After a marginal tax rate of 39%, unusual items in the second quarter of 2008 include a loss of $81 million or $0.58 per share in derivative positions mainly related to the long-haul crude hedge program, which was suspended in May 2008, and a gain of $48 million, or $0.35 per share, associated with the permanent reduction to inventory versus the start of the year under last-in first-out accounting.
In comparison to 2007, lower gross refining margins and higher operating costs were met with reduced refining throughput. Bottom of the barrel products continued their trend of lagging the rapid rise of crude oil prices, according to Tesoro.
Total fuel oil production for the quarter was 60,000 barrels per day (mbpd), compared to a 2007 full year average of 53mbpd primarily due to planned maintenance activity at Tesoro’s Golden Eagle refinery during the 2008 second quarter. Reported gross refining margins decreased 52% to $10.10 per barrel in the second quarter of 2008, compared to $20.98 per barrel in the same period of 2007.
Bruce Smith, Tesoro’s chairman and CEO, said: The refining sector continues to be impacted by higher crude and energy costs, and lower demand compared to 2007. Crude prices were up almost $60 per barrel in the quarter, compared to 2007, while preliminary industry data suggests that demand in California is down approximately 5% to 6%. As a result of these factors, the benchmark West Coast margin was down almost 40% in the quarter versus a year ago.
