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For Immediate Release
Chicago, IL – August 15, 2012 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Tesoro Corporation (TSO - Analyst Report), BP plc (BP - Analyst Report), Tesoro Logistics L.P. (TLLP - Snapshot Report), Chevron Corporation (CVX - Analyst Report) and Transocean Ltd. (RIG - Analyst Report).
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Here are highlights from Tuesday’s Analyst Blog:
Tesoro to Buy BP Refinery
In a bid to form the largest U.S. oil-refining realm in the Pacific Basin, Tesoro Corporation (TSO - Analyst Report) has agreed to acquire Carson refinery and associated business units from London-based BP plc (BP - Analyst Report).
For the deal, Tesoro will shell out almost $2.5 billion, out of which $1.2 billion will be for the assets, while the rest will be for the value of inventory, estimated at the time of closing. The inventory is currently valued at about $1.3 billion as of the close of business on August 13, 2012.
Located in Southern California, the Carson refinery lies close to Tesoro’s Wilmington refinery and exhibits a conversion capacity of 266 million barrels per day (MBPD).
Apart from the refinery, the acquisition also includes 800 dealer operated retail stations spread across Southern California, Nevada and Arizona along with the well-established ARCO® brand and related registered trademarks. As a part of the deal, BP will also sell off the Watson cogeneration (cogen) facility and anode coke calcining facility.
Tesoro, the biggest oil refiner on the West Coast, will also take over an integrated logistics system that covers marine, land storage and product marketing terminals as well as a network of pipelines. The company plans to transfer these properties to its master limited partnership – Tesoro Logistics L.P. (TLLP - Snapshot Report) – through a number of transactions, enhancing the enterprise value of the latter.
Tesoro will fund the acquisition – which is expected to be completed by mid-2013 – from the proceeds received from the sale of the associated logistics assets to Tesoro Logistics L.P. Tesoro expects operations from the refineries to propel earnings by 24% in its first two years.
With this transaction, Tesoro will be able to increase its refining operations in California by twofold, thereby bridging the gap with the biggest refiner of the region – Chevron Corporation (CVX - Analyst Report).
In addition to the Golden Eagle plant in Martinez and the Wilmington refinery, this is Tesoro’s third refining asset purchase in California, which has raised eyebrows of the regulators. The authorities are not in favor of concentrating the power of gasoline and diesel fuel production in the hands of a single company in a state.
For BP, this disposition is a part of its strategy to sell assets worth $38 billion by the end of 2013. This move underlines the company’s attempts to repay costs connected with the Macondo well blowout in the Gulf of Mexico.
Tesoro currently holds a Zacks #2 Rank, which implies a Buy rating for a period of one to three months, while BP retains a Zacks #3 Rank (short-term Hold rating).
Earnings Scorecard: Transocean
Global offshore drilling contractor Transocean Ltd. (RIG - Analyst Report) reported better-than-expected second-quarter 2012 results on August 1, 2012, with both revenue and earnings per share improving year over year.
We cover below the results of the recent earnings announcement, subsequent analyst estimate revisions and the Zacks ratings for the short-term and long-term outlook for the stock.
Second Quarter Recap
The quarter’s earnings per share (excluding transaction costs) came in at 72 cents, significantly ahead of the Zacks Consensus Estimate of 44 cents and the year-ago adjusted profit of 50 cents.
Quarterly revenue of $2,575.0 million were up 10.3% year over year and also surpassed the Zacks Consensus Estimate by 3.7%, mainly fueled by better efficiency on high-spec floaters and a dip in the number of shipyard days.
Agreement of Analysts
Looking at the estimates’ revision trend, it becomes clear that most of the analysts project a mixed outlook for Transocean through the balance of 2012.
Of the total 19 analysts covering the stock, 4 have raised their estimates and 13 have moved in the opposite direction over the last 30 days. In the last 7 days, two analysts revised the estimates downward, while none increased.
For fiscal 2012, 8 analysts (out of 18 covering the stock) have upped their estimates in the last 30 days, while 3 analysts went for downward revisions. However, over the last 7 days, only one analyst decreased the earnings estimate, as against no upward revision.
The estimate revisions for the upcoming quarter and full-year 2012 indicate the analysts’ sentiment based on the company’s technologically-advanced and versatile offshore drilling fleet, strong backlog and considerable pricing power. However, the not-so-favorable oil and natural gas market conditions along with operational issues – such as fluctuating dayrates and high costs – continue to be an overhang on the company’s shares.
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