In an attempt to form the largest U.S. oil-refining realm in the Pacific Basin, Tesoro Corporation (TSO) closed the acquisition of Carson refinery and associated business units from London-based BP plc (BP).
For the deal, Tesoro paid $2.425 billion, out of which $1.075 billion was for the assets, while the rest was for inventory and other working capital. Located in Southern California, the Carson refinery lies close to Tesoro’s Wilmington refinery and has a conversion capacity of 266 million barrels per day (MBPD).
Apart from the refinery, the acquisition also includes 800 dealer operated retail stations spread across Southern California, Nevada and Arizona along with the well-established ARCO® brand and related registered trademarks.
Simultaneously, Tesoro Logistics LP (TLLP) also closed the previously announced acquisition of Carson-based logistic assets of Tesoro Corporation. It includes six marketing and storage terminal facilities with 225 MBPD of throughput capacity, as well as roughly 6.4 million barrels in total storage capacity. TLLP paid $640 million for the acquisition, which includes $544 million of cash and the rest in equity.
Moreover, TLLP expects to be offered Tesoro’s remaining property, including storage facilities, pipelines and marine terminals for $450–$550 million within a year.
Tesoro financed the BP transaction with $550 million in cash, $544 million in cash proceeds from the acquisition of logistics assets by TLLP, $500 million in term loan borrowings and around $700 million in borrowings under its revolving credit facility.
Following the asset acquisition, Tesoro will be able to increase its refining operations in California by twofold, thereby bridging the gap with Chevron Corporation (CVX) – one of the biggest refiner of the region.
Tesoro currently retains a Zacks Rank #3 (Hold), implying that it is expected to perform in line with the broader U.S. equity market over the next one to three months.
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