Tosco Sees Profit in Quarter After Its Best May Ever
Tosco, a shrunken oil refiner based in Santa Monica, told shareholders Friday that net profits will reach “at least” $30 million in the current quarter and that swollen profit margins made May the best month in its history.
Tosco, once among the nation’s largest independent refiners but now deeply in debt and dependent mostly on a sole refinery in Avon, Calif., also said it is holding preliminary talks with “a bunch” of potential buyers of the company.
Leaving Company Aug. 15
Tosco said earlier that it would entertain offers and hired Bear, Stearns & Co. to find would-be suitors. President and Chief Executive Matthew J. Talbot would say only that “several” parties are interested and that the talks are “quite preliminary.”
Talbot, a longtime Tosco executive who took the top managerial post in 1983 at the low point in the company’s fortunes, will leave the company Aug. 15 because the board chose not to renew his employment contract expiring on that date.
After Talbot’s departure, the company will be run by a new “office of chief executive” consisting of Chairman Clarence G. Frame, who will also become chief executive, John G. Drosdick and Eric Schwartz, who were both promoted to executive vice-president.
Talbot said Friday that there wasn’t any disagreement with the board and that he might become a consultant. He said: “My background is in the area of restructuring, and that’s pretty well done.”
After Tosco’s big oil-shale investment turned sour, along with other alternative-energy schemes in 1982, the company went heavily into debt and sold or closed three refineries. Today, it sells gasoline from the Avon refinery to about 450 independent gasoline marketers on the West Coast.
Drosdick said lower operating costs at the upgraded Avon refinery, with a capacity of 125,000 barrels of oil per day, and higher profit margins made possible by tight supplies of gasoline on the West Coast during the quarter contributed to the current strong showing.
Talbot cautioned that wholesale prices are falling again as the quarter draws to a close. But he predicted “continued profitability” in the third quarter. Tosco lost $100.8 million in its first quarter after turning narrowly profitable in 1985. In the two previous years, the company lost nearly $600 million.
