Tesoro Logistics Files for IPO - Analyst Blog

Tesoro Logistics LP – a newly formed subsidiary of independent refiner Tesoro Corporation (TSO) – said that it has filed a preliminary registration statement with the Securities and Exchange Commission for a proposed initial public offering (“IPO”) of its units representing limited partner interests.

The partnership expects to raise up to $230 million through the offering but added that the number of units to be offered and the price range for  the offering have not been determined. Tesoro Logistics has applied for listing its common units on the New York Stock Exchange under the ticker symbol ‘TLLP'.

In December last year, Tesoro Corp. announced plans to separate a portion of its logistics business to form a master limited partnership (“MLP”) – Tesoro Logistics LP – and raise contribution worth more than $200 million through an IPO. The MLP will be engaged in the ownership, operation, development and acquisition of crude oil and refined products logistics assets.

The initial assets expected to be a part of Tesoro Logistics comprises of Tesoro Corp's crude oil gathering system in the Bakken Shale/Williston Basin area of North Dakota and Montana, eight refined products terminals in the Midwest and western U.S., a crude oil and refined products storage facility, and five related short-haul pipelines in Utah. However, San Antonio, Texas-based Tesoro Corp. will continue to own petroleum refineries and its network of convenience stores.

Tesoro Corp. is an independent refiner and marketer of refined petroleum products in the western U.S. The company operates in two segments: Refining and Retail. The Refining segment manufactures and sells gasoline and gasoline-blend stocks, jet fuel, diesel fuel, and other refined products to customers, primarily in the mid-continental and the western U.S. This segment also markets liquefied petroleum gas, petroleum coke, and asphalt.

Tesoro shares currently retain a Zacks #3 Rank, which translates into a short-term 'Hold' rating. We are also maintaining our long-term 'Neutral' recommendation on the stock.

We believe that the outlook for domestic refiners remains bleak, as the overall environment remains challenging. The refining markets remain fundamentally oversupplied against the backdrop of excess global capacity and the still weak demand level.

Being one of the largest independent refiners, Tesoro, along with Valero (VLO) and Sunoco (SUN), remains particularly exposed to this unfavorable macro backdrop. While some signs of economic improvement appear, high unemployment in California and excess refining capacity in the U.S. will continue to weigh on the company's margins.

 
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