Tesoro Corporation’s (TSO) third-quarter 2009 results came in significantly better than expected, helped by better demand balance in the company’s key West Coast region. Earnings per share came in at 24 cents, against Zacks Consensus Estimate of a penny loss. Tesoro’s outperformance is in contrast to the steep losses posted by the other major refiners that have already reported -- Valero Energy Corp. (VLO) and Sunoco Inc. (SUN). However, compared to the year-ago period, Tesoro’s earnings per share plunged 87.1%, while sales declined 45.4% to $4.7 billion -- severely hampered by depressed refining margins and lower throughput on the back of weak fuel demand and high inventories. Refining Segment Results Tesoro’s refining segment experienced a significant decline in operating income (operating income of $84 million vs. $476 million in the year-earlier quarter) due to struggling profit margins for the production of distillate ...

Oil refiner and marketer Sunoco Inc. (SUN) reported weaker-than-expected third quarter results as its refining and chemicals operations slipped in the red, pulled down by reduced margins and production. Loss per share, excluding special items, came in at 29 cents, significantly wider than the Zacks Consensus Estimate of 9 cents. In the year-ago period, the Pennsylvania-based company earned $4.78 per share. Revenues were down 42.6% year over year to $8.7 billion.   Refining & Supply   The Refining & Supply segment lost $118 million during the quarter, as against a profit of $398 million in the year-earlier period, mainly on account of lower realized margins and lower production volumes, partly canceled by lower expenses. Realized margin averaged $2.72 per barrel, down 81.7% from the third quarter of 2008, reflecting a very weak East Coast refining margin environment. Total production was down approximately 17.2% year over year to 669.2 ...

Earlier today, Valero Energy Corp. (VLO) -- the largest independent refiner in the U.S. -- reported a weaker-than-expected third-quarter 2009 loss, reflecting depressed refining margins and lower throughput on the back of weak fuel demand and high inventories. This was partially offset by lower operating costs. The loss per share, excluding one-time items, came in at 39 cents, well below the Zacks Consensus Estimate of 26 cents. In the year-ago period, the Texas-based marketer of petroleum products earned $1.91 per share. Revenue was down 45.8% year-over-year to $19.5 billion. Operating loss for the quarter was $579 million ($162 million excluding one-time items), compared to operating income of $1.8 billion ($1.6 billion excluding one-time items) in the year-earlier quarter. The main factors causing the operating loss were lower diesel and jet fuel margins, coupled with smaller discounts on sour crude oil and other feedstocks. Throughput Volume...

Recently, the federal government’s Energy Information Administration (EIA) issued an overall bullish report, showing a smaller-than-expected build in crude stockpiles. Further, the data showed that gasoline inventories were down as predicted, while distillate stocks also declined, though fell short of expectations. In its release, the agency said that crude inventories rose by 1.3 million barrels for the week ending October 16, much lower than analysts' expectations. This is the second successive week in which the crude buildup has been lower than originally anticipated. A major contributing factor to the modest increase can be attributed to a fall in crude oil imports, which dropped to the lowest level in two months. Current crude oil stocks, at 339.1 million barrels, are 8.9% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart below). The ...

Yesterday, the U.S. Energy Department's weekly inventory release showed a less-than-expected build in crude stockpiles. However, the headline news was centered on a sharp drop in gasoline stocks and refinery utilization that pushed oil prices to a fresh 2009 peak and lifted energy stocks. The federal government’s Energy Information Administration (EIA) reported a 400,000 barrels rise in crude inventories for the week ending October 9, much less than analyst expectations. The modest increase can be attributed to scaled back operations by the refiners (prompted by weak profit margins) even as imports fell. This follows last week’s report, which showed an unexpected rise in oil supply figures, against consensus forecast of a buildup. Current crude oil stocks, at 337.8 million barrels, are 9.6% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart ...

Yesterday, we got a bullish report from the federal government’s Energy Information Administration (EIA), showing a surprise decline in crude stockpiles. However, the data also showed a buildup in gasoline and distillate inventories, thereby somewhat neutralizing the positive impact. In its weekly release, the agency reported a much bigger-than-expected 5.9 million barrels drop in crude inventories for the week ending September 4, as imports fell and refiners raised demand. This follows last week’s release, which also reported crude drawdown but were below expectations. Current crude oil stocks, at 337.5 million barrels, are 13.3% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart below). The supply cover decreased from 23.6 days in the previous week to 22.9 days of supply, but it remains above the year-earlier level of 20.3 days.  ...

Yesterday, the federal government’s Energy Information Administration (EIA) reported mixed inventory data. The crude drawdown was below expectations and distillate stocks were up more than anticipated. On the positive side, gasoline supplies dropped steeply and total U.S. oil demand over the last four-week period turned positive after a long time. In its weekly release, the agency reported a lower-than-expected 372,000 barrels drop in crude oil stockpiles for the week ending August 28, as a jump in imports offset a rise in petroleum demand. This follows last week’s report, which showed an unexpected rise in oil supply figures, missing estimates of a drop. Current crude oil stocks, at 343.4 million barrels, are 13.0% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart below). The supply cover decreased marginally from 23.8 days in ...

Yesterday, we got a bearish report from the Energy Information Administration (EIA), with crude oil stockpiles showing an unexpected rise. In its weekly release, the agency said that crude inventories rose 128,000 barrels from the preceding week, far off estimates that hoped for another drawdown, following last week’s encouraging data. Major contributing factors to the inventory buildup were a rise in domestic production and crude oil imports. Current crude oil stocks, at 343.8 million barrels, are 12.4% above the year-earlier level and remain above the upper limit of the average for this time of the year (depicted in the first EIA chart below). The supply cover increased marginally from 23.7 days in the previous week to 23.8 days of supply and remains significantly above the year-earlier level of 20.5 days. Gasoline stocks were down 1.7 million week over week, better than expectations ...

Two Big Reasons to Dump your Oil Refinery

Tony Daltorio, The Investment U Research Team

Quite simply, this is not a good time to be in the business of refining oil in the United States.

The obvious reason for this is the continuing recession which has led to lower demand for gasoline and other refined products. With the summer driving season past the halfway point, having the word ’staycation’ become commonplace is not good news for the refiners.

But that’s not all. And it goes well beyond simple economic downturn.

There are other factors at work. And unfortunately, many have escaped the notice of many investors and much of Wall Street.

While everyone was focused on the sharp rise recently of the price of WTI crude oil, other things have been conspiring against domestic refiners of all sorts. Here’s what you need

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ConocoPhillips (COP), along with Saudi Aramco, will resume bidding for the construction of a 400 thousand barrels per day (MBbl/d) refinery at Yanbu Industrial City in Saudi Arabia.Initial offers have been issued to various local and global contractors for early work, and major packages include a coker unit, crude facility, gasoline unit, hydrocracker, tank farm, offsite pipelines and high voltage electrical packages. These offers are expected to be awarded in November this year, while the remainder is due in the second quarter of 2010.The proposed refinery will be capable to process heavy crude supplied by Saudi Aramco, and is expected to produce high-quality, ultra-low sulfur refined products. The new refinery's capacity to process heavy crude would further boost COP's margin capture rates.In a situation when overall market conditions are favorable, a refinery construction -- which will be able to produce ...