(NYSE:TSO) today reported third quarter 2010 net earnings of $56 million, or $0.39 per diluted share compared to net earnings of $33 million, or $0.24 per diluted share for the third quarter of 2009. The Company earned $73 million or $0.51 per diluted share for the period before one-time after-tax expenses of $17 million primarily associated with the Anacortes refinery outage.
Third quarter segment operating income was $201 million excluding the one-time items, compared to $137 million in the third quarter a year ago. The increase in operating income was driven by stronger distillate margins, improved feedstock cost and the Company’s improvement initiatives. These benefits were partially offset by decreased gasoline margins and reduced throughput. The reduction in throughput was primarily a result of the continued shut-down of the Anacortes refinery and the planned turnaround of our Hawaii refinery.
For the third quarter, the Tesoro Index gained $1.42 per barrel (/bbl) or 17% from a year ago. West Coast benchmark diesel margins were up more than 50% over last year while gasoline margins were down 7%. The Company realized all of the index gains and more, capturing a gross margin of $13.28/bbl, which was up $3.69/bbl or 38% from a year ago.
Contributing to the Company’s improved performance relative to the index was an increase in conversion unit utilization which resulted in higher clean product yields. In addition, the Company produced more diesel, capturing the stronger distillate margins and ran more Canadian and South American heavy crudes as the discounts for these crudes widened.
“We are pleased with our third quarter results, even with Anacortes down for the period,” said Greg Goff, President and CEO of Tesoro. “During the quarter we saw improvement in distillate margins in our markets similar to what’s been seen across the country. We attribute this to strong distillate exports, improvements in the U.S. manufacturing sector and increased port activity nationwide. Unfortunately, these increases are not being seen in gasoline margins. While gasoline demand has stabilized, high unemployment in California continues to keep gasoline demand weak.”