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Tesoro Arm Seals $650M LA Asset Deal

Zacks Equity Research

Tesoro Logistics LP (TLLP), an affiliate of independent refiner Tesoro Corp. (TSO), has completed the previously announced purchase of a major portion of the residual Los Angeles-based Logistics properties of the later for roughly $650.0 million. Of the total purchase price, $585.0 million was in cash and the remaining was in equity holding.

After operating the Los Angeles assets for a year, Tesoro Logistics expects earnings before income tax depreciation and amortization (:EBITDA) of $60.0-$65.0 million from the properties. Subsequently, the Logistics resources are expected to deliver EBITDA of $65.0 to $75.0 million.  Moreover, Tesoro Logistics projects maintenance expenses to be in the range of $10.0-$14.0 million every year.  

The acquired properties include 2 marine terminals that have a capacity of 285,000 barrels per day, a 2 million barrels crude oil and refined products storage terminal, a petroleum coke handling and storage unit with a capacity of about 2,600 metric tons per day, a refined products terminal and a shipping container storage lot. The partnership will also own a 100 mile pipeline system – with expected capacity of 550,000 barrels per day – that will provide connectivity to the other acquired assets.

Tesoro Logistics believes that the acquired assets will immediately provide the unit holders with increased cash distributions.

Tesoro Logistics is involved in the acquisition and development of logistics properties of oil and refined products. The partnership currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.

Meanwhile, one can look at better-ranked players in the energy sector like Bonanza Creek Energy Inc. (BCEI) and Harvest Natural Resources Inc. (HNR). Both the stocks sport a Zacks Rank #1 (Strong Buy).

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