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SAN ANTONIO — With a strong third quarter in the books for 2016, Tesoro Corp.'s plans are on track to exceed the company's target of returning between $400 million and $500 million to its shareholders this year.
During the company's third-quarter earnings call, held Tuesday morning, Chairman and CEO Greg Goff reported that Tesoro returned $215 million to shareholders due to the San Antonio-based company's "continued growth in the logistics and marketing business."
"We are pleased with the results for the quarter, which are attributable to our integrated business model and the continued execution of our operating improvements. … Combined with our continued growth in the logistics and marketing business, this resulted in strong operating cash flows. ... We are successfully delivering the improvements to operating income that we identified as part of our 2016 plan and remain committed to meeting or exceeding our target of $400 million to $500 million."
In the latest quarter, which ended Sept. 30, Tesoro's net earnings were $170 million, compared to $759 million in the year-ago quarter. EBITDA was $577 million vs. $1.5 billion last year.
By segment, operating income grew in logistics, but was lower year over year in refining and marketing due to the "stronger than normal marketing environment in 2015," company officials noted.
While Tesoro "successfully" reduced its refining inventory this quarter — which positively impacted the company's cash flow — this move negatively impacted its refining segment, Goff explained. When combined with rising RIN costs, refining operating income was $54 million, compared to $899 million a year ago. The company also reported a gross refining margin of $9.08 per barrel vs. $19.43 for the year-ago-period. Fuel margins in the latest quarter were 14.9 cents per gallon, compared to 20.5 cents per gallon a year ago.
Consumer demand, however, remained strong this quarter, Goff said, and Tesoro's total branded station count increased by 178 to reach a total of 2,467.
Accelerating Low Carbon Fuels
During the third quarter, Tesoro also strengthened its renewable fuels strategy by closing on an acquisition of Virent Inc., a renewable fuels and chemicals company. Upon completion of the deal, Virent became a wholly owned subsidiary of Tesoro and remains headquartered in Madison, Wis.
"With the acquisition, Tesoro intends to foster more rapid commercialization of Virent's renewables technology, which could uniquely position the company with an improved means of future regulatory compliance, as well as potential licensing opportunities," C.J. Warner, executive vice president of operations at Tesoro, said at the time of the acquisition in September.
As CSNews Online previously reported, Tesoro and Virent first initiated a strategic relationship this January, and have worked together to establish a forward plan to scale-up the technology and reduce deployment risks to meet the increasing demands for high-quality renewable fuels and chemicals.
Tesoro Corp. is an independent refiner and marketer of petroleum products. Its retail-marketing system includes retail stations under the ARCO, Shell, Exxon, Mobil, USA Gasoline and Tesoro brands. Through its subsidiaries, Tesoro operates seven refineries in the western United States and has ownership in a logistics business, which includes a 34-percent interest in Tesoro Logistics LP and ownership of its general partner.