Tesoro Logistics Spends $650 Million To Wrap Up Los Angeles Midstream Assets
To buy majority of the remaining Los Angeles logistics including two marine terminals.
Tesoro Logistics LP (NYSE:TLLP) entered into a definitive agreement Nov. 18 to buy the majority of the remaining Los Angeles logistics assets owned by Tesoro Corp.'s subsidiary, Tesoro Refining & Marketing Company LLC for $650 million.
TLLP, based in San Antonio, Texas, said Nov. 19 that it will offer 6.3 million common shares to help pay for the transaction. Tesoro Corp. spun off Tesoro Logistics in April 2011 and holds a 40% stake in the partnership, including a 2% interest in the general partner.
“The cash continues to come in,” said Sam Margolin, an analyst for Cowen and Co., in a report.
The assets include two marine terminals with expected throughput of 285,000 barrels per day, which includes a marine terminal capable of handling a two million barrel capacity very large crude carrier.
The acquisition also includes 100 miles of active crude oil and refined products pipeline system connecting Tesoro's Los Angeles refining complex with the marine terminal facilities to be acquired and TLLP's Los Angeles area refined products terminal and storage facilities with initial expected throughput of 550,000 barrels per day.
The facilities also include crude oil and refined products storage terminals that have a capacity of 2 million barrels and a petroleum coke handling and storage facility with an expected throughput of 2,600 metric tons per day, a refined products terminal and a shipping container storage lot.
Parent company TSO has brought in over $1.4 billion in cash from asset sales since June.
"With the acquisition, we intend to strengthen our position as a West Coast logistics provider and significantly increase our access to long-term, contractually committed, fee-based revenues," said Greg Goff, TLLP's chairman and CEO. "Our expectation is that the acquisition of these strategically important assets will be immediately accretive to unitholder cash distributions and will provide opportunities for future optimization and organic growth."
The partnership expects that the Los Angeles logistics assets will contribute estimated EBITDA of $60 million to $65 million in its first full year of operation and annual EBITDA of $65 million to $75 million thereafter as a result of expected synergies to be gained from the integration of Tesoro's Los Angeles refining complex.
Operationally, TSO continues to benefit from wide Bakken crude discounts, with the Clearbrook hub currently priced at a $14 per barrel discount to WTI, Margolin said.