Across-the-Board Improvements for ARCO

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Across-the-Board Improvements for ARCO


SAN ANTONIO — Tesoro Corp.’s efforts to enhance its retail division are “moving ahead well,” Chairman and CEO Greg Goff reported Tuesday during the company’s 2015 fiscal fourth-quarter earnings call.

As CSNews Online previously reported, Goff first revealed that Tesoro would turn its focus to improving its retail operations output and strengthening in-store offerings for its convenience store customers during its fiscal third-quarter earnings call on Oct. 29.

“With our ARCO model, we are driving across-the-board improvements,” Goff said Tuesday, providing an update. He did not offer any additional details.

Also on the retail front, Goff said he's excited that Anabi Oil selected Tesoro to sell fuel at 55 gas stations and convenience stores in the Las Vegas area. These sites will be rebranded under the ARCO and Mobil names.

As of Dec. 31, Tesoro has 592 company-operated and multi-site-operated stores, a gain of 12 stores year over year. It also had 1,805 jobber/dealer locations vs. 1,683 such locations as of Dec. 31, 2014.

Tesoro’s marketing segment, under which its retail division is housed, reported record earnings of $899 million for 2015 vs. $553 million in 2014. Marketing segment EBITDA came in at $945 million, much higher than the $650 million the company expects from this segment year to year, according to Goff.

In the fourth quarter ended Dec. 31, however, marketing segment earnings fell to $175 million from $261 million in the year-ago period. Lower comparable marketing margins were cited for the decline.

Tesoro did enjoy a same-store sales increase of 1 percent in its most recent quarter, compared to 2014’s fourth quarter.

On the fuel side, sales in gallons rose to 2.2 billion gallons in the fourth quarter vs. 2.13 billion gallons a year ago. Fuel margins per gallon dropped 4 cents to 12 cents per gallon.

During Tuesday's earnings call, Goff was asked whether Wall Street was properly valuing Tesoro’s marketing segment and if the corporation should spin off the division as an initial public offering, something other companies have done, including Murphy Oil Corp. and Valero Energy Corp. His response was that it’s not a good idea for Tesoro.

“It doesn’t fit our business model,” said Goff. “Spinning off [the] marketing [segment] is not attractive from a value standpoint.”

Companywide, San Antonio-based Tesoro achieved record net profit of $1.5 billion for fiscal 2015, a significant increase compared to $843 million in fiscal 2014.

“2015 was a strong year for the company,” relayed Goff.

The 2015 fourth quarter, though, was also “challenging” on a companywide basis, with Tesoro earning a net profit of $83 million, down from $159 million in 2014’s fourth quarter.