Tesoro Corp. (NYSE: TSO) has stitched together more pipeline in the Bakken with a Dec. 7 deal to acquire Great Northern Midstream LLC, which owns and operates pipe, gathering, storage and rail loading in North Dakota.

Great Northern's assets are near Tesoro High Plains Pipeline system and will be integrated to serve Bakken customers while supplying Tesoro’s West Coast refineries with less expensive crude oil.

The price of the acquisition was not disclosed but analysts said Tesoro, based in San Antonio, got the assets on the cheap, likely due to sliding MLP valuations that have been hit hard recently. Tesoro said the acquisition price represents five to six times the Tesoro-estimated future EBITDA for the Great Northern Midstream business and is expected to be immediately accretive.

That price “represents a bargain in our view, given logistics assets have typically historically traded at 9-10x,” said Jeff Dietert, analyst with Simmons & Co. International.

The acquired assets include:

  • The 97-mile BakkenLink crude oil pipeline;
  • A proprietary 28-mile gathering system in the core of the Bakken, supported by acreage dedication;
  • Rail loading capacity of 54,000 barrels per day (bbl/d); and
  • Fryburg, N.D., 657,000 barrel storage facility.

The Fryburg facility can provide outbound deliveries to the west, east and Gulf coasts, Tesoro said.

“Our acquisition of Great Northern Midstream is aligned with our strategy to grow our logistics business, supply advantaged crude oil to our refineries, and make these assets available to third-party customers," said Greg Goff, chairman, president and CEO. "Combining the Great Northern Midstream assets with our Tesoro High Plains Pipeline will create a leading crude oil pipeline system in the most prolific region of the Bakken.”

The transaction is subject to customary closing conditions, including regulatory approval, and is expected to close in the first quarter of 2016.

Goff said the enhanced system could serve as an additional platform for growth and the business will be dropped down into its MLP Tesoro Logistics LP (NYSE: TLLP) in 2016.

Tesoro, through its subsidiaries, operates six refineries in the western U.S. and owns a logistics business that includes an interest in TLLP and ownership of its general partner.

Darren Barbee can be reached at dbarbee@hartenergy.com

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