UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 30, 1996
TESORO PETROLEUM CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
Delaware 1-3473 95-0862768
(State or Other Jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
8700 Tesoro Drive
San Antonio, Texas 78217
(Address of Principal Executive Offices)
(Zip Code)
210-828-8484
(Registrant's Telephone Number, Including Area Code)
TESORO PETROLEUM CORPORATION
FORM 8-K
Item 5. Other Events
On January 30, 1996, Tesoro Petroleum Corporation (the "Company") announced
earnings for the year ended December 31, 1995. In addition, the Company
announced information regarding its natural gas reserves and 1996 capital
budget.
Item 7. Financial Statements and Exhibits
(c) Exhibits
20.1 Press Release of the Company dated January 30, 1996 announcing
earnings for the year ended December 31, 1995.
20.2 Press Release of the Company dated January 30, 1996 announcing
information regarding its natural gas reserves and 1996
capital budget.
2
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
TESORO PETROLEUM CORPORATION
Registrant
Date: January 31, 1996 By: /s/ William T. Van Kleef
William T. Van Kleef
Senior Vice President and
Chief Financial Officer
3
EXHIBIT INDEX
Exhibit Description Page
20.1 Press Release of the Company dated January 30, 1996 5
announcing earnings for the year ending December 31,
1995.
20.2 Press Release of the Company dated January 30, 1996 9
announcing information regarding its natural gas
reserves and 1996 capital budget.
4
FOR IMMEDIATE RELEASE Contact: Greg Wright
(210) 283-2440
TESORO REPORTS ITS BEST RESULTS
IN MORE THAN A DECADE
San Antonio, Texas -- Jan. 30, 1996 -- Tesoro Petroleum Corporation
(NYSE:TSO) today announced 1995 net earnings applicable to common stock of $54.6
million, or $2.18 per share, compared with $13.0 million, or $.56 per share in
1994. Operating profit reached $105.9 million, compared with $64.4 million in
1994. These results represent the company's best performance in more than a
decade, and were achieved despite very difficult industry conditions that
prevailed through most of the year.
The 1995 results included an after-tax gain of approximately $33 million
($1.34 per share) from the sale of certain interests in the Bob West field in
south Texas, partially offset by charges of approximately $5 million ($.21 per
share) for employee terminations and restructuring and $3 million ($.11 per
share) for the early extinguishment of debt. The 1994 results included an $8.5
million ($.37 per share) refund from the resolution of a refining and marketing
tariff issue, partially offset by a $5 million ($.21 per share) charge for the
early extinguishment of debt. Excluding the gain on sale of Bob West field
interests, 1995 results were the best in five years.
"Achieving these results in the face of depressed natural gas and petroleum
refining industry conditions speaks loudly for the changes we have effected at
Tesoro," President and Chief Executive Officer Bruce Smith said. "Initiatives
within our core operations, coupled with company-wide efficiency measures and
lower debt levels, are expected to help continue Tesoro's improvements. Only a
small portion of the benefits we expect from these efforts was realized in 1995,
but they should have a much larger impact in 1996 and beyond."
Tesoro's enhanced 1995 results were primarily attributable to improvements
within its Exploration & Production (E&P) segment, specifically relating to
natural gas operations in south Texas. These operations benefited from
continued development of the Bob West field, despite natural gas market prices
that averaged almost 10 percent lower than in 1994. Excluding the gain from
sale of certain Bob West field interests earlier in the year, the segment's
operating profit rose 18 percent from 1994 to $76 million as total domestic and
Bolivian natural gas production increased 26 percent to an average of 133
million cubic feet per day.
The Refining & Marketing (R&M) segment had operating profit of $.7 million
in 1995, reflecting a strong recovery from more than $7 million of operating
losses through the first half of the year, when industry refining margins were
among the lowest in a decade. These results compare with a $2.4 million
operating profit in 1994.
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Stronger product prices and a more advantageous feedstock mix in the latter
part of 1995 helped to increase the refinery product spread to $3.47 per barrel
for the full year from just $2.89 per barrel for the first six months. The 1995
spread represented a 9 percent drop from the 1994 level of $3.83 per barrel.
However, throughput volume rose significantly in the second half of the year due
to the improved margins and feedstock mix, resulting in a 10 percent increase in
throughput for full-year 1995.
The R&M segment benefited from key initiatives to enhance profitability.
The vacuum tower that went into operation in December 1994 raised the refinery
product spread approximately $.80 per barrel from what it otherwise would have
been. The segment also began to benefit from expansion of its Alaska retail
gasoline market share, which grew from 29 percent in 1994 to 43 percent at
year-end 1995, along with product shipments to the Russian Far East. A larger
impact from these initiatives is expected in 1996.
The company's Marine Services segment, which includes operations previously
reported as Oil Field Supply and Distribution, was the only business area that
did not achieve significant improvements in its fundamental performance during
1995. This segment recorded a $4.4 million loss, compared with a loss of $2.3
million in 1994.
"During the latter part of 1995, we initiated a restructuring that will
refocus these operations, including the sale or closure of unprofitable sites
and the merger of the remaining assets with Coastwide Energy Services into a new
Marine Services segment, which we expect to complete in February," Smith said.
"This newly consolidated segment should achieve a strong market share along the
western Gulf Coast, with considerable efficiencies, resulting in a lean and very
profitable business."
For the fourth quarter of 1995, earnings applicable to common stock were
$8.6 million, or $.35 per share, compared with $15.3 million, or $.61 per share,
in the 1994 quarter. The 1995 fourth quarter results were negatively impacted
by a non-cash extraordinary charge of $2.9 million for the early retirement of
debt, while the 1994 quarter benefited from an $8.5 million refund from
settlement of an R&M tariff issue, partially offset by charges of approximately
$4 million related to environmental contingencies and other matters.
Fourth-quarter operating profit was $20.6 million, compared with $27.3 million
in the 1994 quarter. In addition to the tariff issue, the 1994 fourth-quarter
operating results benefited from Tennessee Gas Pipeline Company's election to
take higher volumes of gas under its contract to make up for reduced takes
during 1994's third quarter.
Tesoro Petroleum Corporation is a natural resource company engaged in
natural gas exploration and production, petroleum refining and marketing, and
wholesale marketing of fuel and lubricants.
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<TABLE>
<CAPTION>
TESORO PETROLEUM CORPORATION
FINANCIAL AND OPERATING DATA
(CONDENSED AND UNAUDITED)
(In millions except per unit amounts)
Three Months Ended Years Ended
December 31, December 31,
------------------ ------------------
1995 1994 1995 1994
<S> <C> <C> <C> <C>
BUSINESS SEGMENT DATA
Gross Operating Revenues
Refining and Marketing:
Refined products . . . . . . . . . . . . . . . . . . $ 164.9 151.9 664.5 582.7
Other, including crude oil resales and merchandise . 17.4 11.5 106.5 104.3
Exploration and Production:
U.S. oil and gas <F1>. . . . . . . . . . . . . . . . 23.8 31.6 107.3 87.5
U.S. gas transportation <F1> . . . . . . . . . . . . 1.5 1.2 5.7 3.1
Bolivia. . . . . . . . . . . . . . . . . . . . . . . 2.6 3.1 11.7 13.2
Marine Services . . . . . . . . . . . . . . . . . . . 17.6 19.5 74.5 77.9
-------- -------- -------- --------
Total Gross Operating Revenues . . . . . . . . . . . $ 227.8 218.8 970.2 868.7
======== ======== ======== ========
Summary of Operations
Segment Operating Profit (Loss):
Refining and Marketing . . . . . . . . . . . . . . . $ 5.2 6.1 .7 2.4
Exploration and Production:
U.S. oil and gas<F2>. . . . . . . . . . . . . . . . 14.6 18.6 96.9 52.1
U.S. gas transportation . . . . . . . . . . . . . . 1.3 1.2 5.1 2.9
Bolivia . . . . . . . . . . . . . . . . . . . . . . 1.4 1.9 7.6 9.3
Marine Services. . . . . . . . . . . . . . . . . . . ( 1.9) ( .5) ( 4.4) ( 2.3)
-------- -------- -------- --------
Total Segment Operating Profit. . . . . . . . . . . 20.6 27.3 105.9 64.4
Corporate and Unallocated Costs:
General and administrative expenses. . . . . . . . . 4.0 4.2 16.4 14.7
Interest expense . . . . . . . . . . . . . . . . . . 4.8 4.7 20.9 18.7
Interest income . . . . . . . . . . . . . . . . . . ( 1.2) ( .9) ( 1.8) ( 2.5)
Other . . . . . . . . . . . . .9 2.0 8.5 7.4
-------- -------- -------- --------
Earnings Before Income Taxes and Extraordinary Item . 12.1 17.3 61.9 26.1
Income Tax Provision. . . . . . . . . . . . . . . . . .6 2.0 4.4 5.6
-------- -------- -------- --------
Earnings Before Extraordinary Item . . . . . . . . . 11.5 15.3 57.5 20.5
Extraordinary Loss on Extinguishment of Debt. . . . . ( 2.9) - ( 2.9) ( 4.8)
-------- -------- -------- --------
Net Earnings. . . . . . . . . . . . . . . . . . . . . 8.6 15.3 54.6 15.7
Dividend Requirements on Preferred Stock. . . . . . . - - - 2.7
-------- -------- -------- --------
Net Earnings Applicable to Common Stock . . . . . . . $ 8.6 15.3 54.6 13.0
======== ======== ======== ========
Average Outstanding Common & Common
Equivalent Shares . . . . . . . . . . . . . . . . . . 25.0 25.0 25.1 23.2
======== ======== ======== ========
Earnings Per Share
Earnings Before Extraordinary Item. . . . . . . . . . $ .46 .61 2.29 .77
Extraordinary Loss on Extinguishment of Debt. . . . . ( .11) - ( .11) ( .21)
-------- -------- -------- --------
Net Earnings . . . . . . . . . . . . . . . . . . . . $ .35 .61 2.18 .56
======== ======== ======== ========
Depreciation, Depletion and Amortization
Refining and Marketing . . . . . . . . . . . . . . . $ 3.1 2.6 11.9 10.4
Exploration and Production:
U.S. oil and gas . . . . . . . . . . . . . . . . . . 6.2 9.1 29.0 24.1
U.S. gas transportation. . . . . . . . . . . . . . . .1 .1 .3 .2
Bolivia. . . . . . . . . . . . . . . . . . . . . . . .3 - .3 -
Marine Services and Other . . . . . . . . . . . . . . .1 .3 1.1 1.3
-------- -------- -------- --------
Total Depreciation, Depletion and Amortization . . . $ 9.8 12.1 42.6 36.0
======== ======== ======== ========
Capital Expenditures
Refining and Marketing . . . . . . . . . . . . . . . $ 2.1 9.1 9.3 32.0
Exploration and Production:
U.S. oil and gas . . . . . . . . . . . . . . . . . . 8.7 16.7 49.4 60.4
U.S. gas transportation. . . . . . . . . . . . . . . .1 .1 .2 5.2
Bolivia. . . . . . . . . . . . . . . . . . . . . . . 3.8 - 3.8 -
Marine Services and Other . . . . . . . . . . . . . . .3 .4 1.2 2.0
-------- -------- -------- --------
Total Capital Expenditures . . . . . . . . . . . . . $ 15.0 26.3 63.9 99.6
======== ======== ======== ========
REFINING AND MARKETING
Refinery Throughput:
Barrels per day . . . . . . . . . . . . . . . . . . . 52,092 49,775 50,569 46,032
% Alaska North Slope crude oil. . . . . . . . . . . . 65% 60% 68% 59%
Refinery Production (Bbls/day):
Gasoline. . . . . . . . . . . . . . . . . . . . . . . 14,385 13,306 14,298 11,728
Middle distillates. . . . . . . . . . . . . . . . . . 22,151 19,489 21,140 18,839
Heavy oils and residual product . . . . . . . . . . . 15,222 16,615 14,516 15,118
Refinery fuel . . . . . . . . . . . . . . . . . . . . 1,785 1,846 2,042 1,776
-------- -------- -------- --------
Total Refinery Production . . . . . . . . . . . . . 53,543 51,256 51,996 47,461
======== ======== ======== ========
Refinery Operations - Product Spread ($/Bbl):
Yield value of products manufactured -
Gasoline . . . . . . . . . . . . . . . . . . . . . . $ 25.46 27.91 25.39 25.88
Middle distillates . . . . . . . . . . . . . . . . . $ 25.33 25.20 24.13 23.94
Heavy oils and residual product. . . . . . . . . . . $ 9.41 9.01 9.37 8.23
Average yield value of products manufactured. . . . . $ 20.89 20.72 20.35 19.48
Cost of raw materials . . . . . . . . . . . . . . . . 16.15 16.38 16.88 15.65
-------- -------- -------- --------
Product Spread. . . . . . . . .. . . . . . . . . . . 4.74 4.34 3.47 3.83
Operating costs. . . . . . . . .. . . . . . . . . . . 2.52 2.69 2.55 2.61
Depreciation . . . . . . . . . .. . . . . . . . . . . .50 .45 .51 .45
-------- -------- -------- --------
Net Refinery Margin . . . . . .. . . . . . . . . . . $ 1.72 1.20 .41 .77
======== ======== ======== ========
Total Product Sales (Bbls/day):
Gasoline. . . . . . . . . . . . . . . . . . . . . . . 21,451 21,970 24,526 23,191
Middle distillates. . . . . . . . . . . . . . . . . . 37,085 33,131 37,988 33,256
Heavy oils and residual product . . . . . . . . . . . 15,737 14,311 14,787 14,228
-------- -------- -------- --------
Total Product Sales Volumes. . . . . . . . . . . . . 74,273 69,412 77,301 70,675
======== ======== ======== ========
Gross Margin - Merchandise & Other ($ millions). . . . $ 3.0 3.4 12.3 13.1
======== ======== ======== ========
EXPLORATION AND PRODUCTION
United States
Natural Gas production, net (Mcf/day):
Spot market and other. . . . . . . . . . . . . . . . 82,929 90,009 94,668 65,841
Tennessee Gas contract <F3>. . . . . . . . . . . . . 15,367 26,353 19,822 17,955
-------- -------- -------- --------
Total Production . . . . . . . . . . . . . . . . 98,296 116,362 114,490 83,796
======== ======== ======== ========
Average natural gas sales price ($/Mcf)<F1>:
Spot market <F4> . . . . . . . . . . . . . . . . . . $ 1.51 1.43 1.34 1.48
Tennessee Gas contract <F3>. . . . . . . . . . . . . $ 8.64 8.13 8.41 7.93
Average. . . . . . . . . . . . . . . . . . . . . . . $ 2.63 2.94 2.57 2.86
Production cost ($/Mcf)<F1> . . . . . . . . . . . . . $ .25 .28 .29 .29
Total operating expense ($/Mcf) . . . . . . . . . . . $ .32 .36 .35 .37
Depletion ($/Mcf) . . . . . . . . . . . . . . . . . . $ .69 .85 .69 .79
Bolivia
Natural gas:
Production, net (Mcf/day). . . . . . . . . . . . . . 17,388 21,551 18,650 22,082
Sales price ($/Mcf). . . . . . . . . . . . . . . . . $ 1.25 1.14 1.28 1.20
Crude oil (condensate):
Production, net (Bbls/day) . . . . . . . . . . . . . 503 702 567 733
Sales price ($/Bbl). . . . . . . . . . . . . . . . . $ 14.22 13.67 14.39 13.28
Production cost ($/NeMcf) . . . . . . . . . . . . . . $ .07 .07 .07 .06
Total operating expense ($/NeMcf) . . . . . . . . . . $ .56 .50 .48 .41
EBITDA, CONSOLIDATED<F5> ($ millions) . . . . . . . . . $ 26.7 34.1 125.4 80.8
<FN>
<F1> Amounts previously reported have been changed to conform with the current presentation.
<F2> Operating profit from the Exploration and Production segment for the year ended December 31,
1995 included a gain of approximately $33 million from the sale of certain interests in the
Bob West Field.
<F3> As previously disclosed, the Company is involved in litigation with Tennessee Gas Pipeline Company.
<F4> Includes effects of the Company's natural gas price swaps which amounted to a gain of $.01
per Mcf for both the 1995 and 1994 years and a loss of $.09 per Mcf and gain of $.03 per Mcf
for the three months ended December 31, 1995 and 1994, respectively.
<F5> EBITDA represents earnings before extraordinary loss, interest expense, income taxes and
depreciation, depletion and amortization. EDITDA, while not purporting to reflect any
measure of the Company's operations or cash flow, is presented for additional analysis.
</TABLE>
FOR IMMEDIATE RELEASE Contact: Greg Wright
(210) 283-2440
TESORO'S RESERVES AND
1996 CAPITAL BUDGET ANNOUNCED
San Antonio, Texas -- Jan. 30, 1996 -- Tesoro Petroleum Corporation
(NYSE:TSO) today announced its Exploration & Production (E&P) segment added
natural gas reserves at about double its total production level during 1995,
although year-end proved reserves were lower due to property sales. The company
also announced its 1996 capital budget, the bulk of which is directed at E&P.
In 1995, Tesoro added 96 billion cubic feet-equivalent (Bcfe) of proved
reserves, virtually all of which were natural gas in south Texas. These
additions, including revisions of prior estimates, replaced 193 percent of
overall net production of 49.8 Bcfe, of which 8 Bcfe were produced in Bolivia.
Focusing on Tesoro's south Texas operations, the company replaced 230 percent of
net domestic production, which totaled 41.8 Bcfe during 1995. Without
revisions, Tesoro added 50.2 Bcfe of domestic proved reserves, for a 120 percent
domestic replacement rate.
Tesoro's domestic proved reserve additions in 1995 were achieved at low
cost, bringing its three-year finding cost to $.70 per thousand cubic
feet-equivalent, which is among the lowest in the industry. These additions
were realized with an 85 percent domestic drilling-success rate during 1995,
reflecting 100 percent success on 17 development wells (9.71 net) and 56 percent
success on nine exploratory wells (3.63 net).
For the year, Tesoro's net proved domestic reserves declined 18 percent due
to the recent sale of certain Bob West field interests, which accounted for
approximately 77 Bcfe of net proved reserves. Tesoro ended the year with 106.4
Bcfe of domestic net proved reserves, compared with 129.1 Bcfe at year-end 1994.
"Our domestic drilling program had a very successful year," Tesoro E&P
President Robert Oliver said. "Even though we sold properties containing about
77 Bcfe and produced about 42 Bcfe, our year-end domestic reserves were down
less than 23 Bcfe. Looking ahead, we expect to derive significant benefits from
the recent sale of some of our Bob West field interests. Aside from greatly
strengthening our financial position, proceeds from the sale are enabling us to
move forward with
-more-
high-potential drilling opportunities outside the Bob West field. During 1995,
on a minimal exploration budget of less than $8 million, we participated in nine
exploratory wells in other parts of south Texas, with a 56 percent success rate.
Included in these numbers is our Longoria No.1 well, which represents a major
new discovery that we named the Tea Jay field. We expect to accelerate this
domestic drilling program in 1996."
Oliver noted that potentially major enhancements also are on the horizon
for Tesoro's Bolivian operations. Passage of a new hydrocarbons law in Bolivia,
expected by mid-year, would significantly boost Tesoro's proved reserves due
solely to a resulting extension of the company's contracts of operation. In
addition, proposed pipeline projects in the region are moving forward, which
would open up significant new markets for Tesoro's production.
"We have discovered five fields on our 1.3 million acres under contract in
Bolivia, with another prospect currently drilling," Oliver said. "Two of these
fields are shut in and the other three could produce at much higher levels if we
had access to sufficient markets. We fully expect our Bolivian operations to go
from being a static asset to a very dynamic asset within the next few years."
Tesoro completed one well (.73 net) in Bolivia during 1995, discovering the
new Palo Marcado natural gas field, which has estimated gross potential reserves
of more than 250 Bcfe. However, until the new hydrocarbon law is approved and
the contracts are extended, no proved reserves can be attributable to this
success. As a result, Tesoro's Bolivian reserves fell 8 percent to 98.0 Bcfe
from year-end 1994.
Capital Expenditures
Tesoro plans company-wide 1996 capital expenditures of approximately $51
million, compared with $64 million in 1995. The E&P segment accounts for almost
$41 million, or 80 percent, of the budgeted expenditures, compared with $53
million, or 84 percent, in 1995. Spending for Tesoro's Refining & Marketing
(R&M) segment in 1996 is expected to be approximately $9 million, about the same
as in 1995.
The E&P segment's 1995 capital expenditures included $49 million for
domestic operations and $4 million in Bolivia. The 1996 E&P budget calls for
$36 million of domestic expenditures and approximately $5 million in Bolivia,
where the current drilling program includes two exploratory
-more-
wells, one of which is now drilling. Planned domestic expenditures include $21
million for exploration, development and acquisition outside the Bob West field,
reflecting a 100 percent increase. Expenditures for Bob West field development,
on the other hand, are budgeted at $15 million, down from about $39 million in
1995. Tesoro expects to substantially complete its development of this field
during 1996.
"Our drilling focus has definitely shifted away from the development of
this one field, which accounted for 80 percent of domestic E&P capital spending
in 1995 but only 40 percent of planned 1996 expenditures," Oliver said.
"However, we plan to remain in the same general area of south Texas within the
Wilcox trend, capitalizing on the expertise we've developed in the region. The
outstanding exploratory success we recorded during 1995 gives us additional
confidence in the drilling prospects we have targeted for 1996."
Approximately 15 percent of the R&M segment's $9 million 1996 capital
budget is earmarked for the installation of facilities that will allow the
company to begin producing and marketing asphalt in Alaska, where Tesoro hopes
to capture a 20 percent market share by year-end. The remainder of the planned
expenditures is targeted primarily toward maintenance and upgrades at Tesoro's
refinery and 7-Eleven convenience stores in Alaska, roughly the same as in 1995.
Tesoro Petroleum Corporation is a natural resource company engaged in
natural gas exploration and production, petroleum refining and marketing, and
wholesale marketing of fuel and lubricants.
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