The Federal Trade Commission (FTC) has permitted
), an independent refiner, to acquire Northwest Products system
from the U.S. energy giant
). However, the U.S. antitrust regulators have imposed a
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TESORO CORP (TSO): Free Stock Analysis Report
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Per the authorization, Tesoro can buy the 760 miles of Northwest
Products Pipeline system and some terminals if it divests a
Boise, Idaho-based petroleum terminal within six months.
In December last year, Tesoro inked a contract with Chevron to
buy the pipeline assets for a total consideration of $400
million. However, later on the price was fixed at $355 million
after negotiations. Following the closure of the deal, Tesoro
will own two out of the three terminals in Boise. According to
FTC, this will allow Tesoro to gain tremendous market dominance
there, which requires it to divest one of the two Idaho
Last month, Tesoro got the consent of FTC to acquire southern
California-based refining business of oil major -
) - for a total consideration of $2.5 billion. However, Tesoro
was not required to divest any property for that deal.
San Antonio, Texas-based Tesoro operates in two segments:
Refining and Retail. The company is involved in a number of
high-return projects that are expected to be cost effective.
These projects will not only boost Tesoro's competitive position
among its peer group but will also provide significant earnings
and cash flow growth visibility.
However, in terms of geographic diversification, Tesoro's lack of
exposure to the other refining regions in the country weakens its
competitive positioning. The company's West Coast operations and
heavy dependence on the weak Californian market act as major
Tesoro 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 1 to 3 months.
Meanwhile, one can look at
Ferrellgas Partners LP
), as a good buying option. The energy stock - sporting a Zacks
Rank #1 (Strong Buy) - has solid secular growth stories with the
potential to rise significantly from the current levels.