8-K/A

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K/A

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): May 10, 2007

Tesoro Corporation

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation)	1-3473 (Commission File Number)	95-0862768 (IRS Employer Identification No.)
300 Concord Plaza Drive San Antonio, Texas (Address of principal executive offices)		78216-6999 (Zip Code)

(210) 828-8484
(Registrant’s telephone number,
including area code)

Not Applicable
(Former name or former address, if
changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

Consent of PricewaterhouseCoopers LLP

Annual Combined Financial Statements

Unaudited Quarterly Combined Financial Statements

Unaudited Pro Forma Combined Condensed Financial Statements

Item 2.01 Completion of Acquisition or Disposition of Assets.

On May 10, 2007, Tesoro Corporation (the “Company”) reported in a Current Report on Form 8-K the completion of its acquisition from Shell Oil Products US of a 100,000 barrel per day (“bpd”) refinery and a 42,000 bpd refined products terminal located south of Los Angeles, California along with 278 Shell-branded retail stations located throughout Southern California (collectively, the “Los Angeles Assets”). The Current Report dated May 10, 2007 is hereby amended to include the audited combined financial statements of the Los Angeles Assets and related pro forma financial information for the transactions (as defined in Exhibit 99.3) as required under Item 9.01 of Form 8-K. The Los Angeles Assets audited combined financial statements as of and for the year ended December 31, 2006 are filed as Exhibit 99.1 to this Current Report on Form 8-K and the related unaudited combined financial statements as of and for the period ended March 31, 2007 and 2006 are filed as Exhibit 99.2 to this Current Report on Form 8-K and each is incorporated herein by reference. The unaudited pro forma combined condensed financial statements for the transactions (as defined in Exhibit 99.3) as of and for the period ended March 31, 2007 and for the year ended December 31, 2006 are filed as Exhibit 99.3 to this Current Report on Form 8-K and are incorporated herein by reference.

9.01 Financial Statements and Exhibits.

(a) Financial Statements of Business Acquired

99.1	Annual Combined Financial Statements of the Shell Los Angeles Refinery and Other Associated Assets.
99.2	Quarterly Unaudited Combined Financial Statements of the Shell Los Angeles Refinery and Other Associated Assets.

(b) Pro Forma Financial Information

99.3 Unaudited Pro Forma Combined Condensed Financial Statements.

(d) Exhibits

23.1 Consent of PricewaterhouseCoopers LLP.

2

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: May 21, 2007

TESORO CORPORATION
By:	/s/ GREGORY A. WRIGHT
	Gregory A. Wright
	Executive Vice President and Chief Financial Officer

3

INDEX TO EXHIBITS

Exhibit Number	Description
23.1	Consent of PricewaterhouseCoopers LLP.
99.1	Annual Combined Financial Statements of the Shell Los Angeles Refinery and Other Associated Assets.
99.2	Quarterly Unaudited Combined Financial Statements of the Shell Los Angeles Refinery and Other Associated Assets.
99.3	Unaudited Pro Forma Combined Condensed Financial Statements.

4

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statement No. 333-135104 on Form S-4, in Registration Statements No. 333-25379, No. 333-39070, No. 333-112427 and No. 333-120716 on Form S-8, and in Registration Statement No. 333-84018 on Form S-3 of Tesoro Corporation of our report dated May 10, 2007 relating to the combined financial statements of The Shell Los Angeles Refinery and Other Associated Assets, which appears in this Current Report on Form 8-K.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP
Houston, Texas
May 21, 2007

EX-99.1

EXHIBIT 99.1

Shell Los Angeles Refinery
and Other Associated Assets
Combined Financial Statements
December 31, 2006

Shell Los Angeles Refinery and Other Associated Assets
Index
December 31, 2006

	Page
Report of Independent Auditors		1
Combined Financial Statements
Combined Balance Sheet		2
Combined Statement of Income and Owner’s Net Investment		3
Combined Statement of Cash Flows		4
Notes to Combined Financial Statements		5-9

PricewaterhouseCoopers LLP

1201 Louisiana

Suite 2900

Houston TX 77002-5678

Telephone (713) 356 4000

Facsimile (713) 356 4717

Report of Independent Auditors

To the Members of Equilon Enterprises LLC

In our opinion, the accompanying combined balance sheet and the related combined statements of income and owner’s net investment and cash flows of the Shell Los Angeles Refinery and other associated assets collectively (“the Business”) present fairly, in all material respects, the financial position of the Business at December 31, 2006, and the results of its operations and its cash flows for the year ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Equilon Enterprises LLC management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

As described in Notes 1 and 5 to the financial statements, the Business has significant transactions and relationships with affiliated entitles.

May 10, 2007
Houston, Texas

Shell Los Angeles Refinery and Other Associated Assets
Combined Balance Sheet
December 31, 2006

(dollars in thousands)

Assets
Current assets
Trade accounts receivable	$	9,515
Inventories		51,728
Prepaid expenses and other current assets		899
Total current assets		62,142
Property, plant and equipment
At cost		1,305,283
Less: Accumulated depreciation and amortization		(327,995	)
Net property, plant and equipment		977,288
Intangible assets		—
Other noncurrent assets		12,034
Total assets	$	1,051,464
Liabilities and Owner’s Net Investment
Current liabilities
Trade accounts payable	$	51,341
Other payables and accruals		30,575
Total current liabilities		81,916
Asset retirement obligation		2,716
Environmental liabilities		46,472
Other provisions and noncurrent liabilities		7,138
Deferred income taxes		239,654
Total liabilities		377,896
Owner’s net investment		673,568
Total liabilities and owner’s net investment	$	1,051,464

The accompanying notes are an integral part of these combined financial statements.

2

Shell Los Angeles Refinery and Other Associated Assets
Combined Statement of Income and Owner’s Net Investment
Year Ended December 31, 2006

(dollars in thousands)
Revenue
Operating revenue	$	2,884,133
Operating costs and expenses
Total cost of sales		2,096,078
Direct operating expenses		509,099
Depreciation and amortization		81,806
Total operating costs and expenses		2,686,983
Income from operations		197,150
Income before income taxes		197,150
Income tax expense		79,349
Net income after income taxes	$	117,801
Deemed distribution to parent company	$	(1,071	)
Owner’s net investment
Beginning of period	$	556,838
Ending of period	$	673,568

The accompanying notes are an integral part of these combined financial statements.

3

Shell Los Angeles Refinery and Other Associated Assets
Combined Statement of Cash Flows
Year Ended December 31, 2006

(dollars in thousands)

Cash flows from operating activities
Net income	$	117,801
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion		83,418
Increase in accounts receivable		(2,907	)
Increase inventory		(500	)
Increase in other assets		(3,058	)
Accounts payable and accrued liabilities		23,321
Deferred income tax		17,571
Provisions and noncurrent liabilities		(88,165	)
Net cash provided by operating activities		147,481
Cash flows from investing activities
Acquisition of fixed assets		(146,410	)
Net cash used in investing activities		(146,410	)
Cash flows from financing activities
Deemed distribution to parent company		(1,071	)
Net cash used in financing activities		(1,071	)
Net cash provided (used) during year		—
Cash and cash equivalents
Beginning cash		—
Ending cash	$	—

The accompanying notes are an integral part of these combined financial statements.

4

Shell Los Angeles Refinery and Other Associated Assets
Notes to Combined Financial Statements
December 31, 2006

1.	Organization and Basis of Presentation
	The accompanying combined financial statements present, in conformity with accounting principles generally accepted in the United States of America, the assets, liabilities, revenues and expenses of the historical operations of the Shell Los Angeles Refinery, including the Wilmington Terminal and 278 retail sites, (“the Business”) owned by Equilon Enterprises LLC, dba Shell Oil Products US (“SOPUS”). Throughout the period covered by the financial statements, SOPUS owned and managed the Business.
	The Business’ main operations consist of a crude oil refinery with a maximum production capacity of approximately 100,000 barrels per day, an oil products terminal located in Wilmington, CA, and 278 retail sites in Southern California. The Business’ operational assets include several conversion units, storage facilities and intra-refinery pipelines. Its primary markets served are Southern California and Arizona.
	The accompanying combined financial statements are presented on a carve-out basis to include the historical operations of the Business owned by SOPUS. In this context, a direct relationship existed between the carve-out operations and the sole owner, SOPUS. SOPUS’ net investment in the Business (owner’s net investment) is shown in lieu of stockholder’s equity in the combined financial statements. Owners net investment represents the balance resulting from transactions between the Business and SOPUS.
	Throughout the period covered by the combined financial statements, SOPUS has provided cash management services to the Business through a centralized treasury function. As a result, all charges and cost allocations for the Business were deemed to have been paid by the Business to SOPUS, in cash, during the period in which the cost was recorded in the combined financial statements.
	All of the allocations and estimates in the financial statements were based on assumptions that SOPUS’ management believes were reasonable under the circumstances. These allocations and estimates are not necessarily indicative of the costs and expenses that would have resulted if the Business had been operated as a separate entity.
2.	Significant Accounting Policies
	Use of Estimates
	The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires SOPUS’ management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. Although SOPUS’ management believes these estimates are reasonable, actual results could differ from these estimates.
	Revenues associated with the sale of crude oil, refined products, retail gasoline and all other sales are recorded at the time title passes to the customer.
	Property and Equipment
	Property, plant and equipment are carried at cost, less any impairment charges. Costs subject to depreciation are net of expected salvage values and deprecation is calculated on a straight-line basis over the estimated useful lives. The useful lives of productive assets are principally 20 years.

5

Shell Los Angeles Refinery and Other Associated Assets
Notes to Combined Financial Statements
December 31, 2006

Acquisitions and expenditures for renewals and betterments, including major refinery maintenance, are capitalized while maintenance and repairs are expensed as incurred. Costs related to capital projects are accumulated as “Construction in Progress” until the project is completed. Upon completion such costs are reclassified to property, plant and equipment. Depreciation commences when the assets are placed in service.

Asset Retirement Obligations

The Business records liabilities equal to the fair value of asset retirement obligations and corresponding additional costs in accordance with relevant accounting standards. The obligations included are those for which there Is a legal obligation as a result of existing or enacted law, statutes, or contracts.

Inventories

Inventories of crude oil and refined projects are valued at the lower of cost or market, reported on a LIFO basis. The year-end inventory values were below their current cost by approximately $107.6 million at the end of 2006.

Environmental and Other Accrued Liabilities

The Business accrues for environmental remediation and other liabilities when it is probable that such liabilities exist, based on past events or known conditions, and the amount of such liability can be reasonably estimated. If the Business can only estimate a range of probable liabilities, the minimum future undiscounted expenditure necessary to satisfy the Business’ future obligation is accrued.

In 2006, an agreement was reached to settle environmental obligations associated with the certain retail sites of the Business for $92 million. Based on the agreement, SOPUS received a full release of all related environmental obligations and an indemnity from any further legal or regulatory action.

Concentration of Credit and Other Risks

A significant portion of the Business’ receivables are from two unrelated customers who collectively represent 47% of the accounts receivable balance as of December 31,2006.

Income Taxes

The Business has not historically accrued income tax expense as the Business was included as part of Shell Petroleum Inc.’s consolidated income tax return, which owns SOPUS. In accordance with the provisions of the Internal Revenue Code, the Business does not file a separate U.S. federal income return. Income tax provision represents tax expense that would be incurred if the Business filed a separate stand alone tax return.

Comprehensive Income

SFAS No. 130, Reporting Comprehensive Income, requires disclosure of all changes in equity during a period except those resulting from investments by and distributions to the Business’ shareholders. There is no difference between the Business’ net income and comprehensive income for all periods presented.

New Accounting Standards

Recent accounting pronouncements that became effective during 2006 or are scheduled to become effective in 2007 and beyond, which could have or are expected to have a significant effect on the Business’ financial position, results of operations or cash flows are described in the following.

6

Shell Los Angeles Refinery and Other Associated Assets
Notes to Combined Financial Statements
December 31, 2006

FASB Interpretation No. 48, “Accounting for Uncertainty In Income Taxes - an Interpretation of FASB Statement 109”-

In July 2006 the FASB issued FIN 48, which is effective for financial years beginning after December 15, 2006. FIN 48 clarifies the accounting and recognition for certain tax benefits. The Business will adopt FIN 48 effective January 1, 2007, and does not expect a significant impact on the Business’ combined financial statements, however additional disclosures will be required.

3.	Taxes
	Income taxes incurred by the business were as follows:
(dollars in thousands)

Federal and other Income taxes
Current
U.S. federal	$	53,061
State		8,717
		61,778
Deferred
U.S. federal		15,092
State		2,479
		17,571
	$	79,349

Deferred income taxes are provided for the temporary differences between the tax basis of the Business’ assets and liabilities and the amounts reported in the financial statements. Significant components of deferred tax liabilities and assets as of December 31, 2006, are as follows:

(dollars in thousands)

Deferred tax liabilities
Property, plant and equipment	$	(250,115	)
Total deferred tax liabilities		(250,115	)
Deferred tax assets
Environmental		8,008
Other		2,453
Total deferred tax assets		10,461
Total net deferred tax liabilities	$	(239,654	)

Total income tax expenses for 2006 was equivalent to an effective tax rate of 40.25% on earnings before income taxes of $197.2 million.

7

Shell Los Angeles Refinery and Other Associated Assets
Notes to Combined Financial Statements
December 31, 2006

Reconciliation to the expected tax at the United States statutory rate (35%) is as follows:

(dollars in thousands)
Expected tax at U.S. statutory rate	$	69,003
State tax		11,196
Domestic manufacturing deductions		(1,593	)
Other		743
	$	79,349

4.	Property, Plant and Equipment
	Property, plant and equipment consisted of the following at December 31, 2006:

(dollars in thousands)
Land	$	99,159
Building and equipment		1,089,361
Construction work-in-progress		98,808
Precious metals		5,943
Other		12,012
		1,305,283
Accumulated depreciation		(327,995	)
Net property, plant and equipment	$	977,288

5.	Related Party Transactions
	The Business has entered into purchase and sale transactions with SOPUS including its affiliates. Such transactions are In the ordinary course of business.
	The aggregate amounts of such transactions for the year ended December 31, 2006, consisted of purchases of crude oil from Shell Oil Products US totaling approximately $2 billion and sales of refined products to Shell Oil Products US totaling approximately $1.2 billion. All related party transactions are settled with SOPUS through owners net investment. See Note 1.
	Certain of the Business’ personnel participate in the Alliance Pension Plan (a defined benefit plan) and the Alliance Savings Plan (a defined contribution plan). Also, certain of those personnel participate in Shell sponsored benefit plans that provide pensions and other postretirement benefits. A portion of these plans are unfunded, and the costs are shared by SOPUS and its employees, The Business’ allocated expense related to these plans was approximately $4.5 million for the year ended December 31, 2006.
	Allocated charges for certain operating activities performed by Shell Oil Products and its affiliates are allocated as an expense to the Business. Charges related to these costs amounted to $51 million during the year ended December 31, 2006 and are reflected as a component of direct operating expenses. See Note 1.
6.	Commitments and Contingencies
	The Business leases certain real property, equipment and operating facilities under various operating leases. The Business also incur costs associated with leased land, rights-of-way, permits and regulatory fees, the contracts for which generally extend beyond one year but can be cancelled at any time should they not be required for operations. Future noncancellable commitments related to these items at December 31, 2006, were not significant.

8

Shell Los Angeles Refinery and Other Associated Assets
Notes to Combined Financial Statements
December 31,2006

	Total lease expense Incurred for the year ended December 31, 2006, was approximately $27.4 million. The leased assets were purchased subsequent to December 31, 2006.
	The Business is subject to possible loss contingencies including actions or claims based on environmental laws, federal regulations, and other matters.
	The Business may be obligated to take remedial action as a result of the enactment of laws or the issuance of new regulations or to correct for the effects of the Business’ actions on the environment. The Business accrued an amount of approximately $37.3 million at December 31, 2006. for planned environmental remediation activities. In SOPUS management’s opinion, this is appropriate based on existing facts and circumstances.
7.	Subsequent Events
	SOPUS entered into certain agreements to sell the Business to Tesoro Corporation on January 29, 2007. The transaction is expected to close on May 10, 2007.

9

EX-99.2

EXHIBIT 99.2

Shell Los Angeles Refinery
and Other Associated Assets
Combined Financial Statements
March 31, 2006 and 2007

Shell Los Angeles Refinery and Other Associated Assets
Combined Balance Sheet
Three Months Ended March 31, 2006 and 2007

	2006			2007
(dollars in thousands)	(Unaudited)
Assets
Current assets
Trade accounts receivable	$	8,078		$	8,265
Inventories		81,566			95,217
Prepaid expenses and other current assets		247			2,573
Total current assets		89,891			106,055
Property, plant and equipment
At cost		1,182,900			1,412,557
Less: Accumulated depreciation and amortization		(264,175	)		(348,797	)
Net property, plant and equipment		918,725			1,063,760
Other noncurrent assets		13,301			11,451
Total assets	$	1,021,917		$	1,181,266
Liabilities and Owner’s Net Investment
Current liabilities
Trade accounts payable	$	32,541		$	40,203
Other payables		13,192			51,463
Total current liabilities		45,733			91,666
Environmental liabilities		133,646			44,630
Other provisions and noncurrent liabilities		10,030			9,553
Deferred income taxes		226,476			243,655
Total liabilities		415,885			389,504
Owner’s net investment		606,032			791,762
Total liabilities and owner’s net investment	$	1,021,917		$	1,181,266

The accompanying notes are an integral part of these combined financial statements.

1

Shell Los Angeles Refinery and Other Associated Assets
Combined Statement of Income and Owner’s Net Investment
Three Months Ended March 31, 2006 and 2007

	2006		2007
(dollars in thousands)	(Unaudited)
Revenue
Operating revenue	$	657,551	$	582,866
Operating costs and expenses
Total cost of sales		492,446		400,549
Direct operating expenses		120,746		133,212
Depreciation and amortization		18,528		20,157
Total operating costs and expenses		631,720		553,918
Income from operations		25,831		28,948
Income before income taxes		25,831		28,948
Income tax expense		10,397		11,652
Net income after income taxes	$	15,434	$	17,296
Deemed contribution from (distribution to) parent company	$	33,760	$	100,898
Owner’s net investment
Beginning of period	$	556,838	$	673,568
End of period	$	606,032	$	791,762

The accompanying notes are an integral part of these combined financial statements.

2

Shell Los Angeles Refinery and Other Associated Assets
Combined Statement of Cash Flows
Three Months Ended March 31, 2006 and 2007

	2006			2007
(dollars in thousands)	(unaudited)
Cash flows from operating activities
Net income	$	15,434		$	17,296
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation, amortization and accretion		19,598			20,802
Increase in accounts receivable		(1,470	)		1,250
Increase Inventory		(30,338	)		(43,489	)
Increase in other assets		(3,673	)		(1,091	)
Accounts payable and accrued liabilities		(12,862	)		9,750
Deferred income tax		4,393			4,001
Provisions and noncurrent liabilities		(815	)		(2,143	)
Net cash provided by (used in) operating activities		(9,733	)		6,376
Cash flows from investing activities
Acquisition of fixed assets		(24,027	)		(107,274	)
Net cash (used in) investing activities		(24,027	)		(107,274	)
Cash flows from financing activities
Deemed contribution from parent company		33,760			100,898
Net cash provided by financing activities		33,760			100,898
Net cash provided (used) during year		—			—
Cash and cash equivalents
Beginning cash		—			—
Ending cash	$	—		$	—

The accompanying notes are an integral part of these combined financial statements.

3

Shell Los Angeles Refinery and Other Associated Assets

Notes to Unaudited Combined Financial Statements
March 31, 2006 and 2007

1.	Organization and Basis of Presentation
	The accompanying unaudited combined financial statements present the assets, liabilities, revenues and expenses of the historical operations of the Shell Los Angeles Refinery, including the Wilmington Terminal and 278 retail sites, (“the Business”) owned by Equilon Enterprises LLC, dba Shell Oil Products US (“SOPUS”). Throughout the period covered by the financial statements, SOPUS owned and managed the Business.
	In the opinion of management, the accompanying unaudited combined financial statements contain all adjustments necessary to present fairly the financial position as of March 31, 2007 and 2006, and the results of operations and cash flows for the three months ended March 31, 2007 and 2006. The unaudited combined financial statements do not include all disclosures normally required by accounting principles generally accepted in the United States of America (“GAAP”).
	The accompanying unaudited combined financial statements are presented on a carve-out basis to include the historical operations of the Business owned by SOPUS. In this context, a direct relationship existed between the carve-out operations and the sole owner, SOPUS. SOPUS’ net investment in the Business (owner’s net investment) is shown in lieu of stockholder’s equity in the combined financial statements.
	Throughout the period covered by the unaudited combined financial statements, SOPUS has provided cash management services to the Business through a centralized treasury function. As a result, all charges and cost allocations for the Business were deemed to have been paid by the Business to SOPUS, in cash, during the period in which the cost was recorded in the combined financial statements.
	All of the allocations and estimates in the unaudited combined financial statements were based on assumptions that SOPUS’ management believes were reasonable under the circumstances. These allocations and estimates are not necessarily indicative of the costs and expenses that would have resulted if the Business had been operated as a separate entity.

2.	Significant Accounting Policies
	Use of Estimates The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires SOPUS’ management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities. Although SOPUS’ management believes these estimates are reasonable, actual results could differ from these estimates.
	Revenues Revenues associated with the sale of crude oil, refined products, retail gasoline and all other sales are recorded at the time title passes to the customer.
	Property and Equipment Property, plant and equipment are carried at cost, less any impairment charges. Costs subject to depreciation are net of expected salvage values and deprecation is calculated

4

Shell Los Angeles Refinery and Other Associated Assets

Notes to Unaudited Combined Financial Statements
March 31, 2006 and 2007

on a straight-line basis over the estimated useful lives. The useful lives of productive assets are principally 20 years.

Acquisitions and expenditures for renewals and betterments, including major refinery maintenance, are capitalized while maintenance and repairs are expensed as incurred. Costs related to capital projects are accumulated as “Construction in Progress” until the project is completed. Upon completion such costs are reclassified to property, plant and equipment. Depreciation commences when the assets are placed in service.

Asset Retirement Obligations
The Business records liabilities equal to the fair value of asset retirement obligations and corresponding additional costs in accordance with relevant accounting standards. The obligations included are those for which there is a legal obligation as a result of existing or enacted law, statutes, or contracts.

Inventories
Inventories of crude oil and refined projects are valued at the lower of cost or market, reported on a LIFO basis.

Environmental and Other Accrued Liabilities
The Business accrues for environmental remediation and other liabilities when it is probable that such liabilities exist, based on past events or known conditions, and the amount of such liability can be reasonably estimated. If the Business can only estimate a range of probable liabilities, the minimum future undiscounted expenditure necessary to satisfy the Business’ future obligation is accrued.

In 2006, an agreement was reached to settle environmental obligations associated with the certain retail sites of the Business for $92 million. Based on the agreement, SOPUS received a full release of all related environmental obligations and an indemnity from any further legal or regulatory action.

Concentration of Credit and Other Risks
A significant portion of the Business’ receivables are from two unrelated customers who collectively represent 53% of the accounts receivable balance as of March 31, 2007.

Income Taxes
The Business has not historically accrued income tax expense as the Business was included as part of Shell Petroleum Inc.’s consolidated income tax return, which owns SOPUS. In accordance with the provisions of the Internal Revenue Code, the Business does not file a separate U.S. federal income return. Income tax provision represents tax expense that would be incurred if the business filed a separate stand alone tax return.

Comprehensive Income
SFAS No. 130, Reporting Comprehensive Income, requires disclosure of all changes in equity during a period except those resulting from investments by and distributions to the Business’ shareholders. There is no difference between the Business’ net income and comprehensive income for all periods presented.

5

Shell Los Angeles Refinery and Other Associated Assets

Notes to Unaudited Combined Financial Statements
March 31, 2006 and 2007

	FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement 109”- In July 2006 the FASB issued FIN 48, which is effective for financial years beginning after December 15, 2006. FIN 48 clarifies the accounting and recognition for certain tax benefits. The Business adopted FIN 48 effective January 1, 2007, which had no impact on the Business’ combined financial statements or disclosures.
3.	Taxes
	Total income tax expenses for March 31, 2006 and 2007 was equivalent to an effective tax rate of 40.25% on earnings, representing the U.S. statutory rate of 35% plus state taxes incurred.
4.	Related Party Transactions
	The Business has entered into purchase and sale transactions with SOPUS including its affiliates. Such transactions are in the ordinary course of business. The aggregate amounts of such transactions for the three months ended March 31, 2007 and 2006, consisted of hydrocarbon purchases from Shell Oil Products US totaling approximately $401 million and $492 million, respectively, and sales of refined products to Shell Oil Products US totaling approximately $164 million and $287 million, respectively. Certain of the Business’ personnel participate in the Alliance Pension Plan (a defined benefit plan) and the Alliance Savings Plan (a defined contribution plan). Also, certain of those personnel participate in Shell sponsored benefit plans that provide pensions and other postretirement benefits. A portion of these plans are unfunded, and the costs are shared by SOPUS and its employees. The Business’ allocated expense related to these plans was approximately $1.3 million for the three months ended March 31, 2007 and 2006.
	Allocated charges for certain operating activities performed by Shell Oil Products and its affiliates are allocated as an expense to the Business. Charges related to these costs amounted to $16 million and $11 million during the three months ended March 31, 2007 and 2006, respectively and are reflected as a component of direct operating expenses. See Note 1.
5.	Commitments and Contingencies
	The Business is subject to possible loss contingencies including actions or claims based on environmental laws, federal regulations, and other matters.
	The Business may be obligated to take remedial action as a result of the enactment of laws or the issuance of new regulations or to correct for the effects of the Business’ actions on the environment. The Business accrued an amount of approximately $44.6 million at March 31, 2007, for planned environmental remediation activities. In SOPUS management’s opinion, this is appropriate based on existing facts and circumstances.
6.	Subsequent Events
	SOPUS entered into certain agreements to sell the Business to Tesoro Corporation on January 29, 2007. The transaction closed on May 10, 2007.

6

EX-99.3

EXHIBIT 99.3

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

Unaudited Pro Forma Combined Condensed Balance Sheet as of March 31, 2007	A-2
Notes to the Unaudited Pro Forma Combined Condensed Balance Sheet	A-3
Unaudited Pro Forma Combined Condensed Statement of Operations for the year ended December 31, 2006	A-4
Unaudited Pro Forma Combined Condensed Statement of Operations for the three months ended March 31, 2007	A-5
Notes to the Unaudited Pro Forma Combined Condensed Statement of Operations	A-6

On May 10, 2007, Tesoro Corporation (“Tesoro” or the “Company”) acquired from Shell Oil Products US (the “Los Angeles Assets Acquisition”) a 100,000 barrel per day (“bpd”) refinery and a 42,000 bpd refined products terminal located south of Los Angeles, California along with 278 Shell-branded retail stations located throughout Southern California (collectively, the “Los Angeles Assets”).The purchase price for the Los Angeles Assets was $1.76 billion which includes $213 million for estimated inventories, subject to post-closing adjustments. Tesoro financed the Los Angeles Assets Acquisition, including estimated fees and expenses of $28 million, with $584 million in cash and with proceeds from (i) the borrowing of $500 million under our amended and restated credit agreement (the “amended credit agreement”) and (ii) the borrowing of $700 million under our 364-day $700 million term loan (the “interim term loan” and collectively, the “Financing Transactions”). The Los Angeles Assets Acquisition and the Financing Transactions are collectively referred to as the “Transactions”.

The following unaudited pro forma combined condensed balance sheet gives effect to the Transactions as if each had occurred on March 31, 2007 and the following unaudited pro forma combined condensed statements of operations give effect to the Transactions as if each had occurred on January 1, 2006. The unaudited pro forma combined condensed financial statements do not include the USA Petroleum acquisition as it is insignificant to the Company’s financial position and results of operations. The USA Petroleum acquisition was completed on May 1, 2007 and included 138 USA retail stations located primarily in California. The purchase price of the assets and the USA^® brand of $273 million was paid in cash, including $7 million for inventories, subject to post-closing adjustments.

The estimates of the fair values of the Los Angeles Assets and related liabilities included in the unaudited pro forma combined condensed balance sheet are based on preliminary estimates. These estimates with respect to inventories, property, plant and equipment, acquired intangibles and certain assumed liabilities will likely change. The unaudited pro forma combined condensed financial statements are based on assumptions that the Company believes are reasonable and are intended for informational purposes only. They are not necessarily indicative of the future financial position or the results of operations that would have actually occurred had the Los Angeles Assets Acquisition taken place as of the date or for the periods presented. The unaudited pro forma combined condensed statements of operations do not reflect any benefits from potential cost savings or revenue enhancements resulting from the integration of the operations of the Los Angeles Assets Acquisition. The unaudited pro forma combined condensed statements of operations include allocations of corporate overhead related to the historical Los Angeles Assets financial statements totaling $51 million and $16 million for the year ended December 31, 2006 and the three months ended March 31, 2007, respectively. Tesoro believes the actual incremental corporate overhead that we will incur will be less than the allocated amounts.

These unaudited pro forma combined condensed statements should be read in conjunction with the Company’s annual report on Form 10-K for the year ended December 31, 2006 including “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, the Company’s historical consolidated financial statements included in its quarterly report on Form 10-Q for the three months ended March 31, 2007 and the financial statements of the Shell Los Angeles Refinery and Other Associated Assets included as Exhibit 99.1 and Exhibit 99.2 to this Form 8-K/A.

A-1

UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
March 31, 2007

	Historical						Pro Forma
	Tesoro			Los Angeles Assets			Adjustments			Combined
	(Dollars in millions)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	829			—			(606	) (a)	$	223
Receivables, less allowance for doubtfull accounts		913			8			(8	) (b)		913
Inventories		944			95			147	(c)		1,186
Prepayments and other		156			3			(3	) (b)		156
Total Current Assets		2,842			106			(470	)		2,478
Property, plant and equipment		3,695			1,412			(24	) (c)		5,083
Less accumulated depreciation and amortization		(918	)		(349	)		349	(c)		(918	)
Net Property, Plant and Equipment		2,777			1,063			325	(c)		4,165
Goodwill		89			—			—			89
Acquired intangibles, net		110			—			123	(c)		233
Other, net		258			12			67	(c)		353
								16	(a)
Total Other Noncurrent Assets		457			12			206			675
TOTAL ASSETS	$	6,076			1,181			61		$	7,318
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	1,239			40			(40	) (b)	$	1,239
Accrued liabilities		371			51			(51	) (b)		371
Current maturities of debt		17			—			—			17
Total current liabilities		1,627			91			(91	)		1,627
Deferred income taxes		358			244			(244	) (b)		358
Other liabilities		428			54			(12	) (c)		470
Debt		1,032			—			1,200	(a)		2,232
Owner’s net investment		—			792			(792	) (d)		—
STOCKHOLDERS’ EQUITY:
Common stock		12			—			—			12
Additional paid-in capital		863			—			—			863
Retained earnings		1,983			—			—			1,983
Treasury stock		(159	)		—			—			(159	)
Accumulated other comprehensive loss		(68	)		—			—			(68	)
Total Stockholders’ Equity		2,631			—			—			2,631
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	6,076			1,181			61		$	7,318

A-2

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
March 31, 2007

(a) Represents an increase to aggregate borrowings of $1.2 billion and a decrease to cash of $606 million to fund the Los Angeles Assets acquisition and pay related fees and expenses totaling $1,790 million as well as to fund debt issue costs totaling an estimated $16 million.

(b) Represents an adjustment to exclude assets and liabilities of the Los Angeles Assets we are not acquiring.

(c) The following is a preliminary estimate of the purchase price for the Los Angeles Assets (in millions):

Purchase price per the purchase and sale agreement	$	1,630
Purchase price adjustment to reflect retail stations not purchased		(87	)
Estimated value of feedstock and refined product inventories		235
Estimated direct costs of acquisition		12
Total purchase price	$	1,790

Feedstock and refined product inventories reflect estimated post-closing adjustments. Further post-closing adjustments will be necessary if the actual value of the feedstock and refined products inventories differs from the estimated value above. For purposes of this pro forma analysis, the above estimated purchase price has been allocated based on a preliminary assessment of the fair value of the assets to be acquired and liabilities to be assumed as follows (in millions):

	Fair			Historical
	Value			Value			Adjustment
Property, plant and equipment, net	$	1,388			1,063			325
Inventories:
Feedstocks and refined products		235			88			147
Materials and supplies		7			7			—
Acquired intangibles		123			—			123
Other, net (primarily deferred turnarounds)		79			12			67
Employee benefits, environmental and other liabilities		(42	)		(54	)		12
Total purchase price	$	1,790

(d) Represents the elimination of historical equity related to the Shell Assets.

A-3

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2006

	Historical						Pro Forma
	Tesoro			Los Angeles Assets			Adjustments			Combined
	(Dollars in millions)
REVENUES	$	18,104			2,884			(10	) (a)	$	20,978
COSTS AND EXPENSES:
Costs of sales and operating expenses		16,314			2,605	(b)		12	(c)		18,931
Selling, general and administrative expenses		176			—			—			176
Depreciation and amortization		247			82			(35	) (d)		313
								10	(e)
								9	(f)
Loss on assets disposals and impairments		50			—			—			50
OPERATING INCOME		1,317			197			(6	)		1,508
Interest and financing costs		(77	)		—			(78	) (g)		(163	)
								(8	) (h)
Interest income and other		46			—			(30	) (i)		16
EARNINGS BEFORE INCOME TAXES		1,286			197			(122	)		1,361
Income tax provision		485			79			(47	) (j)		517
NET EARNINGS	$	801			118			(75	)	$	844
NET EARNINGS PER SHARE:
Basic	$	11.78								$	12.41
Diluted	$	11.46								$	12.07
WEIGHTED AVERAGE COMMON SHARES:
Basic		68.0									68.0
Diluted		69.9									69.9

A-4

UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 2007

	Historical						Pro Forma
	Tesoro			Los Angeles Assets			Adjustments			Combined
	(Dollars in millions)
REVENUES	$	3,876			582			(3	) (a)	$	4,455
COSTS AND EXPENSES:
Costs of sales and operating expenses		3,548			533	(b)		3	(c)		4,084
Selling, general and administrative expenses		69			—			—			69
Depreciation and amortization		69			20			(8	) (d)		86
								3	(e)
								2	(f)
Loss on assets disposals and impairments		2			—			—			2
OPERATING INCOME		188			29			(3	)		214
Interest and financing costs		(17	)		—			(19	) (g)		(37	)
								(1	) (h)
Interest income and other		14			—			(8	) (i)		6
EARNINGS BEFORE INCOME TAXES		185			29			(31	)		183
INCOME TAX PROVISION		69			12			(12	) (j)		69
NET EARNINGS	$	116			17			(19	)	$	114
NET EARNINGS PER SHARE:
Basic	$	1.72								$	1.69
Diluted	$	1.67								$	1.64
WEIGHTED AVERAGE COMMON SHARES:
Basic		67.6									67.6
Diluted		69.4									69.4

A-5

NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2006 and Three Months Ended March 31, 2007

(a)	Represents an adjustment to eliminate rental revenues associated with Shell’s company-owned/dealer operated retail stations that were not sold to Tesoro.
(b)	Historical Los Angeles Assets results include $51 million and $16 million of allocated corporate overhead expenses for the year ended December 31, 2006 and the period ended March 31, 2007, respectively.
(c)	Represents franchise fees Tesoro would pay to Shell for the use of Shell’s trademarks and other licensed branding under an agreement that will be in place after the acquisition that is based on the estimated volume of products sold at certain retail stations.
(d)	Represents an adjustment to historical depreciation expense based on our preliminary allocation of fair values to property, plant and equipment using estimated weighted-average useful lives of 28 years for refinery assets, 19 years for terminals and 15 years for retail assets and a salvage value of 10%.
(e)	Represents an adjustment to record amortization of acquired intangible assets consisting primarily of air emission credits, software licenses and refinery permits and plans with lives ranging from 3 to 28 years, for a total weighted-average life of 23 years.
(f)	Represents an adjustment to record amortization of deferred turnarounds based on our preliminary allocation of fair values using a weighted-average estimated useful life of 4 years.
(g)	Represents additional interest expense associated with the $1.2 billion in borrowings to finance the Los Angeles Assets acquisition at a weighted average rate of 6.45%. A 1/8% change in the interest rates associated with the amended credit agreement and interim term loan would have approximately a $625,000 and $875,000 effect on annual interest expense, respectively.
(h)	Represents amortization of the $16 million of deferred financing costs over terms of five years and one year for the amended credit agreement and the interim term loan, respectively.
(i)	Represents a reduction in interest income reflecting the $606 million reduction in cash used to fund a portion of the acquisition assuming an average rate of interest earned of 5.0%.
(i)	Represents the income tax effect of the adjustments above at a combined statutory tax rate of 38.6%.

A-6