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Tesoro & its Partnership in Deal

Zacks Equity Research

Tesoro Corporation (TSO) completed the transfer of the Anacortes Rail Unloading Facility to the master limited partnership (MLP) – Tesoro Logistics LP (TLLP). For the property, Tesoro Logistics made a payment of $180 million, of which $162 million was in cash and the remaining was through the partnership’s equity.

The facility – owned by subsidiary Tesoro Refining and Marketing Company – comprised of a four track offloading station, which has an unloading capacity of 100 car unit trains and permitted to hold nearly 50,000 barrels per day.

Tesoro Corporation and its partnership also signed a throughput and use agreement associated with the rail unloading facility assets. Per the deal, the contract stands for an initial period of 10 years, with at least a daily throughput commitment of 40 million barrels as well as price escalations every year.

Tesoro Logistics expects to witness an estimated additional annual logistics EBITDA of $19 million from this transaction.

Prior to this divesture, Tesoro Corporation had passed on the Martinez Crude Oil Marine Terminal and the Long Beach marine terminal along with Los Angeles short-haul pipelines to Tesoro Logistics.

These sales underline the attempt of Tesoro to expand the partnership’s business horizon and broaden its asset base.

San Antonio, Texas-based Tesoro Corporation is an independent refiner and marketer of refined petroleum products in the western U.S. The company operates in two segments: Refining and Retail.

In early November, Tesoro came out with mixed third-quarter 2012 results, with earnings per share missing the Zacks Consensus Estimate and revenue going ahead of our projection. The company also announced a 25.0% increase in its quarterly dividend to 15 cents per share, or 60 cents per share annualized.

While Tesoro Corporation - which has business ties with BP plc (BP) - currently holds a Zacks #3 Rank (short-term Hold rating), we maintain our long-term Outperform recommendation on the stock.

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