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TLLP and Tesoro Ink a Deal

Zacks Equity Research

Independent refiner Tesoro Corporation (TSO) announced that it has entered into a deal with its affiliate Tesoro Logistics LP (TLLP).

Per the contract, TLLP will buy part of the Carson-based logistic assets of Tesoro – which include six marketing and storage terminal facilities with 224,800 barrels per day of throughput capacity, as well as roughly 6.4 million barrels in total storage capacity. TLLP is expected to pay roughly $640 million for the acquisition, which includes $544 million of cash and the rest in equity.

The cash component is expected to be financed with the borrowings from the revolving credit agreement. The transaction is anticipated to be closed by the second quarter of 2013.

The expected yearly earnings before interest, taxes, depreciation and amortization (:EBITDA) from the assets will be $60 to $65 million.

Moreover, TLLP believes that the residual portion of the property of Tesoro, which includes storage facilities, pipelines and marine terminals, will be offered to it for $450 to $550 million, within a year after the initial transaction gets closed.

San Antonio, Texas-based TLLP is a limited partnership, which purchases and possesses logistics properties of crude oil and refined products. The partnership also involves in the operation of the assets.

TLLP 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.

Two oil and gas production pipeline Master Limited Partnerships (MLP) like Kinder Morgan Management LLC (KMR) and Magellan Midstream Partners LP (MMP) are expected to outperform the broader U.S. equity market over the next one to three months. Both the firms retain a Zacks Rank #2 (Buy).

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