Tesoro Corp.'s Kapolei, Hawaii, refinery resumed production on Oct. 15 just days after an earthquake caused a power outage at the facility located 22 miles west of Honolulu. That's a positive sign for the San Antonio, Texas-based oil company because executives expect its strong 2006 performance to continue if refineries are running at full capacity.
The company -- one of IndustryWeek's Best 50 Manufacturers for 2006 -- posted record net earnings of $326 million, or $4.66 per share, for the second quarter compared with net earnings of $184 million, or $2.62 per share for the year-ago period. That coupled with a refining operating income that was 50% higher, or $212 million more than second-quarter 2005, has Tesoro President and CEO Bruce Smith sounding optimistic.
"The margin environment in the second quarter was very, very strong, and we expect the fundamentals to continue to be good for the remainder of the year," he said in an Aug. 3 statement. "The key to our performance will be to continue to have each and every employee focus on our safety and operational excellence. That will enable us to run our refineries at the optimal level and capture these strong margins."
At A Glance
San Antonio, Texas
Primary Industry: Petroleum and coal products
Number of employees: 3,928
2005 In Review
Revenue: $16.6 billion
Profit Margin: 3.06%
Sales Turnover: 3.25
Inventory Turnover: 19.34
Revenue Growth: 35.22%
Return On Assets: 12.44%
Return On Equity: 38.20%
The Hawaii refinery, which produces 94,000 barrels per day of gasoline, diesel and jet fuel, has become a key site for future corporate growth. Most recently, in October the company said it had won a $5.6 million contract with the Defense Energy Support Center in Virginia to provide jet fuel from the Hawaii refinery to the U.S. Navy, according to the San Antonio Business Journal. The contract expires on Dec. 31, 2009. A month earlier the Business Journal reported that the Defense Department awarded Tesoro a $253 million contract to supply the government with military-grade jet fuel. That contract runs through Oct. 30, 2007, the publication reported.
The company also plans a record year of $670 million of capital spending. Included in the capital budget are projects that focus on improving the company's crude flexibility, product yields and its cost structure, said Smith in the 2005 annual report.
"The economic projects leverage our existing asset base, take advantage of local market opportunities and are expected to return cash invested within three years from the first dollar spent, thereby generating significant returns for our shareholders," Smith wrote.
Smith also said in the statement that in 2005 the company restructured its business model. "We made a decision to adopt a new centralized, functional business model that allows us to operate and optimize all of our assets as an integrated system ... "While Tesoro operates as a global company, our streamlined structure and efficient processes enable us to move with the speed and agility of a much smaller company."
The company will announce its third-quarter results on Nov. 2.
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