Tesoro Sells Terminal to MLP - Analyst Blog

By Zacks Equity Research,

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Tesoro Corporation ( TSO ) has agreed to transfer the Martinez Crude Oil Marine Terminal to its newly formed master limited partnership ( MLP ) - Tesoro Logistics LP ( TLLP ). For the terminal, Tesoro Logistics will make a payment of $75 million, of which $67.5 million will be in cash and the remaining will be through the partnership's equity.

Located on the Sacramento River, the terminal has a total throughput capacity of approximately 145,000 barrels per day. The terminal, which receives crude oil via marine vessels and delivers it to the nearby Tesoro's Martinez refinery, comprises a single-berth dock, five crude oil storage tanks with a combined capacity of 425,000 barrels and associated pipelines.

Tesoro Corporation and its partnership also collaborated on a 10-year terminalling agreement that has a minimum throughput commitment. This deal is expected to generate incremental revenue of $15 million for TesoroLogistics along with an incremental annual EBITDA of $8 million.

Last year, Tesoro Corporation spun off its logistics business and formed Tesoro Logistics LP through an initial public offering.

This transfer of the Martinez Crude Oil Marine Terminal underlines the attempt of Tesoro to expand the partnership and broaden its asset base. Management of the company expects this contribution to be accretive to the partnership immediately and will remain committed to bring in more logistics business in the future.  

San Antonio, Texas-based Tesoro Corporation is an independent refiner and marketer of refined petroleum products in the western U.S. The company operates in two segments: Refining and Retail.

We expect Tesoro to benefit from the various strategic initiatives, acquisitions and planned investment programs. Additional positives for Tesoro include the scale and diversification benefits afforded by its portfolio of seven refineries.

However, Tesoro remains exposed to the risk of sluggish U.S. economic growth and weak product demand. The company also lacks geographic diversification and depends excessively on the West Coast market, which will further limit the ability to generate positive earnings surprises. As such we see limited upside potential for the stock and maintain a long-term Neutral recommendation.

TESORO LOGISTIC ( TLLP ): Free Stock Analysis Report
TESORO CORP ( TSO ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Stocks: MLP , TLLP , TSO

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