Independent refiner Tesoro Corporation (TSO) announced the pricing of senior notes worth $300 million. The notes, carrying an interest rate of 5.125%, are expected to mature in 2024. Tesoro Corp. expects the offering to close on Mar 18.
The company plans to use the funds generated from this offering, along with the cash on hand, to redeem an earlier offering. The earlier offered senior notes, due 2019, carried an interest rate of 9.75% and were worth $300 million as of Dec 31, 2013. Tesoro Corp. announced that it has released a redemption notice for the 2019 notes but the redemption process is subject to the closing of this offering.
San Antonio, Texas-based Tesoro Corp. is an independent refiner and marketer of refined petroleum products in the western U.S. A major advantage for the company is the scale and diversification benefits afforded by its portfolio of seven refineries. We also like Tesoro’s solid long-term competitive position on the supply-constrained California market.
However, the company does not look too good on the earnings front. It has missed the Zacks Consensus Estimate in two back-to-back quarters with the most recent quarter reflecting a massive 86.67% negative surprise. Tesoro Corp. reported fourth quarter earnings of 4 cents, down 97.1% from the year-ago adjusted earnings of $1.38 and below the Zacks Consensus Estimate of 30 cents, due to a significant increase in operating expenses and sharp drop in refining margins across all operating regions.
Tesoro Corp. currently has 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.
Meanwhile, one can consider better-ranked players in the oil refining and marketing sector like Marathon Petroleum Corporation (MPC), Valero Energy Corp. (VLO) and Western Refining, Inc. (WNR). All these stocks hold a Zacks Rank #2 (Buy).
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