capital in Denver, had forecast a loss of 3 cents a share and said many people were caught off guard by the size of Tesoro's loss.

"I think everybody was a little bit surprised by the operating loss at the Hawai'i refinery," said Chow. He said the Hawai'i loss could be traced to two issues, one of which was rising prices for the "sweet" crude oil the refinery uses. The other was a problem at the refinery that shut down gasoline production for more than a month.

Tesoro said the finished product prices here didn't reflect the rapidly rising cost and premiums paid for crude oil because of the way some of its commercial contracts are written. The outage at its Hawai'i refinery also contributed about $30 million to the loss here, with $10 million of that going to higher repair and maintenance expenses.

The outage also resulted in Tesoro refining only 74,000 barrels of oil a day during the fourth quarter, compared with the 77,000 a year earlier.

Chow said he expected Tesoro to focus initially on crude oil contracts and getting better pricing.

"That's what they'll address first and foremost," said Chow, who has an "outperform" rating on Tesoro shares and doesn't own any of the stock personally.

Tesoro in January said it expected to continue running its O'ahu refinery below year-earlier levels. It had previously said it might spend as much as $175 million to boost processing of high-sulfur "sour" crude oil at its Hawai'i oil refinery.

Yesterday the company was asked whether it made sense to invest more into the Hawai'i refinery since it has been one of the least profitable refineries Tesoro owns.

Smith acknowledged the refinery has been at the low end of returns, but that it has done a thorough analysis and concluded that it could substantially improve the profitability of the plant.

"We still think that this facility obviously can do a lot better than it has done," Smith said.

Reach Greg Wiles at gwiles@honoluluadvertiser.com.