Filed pursuant to Rule 424(b)(3)

Registration No. 333-146230

PROSPECTUS

 

Tesoro Corporation

 

Offer to Exchange

$500,000,000 Outstanding

61/2% Senior Notes due 2017

for

$500,000,000 Registered

61/2% Senior Notes due 2017

 

The Exchange Offer

 

The exchange offer expires at 5:00 p.m., New York City time, on November 19, 2007, unless extended.

 

The exchange offer is not conditioned upon the tender of any minimum aggregate amount of the outstanding unregistered 61/2% Senior Notes due 2017, which we refer to in this prospectus as the outstanding notes.

 

All of the outstanding notes tendered according to the procedures set forth in this prospectus and not withdrawn will be exchanged for an equal principal amount of registered 61/2% Senior Notes due 2017, Series B, which we refer to as the exchange notes.

 

The exchange offer is not subject to any condition other than that it does not violate applicable laws or any applicable interpretation of the staff of the Securities and Exchange Commission, and that no judicial or administrative proceeding be pending or shall have been threatened that would limit us from proceeding with the exchange offer.

 

We urge you to carefully review the risk factors beginning on page 19 of this prospectus, which you should consider before participating in the exchange offer.

 

The Exchange Notes

 

The terms of the exchange notes to be issued in the exchange offer are substantially identical to the outstanding notes, except that we have registered the issuance of the exchange notes with the Securities and Exchange Commission. In addition, the exchange notes will not be subject to the transfer restrictions applicable to the outstanding notes or contain provisions relating to additional interest, will bear a different CUSIP or ISIN number from the outstanding notes and will not entitle the holder to registration rights. We will not apply for listing of the exchange notes on any securities exchange or arrange for them to be quoted on any quotation system. The outstanding notes and the exchange notes are referred to in this prospectus as the “notes”.

 

The Guarantees

 

The exchange notes initially will be jointly and severally guaranteed on a senior unsecured basis by substantially all of our existing and future domestic subsidiaries that have outstanding or incur or guarantee other specified indebtedness.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

 

The date of this prospectus is October 19, 2007.

 

Table of Contents

 

 

 

 

 

We have not authorized anyone to give you any information or to make any representations about anything we discuss in this prospectus other than those contained in the prospectus. If you are given any information or representation about these matters that is not discussed in this prospectus, you must not rely on that information.

 

We are not making an offer to sell, or a solicitation of an offer to buy, the exchange notes or the outstanding notes in any jurisdiction where, or to any person to or from whom, the offer or sale is not permitted.

 

In making an investment decision, investors must rely on their own examination of the issuer and the terms of the offer, including the merits and risks involved. These securities have not been recommended by any federal or state securities commission or regulatory authority. Furthermore, the foregoing authorities have not confirmed the accuracy or determined the adequacy of this document. Any representation to the contrary is a criminal offense.

 

We are not making any representation to any holder of the outstanding notes regarding the legality of an investment in the exchange notes under any legal investment or similar laws or regulations. We are not providing you with any legal, business, tax or other advice in this prospectus. You should consult your own attorney, business advisor and tax advisor to assist you in making your investment decision and to advise you whether you are legally permitted to invest in the exchange notes.

 

In connection with the exchange offer, we have filed with the U.S. Securities and Exchange Commission, or the “SEC”, a registration statement on Form S-4, under the Securities Act of 1933, as amended, relating to the exchange notes to be issued in the exchange offer. As permitted by the SEC, this prospectus omits information included in the registration statement. For a more complete understanding of the exchange offer, you should refer to the registration statement, including its exhibits.

 

 

 

We sold the outstanding notes to Lehman Brothers Inc., J.P. Morgan Securities Inc., Goldman, Sachs & Co. and Greenwich Capital Markets, Inc., as the initial purchasers, on May 29, 2007, in transactions not registered under the Securities Act of 1933, in reliance on the exemption provided under Section 4(2) of the Securities Act. The initial purchasers placed the outstanding notes with qualified institutional buyers (as defined in Rule 144A under the Securities Act) (Qualified Institutional Buyers, or QIBs) and certain non-U.S. investors, each of whom agreed to comply with certain transfer restrictions and other restrictions. Accordingly, the outstanding notes may not be reoffered, resold or otherwise transferred in the United States unless such transaction is registered under the Securities Act or an applicable exemption from the registration requirements of the Securities Act is available. We are offering the exchange notes by this prospectus in order to satisfy our obligations under the registration rights agreement among Tesoro, certain of our subsidiary guarantors and the initial purchasers (the “registration rights agreement”).

 

The outstanding notes were initially represented by two global notes (the “Old Global Notes”) in registered form, registered in the name of Cede & Co., as nominee for The Depository Trust Company (DTC, or the Depositary), as depositary. The exchange notes exchanged for outstanding notes represented by the Old Global Notes will be initially represented by two or more global exchange notes (the “Exchange Global Notes”) in registered form, registered in the name of the Depositary. See “Book-entry; delivery and form”. Unless otherwise indicated, references in this prospectus to Global Notes shall be references to the Old Global Notes and the Exchange Global Notes.

 

Based on an interpretation of the SEC, exchange notes issued pursuant to the exchange offer in exchange for outstanding notes may be offered for resale, resold and otherwise transferred by a holder thereof (other than (1) a broker-dealer who purchased such outstanding notes directly from us for resale pursuant to Rule 144A or any other available exemption under the Securities Act or (2) a person that is our “affiliate” (within the meaning of Rule 405 of the Securities Act)), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such holder is acquiring the exchange notes in its ordinary course of business and is not participating, and has no arrangement or understanding with any person to participate, in the distribution of the exchange notes. Holders of outstanding notes wishing to accept the exchange offer must represent to us that such conditions have been met.

 

Each broker-dealer that receives exchange notes for its own account pursuant to the exchange offer must agree that it will deliver a prospectus in connection with any resale of such exchange notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an “underwriter” within the meaning of the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of exchange notes received in exchange for outstanding notes where such outstanding notes were acquired by such broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of one year after the expiration date of the exchange offer, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See “Plan of Distribution”.

 

The exchange notes will be a new issue of securities for which there currently is no market. The initial purchasers are not obligated to make a market in the exchange notes, and any such market-making may be discontinued at any time without notice. Because the outstanding notes were issued, and the exchange notes are being issued, to a limited number of institutions who typically hold similar securities for investment, we do not expect that an active public market for the exchange notes will develop. Accordingly, there can be no assurance as to the development, liquidity or maintenance of any market for the exchange notes on any securities exchange. See “Risk Factors”.

 

WHERE YOU CAN FIND MORE INFORMATION

 

We file annual, quarterly and special reports, proxy statements and other information with the SEC. You may read and copy materials that we have filed with the SEC at the following SEC public reference room:

 

450 Fifth Street, N.W.
Room 1024
Washington, D.C. 20549

 

Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

 

Our common stock is listed and traded on the New York Stock Exchange under the symbol “TSO”, and our SEC filings can also be read at the following address:

 

New York Stock Exchange, 20 Broad Street, New York, New York

 

Our SEC filings are also available to the public on the SEC’s internet website at http://www.sec.gov and on our website at http://www.tsocorp.com.

 

We have agreed that, for so long as any of the outstanding notes remain outstanding, we will furnish to holders of notes and to prospective purchasers designated by such holders the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act to permit compliance with Rule 144A in connection with resales of the outstanding notes.

 

This prospectus “incorporates by reference” the information we file with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference is considered to be part of this prospectus, and information that we file later with the SEC will automatically update and supersede the information in this prospectus. We incorporate by reference the documents listed below and any future filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934, as amended:

 

 

You may request a copy of these filings at no cost, by writing or telephoning us at the following address:

 

Charles S. Parrish, Secretary

Tesoro Corporation

300 Concord Plaza Drive

San Antonio, Texas 78216-6999

(210) 828-8484

 

FORWARD-LOOKING STATEMENTS

 

This prospectus includes and incorporates by reference forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are included throughout this prospectus, including in the sections entitled “Summary” and “Risk Factors”, and relate to, among other things, expectations regarding refining margins, revenues, cash flows, capital expenditures, turnaround expenses, other financial items, discussions of estimated future revenue enhancements and cost savings. These statements also relate to our business strategy, goals and expectations concerning our market position, future operations, margins and profitability. We have used the words “anticipate”, “believe”, “could”, “estimate”, “expect”, “intend”, “may”, “plan”, “predict”, “project”, “will” and similar terms and phrases to identify forward-looking statements in this prospectus and in the documents incorporated by reference in this prospectus.

 

Although we believe the assumptions upon which these forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. Our operations involve risks and uncertainties, many of which are outside our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct. Accordingly, these forward-looking statements are qualified in their entirety by reference to the factors described in “Risk Factors” and included or incorporated by reference elsewhere in this prospectus.

 

Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking statements depending on a variety of factors including, but not limited to:

 

 

Many of these factors are described in greater detail in our filings with the SEC. All future written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the previous statements. Except as required by law, we undertake no obligation to update any information contained or incorporated by reference in this prospectus or to publicly release the results of any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of this prospectus.

						Throughput (mbpd)
																		Six Months
		Rated Crude																Ended
		Oil Capacity																June 30,
Refinery		(mbpd)(a)				2004				2005				2006				2007
California
Golden Eagle			166				153				165				165				140
Los Angeles(b)			100				—				—				—				25
Pacific Northwest
Washington			115				117				111				111				124
Alaska			72				57				60				56				59
Mid-Pacific
Hawaii			94				84				83				85				85
Mid-Continent
North Dakota			58				56				58				56				57
Utah			58				53				53				56				49
Total(b)			663				520				530				529				539

(a)		Crude oil capacity is referenced from the Oil and Gas Journal.
(b)		We acquired the Los Angeles refinery on May 10, 2007 in connection with the Shell Acquisition. See “The Acquisition”. Throughput for 2007 includes amounts for the Los Angeles refinery since acquisition averaged over the six month period presented. Throughput averaged over the 51 days of operation was 89 mbpd.

Background of the Outstanding Notes		Tesoro Corporation issued $500 million aggregate principal amount of the outstanding notes to Lehman Brothers, Inc., J.P. Morgan Securities Inc., Goldman, Sachs & Co. and Greenwich Capital Markets, Inc., as the initial purchasers, on May 29, 2007. The initial purchasers then sold the outstanding notes to qualified institutional buyers and certain non-U.S. investors in reliance on Rule 144A and Regulation S under the Securities Act. Because they were sold pursuant to exemptions from registration, the outstanding notes are subject to transfer restrictions.
		In connection with the issuance of the outstanding notes, we entered into a registration rights agreement in which we agreed to deliver to you this prospectus and to use our reasonable best efforts to complete the exchange offer or to file and cause to become effective a registration statement covering the resale of the exchange notes.
The Exchange Offer		We are offering to exchange up to $500 million principal amount of the exchange notes for an identical principal amount of the outstanding notes. The outstanding notes may be exchanged only in a principal amount of $2,000 or an integral multiple of $1,000 in excess thereof. The terms of the exchange notes are identical in all material respects to the outstanding notes except that the exchange notes will be registered under the Securities Act and will not be subject to provisions relating to additional interest. Because we have registered the exchange notes, the exchange notes will not be subject to transfer restrictions and holders of exchange notes will have no registration rights.
Resale of Exchange Notes		We believe you may offer, sell or otherwise transfer the exchange notes you receive in the exchange offer without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that:
		• you acquire the exchange notes you receive in the exchange offer in the ordinary course of your business;
		• you are not participating in, and have no understanding with any person to participate in, the distribution of the exchange notes issued to you in the exchange offer; and
		• you are not an affiliate of ours.
Expiration Date		5:00 p.m., New York City time, on November 19, 2007 unless we extend the exchange offer. It is possible that we will extend the exchange offer until all of the outstanding notes are tendered. You may withdraw the outstanding notes you tendered at any time before 5:00 p.m., New York City time, on the expiration date. See “The Exchange Offer — Expiration Date; Extensions; Amendments”.
Withdrawal Rights		You may withdraw the outstanding notes you tender by furnishing a notice of withdrawal to the exchange agent or by complying with applicable Automated Tender Offer Program (ATOP) procedures of The Depositary Trust Company (DTC) at any time before 5:00 p.m., New York City time on the expiration date. See “The Exchange Offer — Withdrawal of Tenders”.

Accrual of Interest on the Outstanding Notes and the Exchange Notes		The exchange notes will bear interest from May 29, 2007 or, if later, from the most recent date of payment of interest on the outstanding notes.
Conditions to the Exchange Offer		The exchange offer is subject to several customary conditions. We will not be required to accept for exchange, or to issue exchange notes in exchange for, any outstanding notes and may terminate or amend the exchange offer if we determine in our reasonable judgment that the exchange offer violates applicable law, any applicable interpretation of the SEC or its staff or any order of any governmental agency or court of competent jurisdiction. The foregoing conditions are for our sole benefit and may be waived by us. In addition, we will not accept for exchange any outstanding notes tendered, and no exchange notes will be issued in exchange for any such outstanding notes:
		• at any time the stop order is threatened or in effect with respect to the registration statement of which this prospectus constitutes a part; or
		• at any time any stop order is threatened or in effect with respect to the qualification of the indenture governing the notes under the Trust Indenture Act of 1939.
		See “The Exchange Offers — Conditions”. We reserve the right to terminate or amend the exchange offer at any time prior to the applicable expiration date upon the occurrence of any of the foregoing events.
Representations and Warranties		By participating in the exchange offer, you represent to us that, among other things:
		• you will acquire the exchange notes you receive in the exchange offer in the ordinary course of your business;
		• you are not participating in, and have no understanding with any person to participate in, the distribution of the exchange notes issued to you in the exchange offer; and
		• you are not an affiliate of ours or, if you are an affiliate, you will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable.
Procedures for Tendering Our Outstanding Notes		To accept the exchange offer, you must send the exchange agent either
		• a properly completed and executed letter of transmittal; or
		• a computer-generated message transmitted by means of DTC’s ATOP system that, when received by the exchange agent will form a part of a confirmation of book-entry transfer in which you acknowledge and agree to be bound by the terms of the letter of transmittal;
		and either
		• a timely confirmation of book-entry transfer of your outstanding notes into the exchange agent’s account at DTC; or

		• the documents necessary for compliance with the guaranteed delivery procedures described below.
		Other procedures may apply to holders of certificated notes. For more information, see “The Exchange Offer — Procedures for Tendering”.
Tenders by Beneficial Owners		If you are a beneficial owner whose outstanding notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and wish to tender those outstanding notes in the exchange offer, please contact the registered holder as soon as possible and instruct that holder to tender on your behalf and comply with the instructions in this prospectus.
Guaranteed Delivery Procedures		If you are unable to comply with the procedures for tendering, you may tender your outstanding notes according to the guaranteed delivery procedures described in this prospectus under the heading “The Exchange Offer — Guaranteed Delivery Procedures”.
Acceptance of the Outstanding Notes and Delivery of the Exchange Notes		If the conditions described under “The Exchange Offer — Conditions” are satisfied, we will accept for exchange any and all outstanding notes that are properly tendered before 5:00 p.m., New York City time, on the expiration date.
Effect of Not Tendering		Any of the outstanding notes that are not tendered and any of the outstanding notes that are tendered but not accepted will remain subject to restrictions on transfer. Since the outstanding notes have not been registered under the federal securities laws, they bear a legend restricting their transfer absent registration or the availability of an exemption from registration. Upon completion of the exchange offer, we will have no further obligation, except under limited circumstances, to provide for registration of the outstanding notes under the federal securities laws. In addition, upon completion of the exchange offer, there may be no market for the outstanding notes that are not tendered for exchange notes, and you may have difficulty selling them.
Federal Income Tax Considerations		We believe the exchange of outstanding notes for exchange notes will not be a taxable transaction for U.S. federal income tax purposes. See “Certain United States Federal Income Tax Considerations” for a discussion of U.S. federal income tax considerations we urge you to consider before tendering the outstanding notes in the exchange offer.
Exchange Agent		U.S. Bank National Association is serving as exchange agent for the exchange offer. The address for the exchange agent is listed under “The Exchange Offer — Exchange Agent”.

	•	will not bear legends restricting their transfer;
	•	will not be subject to provisions relating to additional interest;
	•	will bear a different CUSIP or ISIN number from the outstanding notes; and
	•	will not entitle the holders to registration rights.

Issuer		Tesoro Corporation
Securities Offered		$500,000,000 aggregate principal amount of 61/2% Senior Notes due 2017, Series B.
Maturity Date		The outstanding notes will mature on June 1, 2017.
Interest Payment Dates		June 1 and December 1 of each year, commencing on December 1, 2007.
Ranking		The exchange notes will be guaranteed, jointly and severally, on a senior unsecured basis, by certain of our existing and future subsidiaries. See “Description of the Exchange Notes — Guarantees”.
		• effectively subordinate to all of our existing and future secured indebtedness, including indebtedness under our credit facility, to the extent of the collateral securing such indebtedness;
		• effectively subordinate to all existing and future indebtedness and other liabilities of our non-guarantor subsidiaries (other than indebtedness and liabilities owed to us);
		• pari passu in right of payment to all of our existing and future senior unsecured indebtedness; and
		• senior in right of payment to all of our existing and future subordinated indebtedness, including our obligations under our Junior Subordinated Notes due 2012.
		As of June 30, 2007, we (excluding our subsidiaries) had total indebtedness of approximately $1.8 billion, including approximately $250 million of secured indebtedness and $110 million of subordinated indebtedness, and the notes would have been effectively subordinated to $183 million of indebtedness and other liabilities (including trade payables) of our non-guarantor subsidiaries.
Subsidiary Guarantees		The exchange notes initially will be jointly and severally guaranteed on a senior unsecured basis by substantially all of our domestic subsidiaries. In the future, the guarantees may be released or terminated under certain circumstances. Each subsidiary guarantee will rank:

		• effectively subordinate to all existing and future secured indebtedness of the guarantor subsidiary, including its guarantee of indebtedness under our credit facility, to the extent of the collateral securing such indebtedness;
		• pari passu in right of payment to all existing and future senior unsecured indebtedness of the guarantor subsidiary; and
		• senior in right of payment to all existing and future subordinated indebtedness of the guarantor subsidiary.
		Not all of our subsidiaries will guarantee the notes. As of June 30, 2007, our guarantor subsidiaries would have had $27 million of indebtedness outstanding in the form of capital leases.
Optional Redemption		At any time prior to June 1, 2010, we may redeem up to 35% of the exchange notes with the net cash proceeds of certain equity offerings at the redemption price set forth under “Description of the Notes — Optional Redemption”.
		At any time prior to June 1, 2012, we may redeem the exchange notes, in whole or in part, at a “make whole” redemption price, plus accrued and unpaid interest and additional interest, if any, to the date of redemption. On and after June 1, 2012, we may redeem the exchange notes, in whole or in part, at the redemption prices set forth under “Description of the Notes — Optional Redemption”.
Mandatory Offer to Repurchase		If a Change of Control Triggering Event occurs, we must offer to repurchase the exchange notes at the redemption price set forth under “Description of the Notes — Repurchase at the Option of Holders — Change of Control Triggering Event”.
Absence of Established Market for the Notes		The exchange notes will be new securities for which there is currently no market. Although the initial purchasers have informed us that they intend to make a market in the exchange notes, they are not obligated to do so and may discontinue market-making activities at any time without notice. Accordingly, we cannot assure you that a liquid market for the exchange notes will develop or be maintained. We have agreed to seek to have the exchange notes made eligible for trading in the PORTAL Market.
Use of Proceeds		We will not receive any cash proceeds from the exchange offer.

	•	the borrowing of $500 million under our amended and restated $1.75 billion credit agreement (the “amended credit agreement”); and
	•	the borrowing of $700 million under our 364-day term loan (the “364-day term loan”).

		Pro Forma Combined
		Year Ended				Six Months
		December 31,				Ended
		2006				June 30, 2007
		(Dollars in millions)
		(Unaudited)
Statement of Operations Data:
Revenues		$	20,978			$	10,352
Costs and Expenses:
Costs of sales and operating expenses			18,936				9,078
Selling, general and administrative expenses			176				142
Depreciation and amortization			323				185
Loss on assets disposals and impairment			50				5
Operating Income			1,493				942
Interest and financing costs			(144	)			(71	)
Interest income and other			4				10
Earnings Before Income Taxes			1,353				881
Income tax provision			514				332
Net Earnings		$	839			$	549

		Historical
		June 30, 2007
		(Dollars in millions)
		(Unaudited)
Balance Sheet Data:
Cash and cash equivalents		$	169
Property, plant and equipment, net		$	4,454
Total assets		$	8,224
Total liabilities		$	5,147
Total stockholders’ equity		$	3,077

		Year Ended December 31,																				Six Months Ended June 30,
		2002(a)				2003				2004				2005				2006				2006				2007(a)
		(Dollars in millions, except per share amounts)
Statement of Operations Data:
Revenues
Refining		$	6,761			$	8,468			$	12,052			$	16,369			$	17,887			$	8,709			$	9,343
Retail			1,052				918				994				1,085				1,204				579				1,006
Marine services(b)			132				156				—				—				—				—				—
Intersegment sales from refining to retail			(826	)			(696	)			(784	)			(873	)			(987	)			(482	)			(869	)
Total revenues		$	7,119			$	8,846			$	12,262			$	16,581			$	18,104			$	8,806			$	9,480
Costs of sales and expenses
Refining			5,758				7,242				10,298				14,132				15,162				7,396				7,281
Retail			1,047				883				978				1,090				1,203				590				1,006
Marine services(b)			127				147				—				—				—				—				—
Corporate			66				74				105				127				125				64				113
Depreciation and amortization			131				148				154				186				247				120				158
Loss on asset disposals and impairments			9				17				14				19				50				12				5
Total costs of sales and expenses			7,138				8,511				11,549				15,554				16,787				8,182				8,563
Operating income (loss)			(19	)			335				713				1,027				1,317				624				917
Interest and financing costs			(166	)			(213	)			(171	)			(211	)			(77	)			(41	)			(47	)
Interest income and other			4				1				5				15				46				17				25
Earnings (loss) before income taxes			(181	)			123				547				831				1,286				600				895
Income tax provision (benefit)			(64	)			47				219				324				485				231				336
Net earnings (loss)(c)		$	(117	)		$	76			$	328			$	507			$	801			$	369			$	559
Net earnings (loss) per share:
Basic		$	(0.97	)		$	0.59			$	2.50			$	3.72			$	5.89			$	2.70			$	4.13
Diluted		$	(0.97	)		$	0.58			$	2.38			$	3.60			$	5.73			$	2.63			$	4.02
Dividends per share(d)		$	—			$	—				—			$	0.10			$	0.20			$	0.10			$	0.15
Other Data:
Cash flows from operating activities		$	58			$	447			$	681			$	758			$	1,139			$	409			$	881
Cash flows used in investing activities			(941	)			(70	)			(174	)			(254	)			(430	)			(143	)			(2,413	)
Cash flows from (used in) financing activities(d)(e)(f)			941				(410	)			(399	)			(249	)			(163	)			(86	)			715
Increase (decrease) in cash and cash equivalents		$	58			$	(33	)		$	108			$	255			$	546			$	180			$	(817	)
Ratio of earnings to fixed charges(g)			(g	)			1.5	x			3.6	x			4.1	x			10.2	x			9.8	x			10.9	x
Total consolidated EBITDA(h)		$	112			$	483			$	867			$	1,213			$	1,569			$	749			$	1,075

		Year Ended December 31,																				Six Months Ended June 30,
		2002(a)				2003				2004				2005				2006				2006				2007(a)
		(Dollars in millions, except per share amounts)
Capital expenditures(i)
Refining		$	151			$	97			$	167			$	214			$	401			$	143			$	307
Retail			41				1				3				6				5				1				2
Marine Services(b)			2				1				—				—				—				—				—
Corporate			10				2				9				42				47				8				20
Total capital expenditures		$	204			$	101			$	179			$	262			$	453			$	152			$	329
Balance Sheet Data (end of period):
Cash and cash equivalents		$	110			$	77			$	185			$	440			$	986			$	620			$	169
Working capital			446				337				400				713				1,139				1,009				494
Property, plant and equipment, net			2,303				2,252				2,304				2,467				2,687				2,514				4,454
Total assets			3,759				3,661				4,075				5,097				5,904				5,600				8,224
Total debt(f)			1,977				1,609				1,218				1,047				1,046				1,042				1,787
Stockholders’ equity(j)			888				965				1,327				1,887				2,502				2,197				3,077

(a)		Financial results of operations acquired in 2007 and 2002 have been included in the amounts above since their respective acquisition dates.
(b)		In December 2003, we sold substantially all of the Marine Services physical assets.
(c)		We have incurred charges that affect the comparability of the periods presented. During 2006, 2005 and 2004, we incurred charges for the Washington refinery delayed coker project termination, debt prepayment and refinancing, and retirement benefits (see “Results of Operations” in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in the filings incorporated by reference herein). In 2003, we incurred charges of $23 million after-tax for the write-off of unamortized debt issuance costs, $6 million after-tax for losses on the sale of marine services assets and certain retail asset impairments, $6 million after-tax for voluntary early retirement benefits and $6 million for the termination of our funded executive security plan. In 2002, we incurred charges for bridge financing fees associated with the acquisition of the Golden Eagle refinery of $8 million after-tax, losses on asset sales and impairment of goodwill of $5 million after-tax, and severance and integration costs of $5 million after-tax. Our 2002 results also included income tax refund claims which reduced previously recognized income tax credits by $6 million and a LIFO inventory liquidation resulting in decreased costs of sales of $3 million after-tax.
(d)		We began paying a quarterly dividend in June 2005. Prior to 2005, we had not paid dividends since 1986.
(e)		During 2006, we repurchased 2.4 million shares of our common stock for $148 million in connection with our share repurchase program.
(f)		See “The Transactions” on page 11 for financing and debt repayment information during 2007. During 2005, we voluntarily prepaid the remaining $96 million of senior secured term loans and refinanced nearly $1 billion of outstanding senior notes through a $900 million notes offering and a $92 million prepayment of debt. During 2004, we voluntarily prepaid the $297.5 million of outstanding senior subordinated notes and $100 million of senior secured term loans. During 2003, we reduced total debt by $377 million primarily through voluntary prepayments. In 2002, we borrowed $892 million and completed a public offering of 23 million shares primarily to fund the acquisition of the Golden Eagle refinery.
(g)		For purposes of computing the ratio of earnings to fixed charges, “earnings” consist of pretax income from continuing operations plus fixed charges (excluding capitalized interest). “Fixed charges” represent interest incurred (whether expensed or capitalized), amortization of debt expense and that portion of rental expense on operating leases deemed to be the equivalent of interest. For the year ended December 31, 2002, fixed charges exceeded earnings by $184 million.
(h)		EBITDA represents earnings before interest and financing costs, interest income and other, income taxes, and depreciation and amortization. We present EBITDA because we believe some investors and analysts use EBITDA to help analyze our cash flow including our ability to satisfy principal and interest obligations with respect to our indebtedness and to use cash for other purposes, including capital expenditures. EBITDA is also used by some investors and analysts to analyze and compare companies on the basis of operating performance. EBITDA is also used by management for internal analysis and as a component of the fixed charge coverage financial covenant in our amended credit agreement. EBITDA should not be considered as an alternative to net earnings, earnings before income taxes, cash flows from operating activities or any other measure of financial performance presented in accordance with accounting principles generally

		accepted in the United States of America. EBITDA may not be comparable to similarly titled measures used by other entities. Our historical EBITDA reconciled to net cash from operating activities was (in millions):

		Year Ended December 31,																				Six Months Ended June 30,
		2002(a)				2003				2004				2005				2006				2006				2007(a)
		(Dollars in millions)
Consolidated EBITDA
Net cash from operating activities		$	58			$	447			$	681			$	758			$	1,139			$	409			$	881
Changes in assets and liabilities			(5	)			(96	)			(45	)			67				84				141				(107	)
Excess tax benefits from stock-based compensation arrangements			—				—				4				27				17				15				13
Deferred income taxes			(3	)			(55	)			(103	)			(77	)			(105	)			(43	)			(19	)
Stock-based compensation			—				—				(14	)			(26	)			(22	)			(14	)			(38	)
Loss on asset disposals and impairments			(9	)			(17	)			(14	)			(19	)			(50	)			(12	)			(5	)
Amortization and write-off of debt issuance costs and discounts			(27	)			(55	)			(27	)			(37	)			(15	)			(7	)			(8	)
Depreciation and amortization			(131	)			(148	)			(154	)			(186	)			(247	)			(120	)			(158	)
Net earnings (loss)		$	(117	)		$	76			$	328			$	507			$	801			$	369			$	559
Add income tax provision (benefit)			(64	)			47				219				324				485				231				336
Less interest income and other			(4	)			(1	)			(5	)			(15	)			(46	)			(17	)			(25	)
Add interest and financing costs			166				213				171				211				77				41				47
Operating income (loss)			(19	)			335				713				1,027				1,317				624				917
Add depreciation and amortization			131				148				154				186				247				120				158
Add gain on partnership sale(k)			—				—				—				—				5				5				—
Consolidated EBITDA		$	112			$	483			$	867			$	1,213			$	1,569			$	749			$	1,075

		Historical EBITDA as presented above differs from EBITDA as defined under our credit agreement. The primary differences are non-cash postretirement benefit costs and loss on asset disposals and impairments, which are added to net earnings under the credit agreement EBITDA calculations.
(i)		Capital expenditures exclude amounts for refinery turnaround spending and other maintenance costs.
(j)		During 2002, we completed a public offering of 23 million shares of common stock to partially fund the acquisition of the Golden Eagle refinery.
(k)		Represents a gain of $5 million associated with the sale of our leased corporate headquarters by a limited partnership in which we were a 50% limited partner.

																						Six Months
																						Ended
		Year Ended December 31,																				June 30,
		2002				2003				2004				2005				2006				2007
Refinery Throughput (thousands of bpd)(a)
California
Golden Eagle(b)			95				156				153				165				165				140
Los Angeles(c)			—				—				—				—				—				25
Pacific Northwest
Washington			104				112				117				111				111				124
Alaska			53				49				57				60				56				59
Mid-Pacific
Hawaii			82				80				84				83				85				85
Mid-Continent
North Dakota			51				48				56				58				56				57
Utah			50				43				53				53				56				49
Total refining throughput			435				488				520				530				529				539
Refining Yield (thousands of bpd)(a)
California(b)(c)
Gasoline and gasoline blendstocks			62				99				96				93				96				85
Jet fuel			—				—				—				—				—				4
Diesel fuel			22				38				38				49				49				43
Heavy oils, residual products and other			16				29				28				31				30				43
Total			100				166				162				173				175				175
Pacific Northwest
Gasoline and gasoline blendstocks			68				72				74				74				67				80
Jet fuel			28				26				31				31				31				30
Diesel fuel			24				26				27				25				27				34
Heavy oils, residual products and other			42				42				47				46				47				45
Total			162				166				179				176				172				189
Mid-Pacific
Gasoline and gasoline blendstocks			20				19				21				20				20				21
Jet fuel			26				23				24				26				26				25
Diesel fuel			12				14				15				12				13				15
Heavy oils, residual products and other			25				25				26				26				27				25
Total			83				81				86				84				86				86
Mid-Continent
Gasoline and gasoline blendstocks			54				49				60				61				62				60
Jet fuel			10				9				11				11				11				10
Diesel fuel			29				25				30				32				32				30
Heavy oils, residual products and other			12				11				12				12				11				10
Total			105				94				113				116				116				110
Total Refining Yield
Gasoline and gasoline blendstocks			204				239				251				248				245				246
Jet fuel			64				58				66				68				68				69
Diesel fuel			87				103				110				118				121				122
Heavy oils, residual products and other			95				107				113				115				115				123
Total			450				507				540				549				549				560

																						Six Months
																						Ended
		Year Ended December 31,																				June 30,
		2002				2003				2004				2005				2006				2007
		(Dollars in millions, except per barrel amounts)
Gross Refining Margin (after inventory changes)(d)		$	699			$	1,196			$	1,706			$	2,246			$	2,631			$	1,733
Refining Margin ($/throughput barrel)(e)
California
Gross refining margin		$	6.41			$	9.63			$	13.98			$	17.88			$	19.51			$	24.65
Manufacturing cost before depreciation and amortization		$	4.17			$	4.41			$	5.07			$	5.56			$	5.57			$	7.83
Pacific Northwest
Gross refining margin		$	4.09			$	6.19			$	7.99			$	9.68			$	11.61			$	16.30
Manufacturing cost before depreciation and amortization		$	2.05			$	2.26			$	2.38			$	2.74			$	2.88			$	2.80
Mid-Pacific
Gross refining margin		$	2.85			$	3.30			$	5.30			$	6.25			$	6.59			$	5.42
Manufacturing cost before depreciation and amortization		$	1.39			$	1.39			$	1.51			$	1.85			$	1.84			$	1.97
Mid-Continent
Gross refining margin		$	4.17			$	5.68			$	7.02			$	10.10			$	14.16			$	20.88
Manufacturing cost before depreciation and amortization		$	2.22			$	2.52			$	2.28			$	2.73			$	2.96			$	3.08
Total
Gross refining margin		$	4.38			$	6.73			$	9.12			$	11.81			$	13.82			$	17.92
Manufacturing cost before depreciation and amortization		$	2.43			$	2.85			$	3.01			$	3.48			$	3.57			$	4.26
Average Number of Retail Stations (during the period)(f)
Company-operated			260				229				222				213				204				273
Branded jobber/dealer			419				346				316				281				261				315
Total average retail stations			679				575				538				494				465				588

(a)		We experienced reduced throughput and yield levels during scheduled maintenance turnarounds for the following refineries: the Los Angeles refinery during the second quarter of 2007; the Golden Eagle and Utah refineries during the first quarter of 2007; the Golden Eagle, Washington and Alaska refineries during 2006; the Golden Eagle, Washington and Hawaii refineries during 2005; the Golden Eagle refinery during 2004; the Alaska, North Dakota and Utah refineries in 2003; and the Washington refinery in 2002.
(b)		Volumes for 2002 include amounts from the Golden Eagle refinery since we acquired it on May 17, 2002, averaged over 365 days. Throughput and yield for the Golden Eagle refinery averaged over the 229 days of operation that we owned it were 151,000 bpd and 160,000 bpd, respectively.
(c)		Volumes and margins for 2007 include amounts for the Los Angeles refinery since acquisition on May 10, 2007 averaged over the six month period presented. Throughput and yield averaged over the 51 days of operation were 89,000 bpd and 103,000 bpd, respectively.
(d)		Gross refining margin is calculated as revenues less costs of feedstocks, purchased refined products, transportation and distribution. Gross refining margin approximates total refining segment throughput times gross refining margin per barrel, adjusted for changes in refined product inventory due to selling a volume and mix of product that is different than actual volumes manufactured. The adjustment for changes in refined product inventory resulted in a decrease in gross refining margin of $37 million in both 2006 and 2005, $30 million in 2004, $3 million in 2003 and an increase in gross margin of $4 million in 2002. During the six months ended June 30, 2007, the adjustments for changes in refined product inventory resulted in a decrease in gross refining margin of $14 million. Gross refining margin also includes the effect of intersegment sales to the retail segment at prices which approximate market.

(e)		Management uses gross refining margin per barrel to evaluate performance, allocate resources and compare profitability to other companies in the industry. Gross refining margin per barrel is calculated by dividing gross refining margin before inventory changes by total refining throughput and may not be calculated similarly by other companies. Management uses manufacturing costs per barrel to evaluate the efficiency of refinery operations. Manufacturing costs per barrel is calculated by dividing manufacturing costs by total refining throughput and may not be comparable to similarly titled measures used by other companies. Investors and analysts use these financial measures to help analyze and compare companies in the industry on the basis of operating performance. These financial measures should not be considered as alternatives to segment operating income, revenues, costs of sales and operating expenses or any other measure of financial performance presented in accordance with accounting principles generally accepted in the United States of America.
(f)		In May 2007, we acquired 416 company-operated and branded jobber/dealer retail stations in connection with our acquisitions of the Shell Assets and the USA Petroleum assets. As of June 30, 2007, our retail network totaled 891 branded retail stations comprising 453 Company-operated retail stations and 438 jobber/dealer stations.

 

RISK FACTORS

 

You should carefully consider the risks described below before making a decision to participate in the exchange offer. We believe these are all the material risks currently facing our business. Our business, financial condition, results of operations and cash flows could be materially adversely affected by these risks. You should carefully consider the factors described below in addition to the remainder of this prospectus and the information incorporated by reference before tendering your outstanding notes.

 

Risks related to the notes

 

If you do not properly tender or you cannot tender your outstanding notes, your ability to transfer the outstanding notes will be adversely affected.

 

We will issue exchange notes only in exchange for outstanding notes that are timely received by the exchange agent, together with all required documents, including a properly completed and signed letter of transmittal. Therefore, you should allow sufficient time to ensure timely delivery of the outstanding notes and you should carefully follow the instructions on how to tender your outstanding notes. Neither we nor the exchange agent is required to tell you of any defects or irregularities with respect to your tender of the outstanding notes. If you do not tender your outstanding notes or if we do not accept your outstanding notes because you did not tender your outstanding notes properly, then, after we consummate the exchange offer, you will continue to hold outstanding notes that are subject to the existing transfer restrictions. In addition, if you tender your outstanding notes for the purpose of participating in a distribution of the exchange notes, you will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the exchange notes.

 

We are a holding company, and we are dependent on the ability of our subsidiaries to distribute funds to us.

 

Tesoro Corporation is a holding company and conducts substantially all of its operations through subsidiaries. Our only significant assets are the capital stock of our subsidiaries. As a holding company, we are dependent on distributions of funds from our subsidiaries to meet our debt service and other obligations, including the payment of principal and interest on the notes. Our subsidiaries may not generate sufficient cash from operations to enable us to make payments on our indebtedness, including the notes. The ability of our subsidiaries to make distributions to us may be restricted by, among other things, applicable state corporate laws, other laws and regulations and contractual restrictions. Furthermore, claims of creditors of our existing and future subsidiaries that are not guarantors, including trade creditors of, and banks and other lenders to, those subsidiaries, generally will have priority with respect to the assets and earnings of those subsidiaries over the claims of our creditors, including the holders of the notes. If we are unable to obtain funds from our subsidiaries as a result of restrictions under our other debt instruments, state law or otherwise, we may not be able to pay interest or principal on the notes when due, or to redeem the notes upon a change of control, and we cannot assure you that we will be able to obtain the necessary funds from other sources.

 

The notes will be effectively subordinated to our and our subsidiary guarantors’ indebtedness under our amended credit agreement and our foreign crude oil letter of credit agreement to the extent of the value of the property securing such indebtedness.

 

The notes and the guarantees will be effectively subordinated to our and our subsidiary guarantors’ indebtedness under our amended credit agreement and our foreign crude oil letter of credit agreement, to the extent of the collateral securing such indebtedness. As of June 30, 2007, we had $250 million in borrowings and $227 million in letters of credit outstanding under our amended credit agreement and total unused credit availability of $1.3 billion, or 74% of the eligible borrowing base. As of June 30, 2007, we had $191 million in letters of credit outstanding under the foreign crude oil letter of credit agreement, resulting in total unused credit availability of $59 million or 24% of total capacity under this credit agreement. The effect of this is that upon a default in payment on, or the acceleration of, any indebtedness under either our amended credit agreement or our foreign crude oil letter of credit agreement, or in the event of our, or our subsidiary guarantors’, bankruptcy, insolvency, liquidation, dissolution, reorganization or similar proceeding, the proceeds from the sale of the collateral that secures our amended credit

agreement and our foreign crude oil letter of credit agreement will be available to pay obligations on the notes offered hereby only after all indebtedness under our amended credit agreement and our foreign crude oil letter of credit agreement, as applicable, has been paid in full.

 

Your right to receive payments on the notes and guarantees is unsecured and will be effectively subordinated to our and our subsidiaries’ existing and future secured indebtedness.

 

The notes will be general unsecured senior obligations of us and our subsidiary guarantors, effectively junior to any secured debt that we and our subsidiary guarantors have and may have in the future to the extent of the value of the assets securing that debt. In the event of liquidation, dissolution, reorganization, bankruptcy or any similar proceeding regarding our assets or the assets of our subsidiary guarantors, whether voluntarily or involuntarily instituted, the holders of our or our subsidiary guarantors’ secured debt will be entitled to be paid from our or their assets, as applicable, before any payment may be made with respect to the exchange notes or the subsidiary guarantees. If any of the foregoing events occurs, we cannot assure you that we or our subsidiary guarantors will have sufficient assets to pay amounts due on our and our subsidiary guarantors’ secured debt, the notes and the subsidiary guarantees. As a result, the holders of the notes may receive less, ratably, than the holders of secured debt in the event of our or our subsidiary guarantors’ liquidation, dissolution, reorganization, bankruptcy or other similar occurrence.

 

Not all of our subsidiaries guarantee will guarantee the notes and, under certain circumstances, the subsidiary guarantees will be released.

 

Certain of our subsidiaries will not guarantee the exchange notes. Additionally, under the terms of the indenture governing the notes, under certain circumstances, some or all of the guarantors may cease to guarantee the notes. In the event of a bankruptcy, liquidation or reorganization of any of these non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims from the assets of those subsidiaries before any assets are made available for distribution to us. As a result, the notes will be effectively subordinated to the debt and other liabilities of our non-guarantor subsidiaries. As of June 30, 2007, the notes were effectively subordinated to approximately $183 million of indebtedness and other liabilities (including trade payables) of our non-guarantor subsidiaries. As of June 30, 2007, our non-guarantor subsidiaries held approximately 2.8% of our consolidated assets.

 

If a subsidiary does not have outstanding or guarantee specified indebtedness at any time, the note guarantee of such subsidiary will be released. If all of the subsidiary guarantors are released from their guarantees of these notes, our subsidiaries will have no obligation to pay any amounts due on the notes or to provide Tesoro with funds for the payment of its obligations. In the event of the release of any subsidiary guarantor’s guarantee, Tesoro’s right, as an equity holder of such subsidiary, to receive any assets of such subsidiary upon its liquidation or reorganization, and therefore the right of the holders of the notes to participate in those assets, will be effectively subordinated to the claims of that subsidiary’s creditors, including trade creditors.

 

We may be able to incur substantially more debt.

 

We may be able to incur substantial indebtedness in the future. The terms of the indenture governing the notes do not fully prohibit us from doing so. If we incur any additional indebtedness that ranks equally with the notes, the holders of that debt will be entitled to share ratably with the holders of the notes in any proceeds distributed in connection with any insolvency, liquidation, reorganization, dissolution or other winding up of Tesoro. If new debt is added to our current debt levels, the related risks we face will increase.

 

The indenture governing the notes allows us to make substantial repurchases of common stock from our stockholders and permits us to distribute capital stock of our subsidiaries to the holders of our common stock.

 

Under the terms of the indenture governing the notes, we may be able to make substantial repurchases of common stock from our stockholders. The indenture does not restrict us from repurchasing our common stock so long as the notes are rated Ba2 or better by Moody’s and BB or better by Standard & Poor’s and our leverage ratio is

equal to or less than 2 to 1. It is possible that if we do make substantial repurchases of common stock from our stockholders, we will not have sufficient funds to meet our payment obligations on our debt, including the notes. In addition to stock repurchases, under the terms of the indenture, we may distribute shares of our subsidiaries to our stockholders under certain circumstances, including compliance with certain coverage ratios under the indenture.

 

Our debt instruments impose restrictions on us that may adversely affect our ability to operate our business.

 

Our ability to comply with the specified financial covenants under our amended credit agreement as they currently exist or as they may be amended, may be affected by many events beyond our control and our future operating results may not allow us to comply with the covenants, or in the event of a default, to remedy that default. Our failure to comply with those financial covenants or to comply with the other restrictions contained in our amended credit agreement could result in a default, which could cause that indebtedness (and by reason of cross-default provisions, indebtedness under the indenture governing the notes and our existing notes and other indebtedness) to become immediately due and payable. If we are unable to repay those amounts, the lenders under our amended credit agreement could proceed against the collateral granted to them to secure that indebtedness. If those lenders accelerate the payment of the amended credit agreement, we may not be able to pay that indebtedness immediately and continue to operate our business.

 

The indenture relating to the notes and the indentures relating to our other existing notes contain covenants that restrict, among other things, our ability to:

 

 

We may be unable to generate the cash flow to service our debt obligations, including the notes.

 

We cannot assure you that our business will generate sufficient cash flow, or that we will be able to borrow funds under our amended credit agreement, in an amount sufficient to enable us to service our indebtedness, including the notes, or to make anticipated capital expenditures. Our ability to pay our expenses and satisfy our debt obligations, to refinance our debt obligations and to fund planned capital expenditures will depend on our future performance, which will be affected by general economic, financial, competitive, legislative, regulatory and other factors beyond our control. If we are unable to generate sufficient cash flow from operations or to borrow sufficient funds in the future to service our debt, we may be required to sell assets, reduce capital expenditures, refinance all or a portion of our existing debt (including the notes) or obtain additional financing. We cannot assure you that we will be able to refinance our debt, sell assets or borrow more money on terms acceptable to us, if at all. Additionally, our ability to incur additional debt under the covenants contained in our amended credit agreement and our indentures will be restricted.

 

The subsidiary guarantees could be deemed fraudulent conveyances under certain circumstances, and a court may try to subordinate or avoid the subsidiary guarantees.

 

Our obligations under the notes initially will be guaranteed on a general unsecured senior subordinated basis by the subsidiary guarantors. Various preference or fraudulent conveyance laws have been enacted for the protection of creditors and may be used by a court to subordinate or avoid any subsidiary guarantee issued by

a guarantor. It also is possible that under certain circumstances a court could hold that the direct obligations of a guarantor could be superior to the obligations under its subsidiary guarantee.

 

To the extent that a court finds that at the time a guarantor entered into a subsidiary guarantee either (1) the subsidiary guarantee was incurred by a guarantor with the intent to hinder, delay or defraud any present or future creditor or that a guarantor contemplated insolvency with a design to favor one or more creditors to the exclusion in whole or in part of others, or (2) the guarantor did not receive fair consideration or reasonably equivalent value for issuing the subsidiary guarantee and, at the time it issued the subsidiary guarantee, the guarantor (a) was insolvent or rendered insolvent by reason of the issuance of the subsidiary guarantee, (b) was engaged or about to engage in a business or transaction for which the remaining assets of the guarantor constituted unreasonably small capital or (c) intended to incur, or believed that it would incur, debts beyond its ability to pay debts as they matured, the court could avoid or subordinate the subsidiary guarantee in favor of the guarantor’s other creditors. Among other things, a legal challenge of a subsidiary guarantee issued by a guarantor on fraudulent conveyance grounds may focus on the benefits, if any, realized by the guarantor as a result of our issuance of the notes. To the extent a subsidiary guarantee is voided as a fraudulent conveyance or held unenforceable for any other reason, the holders of the notes would cease to have any claim as a creditor in respect of that subsidiary guarantor.

 

We cannot assure you that a court would conclude that the notes and the subsidiary guarantees issued concurrently with the issuance of these notes were incurred for proper purposes and in good faith. We also cannot assure you that a court would conclude that, after giving effect to indebtedness incurred in connection with the issuance of the notes and the issuance of the subsidiary guarantees, Tesoro and the subsidiary guarantors are solvent and will continue to be solvent, will have sufficient capital for carrying on their respective businesses and will be able to pay their debts as they become absolute and mature.

 

We may not be able to finance a change of control offer as required by the indenture.

 

Under the indenture, upon the occurrence of a change of control triggering event, we will be required to offer to repurchase all of the notes then outstanding at 101% of the principal amount, plus accrued and unpaid interest and additional interest, if any, to the repurchase date. If a change of control triggering event were to occur today, we would not have the financial resources available to repay all of our debt that would become payable upon a change of control triggering event and to repurchase all of the notes. In addition, if we only were required to repay all of the notes if a change of control triggering event were to occur today, we would not have the financial resources to repurchase all of those notes. We cannot assure you that we will have the financial resources available or that we will be permitted by our debt instruments to fulfill these obligations upon a change of control in the future. See “Description of Other Indebtedness” and “Description of the Notes — Repurchase at the Option of Holders — Change of Control Triggering Event”.

 

Your ability to transfer your exchange notes may be limited by the absence of an active trading market, and we cannot assure you that any active trading market will develop for your exchange notes.

 

We do not intend to list the notes on any national securities exchange or to seek the admission thereof to trading in the Nasdaq National Market. The exchange notes are expected to be eligible for trading in the PORTAL^sm Market. We have been advised by the initial purchasers that the initial purchasers are currently making a market in the outstanding notes. The initial purchasers are not obligated to do so, however, and any market-making activities with respect to the outstanding notes or the exchange notes may be discontinued at any time without notice. In addition, any market-making activity may be limited during the pendency of any shelf registration statement. Accordingly, we cannot assure you that an active public or other market will develop for the exchange notes or as to the liquidity of the trading market for the exchange notes. If a trading market does not develop or is not maintained, you may experience difficulty in reselling your exchange notes or you may be unable to sell them at all. If a market for the exchange notes develops, that market may be discontinued at any time. If a public trading market develops for your exchange notes, future trading prices of the exchange notes will depend on many factors, including among other things, prevailing interest rates, our financial condition and results of operations, and the market for similar notes. Depending on those and other factors, your exchange notes may trade at a discount from their principal amount.

Risks relating to our business

 

The volatility of crude oil prices, refined product prices and natural gas and electrical power prices may have a material adverse effect on our cash flow and results of operations.

 

Our earnings and cash flows from our refining and wholesale marketing operations depend on a number of factors, including fixed and variable expenses (including the cost of crude oil and other refinery feedstocks) and the margin above those expenses at which we are able to sell refined products. In recent years, the prices of crude oil and refined products have fluctuated substantially. These prices depend on numerous factors beyond our control, including the global supply and demand for crude oil, gasoline and other refined products, which are subject to, among other things:

 

 

Prices for refined products are influenced by the price of crude oil. We do not produce crude oil and must purchase all of our crude oil, the price of which fluctuates on worldwide market conditions. Generally, an increase or decrease in the price of crude oil affects the price of gasoline and other refined products. However, the prices for crude oil and prices for our refined products can fluctuate in different directions based on global market conditions. In addition, the timing of the relative movement of the prices (both among different classes of refined products and among various global markets for similar refined products) as well as the overall change in refined product prices, can reduce profit margins and could have a significant impact on our refining and wholesale marketing operations, earnings and cash flow. Also, crude oil supply contracts are generally term contracts with market-responsive pricing provisions. We purchase our refinery feedstocks weeks before manufacturing and selling the refined products. Price level changes during the period between purchasing feedstocks and selling the manufactured refined products from these feedstocks could have a significant effect on our financial results. We also purchase refined products manufactured by others for sale to our customers. Price level changes during the periods between purchasing and selling these refined products also could have a material adverse effect on our business, financial condition and results of operations.

 

Volatile prices for natural gas and electrical power used by our refineries and other operations have affected manufacturing and operating costs. Natural gas and electricity prices have been and will continue to be affected by supply and demand for fuel and utility services in both local and regional markets.

 

The dangers inherent in our operations and the potential limits on insurance coverage could expose us to potentially significant liability costs.

 

Our operations are subject to hazards and risks inherent in refining operations and in transporting and storing crude oil and refined products, such as fires, natural disasters, explosions, pipeline ruptures and spills and mechanical failure of equipment at our or third-party facilities, any of which can result in damage to our properties and the properties of others. A serious accident could also result in serious injury or death to our employees or contractors and could expose us to significant liability for personal injury claims and reputational risk. In addition, we operate seven petroleum refineries, any of which could experience a major accident, be damaged by severe weather or other natural disaster, or otherwise be forced to shut down. Any such unplanned shutdown could have a material adverse effect on our business, financial condition and results of operations. While we carry property, casualty and business interruption insurance, we do not maintain insurance coverage against all potential losses, and

we could suffer losses for uninsurable or uninsured risks or in amounts in excess of existing insurance coverage. The occurrence of an event that is not fully covered by insurance could have a material adverse effect on our business, financial condition and results of operations.

 

Our business is impacted by risks inherent in refining operations.

 

The operation of refineries, pipelines and refined products terminals is inherently subject to spills, discharges or other releases of petroleum or hazardous substances. If any of these events had previously occurred or occurs in the future in connection with any of our refineries, pipelines or refined products terminals, or in connection with any facilities to which we sent wastes or by-products for treatment or disposal, other than events for which we are indemnified, we could be liable for all costs and penalties associated with their remediation under federal, state and local environmental laws or common law, and could be liable for property damage to third parties caused by contamination from releases and spills. The penalties and clean-up costs that we may have to pay for releases or spills, or the amounts that we may have to pay to third parties for damage to their property, could be significant and the payment of these amounts could have a material adverse effect on our business, financial condition and results of operations.

 

We operate in environmentally sensitive coastal waters, where tanker, pipeline and refined product transportation operations are closely regulated by federal, state and local agencies and monitored by environmental interest groups. Our California, Mid-Pacific and Pacific Northwest refineries import crude oil feedstocks by tanker. Transportation of crude oil and refined products over water involves inherent risk and subjects us to the provisions of the Federal Oil Pollution Act of 1990 and state laws in California, Hawaii, Washington and Alaska. Among other things, these laws require us to demonstrate in some situations our capacity to respond to a “worst case discharge” to the maximum extent possible. We have contracted with various spill response service companies in the areas in which we transport crude oil and refined products to meet the requirements of the Federal Oil Pollution Act of 1990 and state laws. However, there may be accidents involving tankers transporting crude oil or refined products, and response services may not respond to a “worst case discharge” in a manner that will adequately contain that discharge, or we may be subject to liability in connection with a discharge.

 

Our operations are subject to general environmental risks, expenses and liabilities which could affect our results of operations.

 

From time to time we have been, and presently are, subject to litigation and investigations with respect to environmental and related matters, including product liability claims related to the oxygenate MTBE. We may become involved in further litigation or other proceedings, or we may be held responsible in any existing or future litigation or proceedings, the costs of which could be material.

 

We have in the past operated retail stations with underground storage tanks in various jurisdictions, and currently operate retail stations that have underground storage tanks in 17 states in the mid-continental and western United States. Federal and state regulations and legislation govern the storage tanks, and compliance with these requirements can be costly. The operation of underground storage tanks also poses certain other risks, including damages associated with soil and groundwater contamination. Leaks from underground storage tanks which may occur at one or more of our retail stations, or which may have occurred at our previously operated retail stations, may impact soil or groundwater and could result in fines or civil liability for us.

 

Consistent with the experience of other U.S. refineries, environmental laws and regulations have raised operating costs and require significant capital investments at our refineries. We believe that existing physical facilities at our refineries are substantially adequate to maintain compliance with existing applicable laws and regulatory requirements. However, potentially material expenditures could be required in the future. For example, we may be required to comply with evolving environmental, health and safety laws, regulations or requirements that may be adopted or imposed in the future. We also may be required to address information or conditions that may be discovered in the future and that require a response.

 

Assembly Bill 32, a California bill that creates a statewide cap on greenhouse gas emissions and requires that the state return to 1990 emission levels by 2020, was passed by the California legislature and was signed by Governor Schwarzenegger on September 27, 2006. The bill focuses on using market mechanisms, such as offsets

and cap-and-trade programs, to achieve the targets. Regulations under the bill have not yet been promulgated. The bill specifies that any established greenhouse gas allowances will be assigned to the entity regulated under the cap. Implementation is slated to begin January 1, 2010 with full implementation to occur by 2020. The implementation and implications of this legislation will take many years to realize, and we cannot predict at this time what impact, if any, this legislation will have on our business.

 

Currently, various legislative and regulatory measures to address greenhouse gas emissions (including carbon dioxide, nitrogen oxides and sulfur dioxide) are in various phases of discussion or implementation. These include proposed federal legislation and state actions to develop statewide or regional programs, each of which have imposed or would impose reductions in greenhouse gas emissions. These actions could result in increased costs to (i) operate and maintain our facilities, (ii) install new emission controls on our facilities and (iii) administer and manage any greenhouse gas emissions program. These actions could also impact the consumption of refined products, thereby affecting our operations.

 

We are subject to interruptions of supply and increased costs as a result of our reliance on third-party transportation of crude oil and refined products.

 

Our Washington refinery receives all of its Canadian crude oil and delivers a high proportion of its gasoline, diesel and jet fuel through third-party pipelines and the balance through marine vessels. Our Hawaii and Alaska refineries receive most of their crude oil and transport a substantial portion of refined products through ships and barges. Our Utah refinery receives substantially all of its crude oil and delivers substantially all of its refined products through third-party pipelines. Our North Dakota refinery delivers substantially all of its refined products through a third-party pipeline system. Our Golden Eagle refinery receives approximately one-third of its crude oil through pipelines and the balance through marine vessels. Substantially all of our Golden Eagle refinery’s production is delivered through third-party pipelines, ships and barges. Our Los Angeles refinery receives California crudes through third-party pipelines and the balance of its crude supply through marine vessels. Approximately two-thirds of our Los Angeles refinery production is delivered through third-party pipelines, terminals, ships and barges. In addition to environmental risks discussed above, we could experience an interruption of supply or an increased cost to deliver refined products to market if the ability of the pipelines or vessels to transport crude oil or refined products is disrupted because of accidents, governmental regulation or third-party action. A prolonged disruption of the ability of a pipeline or vessels to transport crude oil or refined product could have a material adverse effect on our business, financial condition and results of operations.

 

Terrorist attacks and threats or actual war may negatively impact our business.

 

Our business is affected by global economic conditions and fluctuations in consumer confidence and spending, which can decline as a result of numerous factors outside of our control, such as actual or threatened terrorist attacks and acts of war. Terrorist attacks, as well as events occurring in response to or in connection with them, including future terrorist attacks against U.S. targets, rumors or threats of war, actual conflicts involving the United States or its allies, or military or trade disruptions impacting our suppliers or our customers or energy markets in general, may adversely impact our operations. As a result, there could be delays or losses in the delivery of supplies and raw materials to us, delays in our delivery of refined products, decreased sales of our refined products and extension of time for payment of accounts receivable from our customers. Strategic targets such as energy-related assets (which could include refineries such as ours) may be at greater risk of future terrorist attacks than other targets in the United States. These occurrences could significantly impact energy prices, including prices for our crude oil and refined products, and have a material adverse impact on the margins from our refining and wholesale marketing operations. In addition, disruption or significant increases in energy prices could result in government-imposed price controls. Any one of, or a combination of, these occurrences could have a material adverse effect on our business, financial condition and results of operations.

 

The anticipated benefits of the Shell Acquisition may not be realized.

 

We made the Shell Acquisition with the expectation of various benefits including, among other things, benefits relating to enhanced revenues, a strengthened marketing presence in California, operating efficiencies and synergies in operating our West Coast refineries as a system. Achieving the expected benefits of the Shell

Acquisition is subject to a number of uncertainties, including whether we integrate the Shell Assets in an efficient and effective manner, and general competitive factors in the marketplace. Failure to achieve these anticipated benefits could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy and could materially impact our business, financial condition and operating results.

 

Our operating results are seasonal and generally are lower in the first and fourth quarters of the year.

 

Demand for gasoline is higher during the spring and summer months than during the winter months in most of our markets due to seasonal increases in highway traffic. As a result, our operating results for the first and fourth quarters are generally lower than those for the second and third quarters.

 

THE EXCHANGE OFFER

 

Purpose and Effect of the Exchange Offer

 

We issued $500 million aggregate principal amount of the outstanding notes to the initial purchasers on May 29, 2007, in transactions not registered under the Securities Act in reliance on exemptions from registration. The initial purchasers then sold the outstanding notes to qualified institutional buyers and certain non-U.S. investors in reliance on Rule 144A and Regulation S under the Securities Act. Because they were sold pursuant to exemptions from registration, the outstanding notes are subject to transfer restrictions.

 

In connection with the issuance of the outstanding notes, we agreed with the initial purchasers that we would:

 

 

Our failure to comply with these agreements within certain time periods would result in additional interest being due on the outstanding notes.

 

Based on existing interpretations of the Securities Act by the staff of the SEC described in several no-action letters to third parties, and subject to the following sentence, we believe that the exchange notes issued in the exchange offer may be offered for resale, resold and otherwise transferred by their holders, other than broker-dealers or our “affiliates”, without further compliance with the registration and prospectus delivery provisions of the Securities Act. However, any holder of the outstanding notes who is an affiliate of ours, who is not acquiring the exchange notes in the ordinary course of such holder’s business or who intends to participate in the exchange offer for the purpose of distributing the exchange notes:

 

 

We do not intend to seek our own no-action letter, and there is no assurance that the staff of the SEC would make a similar determination regarding the exchange notes as it has in these no-action letters to third parties.

 

As a result of the filing and effectiveness of the registration statement of which this prospectus is a part, we will not be required to pay additional interest on the outstanding notes unless we either fail to timely consummate the exchange offer or fail to maintain the effectiveness of the registration statement to the extent we agreed to do so. Following the closing of the exchange offer, holders of the outstanding notes not tendered will not have any further registration rights except in limited circumstances requiring the filing of a shelf registration statement, and the outstanding notes will continue to be subject to restrictions on transfer. Accordingly, the liquidity of the market for the outstanding notes will be adversely affected.

 

Terms of the Exchange Offer

 

Upon the terms and subject to the conditions stated in this prospectus and in the letter of transmittal, we will accept all outstanding notes properly tendered and not withdrawn before 5:00 p.m., New York City time, on the expiration date. After authentication of the exchange notes by the trustee or an authenticating agent, we will issue $1,000 principal amount of the relevant series of exchange notes in exchange for each $1,000 principal amount of the relevant series of outstanding notes accepted in the exchange offer (provided, however, that you may tender each

series of outstanding notes only in a minimum denomination of $2,000 or an integral multiple of $1,000 in excess thereof).

 

By tendering the outstanding notes for exchange notes in the exchange offer and signing or agreeing to be bound by the letter of transmittal, you will represent to us that:

 

 

Broker-dealers that are receiving exchange notes for their own account must have acquired the outstanding notes as a result of market-making or other trading activities in order to participate in the exchange offer. Each broker-dealer that receives exchange notes for its own account under the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the exchange notes. The letter of transmittal states that, by so acknowledging and by delivering a prospectus, a broker-dealer will not be admitting that it is an “underwriter” within the meaning of the Securities Act. We will be required to allow broker-dealers to use this prospectus following the exchange offer in connection with the resale of exchange notes received in exchange for outstanding notes acquired by broker-dealers for their own account as a result of market-making or other trading activities. If required by applicable securities laws, we will, upon written request, make this prospectus available to any broker-dealer for use in connection with a resale of exchange notes. See “Plan of Distribution”.

 

The exchange notes will evidence the same debt as the outstanding notes and will be issued under and entitled to the benefits of the same indenture. The form and terms of the exchange notes to be issued in the exchange offer are the same as the form and terms of the outstanding notes except that the exchange notes will be registered under the Securities Act and, accordingly,

 

 

As of the date of this prospectus, $500 million aggregate principal amount of the 61/2% Senior Notes due 2017 are outstanding. In connection with the issuance of the outstanding notes, we arranged for the outstanding notes to be issued and transferable in book-entry form through the facilities of DTC, acting as depositary. The exchange notes will also be issuable and transferable in book-entry form through DTC.

 

This prospectus, together with the accompanying letter of transmittal, is initially being sent to all registered holders as of the close of business on October 18, 2007. We intend to conduct the exchange offer as required by the Exchange Act, and the rules and regulations of the SEC under the Exchange Act, including Rule 14e-1, to the extent applicable.

 

Rule 14e-1 describes unlawful tender offer practices under the Exchange Act. This rule requires us, among other things:

 

 

 

The exchange offer is not conditioned upon any minimum aggregate principal amount of the outstanding notes being tendered, and holders of the outstanding notes do not have any appraisal or dissenters’ rights under the Delaware General Corporation Law or under the indenture in connection with the exchange offer. We shall be considered to have accepted the outstanding notes tendered according to the procedures in this prospectus when, as and if we have given oral or written notice of acceptance to the exchange agent. See “— Exchange Agent”. The exchange agent will act as agent for the tendering holders for the purpose of receiving exchange notes from us and delivering exchange notes to those holders.

 

If any tendered outstanding notes are not accepted for exchange because of an invalid tender or the occurrence of other events described in this prospectus, certificates for these unaccepted outstanding notes will be returned, at our cost, to the tendering holder of outstanding notes or, in the case of outstanding notes tendered by book-entry transfer, into the holder’s account at DTC according to the procedures described below, promptly after the expiration date.

 

Holders who tender outstanding notes in the exchange offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the letter of transmittal, transfer taxes related to the exchange of the outstanding notes in the exchange offer. We will pay all charges and expenses, other than applicable taxes, in connection with the exchange offer. See “— Fees and Expenses”.

 

Neither we nor our board of directors makes any recommendation to holders of the outstanding notes as to whether to tender or refrain from tendering all or any portion of their outstanding notes in the exchange offer. Moreover, no one has been authorized to make any such recommendation. Holders of the outstanding notes must make their own decision whether to tender in the exchange offer and, if so, the amount of the outstanding notes to tender after reading this prospectus and the letter of transmittal and consulting with their advisors, if any, based on their own financial position and requirements.

 

Expiration Date; Extensions; Amendments

 

The term “expiration date” shall mean 5:00 p.m., New York City time, on November 19, 2007, unless we, in our sole discretion, extend the exchange offer, in which case the term “expiration date” shall mean the latest date to which the exchange offer is extended.

 

We expressly reserve the right, in our sole discretion:

 

 

The terms of the purchases or offers described in the fourth and fifth clauses above may differ from the terms of the exchange offer.

 

Any delay in acceptance, termination, extension, or amendment will be followed promptly by oral or written notice to the exchange agent and by making a public announcement. Any public announcement in the case of an extension of the exchange offer will be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. If the exchange offer is amended in a manner determined by us to

constitute a material change, including the waiver of a material condition, we will promptly disclose the amendment in a manner reasonably calculated to inform the holders of the amendment. We will also extend the exchange offer for a period of at least five business days, as required by applicable law, depending upon the significance of the change and the manner of disclosure to the holders, if the exchange offer would otherwise expire during that extended period.

 

Without limiting the manner in which we may choose to make public announcements of any delay in acceptance, termination, extension, or amendment of the exchange offer, we shall have no obligation to publish, advise, or otherwise communicate any public announcement, other than by making a timely release to PR Newswire.

 

You are advised that we may extend the exchange offer because some of the holders of the outstanding notes do not tender on a timely basis. In order to give these noteholders the ability to participate in the exchange and to avoid the significant reduction in liquidity associated with holding an unexchanged note, we may elect to extend the exchange offer.

 

Interest on the Exchange Notes

 

The exchange notes will bear interest from May 29, 2007 or, if later, the most recent date on which interest was paid or provided for on the outstanding notes surrendered in exchange for the exchange notes. Interest on the exchange notes will be payable semi-annually on each June 1 and December 1, commencing on December 1, 2007.

 

Procedures for Tendering

 

Only a holder may tender its outstanding notes in the exchange offer. Any beneficial owner whose outstanding notes are registered in the name of such holder’s broker, dealer, commercial bank, trust company or other nominee or are held in book-entry form and who wishes to tender should contact the registered holder promptly and instruct the registered holder to tender on such holder’s behalf. If the beneficial owner wishes to tender on such holder’s own behalf, the beneficial owner must, before completing and executing the letter of transmittal and delivering such holder’s outstanding notes, either make appropriate arrangements to register ownership of outstanding notes in the owner’s name or obtain a properly completed bond power from the registered holder. The transfer of record ownership may take considerable time.

 

The tender by a holder will constitute an agreement among the holder, us and the exchange agent according to the terms and subject to the conditions described in this prospectus and in the letter of transmittal.

 

A holder who desires to tender outstanding notes and who cannot comply with the procedures set forth herein for tender on a timely basis or whose outstanding notes are not immediately available must comply with the procedures for guaranteed delivery set forth below.

 

The method of delivery of the outstanding notes and the letter of transmittal and all other required documents to the exchange agent is at the election and risk of the holders. Delivery of such documents will be deemed made only when actually received by the exchange agent or deemed received under the ATOP procedures described below. In all cases, sufficient time should be allowed to assure delivery to the exchange agent before the expiration date. No letter of transmittal or outstanding notes should be sent to us. Holders may also request that their respective brokers, dealers, commercial banks, trust companies or nominees effect the tender for holders in each case as described in this prospectus and in the letter of transmittal.

 

Outstanding Notes Held in Certificated Form

 

For a holder to validly tender outstanding notes held in physical form, the exchange agent must receive, before 5:00 p.m., New York City time, on the expiration date, at its address set forth in this prospectus: