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Tesoro to Use Exxon and Mobil Brands

Zacks Equity Research

Independent refiner Tesoro Corporation (TSO) recently secured rights from U.S. energy behemoth ExxonMobil Corporation (XOM) for the use of Exxon and Mobil brands of the latter at retail stations in Northern California, Oregon, Western Washington and Nevada. Tesoro further secured rights to use these brands all through the Minnesota, Central/Eastern North Dakota and Northeastern South Dakota marketing areas.

This will help Tesoro in assuming the ownership of branded wholesale supply contracts for 54 Exxon or Mobil branded retail stations in Minnesota.

Management at Tesoro believes that the inclusion of the well recognized Exxon and Mobil brands into their retail network will help in further integration of their refining and marketing business with brands known for their quality products and marketing programs.

The contracts are expected to be executed by 2013 end and market launch is expected to begin in 2014.

Tesoro is one of the largest independent oil refiners in the U.S. with a combined crude oil processing capacity of approximately 675,000 Bbl/d. A major advantage for the company is the scale and diversification benefits afforded by its portfolio of seven refineries.

Last month, the company reported bright first quarter 2013 results on the back of higher margins and favorable market conditions. Earnings per share (excluding special items) came in at 73 cents, managing to beat the Zacks Consensus Estimate of 71 cents and improving from the year-ago adjusted profit of 39 cents per share.

However, the inherent volatility of the refining business reduces the accuracy and reliability of long-term earnings and revenue estimates. Additionally, results are exposed to unplanned shut-downs that may have a lingering impact.

Tesoro currently retains a Zacks Rank #3 (Hold). But there are other refiner and marketers in the energy sector that are good buying options. These include Ferrellgas Partners LP (FGP) with Zacks Rank #1 (Strong Buy) and Phillips 66 (PSX) with Zacks Rank #2 (Buy).

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