) has entered into a deal with an affiliate of Par Petroleum
Corporation, an energy firm with interests in wide ranging
Per the agreement, Tesoro will sell its 100% ownership of Tesoro
Hawaii LLC to the Houston-based Par Petroleum's arm. Tesoro
Hawaii owns Kapolei refinery, which has a refining capacity of
94,000 barrel per day and is also the owner of retail stations
and related logistic properties.
The deal involves a cash transaction of $75 million and an
estimated $225 million to $275 million market value of net
working capital. The sale price also comprises an earn-out
agreement of up to $40 million, which will be paid over a span of
The deal is expected to be completed by the third quarter of
2013, but will be subject to the approvals from the regulators.
Tesoro management reveals that the primary reason behind the sale
of the asset is that the Hawaii operations were not in line with
the company's business focus.
San Antonio, Texas-based Tesoro operates in two segments:
Refining and Retail. Tesoro is paying greater attention for
improving business processes, reducing operating costs, enhancing
the integration of the refining portfolio and investing in
organic growth. Tesoro is involved with a number of high-return
projects that are expected to be cost effective.
However, in an effort to reduce pollution, the Environmental
Protection Agency (EPA) has recently outlined a proposal that
would require refiners to reduce sulfur content in gasoline by
67% starting 2017. To comply with the new norm, Tesoro will have
to increase its capital expenditure, which will adversely impact
earnings and cash flows.
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
EQT Midstream Partners LP
) as good buying options. These energy stocks - sporting a Zacks
Rank #1 (Strong Buy) - have solid secular growth stories with the
potential to rise significantly from the current levels.
EQT MIDSTRM PTR (EQM): Free Stock Analysis
FERRELLGAS -LP (FGP): Free Stock Analysis
INTEROIL CORP (IOC): Free Stock Analysis
TESORO CORP (TSO): Free Stock Analysis Report
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