Tesoro sells assets for $210M

The refiner previously bid $2.5B to purchase BP's Carson refinery in California.

By Zacks.com Sep 18, 2012 10:46AM

Oil refinery, Chris Knorr, Design Pics, CorbisBy 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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