Consumer Demand Lifts Tesoro's Retail Segment

SAN ANTONIO — Consumer demand helped lift the performance of Tesoro Corp.'s retail segment above the same timeframe in 2014, with operating income hitting $126 million in the first quarter of 2015.

Earnings for the segment were up from $19 million in the first quarter of last year. Same-store fuel sales were also higher by approximately 2.5 percent vs. the first quarter of 2014. Strong consumer demand and favorable market conditions resulted in significantly improved margins, explained Steven Sterin, executive vice president and chief financial officer.

"The 2.5-percent growth is on a same-store basis so it does not have a lot of impact on our growth," explained Greg Goff, CEO of Tesoro. "Our growth in the retail [segment] is primarily growing the use of the Exxon, Mobil and Shell brands in certain geographic areas. That's where our real growth in marketing is. We are seeing so far in the second quarter a good continuation of that growth." 

According to Goff, Tesoro has not made any decision to follow in other oil giants' footsteps and spin off its retail segment.

"Our first focus is to continue to grow our marketing business, to drive higher levels of integration across our system in all the geographic areas. We are actively looking to do that," he said. "At the same time, we are looking at our overall marketing business. We plan to have that completed by the second half of this year on how we would want to position that marketing business going forward. We haven't reached any conclusions on that at all yet."

Tesoro's retail marketing system includes more than 2,200 retail stations under the ARCO, Shell, Exxon, Mobil, USA Gasoline and Tesoro brands.

Companywide, Tesoro reported first-quarter 2015 net earnings of $145 million, compared to net earnings of $79 million for the first quarter of 2014. Adjusted EBITDA for the first quarter, excluding special items, was $489 million vs. $362 million a year ago, according to Sterin.

Looking toward full-year 2015, Tesoro expects to achieve its plan to deliver $550 million to $670 million of business improvements.

"Despite a challenging start to the year, our first-quarter net earnings grew significantly over last year," Goff said, noting labor disruptions at three West Coast refineries and planned maintenance on three other refineries in Tesoro's system. "Moving forward into 2015, we are clearly focused on executing our business plan and delivering the improvements we have laid out."

San Antonio-based Tesoro is an independent refiner and marketer of petroleum products. Through its subsidiaries, the company operates six refineries in the western United States with a combined capacity of more than 850,000 barrels per day and has ownership in a logistics business that includes a 36-percent interest in Tesoro Logistics LP and ownership of its general partner.