Back to top

Analyst Blog

Tesoro Logistics LP (TLLP - Snapshot Report), an affiliate of independent refiner Tesoro Corp. (TSO - Analyst Report), inked a deal with the latter to acquire a major portion of the remaining Los Angeles Logistics Assets which is owned by Tesoro Refining and Marketing Co. LLC – yet another affiliate of Tesoro Corp.  Tesoro Logistics will shell out $650 million for the deal which is expected to close by fourth quarter 2013.

Of the total purchase price, $585 million will be in cash and the remaining will be as equity holding. Part of this cash consideration will be financed by an unregistered public offering of 6,300,000 common units, which Tesoro Logistics announced in a separate release. The partnership has offered underwriters a 30-day period to increase their holding to 945,000 common units.

Post acquisition, Tesoro Logistics will have control over 2 marine terminals that have a capacity of 285,000 barrels per day, a 2 million barrels crude oil and refined products storage terminal, a petroleum coke handling and storage unit with a capacity of about 2,600 metric tons per day, a refined products terminal and a shipping container storage lot. The partnership will also own a 100 mile pipeline system – with expected capacity of 550,000 barrels per day – that will provide connectivity to the other acquired assets.

Per Tesoro Logistics management, this strategic acquisition not only solidifies its position as a West Coast logistics provider but also provides scope for organic growth. The deal should be beneficial to the cash distribution.

The projected net income, for the first year of operation, from the Los Angeles Logistics assets is $28–$33 million. This should increase to $33–$43 million in the years to follow.

Tesoro Logistics is involved in the acquisition and development of logistics properties of crude oil and refined products. The partnership currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line the broader U.S. equity market over the next one to three months.

Meanwhile, one can consider other stocks like SM Energy Company (SM - Analyst Report) and Matador Resources Company (MTDR - Snapshot Report) as good investment opportunities. The stocks currently sport a Zacks Rank #1 (Strong Buy).
 

Please login to Zacks.com or register to post a comment.