FOR IMMEDIATE RELEASE Contact: Greg Wright
(210)283-2440
TESORO COUNTERS DISSIDENT GROUP'S
LATEST CLAIMS IN LETTER TO STOCKHOLDERS
San Antonio, Texas -- March 15, 1996 -- Tesoro Petroleum Corporation
(NYSE:TSO) today said its Board of Directors is sending a letter to all Tesoro
shareholders, urging careful consideration of the facts before acting upon
materials recently mailed to them by a dissident group led by Kevin Flannery.
The board reiterated its recommendation that shareholders support Tesoro's
current leadership and strategy, and to either not give consents or revoke any
consents given to the Flannery group.
In the letter, Tesoro President and Chief Executive Officer Bruce A. Smith
tells stockholders: "Don't let the Flannery Group mislead you into giving them
control of your investment. Don't give them the keys to the company so they can
generate wealth for themselves!."
The full text of Tesoro's letter follows.
Tesoro Petroleum Corporation is a natural resource company engaged in
natural gas exploration and production, petroleum refining and marketing, and
marine services.
March 15, 1996
Dear Fellow Shareholder:
The Stockholders' Committee for New Management of Tesoro Petroleum Corporation
(the "Flannery Group") JUST DOESN'T UNDERSTAND! Recently, they wrote to you
raising several issues to which we want to respond.
WHAT HAS HAPPENED TO THE VALUE OF OUR STOCK?
While shareholder value is ultimately measured by the increase in the price of
Tesoro's stock, most investors understand that the drivers of value are future
earnings and cash flow. Since your board put this management team in place in
1992, earnings and cash flow have increased each year to record levels in 1995.
So why hasn't the stock price increased? It has, almost tripling since 1992.
But what the Flannery Group fails to tell you, or understand, is the negative
impact that the 1995 Tennessee Gas decision by the Texas Supreme Court had on
our stock price. We believe much of the 30% decline they talk about can be
linked to this adverse decision's expected effect on future earnings. They
want to avoid the issue because, in management's view, this litigation might
have been settled were it not for Flannery's interference which led Tennessee
Gas to suspend negotiations with the company and close a window of opportunity
to settle the matter. If they don't understand the fundamental effect of this
issue on the stock (and debt), do you want them working for you to create
shareholder value?
THE REFINING AND MARKETING BUSINESS
The Flannery Group criticizes expenditures for Tesoro's refining and marketing
business. In earlier communications, the Group criticized the high-return,
quick-payback vacuum unit, which has had a positive impact that resulted in a
contribution of approximately $14 million in 1995. Excluding capital
expenditures related to the vacuum unit, Tesoro has generated positive
operating cash flow in excess of expenditures during the last three years.
They also criticize the $90 million of debt attributed to the refinery. This
is another half-truth since two-thirds of that amount represents the settlement
of a claim by the State of Alaska against the company for approximately $100
million which threatened to bankrupt the company and would have left
shareholders with little or no value!
THE BOB WEST FIELD
The Flannery Group provides more half-truths concerning the company's sale of a
part of its Bob West Field interests. First they criticized the sale. Then
they applauded the sale. Now, they criticize the sale again because the buyer
announced it had successfully drilled two new wells. The Flannery Group
doesn't understand economics. A successful well doesn't mean an adequate
return on investment will be received by shareholders. In fact, the sale looks
even better today because the sold properties are producing below what we
predicted and new wells are not even being drilled as quickly as we predicted.
Aggregate production from the sold properties is almost 25% below levels at the
time we sold. Do you really want the lack of understanding demonstrated by the
Flannery Group to be applied to your investment in Tesoro?
A NEW BOARD OF DIRECTORS
The Flannery Group criticizes the director retirement plan which many public
corporations the size of Tesoro have. But he says it will potentially prompt
"what will amount to a boardroom exodus." Yet, he wants your consent to throw
out the entire current board! What does he really want? Under the governance
guidelines adopted by your board, by the 1996 annual meeting, Tesoro's Board of
Directors is expected to be comprised of two directors elected in 1996, one
director named in 1995, three directors named in 1992, and one director named
in 1983. This is a new board!
THE FLANNERY GROUP HAS NO CREDIBLE PLAN FOR TESORO PETROLEUM
-- JUST TALK
Their only recommendation for increasing shareholder value is:
"The Alaskan Refining Business Should be Divested."
Original Mailing to Shareholders by Flannery Group
Now, after reading the company's materials, the Flannery Group has changed its
mind calling for
"Disposition of the Refining Business at the appropriate time...."
Latest Mailing to Shareholders by Flannery Group
The Flannery Group has finally agreed with us that a refinery sale under
current industry conditions destroys shareholder value. Tesoro's management
and industry experts have said that selling a refinery now is a bad idea. Our
refining and marketing business can add value and we have a strategy which
focuses on higher margin products and expanding our marketing efforts while
minimizing future capital investment. Good management finds ways to improve
cash flow and earnings -- that increases shareholder value!
THE FLANNERY GROUP ADMITS ITS "PLAN" MAY PRODUCE NO RESULTS
FOR SHAREHOLDERS
They have stated in their mailing that "the trading price of the Common Stock
is, of course, influenced by many factors and, therefore, it is impossible to
say with certainty that its price will increase or to predict the amount of any
such increase that might occur."
It's obvious from 1995 results that management is having an impact on what is
in its control, but the same external forces that have impacted the stock price
under Tesoro's current management would undoubtedly have a similar influence
for the Flannery Group.
SEND THE GREEN CARD NOW
Don't let the Flannery Group mislead you into giving them control of your
investment. Don't give them the keys to the company so they can generate
wealth for themselves!
THE BOARD URGES YOU NOT TO SUPPORT THE FLANNERY GROUP IN ITS ATTEMPT TO REMOVE
AND REPLACE YOUR BOARD OF DIRECTORS AND URGES YOU TO REVOKE ANY WHITE CONSENT
CARD THAT MAY HAVE BEEN GIVEN.
If you have previously returned a white consent card, you have every right to
change your mind and revoke your consent by signing, dating and returning the
accompanying GREEN revocation of consent card, using the enclosed postage-paid
envelope. Even if you have not previously signed or returned a white consent
card to the Flannery Group, you may sign and return a GREEN revocation of
consent card to Tesoro, which will have no legal effect but would assist us in
monitoring the progress of the Flannery Group's consent solicitation.
Thank you for your support,
/s/ Bruce A. Smith
Bruce A. Smith
President and Chief Executive Officer
If your shares of Common Stock are held
in the name of a bank or brokerage firm,
only that firm can execute a revocation of consent on your behalf.
Please contact the person responsible for your account and give
instructions for a GREEN revocation of consent card
to be voted REVOKING CONSENT on all items.
If you have questions or need assistance in voting your shares, please
contact the firm assisting us in the solicitation of proxies:
GEORGESON & COMPANY INC.
TOLL FREE: 1-800-223-2064
BANKS & BROKERS CALL: 212-440-9800
INTERNET: World Wide Web http://www.georgeson.com
