Refiner and marketer of refined petroleum products,
) recently announced the sale of its Long Beach marine terminal and
Los-Angeles area pipelines to its master limited partnership
Tesoro Logistics LP
) for $210 million.
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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
) 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
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).