How Well Is Tesoro Logistics Placed ahead of Its 2Q16 Results?

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Part 4
How Well Is Tesoro Logistics Placed ahead of Its 2Q16 Results? PART 4 OF 4

Dropdown Assets to Contribute to Tesoro Logistics’ EBITDA Growth

Analyst recommendations for TLLP

Of the analysts surveyed by Bloomberg, 69% rated Tesoro Logistics (TLLP) a “buy,” while 31% rated it a “hold.” None of the surveyed analysts rated TLLP a “sell.” The consensus 12-month target price for TLLP is $56.7. Over the same period, the low and high target prices for the stock are $47 and $63, respectively.

Currently, Tesoro Logistics’ stock is trading near $49.1. If it attains the median target price within one year, it would mean a 15% price return for investors.

Dropdown Assets to Contribute to Tesoro Logistics&#8217; EBITDA Growth

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The above table shows the recommendations and target prices for Tesoro Logistics from some of the brokers surveyed.

As for peers, 70% analysts rated Phillips 66 Partners (PSXP) a “buy,” while 75% rated PBF Logistics (PBFX) a “buy,” and 33% rated Holly Energy Partners (HEP) a “buy.”

Dropdown from Tesoro

On July 1, 2016, TLLP announced the acquisition of storage and terminaling assets from Tesoro Corporation (TSO) for $444 million. The assets include crude oil and refined product storage at Tesoro’s Kenai refinery and two refined product terminals. According to the related press release, “the assets are expected to provide annual net earnings of $36 million and annual EBITDA of $51 million.”

According to Greg Goff, Tesoro Corporation’s Chairman and Chief Executive Officer, “The acquired assets serve as a critical component in the Alaska supply chain and enable TLLP to provide an integrated, full-service logistics solution in the region while contributing stable fee-based cash flows.”

Goff went on to say, “We remain committed to achieving our 2017 target of $650 million in net earnings and $1 billion of annual EBITDA and expect this transaction to be immediately accretive to unitholder distributions.”


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