September 17, 2012 [OPIS] - Tesoro Corporation and Tesoro Logistics LP said in a joint statement on Friday that Tesoro Corporation (Tesoro) has contributed the Long Beach marine terminal and Los Angeles short-haul pipelines owned by Tesoro's subsidiary, Tesoro Refining and Marketing Company, to Tesoro Logistics LP (the Partnership) for total consideration of $210 million.
“This transaction marks Tesoro’s second sale of assets to the Partnership and represents the first significant addition of third-party volumes into the TLLP system, one of the Partnership’s primary business objectives,” said Greg Goff, Tesoro Corporation’s president and chief executive officer and Tesoro Logistics’ chairman and chief executive officer.
“We are committed to capturing the full value of our logistics assets and growing the Partnership’s distributions,” he said. These assets, located near Tesoro’s Wilmington, California refinery, consist of a two-vessel berth dock leased from the City of Long Beach, six storage tanks with combined capacity of 235,000 bbl and six related pipelines with 70,000 b/d throughput connecting the marine terminal, Tesoro’s refinery and other third-party facilities.
The purchase price of $210 million included cash of $189 million and Tesoro Logistics equity valued at about $21 million.
The cash consideration was financed with borrowings under Tesoro Logistics’ recent 5.875% Senior Notes offering.
The equity consideration was based on the average daily closing price of common units for the 10 trading days prior to today, or $44.47 per unit, with 98% in the form of common units and 2% in the form of general partner units.
In connection with the closing of the transaction, Tesoro and the Partnership entered into a throughput and use agreement for the marine terminal assets and a transportation services agreement for the short-haul pipeline assets. Both of these agreements include minimum throughput commitments, annual price escalations and 10-year initial contract terms.
Tesoro Logistics expects that this contribution will result in an estimated $22 million of additional annual EBITDA, approximately half of which is expected to be from third parties.
Also, Tesoro Logistics consummated its previously announced offering of $350 million aggregate principal amount of 5.875% Senior Notes due in 2020.
The Partnership intends to use the proceeds from the offering to fund its acquisition of Tesoro’s Long Beach marine terminal and Los Angeles short-haul pipelines and to repay all of its outstanding indebtedness under its revolving credit facility, with any remaining amounts to be used for working capital and general partnership purposes.
