Bank of America Merrill Lynch Initiates Coverage on Tesoro Logistics

Bank of America Merrill Lynch commented on Tesoro Logistics TLLP in a report released today. In the report, Bank of America Merrill Lynch was positive in its assessment of the company. Bank of America Merrill Lynch writes, "We are initiating coverage of TLLP with a Buy rating and $27 PO. TLLP is an energy MLP primarily engaged in crude oil gathering and crude oil and refined products transportation and terminalling in the western half of the US. Formed by independent US refiner, Tesoro Corp. (TSO), TLLP went public on 19 April 2011 in a $314mn IPO priced at $21/unit (high end of $19-21 price range). We believe TLLP should trade at a premium to its refined products MLP peers given its potential to provide peer-leading cash distribution growth driven by its ability to consummate asset drop-downs from its general partner (GP), TSO, and a solid slate of planned and potential organic growth projects. Even excluding potential upside from future asset drop-downs, we forecast TLLP will grow distributions at a 10% CAGR through 2013E based on expected contributions from planned growth projects. We see TLLP's fee-based contracts and minimum volume commitments as lowering the partnership's business risk profile. Key risks include significant exposure to TSO and uncertainty around timing and terms of drop-downs." Bank of America Merrill Lynch currently has a Buy rating on Tesoro Logistics and a price objective $27. Shares of Tesoro Logistics closed at $24.49 on Friday, up $1.13 from the opening bell.