Independent refiner Tesoro Corporation TSO announced its decision to restart operations at the Martinez, CA refinery following certain agreements that it reached with the local union. Work had stopped at the refinery since Feb 1, due to a nationwide strike.
The refinery had been in the final stages of a major turnaround maintenance activity when the strike was called. The company expects the facility to reach normal operating levels in the next two weeks.
Tesoro added that it has come to an understanding with the unions at the Carson, CA and Anacortes, WA refineries as well. The company also expects to reach a settlement with the Mandan, ND and Salt Lake City, UT refineries in the next few days.
Tesoro stated that as a result of the strike, operating expenses are expected to increase from that in its previous guidance. Also, capture rates are expected to fall below the historical average for its West Coast system.
Tesoro anticipates operating costs per barrel from its California refinery to range between $7.70 and $7.95. Moreover, strike at Martinez and turnaround at Anacortes and Salt Lake City are anticipated to reduce capture rates by about $1.50–$2.00 per barrel in the first quarter of the year. However, the company expects an improvement in capture rates in the second quarter on completion of planned turnaround activities.
Also, idled operations and turnaround activities that resulted in higher-than-expected inventory build up are expected to consume a part of the working capital in the first quarter. However, from the second quarter onwards the working capital impact is expected to lessen as several refineries commence operations.
Currently, Tesoro Corporation holds a Zacks Rank #2 (Buy).
Other stocks that are worth considering from the same industry include Western Refining, Inc. WNR, Ferrellgas Partners LP FGP and Sprague Resources LP SRLP. All these stocks sport a Zacks Rank #1 (Strong Buy).
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