Taking Solace in Retail

Refiners Hess, Tesoro, Valero find store sales among their stronger segments

Published in CSP Daily News

By
Steve Holtz, Online News Director & Beverage Editor

NEW YORK & SAN ANTONIO -- Even as major oil companies are selling off their retail sites to focus on the usually more-profitable refining segment, smaller refiners are finding convenience store retail to be a financial advantage in the current economy.

"In retail marketing, our financial results were adversely affected by lower gasoline volumes, which were 3% below last year, and weaker margins, partially offset by higher convenience store sales, which were up nearly 11% from last year," said John Hess, chairmanand CEO of Hess Corp., New York, during the company's fourth-quarter [image-nocss] earnings call late last month.

The comments from Hess were echoed by other refiners.

"Retail has continued to produce strong results with operating income in the fourth quarter of 2009 at $61 million," said Mike Ciskowski, executive vice president and CFO of Valero Energy Corp., on the company's fourth-quarter earnings call in late January, "which is less, though, than the $163 million in the fourth quarter of 2008, mainly due to lower fuel margins in the U.S., which were partially offset by lower selling expenses. For the full-year 2009, retail earned at $293 million of operating income, making it the second-best year for retail."

When asked to expand on that, Ciskowski added, "In the U.S. fourth quarter of 2008 vs. 2009, and this is on a same-store basis, our gas was down about 4.7%, diesel was up about 5.4%, and in total, total fuel was down 3.7%. On the inside, sales we were up quarter-over-quarter 1.7%... in the U.S."

Overall, Valero, San Antonio, reported a fourth-quarter 2009 loss from the continuing operations of $155 million or $0.28 per share. The fourth-quarter 2009 operating loss was $179 million, excluding special items, vs. $1.3 billion of operating income in the fourth quarter of 2008.

On Tuesday, Tesoro Corp, San Antonio, reported a fourth-quarter 2009 net loss of $179 million compared to net earnings of $97 million for the fourth quarter of 2008.

But in breaking down the data on a conference call Wednesday, chairman and CEO Bruce Smith noted, "The marketing segment, however, continues to perform well. In the fourth quarter, operating income across all product channels was $100 million. With that amount, retail contributed $41 million and for the full year, retail made $83 million. In the face of weak demand, our marketing team has demonstrated an ability to move products into higher-net back channels of trade, an ability that we believe is core strength of the company."

Meanwhile, Hess Corp. reported net income of $358 million for the fourth quarter of 2009 compared with a net loss of $74 million for the fourth quarter of 2008.

By Steve Holtz, Online News Director & Beverage Editor
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