Yesterday, Tesoro Corp. (TSO) sold a bunch of assets to Tesoro Logistics (TLLP) for $650 million, the second “drop-down,” or sale of assets by a parent company to a partnership.
Reuters The Wall Street Journal has the details:
Tesoro Logistics LP, a company spun off in 2011 by oil refiner Tesoro Corp., agreed to pay its former parent $650 million to acquire Los Angeles assets that include two marine terminals and a pipeline system.
The company, which expects to close on the deal in the current quarter, said it will fund the deal using mostly cash, as well as about $65 million in equity. In a separate statement Monday, Tesoro Logistics said it was offering at least 6.3 million common units, with proceeds to be used to fund the deal.
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Cowen’s Sam Margolin assesses where Tesoro Corp. is now and its other drop-down opportunists:
Operationally, TSO continues to benefit from wide Bakken crude discounts, with the Clearbrook hub currently priced at a $14/bbl discount to WTI. During 3Q, TSO realized a gross refining margin of $21/bbl in its mid-con segment, vs refineries with Cushing price exposure in the $11/bbl-$15/bbl range. We expect similar outperformance in the current
period…
The completion of the Vancouver, WA rail terminal in 1Q14 should provide additional drop down opportunities early next year. Comped to the metrics of the Anacortes rail terminal drop, the 125,000 Vancouver terminal could realize a drop down price of over $450MM, with upside in an expansion scenario. We expect TSO to remain a regular provider of cash catalysts through its capital project backlog and aggressive utilization of the TLLP vehicle.
Shares of Tesoro have gained 1.9% to $56.42, besting Phillips 66′s (PSX) 1.5% rise to $68.22, Hollyfrontier’s (HFC) 0.1% drop to $46.19 and Valero Energy’s (VLO) 0.,1% dip to $42.86. Tesoro Logistics has dropped 6% to $49.82.
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