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Tesoro Corp. Affiliate Closes Part of Logistics Assets Deal

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Tesoro Logistics LP , an affiliate of the independent refiner Tesoro Corp. declared that it has completed part of the previously announced West Coast Logistics Assets acquisition. (Read: Tesoro Corp. to Sell Logistic Assets to Affiliate for $270M)

The Tesoro Corp. affiliate has acquired three marketing terminals and a storage facility for a total purchase price of $241 million, which includes $214.4 million in cash and about $27 million as partnership equity.

The partnership announced that its plans to complete the remaining portion of the $270 million acquisition – the refined products pipeline system that connects Tesoro Corp.’s refinery in Kenai to Anchorage – in the third quarter or at the beginning of fourth-quarter 2014.

Tesoro Corp. and the affiliate added that the two parties are expected to enter into throughput and usage agreements for the terminal and storage facilities. The agreement for the terminals includes a minimum throughput commitment while the storage agreement requires Tesoro Corp. to pay a monthly fee for reserving the existing shell capacity of the facility.

San Antonio, TX-based Tesoro Corp. is an independent refiner and marketer of refined petroleum products in the western U.S. A major advantage for the company is the scale and diversification benefits afforded by its portfolio of six refineries. We also commend Tesoro’s solid long-term competitive position in the supply-constrained California market.

However, with refiners being buyers of crude, an increase in oil prices could limit their profitability. Given this factor, with the commodity’s price hovering around $105 per barrel, we expect Tesoro Corp.’s margins to be under pressure.

In keeping with these views, Tesoro Corp. currently carries 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.

Meanwhile, one can consider better-ranked players from the oil refining and marketing industry like Sprague Resources LP (SRLP - Free Report) and Ferrellgas Partners LP (FGP - Free Report) . Both these stocks sport a Zacks Rank #1 (Strong Buy).

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