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Bakken Remains Tesoro’s Land of Opportunity; MLP Makes $1.1B in Buys

As its joint senior management had predicted, Tesoro Corp.'s master limited partnership (MLP), Tesoro Logistics LP (TLLP), went on a buying spree Monday, scooping up $700 million in assets in North Dakota and another $400 million in Northern California.

Both transactions were said to be immediately accretive.

TLLP picked up crude oil, natural gas and produced water gathering systems and two natural gas processing facilities in North Dakota, in addition to acquiring terminaling and storage assets in Martinez, CA, from a subsidiary of Tesoro Corp.

"These acquisitions strengthen TLLP's position as a leading integrated midstream service provider and are expected to support distribution growth [to MLP unitholders]," a Tesoro spokesperson said.

In the Bakken, TLLP agreed to acquire gathering/processing assets from a combination of Whiting Oil/Gas Corp., GBK Investments LLC, and WBI Energy Midstream LLC for a total price of $700 million. Gathering/processing assets include more than 650 miles of oil, gas and produced water pipelines.

The assets have a combined capacity of 170 MMcf/d of gas processing and 18,700 b/d of fractionation capacity in the Sanish and Pronghorn fields of the greater Williston Basin in North Dakota.

"The revenue from the assets is approximately 90% fee-based and backed by acreage dedications from 10 producers," the Tesoro spokesperson said. "The assets are well utilized based on current production levels and provide organic expansion opportunities that support continued drilling in existing well locations with attractive production economics."

In Northern California, the terminaling/storage assets include 5.8 million bbl of crude oil, feedstock and refined product storage capacity at the Martinez refinery, along with a marine terminal capable of handling up to 35,000 b/d of feedstock and refined product throughput.

The assets are expected to provide $28-33 million in net earnings and annual earnings before-interest-taxes-depreciation-amortization (EBITDA) of $45-50 million, the spokesperson said. Tesoro and TLLP also entered into long-term, fee-based storage and throughput and use agreements that are expected to provide stable cash flows to TLLP.

Tesoro CEO Greg Goff said TLLP's portfolio of logistics assets has been strengthened, providing "full-service capabilities to both upstream and downstream customers," and the MLP is now on target to achieve its 2017 goal of $635 million of net earnings and $1 billion of annual EBITDA.

"These assets provide optimization and organic investment opportunities that support future growth," Goff said.

During analyst conference calls earlier this year, Goff has reiterated a strategy aimed at growth through acquisitions.

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