In a bid to form the largest U.S. oil-refining realm in the
) has agreed to acquire Carson refinery and associated business
units from London-based
BP PLC (BP): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis Report
TESORO LOGISTIC (TLLP): Free Stock Analysis
TESORO CORP (TSO): Free Stock Analysis Report
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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
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.
) - 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 -
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
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).