TESORO PETROLEUM CORP /NEW/, PREC14A, 1995-12-26

TESORO PETROLEUM CORP /NEW/
PREC14A, 1995-12-26
PETROLEUM REFINING

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SCHEDULE 14A INFORMATION

Consent Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

Filed by the Registrant / /

Filed by a Party other than the Registrant /x/

Check the appropriate box:
/x/ Preliminary Consent Statement / / Confidential, for Use
of the Commission Only
/ / Definitive Consent Statement (as permitted by
Rule 14a-6(e)(2))
/ / Definitive Additional Materials

/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12

Tesoro Petroleum Corporation
(Name of Registrant as Specified in Its Charter)

The Stockholders Committee
For New Management of Tesoro Petroleum Corporation
(Name of Person(s) Filing Consent Statement)

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Payment of Filing Fee (Check the appropriate box):

/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.

/x/ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).

/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.

(1) Title of each class of securities to which transaction
applies: _____________
(2) Aggregate number of securities to which
transaction applies: ______________

(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
____________________________________________
(4) Proposed maximum aggregate value of transaction:
_______________________
(5) Total fee paid:
_____________________________________________________

/ / Fee paid previously with preliminary materials.

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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY -- SUBJECT TO COMPLETION

CONSENT SOLICITATION STATEMENT
OF
THE STOCKHOLDERS' COMMITTEE FOR
NEW MANAGEMENT OF TESORO PETROLEUM CORPORATION

To the Stockholders of Tesoro Petroleum Corporation:

The time has come for the stockholders of Tesoro Petroleum
Corporation, a Delaware corporation (the "Company"), to take charge of the
future of their investments in the Company. Toward that end, a group of
concerned stockholders have formed The Stockholders' Committee for New
Management of Tesoro Petroleum Corporation (the "Committee") in order to
undertake the consent solicitation described in this Statement, which (together
with the accompanying white Consent Card) is first being sent to stockholders
of the Company on or about [January 2,] 1996. As described in greater detail
below, the Committee is soliciting the consent of holders of the Common Stock
to actions that would result in the removal of all incumbent members of the
Board of Directors of the Company (the "Board") and their replacement with
nominees of the Committee (the "Committee Nominees") who will devote their
energies to reorganizing and revitalizing the Company.

THE BASIC ISSUE WE ARE RAISING THROUGH THIS CONSENT SOLICITATION IS
WHETHER THE INCUMBENT DIRECTORS' RECORD JUSTIFIES THEIR CONTINUATION IN OFFICE
OR WHETHER A NEW BOARD OF DIRECTORS SHOULD BE GIVEN THE OPPORTUNITY TO SEEK NEW
DIRECTIONS FOR THE BENEFIT OF ALL STOCKHOLDERS OF THE COMPANY.

In our view the answer is clear: We think that the Company's
current management has failed to perform its primary function -- maximizing
stockholder value.

The Committee's judgment, based on publicly available
information, is that the value of the Company is substantially greater than
reflected by the public market for the Common Stock, and the question naturally
arises: Why has the return on stockholder investments been so low relative to
our judgment of the inherent value of the Company? As we discuss in detail
below, in our opinion, the primary reason is the failure of the incumbent
directors to take some obvious steps that we think would have an immediate and
significant positive impact on the value of your stock.

Instead of moving vigorously to increase stockholder value,
the incumbent directors have taken actions that we believe are intended to
protect their positions and perquisites and are contrary to the best interests
of stockholders, including amendments to the Company's By-laws adopted by the
Board on September 27, 1995 without prior notice to or involvement by
stockholders and extension by the Board on December 15, 1995 of the

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term of the Company's "poison pill." Moreover, while the return on stockholder
investments have been totally inadequate in our opinion, the Board has recently
rewarded directors and executive officers with what we consider overly generous
and undeserved employee benefits.

WE THINK THAT MANAGEMENT WILL CONTINUE WITH BUSINESS AS USUAL
FOR THE FORESEEABLE FUTURE UNLESS STOCKHOLDERS ELECT A NEW BOARD.

We believe that many of you share our discontent and concerns.
In order to address those concerns, the Committee seeks your help to remove the
directors now in office and elect five new directors who, we believe, will be
more responsive to stockholders and firmly committed to the goal of increasing
stockholder value. We believe that the Committee's nominees have the
background and ability to accomplish that goal.

Your consent is important. No matter how many or how few
shares you own, please help us to improve stockholder value by completing,
signing, dating and mailing the enclosed white Consent Card promptly.

If your shares of Common Stock are held in the name of a
brokerage firm, bank nominee or other institution, only it can execute a
Consent Card with respect to your shares. Accordingly, please contact the
person responsible for your account and give instructions for a Consent Card to
be signed representing your shares. The Committee requests that you to confirm
your instructions to the person responsible for your account in writing and to
provide a copy of such instructions to the Committee c/o Morrow & Co., Inc.,
909 Third Avenue, New York, New York 10022 so that the Committee will be aware
of all instructions given and can attempt to ensure that such instructions are
followed.

If you have any questions about completing or signing the
Consent Card or require assistance, including assistance in assuring that any
of your shares held by brokers or other nominees are voted, please call Morrow
& Co., Inc. at (800) 634-4458.

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THE COMMITTEE AND ITS NOMINEES

The Committee consists of George F. Baker, Kevin S. Flannery,
Alan Kaufman, James H. Stone and Robert S. Washburn.

Mr. Flannery, age 51, has been, since May 1993, President, a
director and the principal shareholder of Whelan Management Corp. ("Whelan"),
an investment advisory firm, and of Whelan Securities, Inc., a securities
broker-dealer. From September 1991 until April 1993 he was Senior Vice
President and head equity trader at George Weiss Associates, Inc., a money
management and brokerage firm in Hartford, Connecticut. From 1975 until
September 1991 Mr. Flannery was with Bear, Stearns & Co., Inc. as Senior
Managing Director and head of the block trading desk.

Mr. Washburn, age 64, has a background in law, real estate
development and investment banking, and currently manages his private
investment portfolio. From 1974 to 1987, Mr. Washburn was a general partner of
Montgomery Securities, a New York Stock Exchange member firm, serving as head
of its investment banking activities and as Chairman of its Executive Committee
for several of those years.

The Committee Nominees are Mr. Baker, Dr. Kaufman, Mr. Stone,
Gale L. Galloway and Douglas Thompson, and the following is brief biographical
information about each of those individuals:

George F. Baker, age 56, has been President of Cambridge
Capital Holdings, an investment advisory firm, since 1987, and a General
Partner of Baker, Nye L.P., an investment partnership, since 1967. Mr. Baker
also is Chairman, President and Chief Executive Officer of Whitehall
Corporation, a New York Stock Exchange company in the electronics, aerospace
and earth sciences fields. He is a director of Digicon, Inc., an American
Stock Exchange Company engaged primarily in the business of collecting,
processing and interpreting geophysical data for the oil and gas exploration
and development industry.

Gale L. Galloway, age 65, has had a long career in the oil and
natural gas industry, and for more than the past five years has been Chairman
of the Board and Chief Executive Officer of GLG Energy, Inc., an independent
oil and gas producer. He also is Chairman and Chief Executive Officer of LIG
Acquisition Corporation and Gas Transmission U.K. Limited, companies engaged in
the acquisition and operation of pipeline systems, as well as an owner and a
member of the board of Prodevco S.A., a project development company involved
principally in the refining industry in South America.

Dr. Alan Kaufman, age 68, has been a practicing neurosurgeon
for over 25 years and an investor in a number of companies. Since 1987, he has
been a director of Newpark Resources, Inc., a New York Stock Exchange company
engaged primarily in providing oilfield services.

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James H. Stone, age 70, has for more than five years been
Chairman and Chief Executive Officer of Stone Energy Corporation, a New York
Stock Exchange company engaged primarily in oil and natural gas exploration and
development. He also is a director and member of the executive committee of
the Board of Directors of Newpark Resources, Inc. (described in Dr. Kaufman's
biographical information above) and a director and member of the executive
Committee of the Board of Directors of Hibernia Corp., a bank holding company
listed on the New York Stock Exchange, and of its subsidiary, Hibernia National
Bank.

Douglas B. Thompson, age 46, has been a director of Digicon,
Inc. (described in Mr. Baker's biographical information above) since 1991 and
Digicon's Chairman of the Board since 1994. Since 1989, he also has served as
President of Jupiter Management Company.

Certain additional information concerning the Committee's members and
the Committee Nominees is set forth in Appendix I attached to this Consent
Solicitation Statement.

All information contained in this Consent Solicitation Statement
(including Appendices) concerning each member of the Committee and each
Committee Nominee has been provided to the Committee by that person.

THE COMMITTEE'S PROPOSALS

For the reasons outlined below under the caption "REASONS FOR
THE CONSENT SOLICITATION," the Committee believes that a new Board must be
elected in order to further stockholder interests. To achieve that end, the
Committee is requesting stockholders to give their written consents to the
following actions:

1. By-law Amendments. The Committee is proposing
amendments (the "By-law Amendments") to certain provisions of the Company's
By-laws as believed to be currently in effect (the "By-Laws"). Our first
proposal concerning the By-Laws relates to the size of the Board, the removal
of directors and the filling of vacancies on the Board. The purpose and effect
of each of the Committee's proposed By-law Amendments is to facilitate the
proposed removal and replacement of all incumbent directors, as discussed
further below.

Article II, Section 2.1 of the By-Laws, as now in effect,
provides that the number of directors who constitute the whole Board is to be
determined by resolution of the Board, but may not be less than three. The
Committee believes that the number of directors constituting the entire Board
currently consists of eight directors. The Committee's proposed amendment to
Article II, Section 2.1, if adopted, will fix the number of directors at five,
while maintaining the authority of the Board to increase or decrease the

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number of directors. The proposed amendment is designed to ensure that the
Committee Nominees, if elected, will maintain majority representation on the
Board in order to carry out their plan of seeking to maximize stockholder
value.

Under the General Corporation Law of the State of Delaware
(the "Delaware Corporation Law"), directors of a corporation without a
classified board and whose certificate of incorporation does not otherwise
provide may be removed with or without cause by the holders of majority of the
outstanding shares entitled to vote in the election of directors. The Company
does not have a classified board, and its Certificate of Incorporation makes no
provision respecting the removal of directors. In addition, unless a Delaware
corporation's certificate of incorporation otherwise provides, the Delaware
Corporation Law permits stockholders to take action without a meeting and
without prior notice if a consent or consents in writing, setting forth the
action so taken, is signed by the holders of outstanding stock having not less
than the minimum number of votes that would be necessary to take such action at
a meeting at which all shares entitled to vote on that action were present.
Under the applicable provision of the Delaware Corporation Law, stockholder
action by written consent is effective when written consents from the holders
of record of the minimum number of shares of stock necessary to authorize the
action are executed and delivered to the corporation within 60 days of the
earliest dated consent so delivered.

Since the Delaware Corporation Law provides that the directors
of a corporation may be removed without cause unless otherwise provided in the
certificate of incorporation, and because the Company's Certificate of
Incorporation contains no contrary provision, we believe that one of the
fundamental charter rights of the Company's stockholders is to exercise
complete and unfettered discretion in choosing and changing the persons who
manage its business and affairs. Section 2.7 of Article II of the By-Laws
provides that directors may be removed (with or without cause) at a special
meeting of stockholders called for that specific purpose. Other provisions of
the By-Laws, however, state that stockholder actions which may be taken at
special meetings may be taken by written consent in lieu of a special meeting,
subject to certain requirements. The Committee believes, therefore, that the
By-Laws (as well as applicable provisions of the Delaware Corporation Law)
permit the removal of directors without cause through use of a written consent
solicitation like the one in which the Committee currently is engaged and do
not limit the exercise of the removal power to special meetings. In order to
achieve certainty, however, the Committee's Consent Card includes a proposal to
amend Article II, Section 2.7 of the By-Laws to unambiguously provide that
stockholders may remove any or all directors with or without cause, whether at
an annual or special meeting or by written consent. The adoption of this
amendment will facilitate the removal of all of the incumbent members of the
Board, as discussed below.

Sections 2.2 and 2.7 of Article II of the By-Laws provide that
vacancies created by the removal of a director may be filled by the majority
vote of the remaining directors. This provision permits such vacancies to be
filled without any stockholder

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participation. The Committee proposes to amend Article II, Section 2.7 of the
By-Laws to require that such vacancies be filled only by stockholder action.
This proposed amendment is intended to prevent the incumbent Board of Directors
from filling any of the vacancies which would be created upon the removal of
any of its members.

The texts of Section 2.1, 2.2 and 2.7 of Article II of the
By-Laws, as believed to be currently in effect, and as proposed to be amended,
are set forth in Appendix II attached to this Consent Solicitation Statement.

On November 14, 1995, the Company filed with the Securities
and Exchange Commission (the "Commission") its report on Form 10-Q for the
quarter ended September 30, 1995 (the "1995 Third Quarter 10-Q"). The 1995
Third Quarter 10-Q included as an exhibit a form of By-laws for the Company
which indicated that they reflected amendments made by the incumbent Board on
September 27, 1995, virtually all of which, in our opinion, increase the
difficulty and expense of stockholder actions to exercise their fundamental
right to choose and change the members of the Board. The By-law Amendments we
are proposing also include the repeal of each provision of the Company's
By-laws or any amendment thereto adopted by the incumbent Board after November
14, 1995, if any. The reason for this proposed repeal is to address the
possibility that the Board may have taken, and not yet publicly disclosed,
other actions, in addition to the By-law amendments described above, that might
impair stockholder democracy, or that the Board might take such actions during
the pendency of this solicitation. Since the Committee, by definition, cannot
now know of any such By-laws or amendments, it is impossible at this point to
identify or describe them specifically; however, an example of such a By-law
provision would be a provision purporting to impose additional delays or
administrative requirements in order to effectuate stockholder consent
proposals.

As indicated above, the 1995 Third Quarter 10-Q includes
By-laws as an exhibit. Accordingly, the Committee assumes that the By-Laws, in
the form filed with the 1995 Third Quarter 10-Q, were current as of November
14, 1995, the date of filing, and the Committee's proposed By-law Amendments
would not repeal any provision of the By-Laws that was publicly disclosed prior
to that date, other than as specifically described herein; however, any
amendment to the By-Laws adopted by the Board since November 14, 1995 and prior
to the effectiveness of the Committee's proposed By- law Amendments would be
repealed. There are no provisions in the By-Laws or in the Company's
Certificate of Incorporation restricting the ability of stockholders to amend
or repeal provisions of the By-Laws without the consent of the Board.
Although, to the Committee's knowledge, there is no Delaware precedent
precisely on point, the Committee is confident that such proposed repeal of
undisclosed By-Laws or amendments is enforceable. If it were not, By-Laws
adopted by the Board would not automatically be repealed, but would be subject
to challenge in court.

THE COMMITTEE RECOMMENDS THAT YOU EXECUTE THE ACCOMPANYING
WHITE CONSENT CARD FOR THE PROPOSED BY-LAW AMENDMENTS.

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2. Removal of all Incumbent Directors. Based on the
Company's filings with the Commission, the individuals who now sit on the Board
are Michael D. Burke, Robert J. Caverly, Peter M. Detwiler, Steven H.
Grapstein, Raymond K. Mason, Sr., John J. McKetta, Jr., Bruce A. Smith and
Murray L. Weidenbaum. As noted elsewhere in this Consent Statement (see
"REASONS FOR THE SOLICITATION"), the Committee believes that the incumbent
directors have failed to maximize stockholder value, and should be removed and
replaced with the Committee Nominees. ACCORDINGLY, THE COMMITTEE RECOMMENDS
THAT YOU EXECUTE THE ACCOMPANYING WHITE CONSENT CARD FOR REMOVAL OF ALL OF THE
PRESENT MEMBERS OF THE COMPANY'S BOARD AND ANY PERSON ELECTED BY THE INCUMBENT
DIRECTORS (WHETHER BEFORE OR AFTER THE DATE OF THIS CONSENT SOLICITATION
STATEMENT) TO FILL ANY VACANCY OR NEWLY CREATED DIRECTORSHIP.

3. Proposed Election of the Committee Nominees. If the
proposed By-law Amendments are adopted and the Company's incumbent directors
are removed, the entire Board will consist of five directorships, all of which
will be vacant. To fill those vacancies, the Committee proposes the election
of George F. Baker, Gale L. Galloway, Alan Kaufman, James H. Stone and Douglas
Thompson. Certain information concerning the Committee's Nominees is set forth
under the caption "THE COMMITTEE AND ITS NOMINEES" and in Appendix I attached
to this Consent Solicitation Statement. Each of the Committee Nominees has
agreed to serve as a director of the Company, if elected.

THE COMMITTEE RECOMMENDS THAT STOCKHOLDERS EXECUTE THE ACCOMPANYING
WHITE CONSENT CARD FOR THE ELECTION OF THE COMMITTEE NOMINEES TO THE BOARD.

REASONS FOR THE CONSENT SOLICITATION

We believe that many of the Company stockholders share the
Committee's profound disappointment with the performance of the Company's stock
and the Company's Board of Directors. In the Committee's opinion, the
incumbent Board has failed to develop any strategy for enhancing stockholder
value, even though we think there are some obvious steps that could be taken
that would have a beneficial effect on Common Stock prices. While displaying
what we believe to be an extremely passive and unimaginative approach to
increasing stockholder returns, the Board has been quite active and creative
when it comes to approving compensation and benefits for directors and officers
and adopting "anti-takeover" measures which the Committee believes serve only
to protect the positions of incumbent management.

The Committee believes that current and recent trading prices
of the Common Stock do not adequately reflect the value of the Company's
underlying businesses and assets. In the Committee's opinion, the principal
reason for that discrepancy is the fact that the Company is primarily engaged
in two businesses, petroleum refining and marketing in Alaska (the "Refining
Business") and natural gas exploration and production in Texas and Bolivia (the
"E & P Business"), which have distinctly separate financial, operating and

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investment characteristics. Unfortunately, they also have quite different
financial performance records, as made clear by the following table which shows
the operating profit (loss) of the Refining Business and the E & P Business for
each of the years 1992 through 1994 and for the nine months ended September 30,
1995:

<TABLE>
<CAPTION>
Operating Profit (Loss)
-----------------------
Refining Business E & P Business
----------------- --------------
(Dollars in millions)
<S> <C> <C>
1992 $(14.9) $13.3(1)
1993 15.2 40.7
1994 (3.4)(2) 64.3
1995 (9 Months) (4.5) 58.8(3)
</TABLE>

____________________
(1) Excludes gain on sale of assets of $5.8 million.
(2) Excludes (i) a refund of $8.5 million received in settlement of a
tariff dispute, (ii) a gain of $2.4 million from the sale of assets,
(iii) favorable feedstock cost adjustments of $1.5 million and (iv)
charges of $6.6 million for environmental contingencies and other
matters.
(3) Excludes $33.5 million gain from sale of certain interests in the Bob
West Field.

Obviously, the E & P Business is a strong financial performer,
and the Company's overall operating results have been dragged down by the
erratic and generally unprofitable Refining Business.

During 1994, the Company made $32 million dollars of capital
expenditures for the Refining Business. That large infusion of funds seems to
have had little positive impact, since the operating loss for the first nine
months of 1995 exceeded the loss for all of 1994 (excluding nonrecurring
items). Nonetheless, the Board poured at least another $8 million into the
Refining Business in 1995, and according to the 1995 Third Quarter 10-Q,
another $10 million will be required in 1997 to comply with environmental laws.
We think that all of that money would be better spent if used to reduce the
Company's high-cost debt or in developing the Company's E & P Business.

We think that a divestiture of the Refining Business would
have several benefits for stockholders. The stock market would be able to
value the Common Stock based on the strong positive cash flow of the Company's
continuing E & P Business, free of the drag on market valuation of the Common
Stock that we think has been caused by the poorly performing Refining Business.
If the divestiture took the form of a sale, the proceeds could be used to
reduce the Company's high-cost debt, directly and immediately increasing the
value of stockholders' investments. Money which otherwise would be needed for
capital expenditures for the Refining Business could be used to reduce debt or

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take other actions to immediately enhance stockholder value. We also think
that the Company's management has been distracted by the many problems
experienced by the Refining Business during the past several years. While the
Company does not publish data showing the allocation between the Refining
Business and the E & P Business of general and administrative expenses, based
on the Committee's knowledge of the oil and gas industry, we believe that most
of those expenses are attributable to the Refining Business, meaning that a
divestiture of the Refining Business would result in a disproportionately
greater increase in net earnings as a percentage of revenues.

In short, we think there is a tremendous opportunity to
significantly increase value for stockholders simply by divesting the Refining
Business and focusing on the core business of exploiting the Company's valuable
interests in the Bob West and Bolivian fields.

Although our Committee includes Dr. Alan Kaufman, an eminent
neurosurgeon, we do not think it takes a brain surgeon to figure out that the
combination of the E & P Business, which consistently generates operating
profits, with the Refining Business, which in recent years has performed poorly
and eaten up large amounts of capital funds, is both a problem and an
opportunity. The problem from the perspective of stockholders is that, in our
judgment, the trading prices of the Common Stock have been below the levels
stockholders would enjoy if the Company's public market value were based solely
on the E & P Business's strong operating results and if the resources poured
into the losing refining operations were used for other purposes. The
opportunity comes from the possibility of realizing improvements in stockholder
value by disposing of the Refining Business and other assets not related to the
core E & P Business, or perhaps by selling the entire Company to another
industry participant who could better assimilate the Company's disparate
businesses.

In our view, the incumbent Board has not responded to either
the problem or the opportunity we identify. In our opinion, the most important
reason for the Board's failure to implement changes that we think would
significantly improve stockholder value is that a majority of the incumbent
directors are more concerned with preserving their power and perquisites as
directors of the Company than with the best interests of all stockholders.
Even though the Refining Business recently has produced no or relatively little
operating profit, it does generate the bulk of the Company's revenues and, we
believe, also accounts for most of the Company's corporate overhead expense.
If the Company's structure were rationalized by divesting the Refining
Business, the result would be a leaner, more efficient Company focused on the
core oil and gas exploration and production business, which would require a
significantly smaller corporate infrastructure. That would benefit
stockholders, but it would mean that the incumbent directors' fiefdom would
shrink and their current levels of benefits would be even harder to justify.
Similarly, if the entire Company were sold, incumbent directors might lose
their positions and benefits.

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While the value of stockholders' investments has languished,
the levels of cash compensation (salary, bonus and incentives) and non-cash
benefits given to the Company's directors and senior management have increased.
According to the Company's Proxy Statement or its 1995 Annual Meeting of
Stockholders (the "1995 Company Proxy Statement"), at the end of 1994 the
Company gave significant salary increases to some of its executive officers,
awarded bonuses to its four most highly compensated officers equal to 100% of
their salaries for the year and also awarded other executive officers large
bonuses.

The Board admits in the 1995 Company Proxy Statement that its
judgments concerning 1994 salary increases and bonuses did not reflect any
"formal measures" or "specific weightings" of "performance factors," but
instead were based on the Board's subjective "qualitative" assessments. In our
opinion, the Board took that approach because, assessed objectively and
quantitatively in terms of "performance factors" such as level of improvement
in the trading prices of the Common Stock, no raises or bonuses could be
justified. We believe that the Board was intent on giving hefty raises and
bonuses to management regardless of whether or not they were earned under any
reasonable objective test.

We do not want you to think, however, that the incumbent
directors only take care of senior officers. Since December 1994, the Board
has adopted special retirement, deferred compensation and stock option plans
for the seven of the Company's eight directors who are not officers of the
Company. A summary of each of those plans is contained in Appendix III
attached to this Consent Solicitation Statement. We think you will agree with
us that the terms of those plans would be extremely generous even for directors
of a company whose stock prices have consistently increased. We believe that
for your Company, whose stock performance has been lackluster at best, the
benefits enjoyed by directors are totally out of line.

It appears to the members of the Committee that the only group
whose economic welfare the Board has ignored is the Company's stockholders.
Directors and officers may be profiting from the Company, but we believe that
stockholders certainly are not.

The Board also has taken several actions which the Committee
believes may limit rights of stockholders and may entrench and further enrich
management. The actions include the following:

o The extension, on December 15, 1995, of the term of
the Company's "poison pill plan," which may deter or
discourage tender offers or other transactions which
offer immediate value to stockholders.

o The approval or continuation of "golden parachute"
severance arrangements for certain of the Company's
officers, providing for

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termination payments if the officer's employment is
terminated following a "change in control," which is
defined to include the election of directors not
approved by the current Board, such as the
Committee's Nominees, the sale or merger of the
Company or the purchase by any person of 20% or more
of the Common Stock, even if such termination is for
negligence or neglect of duties.

o Based on our review of the credit agreements filed by
the Company as exhibits to its report on Form 10-K
for 1994, the approval of credit agreements with the
Company's banks that make a "change in control" of
the Company an event of default, with "change in
control" including, in one case, the election of
directors not approved by the incumbent Board.

o The adoption on September 27, 1995 of By-law
amendments that we believe seriously impair the
ability of stockholders to exercise ultimate control
over management and, therefore, the value of
stockholder investments.

As stated above (see "THE COMMITTEE'S PROPOSALS"), the 1995
Third Quarter 10-Q, filed with the Commission on November 14, 1995, revealed
that the incumbent Board had amended the Company's By-laws on September 27,
1995. The 1995 Third Quarter 10-Q did not contain any statement of the
specific text, purpose or intent of those amendments, and it was only through a
careful comparison of the form of the amended By-laws with those previously
known to the Committee to be in effect that we were able to ascertain the
changes that had been made and reach our own conclusion about their purpose and
effect.

Those changes included, but by no means were limited to, (i) a
new requirement of 60 or 90 days' prior notice in order for stockholders to
nominate directors or place matters on the agenda at an annual or special
meeting of stockholders and (ii) new requirements for and conditions upon
actions by stockholders by written consent. In the Committee's view, the
effect of those and other By-law changes made by the incumbent Board is to
increase the difficulty, time and expense of actions by stockholders, even if a
majority, to effectively exercise their rights as the Company's true owners
and, therefore, to increase the probability that incumbent management will hold
on to their positions and benefits. That, we believe, was precisely the
incumbent Board's intent in adopting the By-law amendments.

We think that on matters affecting fundamental rights of
stockholders, the Board should not amend the Company's By-laws without
stockholder involvement. At the very least, we believe, instead of burying the
By-law amendments in restated By-laws filed without explanation or
justification as an exhibit to a Form 10-Q, the Board should have

-11-
<PAGE> 13
notified stockholders that the amendments had been adopted and offered
stockholders a statement of their purpose and effects.

The Committee believes that the inescapable conclusion is that
Common Stock prices have declined or stagnated, and that the incumbent
directors have no plan or goal other than to remain in office and continue
policies which, it seems to us, have not been effective or in the best
interests of stockholders. It is our position that stockholders cannot afford
to wait any longer. We believe that now is the time to finally implement the
long-overdue changes that must be made in order to restore investor confidence
in the Company and increase stockholder value.

In our judgment, it is imperative that persons who are
committed to protecting and enhancing the investments of stockholders, and who
are sensitive to stockholder concerns, be elected to the Board. We believe
that replacement of the entire incumbent Board is the single most effective
action which can be taken to increase the value of stockholders' investments in
the Company.

The Committee Nominees are committed to providing a Board of
Directors that is responsive to stockholders and, if elected, they will work
diligently in an effort to maximize value for all stockholders.

THE COMMITTEE'S PROGRAM

The Committee Nominees are experienced and independent
businessmen who have no prior relationship with or allegiance to any members of
the Company's senior management. Each of the Committee Nominees has a
substantial background in business, finance or investing. Messrs. Galloway,
Stone and Thompson have, we think, an unsurpassed knowledge of the oil and gas
industry, and Mr. Galloway has a proven track record in turning around
underperforming companies within that industry. The Committee Nominees are
committed to taking appropriate steps to maximize values for all stockholders
as promptly as possible after their election.

Replacement of the incumbent Board with the Committee's
Nominees, therefore, will solve the most pressing immediate problem that we
perceive -- what we believe to be the lack of vigorous action on the part of
the existing Board to improve investment returns to stockholders.

The knowledge of the Committee Nominees concerning the Company
is not as complete as it would be if they were already Board members.
Accordingly, if elected, the Committee Nominees will conduct a detailed review
of the Company and its assets, corporate structure, capitalization, operations,
properties, policies and personnel in order to develop strategies to enhance
stockholder value.

-12-
<PAGE> 14
While we cannot now know the specifics of those strategies,
based on our current knowledge of the Company and its businesses, assets and
operations, we expect that the Committee Nominees, once elected, will:

o Develop a plan for the disposition of the Company's
Refining Business through a sale to one or more
buyers, a spin-off or some other means. We
anticipate that the Committee Nominees will also
proceed to dispose of other non-productive assets
that are unrelated to the core E & P Business. They
will engage in an in-depth analysis of the Company's
operations in an effort to identify opportunities for
reducing corporate overhead and general
administrative expenses and strengthening and
improving the core E & P Business. Our nominees will
thoroughly review the Company's management and make
such changes as they conclude are in the best
interests of stockholders.

o Remove devices contributing to management
entrenchment. The Committee is committed to
stockholder democracy. Stockholders, as the true
owners of the Company, should be able to freely elect
and change the individuals serving on the Board,
without impediments designed to entrench incumbent
directors, and should also be able to decide for
themselves whether to accept or reject third-party
bids for the Company. If elected, the Committee
Nominees intend to repeal any and all impediments to
the stockholders' exercise of those rights.
Particularly, they will abolish devices such as the
Company's "poison pill" and the amendments to the
By-laws adopted by the incumbent Board which impair
stockholder democracy.

o Reduce or refinance high-cost debt. The Committee
believes that the Company is burdened with relatively
high-cost debt. If the Committee Nominees conclude,
after their election to the Board, to pursue a sale
of Refining Business or other assets, we believe that
in the existing interest rate and investment
environment and given other currently prevailing
conditions, reduction of the high-cost debt would be
a profitable use of all or part of the proceeds. Of
course, the Committee's Nominees also will consider
the feasibility of refinancing all or part of the
Company's outstanding debt in order to reduce debt
service costs.

The Committee Nominees will be flexible in pursuing the goal
of maximizing stockholder value. They are prepared to tailor the steps
outlined above to the extent they believe desirable to better suit the
Company's situation, and will fully evaluate alternatives to those steps, such
as a sale of the entire Company. They will, of course, be open to the views
and suggestions of stockholders.

-13-
<PAGE> 15
The Committee has not had discussions with potential acquirors
of the Refining Business, any of the Company's other assets or the Company as a
whole. Of course, there can be no assurance that, if elected, the Committee
Nominees will be able to accomplish the disposition of the Refining Business or
other assets, or as to the timing of or amount of proceeds from any such
disposition which may be arranged. Moreover, while we think that a disposition
of the Refining Business, and the use of all or part of any sale proceeds to
reduce debt or the other steps to be considered will have a favorable impact on
stockholder value, the trading prices of the Common Stock are, of course,
influenced by many factors and, therefore, it is impossible to say with
certainty that prices will increase or to predict the amount of any such
increase that might occur. We think, though, that vigorous and concentrated
efforts to enhance the value of your investments in the Company should be made
and, in fact, are long overdue.

Except as described above, the Committee has no present plans
or proposals which relate to or would result in an extraordinary corporate
transaction, such as a merger, reorganization, liquidation, relocation of
operations or sale or transfer of assets involving the Company or any of its
subsidiaries, or any material changes in the Company's business, corporate
structure or policies; however, as stated above the Committee intends to
consider all of these alternatives.

CONSENT PROCEDURE

Section 228 of the Delaware Corporation Law states that,
unless otherwise provided in the certificate of incorporation of a Delaware
corporation, any action that is required to be or may be taken at any annual or
special meeting of stockholders of that corporation may be taken without a
meeting, without prior notice and without a vote, if a consent or consents in
writing, setting forth the action so taken, are signed by the holders of
outstanding stock having not less than the minimum number of votes that would
be necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted, and those consents are
delivered to the corporation by delivery to its registered office in Delaware,
its principal place of business or an officer or agent of the corporation
having custody of the books in which proceedings of meetings of stockholders
are recorded. The Company's certificate of incorporation does not prohibit
stockholder action by written consent.

Section 213(b) of the Delaware Corporation Law provides that
if no record date has been fixed by the board of directors, the record date for
determining stockholders entitled to consent to corporate action in writing
without a meeting, when no prior action by the board of directors is required,
will be the first date on which a signed written consent setting forth the
action taken or proposed to be taken is delivered to the corporation by
delivery to its registered office in Delaware, its principal place of business
or an officer or agent of the corporation having custody of the books in which
proceedings of meetings of the stockholders are recorded. Notwithstanding the
foregoing, on September 27, 1995, the

-14-
<PAGE> 16
Board, without stockholder involvement, amended its By-laws to provide that a
stockholder seeking to have the stockholders of the Company authorize or take
corporate action by written consent is required to request the Board to fix a
record date. The Board is required to promptly, but in all events within 10
days after the date on which the request is received, adopt a resolution fixing
the record date for the solicitation (which may not be before nor more than 15
days after the date of the resolution). If the Board fails to set a record
date on a timely basis, a stockholder may fix the record date by the delivery
of a signed consent to the Company. Pursuant to the foregoing, __________
199__ has been fixed as the record date (the "Record Date").

If the Proposals are adopted pursuant to the consent
procedure, prompt notice must be given by the Company pursuant to Section
228(d) of the Delaware Corporation Law to stockholders who have not executed
consents.

Effectiveness and Revocation of Consents

The Committee's proposals will become effective when properly
completed, unrevoked consents are signed by the holders of record as of the
Record Date of a majority of the voting power of the then outstanding Common
Stock and such consents are delivered to the Company, provided that the
requisite consents are so delivered within 60 days of the date of the earliest
dated consent so delivered to the Company.

An executed Consent Card may be revoked at any time by
marking, dating, signing and delivering a written revocation before the time
that the action authorized by the executed Consent Card becomes effective. A
revocation may be in any written form validly signed by the record holder as
long as it clearly states that the consent previously given is no longer
effective. The delivery of a subsequently dated Consent Card which is properly
completed will constitute a revocation of any earlier consent. The revocation
may be delivered either to the Committee, in care of Morrow & Co., Inc., 909
Third Avenue, New York, New York 10022, or to the Company at 8700 Tesoro Drive,
San Antonio, Texas 78217 or any other address provided by the Company.
Although a revocation is effective if delivered to the Company, the Committee
requests that either the original or photostatic copies of all revocations of
consents be mailed or delivered to the Committee as set forth above, so that
the Committee will be aware of all revocations and can more accurately
determine if and when the requisite consents to the actions described herein
have been received.

Consents Required

According to the Company, there were _____________ shares of
Common Stock outstanding on the Record Date. Each share of Common Stock
entitles the Record-Date holder to one vote on the Committee's proposals.
Accordingly, written consents by Record-Date holders of approximately
________________ shares of Common Stock will be required to adopt and approve
each of the Committee's proposals.

-15-
<PAGE> 17
As of the Record Date, the Committee's members and their
affiliates and associates owned of record ____________________ shares of Common
Stock, constituting approximately _____% of the Common Stock believed to be
outstanding as of the Record Date, and expect to execute consents to all of the
actions for which consents are being solicited by the Committee with respect to
all such shares. As a result, in addition to the consents of the Committee's
members, the unrevoked consents of other Record-Date stockholders owning
approximately _____% of the outstanding shares of Common Stock on the Record
Date are required to adopt the proposals to which this solicitation relates.

Solicitation of Consents

Consents will be solicited by mail, telephone, telegraph,
telex, facsimile transmission, electronic mail and in person. Solicitations of
consents will be made by all or some of the Committee's members.

In addition, the Committee has retained Morrow & Co., Inc. to
assist in the solicitation and has executed an engagement letter with Morrow &
Co., Inc. providing for the payment of a fee of $150,000 plus reimbursement of
expenses. The engagement letter provides Morrow & Co., Inc. with indemnity
from certain liabilities including liabilities arising under Federal securities
laws. It is anticipated that approximately 50 employees of Morrow & Co., Inc.
will be involved in soliciting the consents of stockholders in this consent
solicitation.

Brokers, custodians, nominees and fiduciaries will be
requested to forward solicitation material to beneficial owners of the Common
Stock. The Committee will reimburse brokers, custodians, nominees and
fiduciaries for their reasonable expenses for sending solicitation material to
the beneficial owners of Common Stock.

Subject to the following two paragraphs, the cost of
solicitation will be borne by the members of the Committee in equal
proportions. Total expenditures for the solicitation, including fees for
attorneys, accountants, financial advisers, solicitors, advertising, printing,
transportation, litigation and other costs incidental to the solicitation are
estimated to be approximately $______________. The total amount of such
expenditures made to date is estimated to be approximately $________________.

Under an agreement between Mr. Washburn and Whelan, Mr.
Washburn will be entitled to receive a portion of the net profits, if any, from
the exercise and sale of 200,000 shares of Common Stock underlying certain
options held by Whelan if Mr. Washburn is not otherwise reimbursed for expenses
incurred in connection with this consent solicitation upon its termination.
The amount payable to Mr. Washburn will be equal to the lesser of (i) 30% of
such net profits and (ii) the aggregate amount of such expenses funded by Mr.
Washburn as to which no reimbursement is received.

The Committee will seek reimbursement of the costs of this
solicitation from the Company to the extent legally permissible. The Committee
does not intend that the question of the Company's reimbursement of
solicitation expenses will be submitted to a vote of stockholders unless such
submission is required by law.

-16-
<PAGE> 18
Special Instructions

If you were a record holder as of the close of business on the
Record Date, you may elect to consent to, withhold consent to or abstain with
respect to each of the Committee's proposals by marking the "CONSENTS", "DOES
NOT CONSENT" or "ABSTAINS" box, as applicable, underneath each such proposal on
the accompanying white Consent Card and signing, dating and returning it
promptly in the enclosed postage-paid envelope.

IF THE STOCKHOLDER WHO HAS EXECUTED AND RETURNED THE CONSENT
CARD HAS FAILED TO CHECK A BOX MARKED "CONSENTS", "DOES NOT CONSENT" OR
"ABSTAINS" FOR ANY OR ALL OF THE PROPOSALS, SUCH STOCKHOLDER WILL BE DEEMED TO
HAVE CONSENTED TO SUCH PROPOSAL OR PROPOSALS.

THE COMMITTEE RECOMMENDS THAT YOU CONSENT TO EACH OF THE
PROPOSALS. YOUR CONSENT IS IMPORTANT. PLEASE MARK, SIGN AND DATE THE ENCLOSED
WHITE CONSENT CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
PROMPTLY. FAILURE TO RETURN YOUR CONSENT WILL HAVE THE SAME EFFECT AS VOTING
AGAINST THE PROPOSALS.

If your shares are held in the name of a brokerage firm, bank
nominee or other institution, only it can execute a consent with respect to
your shares and only upon receipt of specific instructions from you.
Accordingly, you should contact the person responsible for your account and
give instructions for the white Consent Card to be signed representing your
shares. The Committee urges you to confirm in writing your instructions to the
person responsible for your account and provide a copy of those instructions to
the Committee in care of Morrow & Co., Inc., 909 Third Avenue, New York, New
York 10022, so that the Committee will be aware of all instructions given and
can attempt to ensure that such instructions are followed.

BACKGROUND

Each of Messrs. Flannery, Stone and Washburn and Dr. Kaufman
has been a beneficial owner of Common Stock for at least four years, although
the number of shares beneficially owned by each has fluctuated. Those members
of the Committee invested in the Company because, at the time of their
respective investments, they saw fundamental

-17-
<PAGE> 19
values which they expected would eventually be reflected through increases in
stock prices. As already noted, however, the Committee members have lost
confidence in the ability of the incumbent Board to realize those values.

During 1992, when the Company was experiencing particularly
severe financial difficulties, the level of concern of Mr. Flannery and
Dr. Kaufman about their investments in the Company became acute. On October 30,
1992, Mr. Flannery and Dr. Kaufman, together with certain other stockholders of
the Company, including Fraydan Manocherian, filed a statement on Schedule 13D
reporting, among other things, that the persons signing that Schedule 13D (the
"United Partners Reporting Persons") had reached, on October 26, 1992, "an
understanding to act together under the name "United Partners" in order to
attempt to protect and enhance the value of their shares of Common Stock," and
had delivered a letter to the Company requesting that there be added to the
Company's Board of Directors two directors from a list of five designees, who
included Messrs. Flannery and Stone and Dr. Kaufman. On April 2, 1993, an
amendment to the Schedule 13D was filed which stated that as a result of the
Company's failure to respond to the October 26, 1992 letter, the United Partners
Reporting Persons were reviewing the options available, including engaging in a
proxy contest. No agreement or understanding between Mr. Flannery or Dr.
Kaufman and the other United Partners Filing Persons was subsequently reached
regarding a proxy contest or the pursuit of any other option with regard to the
Company. In February, 1994, each of Mr. Flannery and Dr. Kaufman formally
notified Mr. Manocherian of their withdrawal as participants in the Schedule 13D
filing group and the United Partners filed an amendment to the Schedule 13D
reporting that, as a consequence of Dr. Kaufman's withdrawal, the other
participants had ceased to be the beneficial owners of 5% or more of the Common
Stock.

In the weeks before the scheduled 1994 Annual Meeting of the
Company's stockholders, several developments affecting the Company resulted in
a decline in Common Stock prices, including a restructuring by the Company of
its outstanding debt and preferred stock on terms which Mr. Flannery,
Mr. Washburn and Dr. Kaufman independently concluded were contrary to the best
interest of stockholders. At the Company's 1994 Annual Meeting held on May 20,
1994, a representative Messrs. Flannery and Washburn and Dr. Kaufman nominated
from the floor an alternative slate of directors consisting of Messrs. Baker,
Flannery and Washburn, Dr. Kaufman and another individual who is not a member of
the Committee or a Committee Nominee, but were unsuccessful in seating any of
those nominees.

Events affecting the Company in early 1995, including the sale
of a significant part of the Company's rights in the Bob West natural gas
field, led Dr. Kaufman and Mr. Flannery to conclude that another effort to
unseat the then-incumbent Board should be attempted at the forthcoming 1995
Annual Meeting. During the course of several weeks before the scheduled date
for the 1995 Annual Meeting, Mr. Flannery succeeded in obtaining revocable
proxies for the meeting from several other stockholders.

-18-
<PAGE> 20
At the Company's Annual Meeting held on May 4, 1995, a
representative of Mr. Flannery, Dr. Kaufman and the stockholders whose proxies
were held by Mr. Flannery nominated from the floor a dissident slate of six
directors which included Mr. Baker, Mr. Flannery, Dr. Kaufman, and three other
individuals who are not members of the Committee or Committee Nominees.
Following the closing of the polls, the inspectors of election determined that
they could not make a report on the vote at that time because of the number of
ballots and proxies submitted by stockholders at the meeting. On May 15, 1995,
the inspectors of election delivered a report showing that all of the
Board-approved nominees had been elected and all of the dissident nominees had
been defeated.

As a result of what he perceived to be irregularities in the
process by which votes were taken, tallied, inspected and reported,
Mr. Flannery, through Whelan, the record holder of the shares of Common Stock
then beneficially owned by Mr. Flannery, formally challenged the reported
results of the election. On June 8, 1995, the inspectors of election denied
Whelan's challenges, and on June 9, 1995 issued a second report confirming the
results of the first report. That second report indicated that with respect
to three directorships, the average difference in votes between the three
Board-approved nominees receiving the fewest votes and the three alternative
nominees with the highest votes was 1,670,522 votes, or only 7.48% of the
22,303,905 shares present at the meeting, in person or by proxy. In other
words, a change in vote by holders of only 841,345 shares (or 3.7% of the
shares present at the Annual Meeting) would have elected three of the
alternative nominees. In light of the advantages typically enjoyed by
incumbent management in annual elections of directors and the fact that the
dissident nominees were nominated from the floor without a formal solicitation
of proxies from stockholders generally, the Committee believes those results
are a strong indication of the breadth and depth of opposition to the existing
Board.

On June 23, 1995, Whelan filed with the Court of Chancery of
the State of Delaware (New Castle County) an application for review of the
election of directors held at the Annual Meeting held in 1995, and the Court
eventually issued a ruling upholding the results of the election as reported by
the inspectors of election.

The activities of Mr. Flannery and Dr. Kaufman relating to the
1995 Annual Meeting were conducted with the guidance of legal counsel, and each
believes that his activities were in compliance with all applicable laws.

Following the decision of the Delaware Chancery Court
upholding the results of the 1995 election, Mr. Flannery and Dr. Kaufman
continued to strongly believe that the Company's management was seriously
deficient. As a result of his role at the Annual Meetings held in 1994 and
1995, Mr. Flannery was periodically contacted by dissatisfied stockholders
voicing their complaints against incumbent management and, in some cases,
encouraging him to take further steps to attempt to change the direction of the
Company's management; however, as a result of the time, effort and expense
which Mr. Flannery knew would be required in order to mount another effort to
challenge the Board, he was reluctant

-19-
<PAGE> 21
to do so. In August 1995, however, the Texas Supreme Court rendered a decision
in the litigation between the Company the Tennessee Gas Pipeline Company (which
is more fully described in the 1995 Company Proxy Statement) that Mr. Flannery
considered unfavorable to the Company. In September 1995, the Company
announced that it had agreed to purchase Coastwide Energy Services, Inc. on
terms which Mr. Flannery believed to be dilutive to the Company's existing
stockholders. Furthermore, the closing prices of the Common Stock on the NYSE
had been declining since the election loss by the dissidents at the 1995 Annual
Meeting, reaching a low for the year of $7-3/8 on October 5, 1995. As the
result of these events, as well as the continued urgings of other stockholders,
Mr. Flannery began in September 1995 to more seriously consider various options
for influencing or replacing the incumbent Board. His deliberations included
discussions with Messrs. Baker, Stone and Washburn and Dr. Kaufman.

Those discussions were informal, general and exploratory, and
no agreement or understanding was reached until December 14, 1995, at which
time Messrs. Baker, Flannery, Stone and Washburn and Dr. Kaufman orally agreed
to form the Committee in order to pursue removal and replacement of the
Company's entire Board of Directors. In view of the expense and intense effort
associated with a consent solicitation in opposition to incumbent management,
each Committee member's decision was made after lengthy deliberation and with
reluctance. In the final analysis, we concluded that there was no other
choice. After discussions with Committee members, Mr. Galloway and
Mr. Thompson agreed to become Committee Nominees.

On December 26, 1995, the Committee filed with the Commission,
within the period provided by law, a Statement on Schedule 13D disclosing
formation of the Committee and its intention to commence this consent
solicitation.

Over the past several months, each of Mr. Baker and
Mr. Flannery has at various times discussed with Ardsley Advisory Partners
("Ardsley"), the Company's largest stockholder, the possibility that Ardsley
might sell options to purchase some of the shares of Common Stock held by
Ardsley. On November 16, 1995, Whelan purchased from Ardsley options to
acquire up to 400,000 of the shares of Common Stock held by Ardsley. As part
of the oral agreement reached on December 14, 1995, Whelan sold to each of
Mr. Baker and Mr. Stone corresponding options written by Whelan to acquire
100,000 of the shares of Common Stock covered by the options written by
Ardsley.

By letter dated December __, 1995, _____________, as the
record holder of shares of Common Stock beneficially owned by Mr. Flannery and
on his behalf, requested that the Company provide a list of stockholders to
enable the Committee to undertake this Consent Solicitation and for other valid
purposes.

On December 26, 1995, Committee commenced a lawsuit in the
United States District Court for the Western District of Texas, San Antonio
Division, against the Company and its Chief Executive, Bruce A. Smith. The
action seeks, among other relief, a

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<PAGE> 22
judgment (i) declaring that the Company's "poison pill" plan does not apply to
the efforts of the Committee to solicit consents from other stockholders of the
Company; (ii) declaring that the Company's By-laws permit removal of directors
through stockholder action by written consent; (iii) enjoining the Company from
delaying or otherwise unlawfully interfering with the efforts of the Committee
to solicit consents from other stockholders; and (iv) declaring that the
actions and disclosures of the Committee with regard to their effort to solicit
consents are and have been in compliance with the Securities and Exchange Act
of 1934, as amended.

ADDITIONAL INFORMATION

The Company's principal executive offices are at 8700 Tesoro
Drive, San Antonio, Texas 78217, and its telephone number at that address is
(210) 828-8484.

Certain information regarding ownership of voting securities
of the Company by certain members of the Company's management and principal
stockholders other than the Committee is contained in Appendix III attached to
this Consent Solicitation Statement.

The information concerning the Company contained in this
Consent Solicitation Statement has been taken from or based upon publicly
available reports, proxy statements and other documents on file with the
Commission and other public sources. Such reports, proxy statements and other
documents on file with the Commission may be inspected without charge at public
reference facilities maintained by the Commission office at 450 Fifth Street,
N.W., Washington, D.C. 20549, and also should be available for inspection at
the regional offices of the Commission located in 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New
York, New York 10048. Copies may be obtained from the Commission on payment of
the Commission's prescribed rates through the Commission's Public Reference
Section by writing to its principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549. Such material should also be available for inspection
at the New York Stock Exchange Inc., 20 Broad Street, New York, New York 10005.

YOUR VOTE IS IMPORTANT. PLEASE SIGN, DATE AND MAIL THE
ENCLOSED WHITE CONSENT CARD PROMPTLY IN THE POSTAGE-PAID ENVELOPE PROVIDED.

Dated: ____________, 1996

THE STOCKHOLDERS' COMMITTEE
FOR NEW MANAGEMENT OF
TESORO PETROLEUM
CORPORATION

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<PAGE> 23
APPENDIX I

This Appendix I sets forth certain information regarding each
Committee member and each Committee Nominee.

A. The following table sets forth with respect to each such
person such person's (i) name and business address, (ii) present principal
occupation or employment and the name, principal business and address of any
corporation or other organization in which such employment is carried on.

<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
--------------------
NAME AND BUSINESS ADDRESS OR EMPLOYMENT
------------------------- -------------
<S> <C>
Kevin S. Flannery President and director of Whelan Management Corp.
P.O. Box 1970 which is engaged in investment advisory services and
8 Holley Street of Whelan Securities, Inc., which is engaged in
Lakeville, CT 06039 broker-dealer services

George F. Baker Partner of Baker Nye, L.P. which is engaged in money
767 Fifth Avenue, Suite 2800 management and investment advisory services
New York, New York 10153

Gale L. Galloway Independent oil and gas operator
400 West 15th Street, Suite 808
Austin, TX 78701

Alan Kaufman Neurosurgeon
5500 Hohman Avenue, Suite 2A
Hammond, IN 46320

James H. Stone Chairman of the Board of Stone Energy Corporation,
909 Poydras Street, Suite 2650 which is engaged in oil and gas production
New Orleans, Louisiana 70112

Robert S. Washburn Private investor
c/o Whelan Management Corp.
P.O. Box 1970
8 Holley Street
Lakeville, CT 06039

Douglas Thompson Chairman of Digicon, Inc., which is engaged in
3701 Kirby Drive worldwide geophysical services
Houston, TX 77098
</TABLE>

I-1
<PAGE> 24
B. The following table and the notes thereto set forth the
aggregate number of shares of Common Stock beneficially owned, directly or
indirectly, as of the date of this Consent Solicitation Statement by each of
the Committee's members and their respective "associates," individually and as
a group. As of such date, neither Mr. Galloway nor Mr. Thompson beneficially
owned any shares of Common Stock. Unless otherwise indicated, each person has
sole voting and investment power with respect to the shares of Common Stock
listed.

<TABLE>
<CAPTION>
Percentage of
Issued and
Shares of Outstanding
Name Common Stock (1) Common Stock (1)
- ---- ---------------- ----------------
<S> <C> <C>
Kevin S. Flannery 366,972 (2) 1.5%

George F. Baker 110,000 (3) 0.4%

Alan Kaufman 601,500 (4) 2.4%

James H. Stone 156,000 (5) 0.6%

Robert S. Washburn 233,336 (6) 0.9%
-------- -----

All Committee Members as a Group 1,467,808 (1-6) 5.9%
- ----------------- ========= =====
</TABLE>

(1) For purposes of this table, the number of shares which a person or
group of persons is deemed to "beneficially own" includes any shares
that such person has the right to acquire within 60 days. For
purposes of computing the percentage of outstanding shares held by
each person or group of persons named above on a given date, any
security that such person or persons has the right to acquire within
60 days is deemed to be outstanding, but is not deemed to be
outstanding for the purpose of computing the percentage ownership of
any other person. Such computations are based on information
concerning the number of shares of Common Stock issued and outstanding
as of October 31, 1995, as reported by the Company in its Form 10-Q
report for the quarter ended September 30, 1995.

(2) The shares shown include (ii) 140,615 shares held by Whelan
Management, Inc. ("Whelan"), of which Mr. Flannery is the principal
executive officer and a 75% common stockholder and 200,000 shares
which Whelan has the right to acquire through the exercise of stock
options which were exercisable on December 26, 1995, or within 60 days
thereafter and (ii) (A) 18,357 shares held by the Sean Kenrick
Flannery Trust of which Mr. Flannery is the investment officer and (B)
8,000 shares which such trust has the right to acquire through the
exercise of stock options which were exercisable on December 26, 1995,
or within 60 days thereafter. The shares shown do not include 2,500
shares of Common Stock owned by Mr. Flannery's wife

I-2
<PAGE> 25
as to which Mr. Flannery disclaims beneficial ownership and shares
that Whelan Securities, Inc., in the ordinary course of its business
as a broker-dealer, has purchased and sold for the accounts of its
customers as to which Mr. Flannery also disclaims beneficial
ownership. Mr. Flannery has advised the Committee that all such
customer accounts are non-discretionary and that neither Whelan nor
Whelan Securities, Inc. has any control over buying, selling or voting
shares of Common Stock in such accounts. As a result, Whelan, Whelan
Securities, Inc. or its clearing agent may be the record owner of
certain of such shares of Common Stock over which it does not exercise
beneficial ownership.

(3) The shares shown include 100,000 shares which Mr. Baker has the right
to acquire through the exercise of stock options which were
exercisable on December 26, 1995, or within 60 days thereafter.

(4) The shares shown include 581,500 shares owned by Dr. Kaufman either
directly or through an individual retirement account and 20,000 shares
held by the Kaufman Children's Trust of which Dr. Kaufman is the sole
trustee. Dr. Kaufman disclaims beneficial ownership of the shares in
such trust. The shares shown do not include 10,500 shares of Common
Stock owned by Dr. Kaufman's wife as to which Dr. Kaufman disclaims
beneficial ownership.

(5) The shares shown include 110,000 shares which Mr. Stone has the right
to acquire through the exercise of stock options which were
exercisable on December 26, 1995, or within 60 days thereafter.

(6) The shares shown include 39,545 shares held by the Robert S. and
Suzanne P. Washburn Revocable Trust of which Mr. Washburn is a
co-trustee and 193,791 shares held by the Robert S. Washburn Money
Purchase Pension and Profit Sharing Keogh Plan Trust of which Mr.
Washburn is the sole trustee. Mr. Washburn exercises shared voting
and investment power with respect to the Common Stock held by the
Robert S. and Suzanne P. Washburn Revocable Trust.

C. Except as otherwise described herein, no member of the
Committee, Committee Nominee or "associate" of any of the foregoing owns
securities of the Company of record but not beneficially.

D. The following table sets forth shares of Common Stock and
Preferred Stock of the Company purchased or sold within the past two years by
each of the members of the Committee, the Committee Nominees, or Whelan or
either of the two trusts of which Mr. Washburn is a trustee referred to in
note (6) to the table under paragraph B above, the dates on which they were
purchased or sold and the amount purchased or sold on each such date. In the
tables below, the term "Preferred Stock" shall mean the Company's $2.16
Cumulative Convertible Preferred Stock which is no longer outstanding and
"Exchange Notes" shall mean the Company's 13% Exchange Notes due December 1,
2000.

I-3
<PAGE> 26
KEVIN S. FLANNERY

<TABLE>
<CAPTION> Principal
Purchase, Sale or Number of Shares of Number of Shares of Amount of
Date Exchange Common Stock Preferred Stock Exchange Notes
---- -------- ------------ --------------- --------------
<S> <C> <C> <C> <C>
01/20/94 SALE 4,700

01/20/94 SALE 9,000

01/20/94 PURCHASE 1,800

01/20/94 PURCHASE 1,000

02/11/94 EXCHANGE 4,900* (1,000)*

02/11/95 EXCHANGE 24,500* 5,000*

02/15/94 SALE 500

02/15/94 SALE 1,500

02/16/94 PURCHASE 500

02/16/94 PURCHASE 1,500

02/23/94 PURCHASE 1,000

02/24/94 SALE 10,000

02/25/95 EXCHANGE 9,800* 2,000*

03/23/94 SALE 10,000

08/30/94 DISTRIBUTION 215

08/30/94 DISTRIBUTION 375

08/30/94 DISTRIBUTION 44

09/14/94 PURCHASE 10,000

09/14/94 PURCHASE 60,000

05/08/95 SALE 10,000

09/01/95 SALE 7,644

09/08/95 SALE 14,515
</TABLE>

I-4

<PAGE> 27

<TABLE>
<CAPTION>
Purchase, Sale or Number of Shares of Number of Shares Principal Amount of
Date Exchange Common Stock of Preferred Stock Exchange Notes
---- -------- ------------ ------------------ --------------
<S> <C> <C> <C> <C>
10/12/95 SALE 10,000

10/12/95 SALE 25,000

10/16/95 SALE 8,000

12/19/95 SALE 10,000
</TABLE>

* Exchange of number of shares of Preferred Stock indicated for the number of
shares of Common Stock indicated.

I-5
<PAGE> 28
WHELAN

01/31/94 PURCHASE 200

01/31/94 PURCHASE 1,400

01/31/94 SALE 5,000

01/31/94 PURCHASE 3,800

01/31/94 PURCHASE 10,000

01/31/94 SALE 10,000

02/01/94 PURCHASE 2,500

02/01/94 PURCHASE 4,300

02/01/94 PURCHASE 10,000

02/01/94 PURCHASE 20,000

02/01/94 PURCHASE 1,000

02/01/94 SALE 2,000

02/02/94 PURCHASE 7,000

02/02/94 PURCHASE 14,900

02/02/94 PURCHASE 200

02/02/94 PURCHASE 700

02/02/94 PURCHASE 1,000

02/02/94 PURCHASE 1,000
</TABLE>

I-6

<PAGE> 29

02/02/94 SALE 2,000

02/03/94 PURCHASE 200

02/03/94 PURCHASE 1,600

02/03/94 PURCHASE 2,000

02/04/94 SALE 2,000

02/09/94 SALE 7,500

02/10/94 PURCHASE 500

02/10/94 PURCHASE 2,500

02/10/94 SALE 22,500

02/11/94 EXCHANGE 185,510* 39,900*

02/14/94 SALE 2,500

02/14/94 SALE 3,000

02/14/94 PURCHASE 20,000

02/16/94 PURCHASE 10,000

02/16/94 PURCHASE 3,000

02/16/94 PURCHASE 10,000

02/24/94 SALE 10,000

02/24/94 SALE 20,000

02/24/94 PURCHASE 10,000

03/03/94 PURCHASE 600

03/23/94 SALE 50

03/23/94 SALE 38,000

</TABLE>

I-7

<PAGE> 30
<TABLE>
<CAPTION>
Purchase, Sale or Number of Shares of Number of Shares Principal Amount of
Date Exchange Common Stock of Preferred Stock Exchange Notes
---- -------- ------------ ------------------ --------------
<S> <C> <C> <C> <C>
03/24/94 SALE 6,700

03/31/94 PURCHASE 2,000

04/06/94 PURCHASE 8,000

04/07/94 PURCHASE 10,000

04/07/94 PURCHASE 20,000

04/18/94 PURCHASE 9,000

04/19/94 PURCHASE 7,500

04/20/94 PURCHASE 1,200

04/27/94 PURCHASE 2,900

04/28/94 PURCHASE 10,000

05/05/94 PURCHASE 10,000

06/07/94 PURCHASE 20,000

06/28/94 PURCHASE 2,500

08/12/94 SALE 1,500

08/12/94 SALE 5,000

08/12/94 SALE 8,500

08/30/94 DISTRIBUTION 1,178

09/14/94 PURCHASE 135,000

11/16/94 SALE 10,000

11/16/94 SALE 25,000

11/18/94 SALE 6,118

12/01/94 PURCHASE 1,500

12/07/94 SALE 3,500

12/22/94 SALE 10,000
</TABLE>

I-8
<PAGE> 31
<TABLE>
<CAPTION>
Purchase, Sale or Number of Shares of Number of Shares Principal Amount of
Date Exchange Common Stock of Preferred Stock Exchange Notes
---- -------- ------------ ------------------ --------------
<S> <C> <C> <C> <C>
03/29/95 SALE 13,000

05/09/95 SALE 10,000

05/16/95 SALE 10,000

05/22/95 SALE 10,000

07/06/95 SALE 1,800

08/04/95 SALE 2,500

09/07/95 SALE 10,000

09/08/95 SALE 2,985

09/11/95 SALE 10,000

09/12/95 SALE 10,000

09/13/95 SALE 5,000

09/19/95 SALE 10,000

09/28/95 SALE 10,000

10/10/95 SALE 7,500

10/12/95 PURCHASE 15,000

10/12/95 PURCHASE 20,000

10/12/95 PURCHASE 26,000

10/13/95 PURCHASE 3,500

10/16/95 PURCHASE 7,500

10/16/95 PURCHASE 8,000

10/18/95 SALE 3,000

10/18/95 SALE 7,000

10/25/95 SALE 8,000

10/25/95 SALE 42,000

10/27/95 PURCHASE 900
</TABLE>

I-9
<PAGE> 32
<TABLE>
<CAPTION>
Purchase, Sale or Number of Shares of Number of Shares Principal Amount of
Date Exchange Common Stock of Preferred Stock Exchange Notes
---- -------- ------------ ------------------ --------------
<S> <C> <C> <C> <C>
10/27/95 PURCHASE 2,000

10/30/95 PURCHASE 45,000

11/15/95 PURCHASE 500

12/01/95 PURCHASE 1,000

12/07/95 SALE 7,500

12/08/95 SALE 10,500

12/11/95 SALE 13,000
</TABLE>

* Exchange of number of shares of Preferred Stock indicated for the number of
shares of Common Stock indicated.

I-10
<PAGE> 33
ROBERT S. WASHBURN (REVOCABLE TRUST ACCOUNT)

<TABLE>
<CAPTION>
Purchase, Sale or Number of Shares Number of Shares Principal Amount of
Date Exchange of Common Stock of Preferred Stock Exchange Notes
---- -------- --------------- ------------------ --------------
<S> <C> <C> <C> <C>
02/09/94 PURCHASE 17,000

02/10/94 PURCHASE 6,400

02/11/94 PURCHASE 5,000

02/11/94 PURCHASE 3,000

02/11/94 EXCHANGE 39,200* 8,000*

02/14/94 PURCHASE 1,000

02/25/94 PURCHASE 9,700

03/29/94 PURCHASE 5,000

03/30/94 PURCHASE 4,400

07/10/95 SALE 9,000

07/14/95 SALE 4,900

07/17/95 SALE 10,000

07/17/95 SALE 1,000

07/17/95 SALE 6,000

07/18/95 SALE 10,000

08/07/95 SALE 9,700

08/07/95 SALE 4,400

08/07/95 SALE 1,500
</TABLE>

* Exchange of number of shares of Preferred Stock indicated for the number of
shares of Common Stock indicated.

I-11
<PAGE> 34
ROBERT S. WASHBURN (PROFIT SHARING PLAN ACCOUNT)

Purchase, Sale or Number of Shares Number of Shares of Principal Amount of
Date Exchange of Common Stock Preferred Stock Exchange Notes
---- -------- ----------------- ------------------- ------------------
<S> <C> <C> <C> <C>
12/20/93 PURCHASE 400

12/30/93 SALE 5900

12/30/93 SALE 2100

01/03/94 PURCHASE 31,800

02/11/94 EXCHANGE 129,850* 26,500*

02/22/94 PURCHASE 20,000

03/29/94 PURCHASE 6,000

03/30/94 PURCHASE 21,500

03/30/94 PURCHASE 5,000

08/07/95 SALE 15,700

08/08/95 SALE 500

10/05/95 PURCHASE 10,000

10/06/95 PURCHASE 5000

10/18/95 SALE 15,000

12/04/95 SALE 3,100

12/07/95 SALE 1,900
</TABLE>

* Exchange of number of shares of Preferred Stock indicated for the number of
shares of Common Stock indicated.

I-12
<PAGE> 35
STONE (1)

<TABLE>
<CAPTION>
Purchase, Sale or Number of Shares Number of Shares of Principal Amount of
Date Exchange of Common Stock Preferred Stock Exchange Notes
---- -------- ----------------- ------------------- ------------------
<S> <C> <C> <C> <C>
05/26/94 PURCHASE 5,000

05/27/94 PURCHASE 2,500

05/31/94 PURCHASE 2,500

06/21/94 PURCHASE 10,000

08/01/95 PURCHASE 5,000

10/05/95 PURCHASE 5,000

12/16/95 PURCHASE 11,000 (2)
</TABLE>

(1) Mr. Stone purchased options to purchase 10,000 shares of Common Stock
on 12/1/95 and sold 300 puts to sell the Common Stock on 9/21/95.
(2) Through exercise of expiring options.

I-13
<PAGE> 36
E. All of the shares described above in paragraph D were
purchased with personal funds, working capital or margin borrowings extended by
broker-dealers in the regular course of business. As of the date of this
Consent Solicitation Statement none of the persons named in such paragraph have
any outstanding margin indebtedness with respect to any securities of the
Company.

F. No participant owns beneficially, directly or indirectly, any
securities of any parent or subsidiary of the Company.

G. Except as described in this Appendix or elsewhere in the
Consent Solicitation Statement,

(a) none of the members of the Committee or the Committee Nominees
is, or was within the past year, a party to any contract, arrangement or
understanding with any person with respect to any securities of the registrant,
including, but not limited to joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses
or profits, or the giving or withholding of proxies;

(b) none of the members of the Committee, the Committee Nominees
or any of their respective associates has had any transaction, or series of
similar transactions, since January 1, 1995, or any currently proposed
transaction, or series of similar transactions, to which the Company or any of
its subsidiaries was or is to be a party, in which the amount involved exceeds
$60,000 and in which any such participant had, or will have, a direct or
indirect material interest;

(c) none of the members of the Committee, the Committee Nominees
or any of their respective associates has any arrangement or understanding with
any person (i) with respect to any future employment by the Company or its
affiliates; or (ii) with respect to any future transactions to which the
Company or any of its affiliates will or may be a party;

(d) no person who is a party to an arrangement or understanding
pursuant to which a Committee Nominee is proposed to be elected, has any
substantial interest, direct or indirect, by security holdings or otherwise, in
any matter to be acted upon by the stockholders of the Company;

(e) there are no material proceedings to which any Committee
Nominee or any associate of any such Committee Nominee, is a party adverse to
the Company or any of its subsidiaries or has a material interest adverse to
the Company or any of its subsidiaries; and

(f) No Committee Nominee has been party to any of the following
events that occurred during the past five years and that are material to an
evaluation of the ability or integrity of any person nominated to become a
director of the Company:

I-14
<PAGE> 37
(1) A petition under the Federal bankruptcy laws or any
state insolvency law was filed by or against, or a
receiver, fiscal agent or similar officer was
appointed by a court for the business or property of
such person, or any partnership in which he was a
general partner at or within two years before the
time of such filing, or any corporation or business
association of which he was an executive officer at
or within two years before the time of such filing;

(2) Such person was convicted in a criminal proceeding or
is a named subject of a pending criminal proceeding
(excluding traffic violations and other minor
offenses);

(3) Such person was the subject of any order, judgment,
or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction,
permanently or temporarily enjoining him from, or
otherwise limiting, the following activities:

i) Acting as a futures commission merchant, introducing
broker, commodity trading advisor, commodity pool
operator, floor broker, leverage transaction
merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person
of any of the foregoing, or as an investment advisor,
underwriter, broker or dealer in securities, or as an
affiliated person, director or employee of any
investment company, bank, savings and loan
association or insurance company, or engaging in or
continuing any conduct or practice in connection with
such activity;

ii) Engaging in any type of business practice; or

iii) Engaging in any activity in connection with the
purchase or sale of any security or commodity or in
connection with any violation of Federal or State
securities laws or Federal commodities laws;

(4) Such person was the subject of any order, judgment or decree,
not subsequently reversed, suspended or vacated, of any
Federal or State authority barring, suspending or otherwise
limiting for more than 60 days the right of such person to
engage in any activity described in paragraph G.(f)(3)(i) of
this Appendix, or to be associated with persons engaged in any
such activity;

(5) Such person was found by a court of competent jurisdiction in
a civil action or by the Commission to have violated any
Federal or State securities law, and the judgment in such
civil action or finding by the Commission has not been
subsequently reversed, suspended, or vacated; or

I-15
<PAGE> 38
(6) Such person was found by a court of competent jurisdiction in
a civil action or by the Commodity Futures Trading Commission
to have violated any Federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures
Trading Commission has not been subsequently reversed,
suspended or vacated.

For purposes of the foregoing, the term "associate" has the
meaning set forth in Rule 14a-1 under the Exchange Act.

I-16
<PAGE> 39
APPENDIX II

This Appendix sets forth the text, in relevant part, of the
By-laws which are proposed by the Committee to be amended, as the Company's
public filings indicate such By-laws were in effect on November 14, 1995 and as
they will appear after adoption of the Committee's proposed By-law Amendments.
Language proposed to be deleted is marked in brackets. Language proposed to be
added is in italics. The Committee is not aware of any amendments to the
By-laws since November 14, 1995. To the extent any such By-law amendments have
been adopted subsequently, such intervening amendments shall be repealed by the
adoption of the following amendments if inconsistent therewith.

Section 2.1 Number, Election and Term of Office. The number of
directors which shall constitute the whole Board of Directors shall be five,
unless and until changed by resolution of the Board of Directors [fixed from
time to time by resolution of the Board of Directors but shall not be less than
three]. The directors shall be elected at the annual meeting of stockholders,
except as provided in Section 2.2, and each director elected at an annual
meeting of stockholders, and directors elected or appointed in the interim to
fill vacancies and newly created directorships shall hold office until the next
annual meeting of stockholders and [or] until their successors are duly elected
and qualified or until their earlier resignation or removal. A director need
not be a stockholder.

Section 2.2 Vacancies and Additional Directorships. Any vacancy or
vacancies created by the death or resignation of a director may be filled only
by the majority vote of the remaining directors, though less than a quorum, or
by the sole remaining director. Any vacancy or vacancies created by the
removal of one or more directors may be filled only by action of the holders of
shares representing a majority of the shares of Common Stock outstanding and
entitled to vote and such action may be taken at the same annual or special
meeting, or by means of the same written consent or consents, of stockholders
at or by which such director or directors were removed, or may be taken at a
different meeting or by a separate written consent or consents. Newly created
directorships resulting from any increase in the authorized number of directors
shall be filled only by a majority of the directors then in office, though less
than a quorum, or by the sole remaining director, and such newly created
directorships may not be filled by the stockholders unless otherwise required
by law. [Unless otherwise provided in the Certificate of Incorporation or
these By-laws: (1) vacancies and newly created directorships resulting from
any increase in the authorized number of directors elected by all of the
stockholders having the right to vote as a single class may be filled by a
majority of the directors then in office, although less than a quorum; (2)
whenever the holders of any class or classes of stock or series thereof are
entitled to elect one or more directors by the Certificate of Incorporation,
vacancies and newly created directorships of such class or classes or series
may be filled by a majority of the directors elected by such class or classes
or series thereof then in office.]

Section 2.7 Removal of Directors. At any annual meeting of
stockholders, at any special meeting of the stockholders duly called for the
purpose of removing a director or

II-1
<PAGE> 40
directors as provided in these By-laws, or by action of the stockholders by
written consent in accordance with the laws of the State of Delaware and the
Certificate of Incorporation, any director or directors may, by the affirmative
vote or written consent, as the case may be, of the holders of shares
representing a majority of [the votes of all] the shares of Common Stock
[stock] outstanding and entitled to vote [for the election of directors], be
removed from office, either for or without cause. Such vacancy [shall] may
only be filled by the stockholders [directors] as provided in Section 2.2.

II-2
<PAGE> 41
APPENDIX III

NON-EMPLOYEE DIRECTOR
COMPENSATION AND BENEFITS

The information set forth in this Appendix has been taken from
or is based upon the Company's proxy statement for its 1995 Annual Meeting of
Stockholders, which is on file with the Commission.

Each member of the Board who is not an officer of the Company
receives a base retainer fee of $18,000 per year, and an additional $2,000 for
each meeting of the Board of Directors or any committee thereof attended in
person, and $1,000 for each telephone meeting, including committee meetings
held on the same day as a meeting of the Board. The Chairman of the Board
receives $100,000 per year for his services and the Vice Chairman receives
$100,000 per year for his services if the Chairman of the Board is unable to
serve. In addition, the Chairman of the Audit Committee and the Chairman of
the Compensation Committee each receive $5,000 per year for their service in
such positions. Non-employee directors also receive various insurance
benefits.

In December 1994, the Board of Directors adopted the
Non-Employee Director Retirement Plan (the "Director Retirement Plan") which
provides that any eligible non-employee director who elects to participate in
the Director Retirement Plan and who has served on the Board of Directors for
at least three full years (excluding service while a full-time employee of the
Company) shall be entitled to a retirement payment beginning the later of the
director's sixty-fifth birthday or such later date that the individual's
service as a director ends. The Director Retirement Plan provides that the
Company shall pay to such director annually a sum (the "Retirement Amount")
equal to the base annual retainer fee paid to the director at the time such
director ends service as a director to the Company. Such payments are to be
made for a period of time equal to the aggregate length of time (the "Benefit
Period") such director served on the Board of Directors (excluding any period
during which the director was a full-time employee of the Company). The
Company's obligation to pay the Retirement Amount terminates upon the death of
the director; however, in the event of death of a director after age 65, the
Company will pay an amount equal to 50 percent of the Retirement Amount to the
director's spouse for the shorter of the remaining term of the Benefit Period
or until the date of death of such spouse. In the event of death of a director
during a year, the amount paid the surviving spouse is prorated based upon the
director's date of death. If a director does not have a spouse at the time of
his death, no further benefits will be paid.

In addition to the retirement benefit provided above, if a
non-employee electing director was the Chairman of the Board of Directors or
the Chairman of any committee of the Company's Board of Directors at the time
the director's service ends, the Company will pay such director a one-time
payment equal to the fee paid during the prior

III-1
<PAGE> 42
calendar year by the Company for the director's service as Chairman of the
Board of Directors and/or Chairman of any committee of the Board of Directors.
In the event of death of a director while serving as Chairman of the Board of
Directors or Chairman of any committee of the Board of Directors, this payment
will be made to such director's spouse, if living, otherwise such payment will
be made to his estate.

Effective April 1, 1995, the Board of Directors adopted the
Tesoro Petroleum Corporation Board of Directors Deferred Compensation Plan (the
"Deferred Compensation Plan") pursuant to which a director electing to
participate may defer between 20 percent and 100 percent of his director fees
for the ensuring year, which deferred fees are credited to an interest-bearing
account maintained by the Company. All payments under the Deferred
Compensation Plan are the sole obligation of the Company. Upon the death of a
participating director, the balance in his account under the Deferred
Compensation Plan is paid to his beneficiary or beneficiaries in one lump sum.
In the event of the disability, retirement or the removal or resignation prior
to the death, disability or retirement of a participating director, the balance
in his account will be paid to such director in ten equal annual installments.
In the event of a change of control (as "change of control" is defined in the
Deferred Compensation Plan), the balance in each participating director's
account will be distributed to him as a lump sum within 30 days after the date
of the change of control.

Under the Company's Non-Employee Director Stock Option Plan
(the "1995 Plan"), stock options with respect to 5,000 shares of the company's
Common Stock were awarded to each non-employee director on February 23, 1995.
In addition, stock options for 1,000 shares will be granted to each
non-employee director of the Company on the day following the annual meeting of
stockholders in 1995 and following the annual meeting of stockholders in each
succeeding year until February 2005, when the 1995 Plan will terminate as to
the issuance of stock options. A maximum of 150,000 shares of Common Stock is
reserved for issuance upon exercise of stock options granted under the 1995
Plan.

III-2
<PAGE> 43
APPENDIX IV

PRINCIPAL STOCKHOLDERS OF THE COMPANY AND
STOCK HOLDINGS OF THE COMPANY'S MANAGEMENT

Schedule 14A adopted by the Commission under the Exchange Act
requires the Committee to disclose, to the extent known to the Committee,
certain information regarding ownership of voting securities of the Company.
The information set forth in this Appendix is provided in response to that
requirement. Except with respect to information concerning the Committee and
its members, all information contained in the following tables (including the
footnotes) has been taken from or is based upon the 1995 Company Proxy
Statement and other information contained in other filings by the Company with
the Commission. Although the Committee does not have any knowledge that would
indicate that any statements contained herein based on such filings are untrue,
the Committee does not take responsibility for the accuracy or completeness of
the information contained in any such document filed by the Company with the
Commission, or for any failure by the Company or beneficial owners of its
voting securities to disclose relevant information or events that may have
occurred and may affect the significance or accuracy of any such information
but which are unknown to the Committee.

The following table shows the beneficial ownership of the
Company's Common Stock as of March 23, 1995, including shares as to which a
right to acquire ownership exists (for example, through the exercise of stock
options or stock awards) within the meaning of Rule 13d-3(d)(1) under the
Exchange Act for each director of the Company, the Company's Chief Executive
Officer, the other four most highly compensated officers of the Company during
1994 and, as a group, such persons and other executive officers. Unless
otherwise indicated, each person or member of the group listed has sole voting
and investment power with respect to the shares of Common Stock listed.

<TABLE>
<CAPTION>
Beneficial Ownership
Of Common Stock
On March 23, 1995
-------------------------------------
Shares Percent of Class
-------- ----------------
<S> <C> <C>
Michael D. Burke . . . . . . . . . . . . . . . . 516,134(1) 2.075
Robert J. Caverly . . . . . . . . . . . . . . . 3,000 0.012
Peter M. Detwiler . . . . . . . . . . . . . . . 8,715 0.036
Steven H. Grapstein . . . . . . . . . . . . . . 1,522,900(2) 6.206
Raymond K. Mason, Sr. . . . . . . . . . . . . . 12,428 0.051
John J. McKetta, Jr. . . . . . . . . . . . . . . 1,565 0.006
Joel V. Staff . . . . . . . . . . . . . . . . . 1,200(3) 0.005
Murray L. Weidenbaum . . . . . . . . . . . . . . 100 -
Charles Wohlstetter (4) . . . . . . . . . . . . 3,106 0.013
</TABLE>

IV-1
<PAGE> 44
<TABLE>
<CAPTION>
Beneficial Ownership
Of Common Stock
On March 23, 1995
-------------------------------------
Shares Percent of Class
-------- ----------------
<S> <C> <C>
Gaylon H. Simmons . . . . . . . . . . . . . . . 119,283(5) 0.484
Bruce A. Smith . . . . . . . . . . . . . . . . . 84,488(6) 0.343
James C. Reed, Jr. . . . . . . . . . . . . . . . 23,663(7) 0.096
William T. Van Kleef . . . . . . . . . . . . . . 19,825(8) 0.081
All directors, nominees for election as a
director and executive officers as a group
(16 individuals) . . . . . . . . . . . . . . . . 2,361,566(9) 9.415
</TABLE>
- --------------------
(1) The shares shown include 40,000 share which Mr. Burke has the right to
acquire, all or some of which shares, according to the 1995 Company
Proxy Statement, were as of March 23, 1995, subject to substantial
restrictions and conditions of forfeiture and 959 shares credited to
the account of Mr. Burke under the Company's Thrift Plan. In
addition, the shares shown include 300,000 shares which Mr. Burke had
the right to acquire through the exercise of stock options which were
exercisable on March 23, 1995, or within 60 days thereafter.

(2) Mr. Grapstein is an officer of Oakville N.V., which owns 1,522,900
shares of the Company's Common Stock. Mr. Grapstein, as an officer,
shares voting and investment power with respect to such shares.

(3) Mr. Staff shares voting and investment power with respect to these
shares with his spouse. According to the Company's report on Form
10-Q for the quarter ended June 30, 1995, Mr. Staff resigned as a
director of the Company effective June 13, 1995.

(4) Mr. Wohlstetter is now deceased.

(5) The shares shown include 100,000 shares which Mr. Simmons had the
right to acquire through the exercise of stock options which were
exercisable on March 23, 1995, or within 60 days thereafter.

(6) The shares shown include 1,039 shares credited to Mr. Smith's account
under the Company's Thrift Plan and 66,666 shares which Mr. Smith had
the right to acquire through the exercise of stock options which were
exercisable on March 23, 1995, or within 60 days thereafter.

(7) The shares shown include 733 and 88 shares credited to Mr. Reed's
account under the Company's Thrift Plan and Employee Stock Ownership
Plan, respectively, and 13,000 shares which Mr. Reed had the right to
acquire through the exercise of stock options or stock awards on March
23, 1995, or within 60 days thereafter.

(8) The shares shown include 339 shares credited to Mr. Van Kleef's
account under the Company's Thrift Plan and 9,200 shares which Mr. Van
Kleef had the right to

IV-2
<PAGE> 45
acquire through the exercise of stock options or stock awards on March
23, 1995, or within 60 days thereafter.

(9) The shares shown include 3,070 and 264 shares credited to the accounts
of officers and directors under the Company's Thrift Plan and Employee
Stock Ownership Plan, respectively, and 545,400 shares which directors
and executive officers had the right to acquire through the exercise
of stock options or stock awards which were exercisable on March 23,
1995, or within 60 days thereafter. The shares shown also include
3,000 shares acquired in the name of an executive officer's mother
with respect to which such executive officer has voting and investment
power.

-----------------------------

The following table sets forth information as to each person
or group, other than the Committee and its members, who, according to the 1995
Company Proxy Statement, beneficially owned more than five percent of the
outstanding shares of Common Stock of the Company as of March 23, 1995. For
information concerning ownership of Common Stock by members of the Committee,
see Appendix I attached to this Consent Solicitation Statement.

<TABLE>
<CAPTION>
Amount and Nature of Beneficial
Ownership
-------------------------------
Name and Address Number of Percent of
Title of Class of Beneficial Owner Shares Class
-------------- ------------------- -------- ----------
<S> <C> <C> <C>
Common Stock . . . . . . . . . Ardsley Advisory Partners (1) 2,985,000 12.165
646 Steamboat Road
Greenwich, CT 06838
Common Stock . . . . . . . . . Oakville N.V. (2) 1,522,900 6.206
c/o Kuo Investment Company
33rd Floor
767 Third Avenue
New York, NY 10017
</TABLE>

__________________

(1) According to a Schedule 13G filed with the Commission, Ardsley
Advisory Partners ("Ardsley") is a general partnership organized under
the laws of the State of Connecticut. Ardsley is an investment
adviser registered under Section 203 of the Investment Advisers Act of
1940, as amended, with respect to the shares of

IV-3
<PAGE> 46
Common Stock of the Company held by Ardsley as of March 23, 1995, for
the discretionary account of certain clients, including (i) investment
partnerships for which Ardsley serves as the management company and
(ii) a general partnership comprised of the same partners as Ardsley
serves as general partner. By reason of the provisions of Rule 13d-3
under the Exchange Act, Ardsley is deemed to own beneficially the
shares owned by the managed accounts. Each client for whose account
Ardsley had purchased Common Stock has the right to receive or the
power to direct the receipt of dividends from, or the proceeds from
the sale of, such shares purchased for his account. No such client
has any of the foregoing rights with respect to more than five percent
of the Company's Common Stock. According to the Schedule 13G filed by
Ardsley, there is no agreement or understanding among such persons to
act together for the purpose of acquiring, holding, voting or
disposing of any such securities. Philip J. Hempleman, a managing
partner of Ardsley, is a citizen of the United States. By virtue of
Mr. Hempleman's position as managing partner of Ardsley, he may be
deemed to have the shared power to vote, or direct the voting of, and
the shared power to dispose, or direct the disposition of, the shares
of Common Stock held by the discretionary accounts managed by Ardsley,
and therefore, Mr. Hempleman may be deemed to be a beneficial owner of
such shares.

(2) According to Schedule 13Ds on file with the SEC, Oakville N.V.,
Netherlands Antilles corporation ("Oakville"), is a wholly owned
subsidiary of Kuo Investment Limited, a Cayman Islands corporation
("Kuo"). According to information provided to the Company by
Oakville, the following persons are Oakville's directors and executive
officers: (a) Peter Yun Siak Fu, President and Director of Oakville,
Director and officer of Kuo; (b) Peter Chong Cheng Fu, Director and
Secretary of Oakville, Director and officer of Kuo; (c) Ong Beng Seng,
Vice President and Director of Oakville; Director and officer of Kuo;
(d) David Song Long Ban, Treasurer and Director of Oakville, Director
and officer of Kuo; (e) Steven H. Grapstein, Vice President and
Director of Oakville; and (f) Holland Intertrust (Curacao) N.V., a
Netherlands Antilles corporation, a Director of Oakville. Oakville
reports that it has sole voting and dispositive power over its voting
securities.

As stated under the caption "BACKGROUND" in the Consent
Solicitation Statement to which this Appendix is attached, on November 16,
1995, Whelan Management Corp. purchased from Ardsley options to acquire up to
400,000 shares of Common Stock from Ardsley, and the foregoing table does not
reflect that transaction, nor any other changes to beneficial ownership of
Common Stock which may have occurred since March 23, 1995.

IV-4
<PAGE> 47
[BACK COVER OF SOLICITATION STATEMENT]

IMPORTANT

1. If your shares are held in your own name, please sign, date and mail
the enclosed white consent card to our solicitation agent, Morrow &
Co., Inc., in the postage-paid envelope provided.

2. If your shares are held in the name of a brokerage firm, bank nominee
or other institution, only it can execute a consent with respect to
your shares and only upon receipt of your specific instructions.
Accordingly, you should contact the person responsible for your
account and give instructions for a white consent card to be signed
representing your shares. The Committee urges you to confirm in
writing your instructions to the person responsible for your account
and to provide a copy of those instructions to The Stockholder'
Committee For New Management of Tesoro Petroleum Corporation in care
of Morrow & Co., Inc. at the address set forth below so that the
Committee will be aware of all instructions given and can attempt to
ensure that such instructions are followed.

If you have any questions or require any assistance in
executing your consent, please call

Morrow & Co., Inc.
909 Third Avenue
New York, New York 10022
Toll Free: (800) 634-4458

Banks and Brokerage firms, please call collect:
(212) 754-8000

<PAGE> 48
INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
------- -----------

99.1 Form of Consent Card

99.2 Form of Letter to Institutional Shareholders

99.3 Form of "To Our Clients" Letter

99.4 Form of Letter to Beneficial Owners

<PAGE> 1
[FRONT OF FORM OF CONSENT CARD]

PRELIMINARY COPY--SUBJECT TO COMPLETION

WRITTEN CONSENT BY STOCKHOLDERS OF
TESORO PETROLEUM CORPORATION
TO ACTION WITHOUT A MEETING

Solicited by

THE STOCKHOLDERS' COMMITTEE FOR NEW MANAGEMENT
OF TESORO PETROLEUM CORPORATION IN
OPPOSITION TO THE BOARD OF DIRECTORS
OF TESORO PETROLEUM CORPORATION

Unless otherwise indicated below, the undersigned, a stockholder of
record of Tesoro Petroleum Corporation, a Delaware corporation (the "Company"),
on __________, 1995 (the "Record Date"), hereby consents pursuant to Section
228(a) of the Delaware General Corporation Law with respect to all shares of
common stock, par value $.16 2/3 per share, of the Company (the "Common Stock")
held by the undersigned to the taking of each of the following actions without
a meeting, without prior notice and without a vote:

THE STOCKHOLDERS' COMMITTEE FOR NEW MANAGEMENT OF TESORO PETROLEUM
CORPORATION STRONGLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY CONSENT TO
ALL OF THE FOLLOWING RESOLUTIONS. EACH OF THE RESOLUTIONS REQUIRES THE
APPROVAL OF A MAJORITY OF THE COMMON STOCK ON THE RECORD DATE.

THIS CONSENT CARD IS CONTINUED ON THE REVERSE SIDE. PLEASE MARK, SIGN
AND DATE THIS CONSENT CARD ON THE REVERSE SIDE BEFORE RETURNING THIS CONSENT
CARD IN THE ENCLOSED ENVELOPE.

1. Fix the number of directors at five (5).

RESOLVED, that Section 2.1 of Article II of the Bylaws be amended to
read as follows:

Section 2.1 Number, Election and Term of Office. The number of
directors which shall constitute the whole Board of Directors shall be five,
unless and until changed by resolution of the Board of Directors. The
directors shall be elected at the annual meeting of stockholders, except as
provided in Section 2.2, and each director elected at an annual meeting of
stockholders, and directors elected or appointed in the interim to fill
vacancies and newly created directorships shall hold office until the next
annual meeting of stockholders and until

<PAGE> 2
their successors are duly elected and qualified or until their earlier
resignation or removal. A director need not be a stockholder.