Tesoro Plans MLP Through IPO - Analyst Blog

Independent refiner and marketer of refined petroleum products, Tesoro Corporation (TSO) announced plans to separate a portion of its logistics business to form a Master Limited Partnership (MLP). In this respect, Tesoro also intends to raise contribution worth $200 million through an initial public offering (IPO).

The MLP will provide assistance to Tesoro in the expansion and development of its logistics business. The net proceeds from the offering will be utilized for general corporate purposes.

The logistics assets expected to be a part of the MLP comprises High Plains crude oil gathering system in the Bakken Shale/Williston basin area, eight refined products terminals and a crude oil and refined products storage facility along with five related short-haul pipelines.

Texas-based Tesoro operates in two segments: Refining and Retail. The company currently has seven refineries in the western United States with a combined capacity of approximately 665,000 barrels per day. The retail-marketing system includes over 880 branded retail stations.

We believe that Tesoro enjoys the benefits of large scale and diversification offered by its portfolio of refineries. We also appreciate the company's restructuring initiatives and long-term competitive position in the market, which enable it to navigate the current cyclical downturn better than most of its peers.

However, in the view of a bleak outlook for domestic refiners, slow recovery of economic conditions and strong competition from peers such as Exxon Mobil (XOM) and Valero Energy (VLO) we retain our Neutral rating on the stock.

Tesoro currently retains a Zacks #3 Rank, which translates into a short-term Hold rating.

 
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