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Tesoro Sells Assets for $210M

Zacks Equity Research

Refiner and marketer of refined petroleum products, Tesoro Corporation (TSO) recently announced the sale of its Long Beach marine terminal and Los-Angeles area pipelines to its master limited partnership Tesoro Logistics LP (TLLP) for $210 million.

The purchase consideration was divided into $189 million in cash and Tesoro Logistics equity worth $21 million. Borrowings under Tesoro Logistics’ 5.875% senior notes offering were used to finance the cash portion of the deal. The equity part comprised 98% common units while general partner units constituted the remaining 2%.

The assets comprise a two-vessel berth dock, six storage tanks with a total capacity of 235,000 barrels and six associated pipelines with a capacity of 70,000 barrels-per-day throughput. The pipeline links the marine terminal with Tesoro’s Wilmington, California refinery and other third party facilities.

The asset sale comes on the heels of Tesoro’s $2.5 billion bid to purchase BP Plc.'s (BP) Carson refinery in California, with a capacity of 266,000 barrels-per-day. The company intends to integrate the Carson plant with its Wilmington refinery to form a sort of a West Coast refining empire.  However, management cleared that the asset transfer was not related to the Carson plant bid.

Apart from the purchase agreement, Tesoro and Tesoro Logistics also signed a transportation services deal related to short-haul pipeline assets and a throughput and use agreement concerning the marine terminal assets.  Both the contracts include minimum throughput commitments, annual price hikes and 10-year initial contract terms.

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

Overall, we believe Tesoro is well positioned going forward and view it as an attractive investment.

We maintain our long-term Outperform recommendation, supported by a Zacks #1 Rank (short-term Strong Buy rating).

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