June 2008 -- In 2007 Tesoro Corp. saw crude oil prices rise to new highs. Yet, at the same time, product
prices failed to fully reflect the high cost of crude. The result: Net earnings for 2007
declined to $566 million, or $4.06 per share, from $801 million, or 5.73 per share, in 2006. The
decline was attributed to:
Substantially lower refined product margins on the U.S. West Coast during the second
half as crude prices rose rapidly while product prices increased only moderately.
Significantly lower gross refining margins at Tesoro's Hawaii refinery.
Higher operating expenses reflecting increased repairs and maintenance expense and employee
costs
The impact of rising crude oil costs on non-trading derivative positions and
Increased selling, general and administrative expenses reflecting higher stock-based
compensation and employee costs.
But even with those changes, the company managed a strategy that delivered a 44% return to
shareholders in 2007 and a five-year compound average growth rate of 50%. Other achievements
include the acquisition of the Los Angeles refinery and retail network of 276 Shell branded and
138 USA Gasoline branded retail stations and excluding the Los Angeles refinery, achieving
throughput of 526,500 barrels per day, which was just below the 529,600 barrels per day record
set in 2005.
