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Tesoro’s outlook for 2014 and 2015: A growth capex of $100 million

Kshitija Bhandaru

A must-know investor's guide to Tesoro Logistics and more (Part 4 of 4)

(Continued from Part 3)

Tesoro Logistics’ outlook

In 2013, Tesoro Logistics (TLLP) spent $65 million in growth capex and $7 million in maintenance capex. TLLP has given guidance for growth capital expenditures of $100 million in 2014. Plus, the outlook for maintenance capital expenditures in 2014 is ~$35 million. TLLP is committed to investing $100 million as growth capex every year. Maintenance capex outlook for 2015 and 2016 is $28 and $29 million, respectively.

A significant portion of near-term income capital spend is associated with expansion of High Plains System, where TLLP intends to grow throughput on northbound segment of pipeline by 50,000 bpd to 75,000 bpd. A crude oil storage hub of 480,000 bbls (oil barrel) is also scheduled for completion. Both these projects are stated to be completed by mid-2014.

Tesoro Logistics’ FY2013 EBITDA was $129 million. The estimated EBITDA growth for 2014 is $260 million, and for 2015, it is $366 million. Much of the EBITDA growth would be attributed to the synergies derived from The Los Angeles logistics assets, acquired last quarter, which is stated to contribute between $60 million to $65 million in EBITDA in the first year of operation. Wall Street analysts are expecting 2014 cash distributions to total $2.51 per limited partner unit, which represents a 19% rise over 2013′s $2.11.

Tesoro Logistics may be considered to be a prudent investment with an annual distribution growth percentage of 19% to 20% and a yield of 3.5%. Tesoro Logistics is expected to report earnings for the first quarter of 2014 on April 30. Note that Tesoro Logistics was born out of Tesoro Corporation who also happen to be Tesoro Logistics’ primary customer. Therefore, TLLP is a crude and refined products MLP with a strong relationship to a refiner (TSO). Comparable companies include Valero Energy Corporation (VLO), HollyFrontier Corp (HFC)  and Western Refining Inc (WNR). All these companies are a component of the SPDR   S&POil & Gas Exploration & Production ETF (XOP). TLLP is part of the Alerian MLP ETF (AMLP) and Global X MLP ETF (MLPA).

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