Tesoro (TSO) To Divest Alaskan Storage & Terminal Properties

Independent refiner Tesoro Corporation (NYSE:TSO) has entered into a deal with Tesoro Logistics LP (NYSE:TLLP) – a master limited partnership – wherein the former will divest its Alaska storage and terminalling properties to the latter. The divesture has been valued at roughly $444 million, of which $400 million will be in cash.

The storage assets include crude oil, feedstock and refined product storage tanks in Kenai, Alaska. The combined capacity of the tanks – having connectivity with Kenai Refinery of Tesoro along with Tesoro Alaska Pipeline and Nikiski Products Terminal of Tesoro Logistics – is 3.5 million barrels. The divesture of the storage assets has already been completed.

The to-be divested terminal assets comprise refined product terminals in Anchorage and Fairbanks having a combined capacity to store more than 600,000 barrels. The terminals will be sold in the third quarter.

Investors should know that the transaction will likely be completed in two stages. In the first stage, Tesoro is expected to get a cash amount of $239 million along with $27 million worth common and general partner units of TLLP. During the second stage, Tesoro is anticipated to fetch $160 million in cash in addition to $18 million worth common and general partner units of TLLP.

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San Antonio, TX-based Tesoro is one of the largest independent oil refiners in the U.S. with a combined crude oil processing capacity of approximately 850,000 Bbl/d. The major advantages for the company are the scale and diversification benefits by virtue of its portfolio of six refineries. The company’s solid long-term competitive position on the supply-constrained California market is commendable.

Currently, the company carries a Zacks Rank #3 (Hold), which implies that the stock will perform in line with the broader U.S. equity market over the next one to three months.

Some better-ranked players in the oil refining and marketing sector include World Fuel Services Corp. (NYSE:INT) and Murphy USA Inc. (NYSE:MUSA) . World Fuel Services sports a Zacks Rank #1 (Strong Buy) while Murphy USA carries a Zacks Rank #2 (Buy).