Tesoro, one of the nation’s biggest refiners, on Monday reported weak fourth-quarter earnings for 2015, one of the first indications that the refinery sector is not immune to the low cost of oil.
The San Antonio company, whose name means “treasure” in Spanish, earned $54 million in the final quarter of 2015, down 63 percent from its $145 million profit a year ealier, the company said Monday night.
Tesoro’s earnings report comes just days after the nation’s No. 2 producer of crude oil, Chevron, reported record losses of $588 million due to the global oil glut.
Tesoro is a major West Coast refiner, which includes California and Hawaii, which historically have high gasoline prices. But that didn’t help the company because the low price of oil made all fuel prices cheaper, hurting the company’s bottom line, said CEO Greg Goff. The company took a $276 million pre-tax charge because of cheap crude.
Tesoro is not a producer of crude oil, but derives the products it sells from refining crude. Some energy analysts anticipated that low oil prices would have helped refiners with their bottom lines. Tesoro, being one of the first major refiners to report its earnings, could signal more pain for the refinery sector as companies issue their earnings reports over the next month.
Nevertheless, Goff kept an optimistic outlook, saying, “2015 was a record year for … net income and earnings per share, despite a challenging fourth quarter,” he said. “We continued to strengthen our business as we estimate that we delivered approximately $670 million of improvements in 2015.”
In recent weeks, the price of oil fell more than 5 percent in so short a period that it hurt the stock market. Many see the trend extending into next year.
The investment banking house Goldman Sachs predicted Monday that the price per barrel of oil could slip as low as $26, despite talk of Saudi Arabia and Russia potentially agreeing to pull back on production. The company said it is too late for such action to have any sustained effect.
“It may already be too late for [Organization of the Petroleum Exporting Countries] producers to be able to prevent another large decline in prices,” the Wall Street firm wrote in a report published Sunday.
ExxonMobil and ConocoPhillips will release their fourth-quarter earnings Tuesday and Thursday, respectively. Analysts say to expect significant drops in net income because of low crude oil prices.
