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SAN ANTONIO -- Tesoro Corp. reported fourth quarter 2008 net earnings of $97 million, compared to a net loss of $40 million for the fourth quarter of 2007. Excluding special items, Tesoro posted net income of $137 million for the 2008 fourth quarter.
Full year 2008 earnings were $278 million compared to $566 million for 2007. Full year 2008 operating income was $471 million, compared to $967 million in 2007, due to lower per-barrel refining margins and higher per-barrel manufacturing costs.
The company’s fourth quarter segment operating income of $204 million was $196 million higher than the $8 million earned in the fourth quarter 2007, primarily due to higher gross margins as Tesoro improved its capture of available industry benchmark margins, especially in the Hawaii and California regions, as well as improved results from its retail segment. The increase in segment operating income was partially offset by lower throughput rates, the company reported.
"The actions we’ve been taking since late in 2007 have positioned the company to succeed even in this weak market environment," Bruce Smith, chairman, president and CEO of Tesoro, said in a statement. "While falling commodity prices did benefit our wholesale and retail marketing channels, the capital and non-capital initiatives we implemented beginning in early 2008 have enhanced our ability to deliver substantial and sustainable improvements in our capture of the available margin, and I am pleased to see these successful efforts reflected in our fourth quarter results."
At the end of 2008, the company had a cash balance of $20 million. The impact of falling commodity prices during the quarter negatively impacted cash, causing Tesoro to borrow $66 million on its revolving credit facility. The company estimated the contraction of receivables vs. payables due to crude prices dropping in the quarter was approximately $325 million, including the impact from the receivable write-off.
Company executives said they are encouraged to see a reversal of this trend, and by the fact that the West Coast experienced an increase in industry benchmark margins.
"While the strength in first quarter West Coast margins has been a pleasant surprise, we plan to continue to follow our 2009 business plan, which is based on industry benchmark margins that are lower than 2008, and our expectation that we will realize continued improvement in margin capture. Our program of non-capital objectives and benefits of our 2008 income capital spending is resilient and continues to provide the platform for our organic growth opportunities," Smith said in a released statement.