Chairman, president, and chief executive officer, Tesoro Petroleum Corporation
Born: October 12, 1943, in Coffeyville, Kansas.
Education: Westminster College, BA, 1965; University of Kansas, MBA, 1967.
Family: Son of George Alfred Smith and Isabel Andrews; married Cynthia Denton Doughat, 1969 (divorced, 1987); married Gail Hutchison, 1990; children: five.
Career: Ford Motor Company, 1967–1969; Continental Illinois National Bank and Trust Company of Chicago, 1971–1973, banking officer; 1973–1975, second vice president, Multinational Division; 1975–1977, vice president, Mining Division; 1977–1980, vice president and section manager; 1980–1982, vice president and manager, International Energy Division; 1983–1986, vice president and manager, Southwest commercial banking group; Valero Energy Group, 1986–1992, corporate vice president and treasurer; Tesoro Petroleum Corporation, 1992–1993, vice president and chief financial officer; 1993–1995, executive vice president, chief financial officer, and manager of the exploration and production segment; 1995, executive vice president, chief financial officer, chief operating officer, and manager of the exploration and production segment; 1995–1996, president and chief executive officer; 1996–, chairman, president, and chief executive officer.
Address: Tesoro Petroleum Corporation, 300 Concord Plaza Drive, San Antonio, Texas 78216-6999; http://www.tesoropetroleum.com.
■ Bruce A. Smith became chief executive officer (CEO) of Tesoro Petroleum Corporation of El Paso, Texas, in September 1995. In his years at the helm, he led the oil refiner to sharp increases in revenue. Tesoro's sales grew from just under $1 billion in 1995 to nearly $9 billion in 2003. During this same period, the company's earnings experienced a series of ups and downs, reflecting both the volatility of petroleum prices worldwide and the industry's susceptibility to the ebb and flow of the economy at home and abroad. Tesoro's bottom line was also affected dramatically in 2002 and 2003 by Smith's expansion of the company's refining and marketing operations.
Smith was named Tesoro's president and CEO in 1995 and assumed the additional responsibilities of chairman the following year. Under his direction, Tesoro significantly streamlined its operations, spinning off its exploration and production interests to focus solely on oil refining and marketing. The company's six petroleum-refinery operations, all located in the western United States, produced a wide variety of products, including gasoline, fuel oil, diesel fuel, and jet fuel. In 2004 Tesoro's six refineries boasted a daily capacity of approximately 560,000 barrels of crude. On the retailing side, the company marketed its products through a network of more than 550 outlets, most of them located in the western United States, Hawaii, and Alaska. Approximately half of these outlets were owned and operated by Tesoro. In addition to its retail outlets, the company sells jet and marine fuels to the aviation and marine industries serving both the trans-Pacific and transpolar transportation routes. Tesoro also markets wholesale motor fuels to unbranded dealers.
The son of George Alfred and Isabel (Andrews) Smith, Bruce Smith was born on October 12, 1943, in Coffeyville, a medium-sized town in southeastern Kansas. After graduating from high school, he enrolled at Westminster College in Fulton, Missouri, from which he received his bachelor's degree in liberal arts in 1965. He next attended the University of Kansas and two years later received his MBA. Fresh out of college, Smith went to work for Ford Motor Company in Dearborn, Michigan, in late 1967 but left two years later to serve in the U.S. Army. On August 7, 1969, Smith married Cynthia Denton Doughat. The couple divorced in January 1987.
In 1971, following his discharge from military service, Smith briefly pursued postgraduate studies at the University of Chicago. He also began work for Continental Illinois National Bank and Trust Company, serving as a banking officer from 1971 until 1973. In 1973 Smith was named second vice president of the bank's Multinational Division. Two years later he was promoted to vice president of Continental Illinois's Mining Division. In 1977 Smith was named a corporate vice president and section manager. Three years later he was selected to head the bank's International Energy Division while still retaining his corporate vice presidency. In 1983 Smith, still a vice president, was appointed manager of commercial banking for Continental Illinois' Southwest group.
For much of his banking career, Smith worked closely with customers in the energy sector, in the process becoming in creasingly familiar with the workings of the petroleum indus try and related industries. In 1986 he left Continental Illinois to become vice president and treasurer of Valero Energy Cor poration and Valero Natural Gas Partners, headquartered in San Antonio, Texas. Six years later Smith left Valero to join Tesoro Petroleum Corporation, also based in San Antonio, as vice president and chief financial officer (CFO). In 1993 he was promoted to executive vice president of both Tesoro Petroleum Corporation and its subsidiary, Tesoro Exploration and Production Company. Smith was named a director in 1995 and given the added responsibilities of chief operating officer. He retained his positions as executive vice president and CFO.
In September 1995 Smith succeeded Michael D. Burke as Tesoro's president and CEO. Less than a month after his appointment, Smith announced a company-wide reorganization and accelerated debt-reduction plan that he said could reduce costs by about $10 million annually. Roughly half of the savings, Smith said, would come from an organizational restruc-turing that would result in a workforce reduction of about 7 percent. The remaining savings would be accounted for by an annual savings in interest costs of $4 million to $6 million by reducing the company's public debt and outstanding borrowings on its credit facility. In 1996 Smith was given the added responsibility of chairman.
One of Smith's most ambitious initiatives was unveiled in May 1999, when he announced that the company had decided to spin off, sell, or trade its exploration and production operations despite the success enjoyed by that segment of its business. In announcing the decision, according to a company press release (May 26, 1999), Smith pointed out that Tesorosaw "tremendous opportunities" for both its refining and marketing activities and its exploration and production operations, noting, however, that "growth requires additional investment." He said that concentrating its resources on refining and marketing would "improve our capital structure, provide additional financial flexibility, and add focus to the downstream business." By the end of 1999 Tesoro had sold its U.S. exploration and production business to EEX Corporation and its Bolivian-based E&P operations to BG International Ltd.
Much of Smith's energy in 2000 was focused on hammering out a strategy for the newly streamlined Tesoro, which by then had been pared to the refining, distribution, and marketing of petroleum products and providing marine logistics services. In January 2000 the company announced that it had reached a lease agreement with Wal-Mart Stores that would allow Tesoro to build and operate retail fuel outlets on sites at existing and future Wal-Mart stores in 11 Western states. As of early 2004 Tesoro operated more than 75 such outlets at Wal-Mart sites, all of which market gasoline and other petroleum products under the Mirastar brand name.
To expand its core refining business, in 2001 Smith announced Tesoro's plans to acquire two refineries as well as retail outlets in the intermountain West from BP. The BP refineries, located in Mandan, North Dakota, and Salt Lake City, Utah, had a combined daily refining capacity of 110,000 barrels of crude, increasing Tesoro's total refining capacity to 390,000 barrels per day. The biggest expansion, however, was yet to come.
On February 5, 2002, Smith announced that Tesoro had reached a definitive agreement with Valero Energy Corporation to acquire Valero's Golden Eagle refinery in Martinez, California, along with about 70 Valero retail outlets throughout Northern California. Before it could be finalized, the deal almost fell through. According to Greg Jefferson of the San Antonio Express-News , plummeting profit margins forced Smith to tell analysts on May 1, 2002, that Tesoro would not complete the purchase if it cut too deeply into liquidity. Shortly thereafter Valero and Tesoro recast the terms of the transaction in such a way as to minimize its impact on cash flow. The Golden Eagle facility had a daily refining capacity of about 168,000 barrels of crude and brought Tesoro's total refining capacity to nearly 560,000 barrels per day. Perhaps most importantly, the Golden Eagle acquisition ended Smith's quest for a California presence for Tesoro.
The $1.1 billion cost of the acquisition from Valero, combined with a slump in the refining business, brought Tesoro to the brink of bankruptcy, threatening a cash crisis that was narrowly averted when Tesoro reached agreement with its lenders on a new loan package in late September 2002. According to Jefferson, the refiner won lenders' approval for a suspension of cash-flow requirements through June 30, 2003, in return for tougher spending limits and debt-repayment requirements, along with a higher interest rate for the $1.275 billion loan package.
One of Smith's primary focuses was the reduction of Tesoro's debt load, which soared to nearly $2.1 billion in 2002 after the purchase of three new refineries. Shortly after the company closed on its 2002 purchase of the Golden Eagle refinery, Smith pledged the company to pay down $500 million of its debt by the end of 2003. In his February 3, 2004, report on Tesoro's 2003 financial performance, according to a company press release, Smith reported that the company had met its debt-reduction goal and ended the year with $77 million in cash. He also reported that Tesoro had "negotiated a more flexible, less expensive credit agreement and rationalized our asset base by trimming non-core and underperforming assets. In addition, despite higher utility expenses, we made good progress in right-sizing our cost structure."
In time, Tesoro's gamble on the giant Golden Eagle refinery paid off, contributing the lion's share of the company's net income of $20.4 million in the first quarter of 2003. Although the Martinez refinery represented only 40 percent of Tesoro's total refining capacity, it generated $68 million, or 62.3 percent, of Tesoro's $109.2 million in operating income from refining during the quarter, according to Alan Doyle of East Bay Business Times. Another major factor in Tesoro's return to profitability in early 2003 was the resurgence in crude prices, refining margins, and profits throughout the industry.
In the final quarter of 2003, Smith announced the sale of its marine-services unit to Martin Midstream Partners and Midstream Fuel Services for $32 million. The sale represented the end to all operations outside of Tesoro's core refining and marketing business. Interviewed by Elizabeth Allen of the San Antonio Express-News , Jacques Rousseau, a securities analyst with Friedman Billings Ramsey, hailed Tesoro's progress in reducing its debt burden, but he cautioned that it was important for the refiner to continue its efforts to pay down its debts. "The key thing is to focus on debt reduction so the next time the cycle turns, they'll be in good enough shape to avoid the same problems."
Smith married Gail Hutchison on November 10, 1990. Away from his responsibilities at Tesoro, Smith was active in both industry and civic affairs. He was a member of the Financial Executives Institute and served as the president of the organization's San Antonio chapter. He also served on the board of trustees of San Antonio's University of the Incarnate Word.
See also entries on Ford Motor Company, Tesoro Petroleum Corporation, and Valero Energy Corporation in International Directory of Company Histories .
Allen, Elizabeth, "San Antonio-Based Tesoro Petroleum To Shed Its Marine Services Unit," San Antonio Express-News , October 29, 2003.
Doyle, Alan, "Golden Eagle Puts Tesoro Back in Black," East Bay Business Times , May 2, 2003.
——, "Valero, Tesoro Seen Near New Deal on Golden Eagle," East Bay Business Times , May 3, 2002.
Jefferson, Greg, "Loan Agreement Saves Tesoro Petroleum Corp. from Potential Cash Crisis," San Antonio Express-News , September 26, 2002.
——, "Stockholders, Analysts Leery of Competitive Effort by Tesoro Petroleum," San Antonio Express-News , June 17, 2002.
McGurty, Janet, "Tesoro Scraps Williams Deal," Reuters Business, November 22, 2002.
Oberbeck, Steven, "BP Selling Salt Lake City Refinery in $677 Million Deal," Salt Lake Tribune , July 18, 2001.
Parmelee, Catherine, "Tesoro Alaska: Customer-Driven Strategies Fuel Tomorrow's Standards Today," Alaska Business Monthly , April 1, 2002.
"Tesoro Petroleum Corporation Reports Fourth Quarter and Full Year Results," company press release, January 21, 2004, http://www.tesoropetroleum.com/2004/20040203.html .
"Tesoro Posts Unexpected Loss; Poor Margins Blamed," Reuters, February 3, 2004.
"Tesoro to Focus on Refining and Marketing," company press release, January 21, 2004, http://www.tesoropetroleum.com/1999/990526.html .