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SAN ANTONIO -- Refiner, marketer and convenience store operator Tesoro Corp. reported a fourth quarter 2009 net loss of $179 million, compared to net earnings of $97 million for the same period of 2008.
The company's fourth quarter results include a non-cash charge of $43 million for a goodwill impairment related to the company's Anacortes refinery.
For the full year 2009, the company reported a net loss of $140 million, vs. net earnings of $278 million for the full year 2008. Full-year 2009 segment operating income was $138 million, compared to $673 million for the full year 2008. The negative variance is a result of lower gross margins, partially offset by lower operating expenses, the company said.
For the fourth quarter, the company recorded a segment operating loss of $172 million, compared to segment operating income of $204 million a year ago. The decrease in operating income is primarily due to lower distillate margins and compressed discounts for heavy crudes, partially offset by improved margins for gasoline.
The company's fourth quarter gross refining margin fell to $5.37 per barrel from $12.47/bbl in the 2008 fourth quarter.
"Depressed consumer demand for transportation fuels significantly impacted the company's gross margins," Bruce Smith, chairman, president and CEO of Tesoro, said in a statement. "While we are disappointed with the loss, we are pleased we were able to maintain the strength of our balance sheet by making operational adjustments that minimized these difficult market conditions.
"The supply and optimization team continually adjusted crude supply, throughput and inventory as they attempted to match wildly fluctuating supply prices and product margins to highly uncertain demand. The team managed to reduce inventories by 3.7 million barrels during the year. The refining team focused on reducing costs and ensuring that our capital program was effective as they reduced our $600 million capital budget to $542 million. We also exceeded our non-capital and capital improvement initiative target of approximately $370 million by $55 million."
Low demand for winter grade gasoline and the required switch to summer grade gasoline contributed in keeping margins depressed to start 2010, the company said in a statement. "However, January margins are historically the lowest of the year, and on average for the last 20 years West Coast gasoline demand has increased by more than 75,000 barrels per day from January to March," Smith said.
Tesoro will suspend its quarterly dividend for the foreseeable future to preserve cash and keep a healthy balance sheet. "While we ended the fourth quarter with over a billion dollars of cash and availability under our revolver, we expect further margin volatility as supply adjustments are continuing in the market place. There is still no transparency into the future of global demand for petroleum products, and therefore we must act prudently. We believe that capturing the superior returns of our quick hit investment program will deliver the highest shareholder return, and this action helps to ensure its completion," Smith said.
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