Independent refiner Tesoro Corporation TSO has decided to buy crude oil logistics provider Great Northern Midstream LLC. The value of the transaction has not been disclosed.
The logistics provider has ownership interest in high-quality assets that include new crude oil pipeline, gathering and transportation properties along with facilities for storage and rail loading. All these properties are based in the Williston Basin of North Dakota.
To be specific, the deal comprises BakkenLink crude oil pipeline that spreads over 97 miles and connects to the gathering assets of the third party. Moreover, the agreement includes rail loading assets – with 154,000 barrel per day capacity – and storage properties – which can store 657,000 barrel liquids − in Fryburg, ND. Notably, the logistics assets deliver crude in the west, east and Gulf coasts.
Management added that the acquisition reflects the company’s goal of broadening its logistics properties for supplying cost-effective oil to refineries and third-party clients. Most importantly, the properties of Great Northern Midstream, along with Tesoro High Plains Pipeline system of the company, will pave the way for leading crude oil pipeline systems in the Bakken region.
The deal, anticipated to close by the first quarter of 2016, is dependent on customary closing conditions.
San Antonio, TX-based Tesoro is an independent refiner and marketer of refined petroleum products in the western U.S.
With refiners being buyers of crude – which has seen soft trading since June last year – their profitability has been favorably impacted by a fall in input costs. Operators like Tesoro are expected to benefit from this low oil price environment.
However, in an effort to reduce pollution, the EPA has recently outlined a proposal that would require refiners to significantly reduce sulphur content in gasoline, starting from 2017. In order to comply with the new standards, Tesoro will have to increase their capital expenditure, which will adversely impact earnings and cash flows.
As a result, Tesoro carries a Zacks Rank #3 (Hold), implying that the stock will perform in line with the broader U.S. equity market over the next one to three months.
Meanwhile, better-ranked players in the energy sector include Murphy USA Inc. MUSA, Energy Transfer Equity LP ETE and Boardwalk Pipeline Partners, LP BWP. Each of these stocks sports a Zacks Rank #1 (Strong Buy).
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