Tesoro Corporation Announces Record Third Quarter Earnings and Throughput.

SAN ANTONIO -- Tesoro Corporation (NYSE:TSO) today reported third quarter net income of $274 million, or $3.92 per share, as compared to $226 million, or $3.20 per share, for the third quarter of last year. Results for the third quarter include an after-tax charge of $17 million, or $0.24 per share, related to the termination of the Anacortes coker project. Excluding this charge, earnings for the quarter were $4.16 per share. For the first nine months of 2006, net income was $643 million, or $9.17 per share, compared to net income of $438 million, or $6.23 per share, for the nine months ending September 30, 2005.

The company set a new throughput record this quarter of 574,000 barrels per day which was 15,000 barrels a day greater than the previous record. The company's refineries in California, Alaska, Washington and North Dakota each achieved record throughput for an individual quarter.

"Over the past 12 months, five of our six refineries have recorded quarterly record throughput rates. This is just one of many improvements that have contributed to our strong financial performance and allowed us to surpass in the third quarter many of our 2005 annual records," said Bruce A. Smith, Tesoro's Chairman, President and CEO. Operating income for the first nine months of 2006 was $1.1 billion, surpassing the company's 2005 full year operating income.

Operating income for the quarter was up 14% or over $50 million versus the third quarter of 2005, despite West Coast crack spreads that were down 15%. This improvement reflects higher reliability and better optimization of the company's assets through sourcing crude oils with the best refining value and moving the products into the right markets. In addition, gross profit margins and capture rates were higher due to a more stable margin environment. As compared to the hurricane-driven volatility of last year's third quarter, the relative stability this year resulted in higher wholesale market spreads and better realizations of the benchmark crack spread.

Capital spending for the first nine months of 2006 was approximately $345 million, of which $59 million was for turnaround expenditures. For the year, the company anticipates capital spending of between $550 and $575 million. The company expects capital spending for 2007 to be between $550 and $650 million including turnarounds. The Golden Eagle coker modification project is now expected to cost between $475 and $525 million and the startup has been deferred to early 2008. Higher raw material costs and limited engineering and construction resources continue to pressure project costs.

In addition, the company purchased roughly 815,000 shares of its common stock for $51 million during the quarter. Year to date through the third quarter, the company has purchased 2.1 million shares for $135 million.

Looking at the immediate quarter, two factors will impact profitability - normal seasonal demand shifts and the Anacortes turnaround. While the seasonal demand shift is expected to be typical, the fundamental outlook remains bullish for product demand in 2007. Gasoline inventories on the West Coast are low relative to the five-year average heading into a busy turnaround season that is expected to extend into the first quarter of next year. In addition, immediate relief for the industry's need to import high octane blending components required to produce West Coast gasoline seems unlikely in the near-term. These factors should provide support for a strong West Coast margin environment in 2007.

"Our employees continue to excel in achieving throughput records through safe and reliable performance. Given each and every employee's commitment to operational excellence, along with our belief that historically strong margins will persist, we expect to continue delivering significant value growth for our shareholders," said Smith.

Board Declares Quarterly Dividend

Tesoro announced today that its Board of Directors has approved a regular quarterly cash dividend of $0.10 per share. The dividend is payable December 15, 2006 to shareholders of record as of December 1, 2006.

Public Invited to Listen to Analyst Conference Call via Internet

At 3:00 p.m., CST, Thursday, November 2nd, 2006, Tesoro will broadcast, live, its conference call with analysts regarding third quarter 2006 results. Interested parties may listen to the live conference call over the Internet by logging on to Tesoro's Internet site at http://www.tsocorp.com.

Tesoro Corporation, a Fortune 200 Company, is an independent refiner and marketer of petroleum products. Tesoro operates six refineries in the western United States with a combined capacity of approximately 560,000 barrels per day. Tesoro's retail-marketing system includes over 450 branded retail stations, of which over 200 are company owned and operated under the Tesoro([R]) and Mirastar([R]) brands.

This earnings release contains certain statements that are "forward-looking" statements concerning the market environment, capital expenditures and accounting adjustments within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. For more information concerning factors that could affect these statements see our annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission. We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date hereof."

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