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Why Did Tesoro Logistics Have Impressive Revenue Growth?

Kurt Gallon - Author
By

Aug. 18 2020, Updated 5:16 a.m. ET

Revenue growth

In the last part of this series, we analyzed the recent total returns of Buckeye Partners (BPL), Sunoco Logistics (SXL), Tesoro Logistics (TLLP), and NuStar Energy (NS). In this part, we’ll discuss their 1Q15 YoY (year-over-year) revenue growth.

Tesoro Logistics is the only MLP (master limited partnership) among the selected peer group that had positive YoY revenue growth in 1Q15. Its 1Q15 revenue grew by 107% YoY—driven mainly by the addition of natural gas gathering and processing operations through its QEP Field Service acquisition in December 2014. Tesoro Logistics’ pro forma[1. pro forma numbers assume the QEP Field Service acquisition was completed on January 1, 2014] 1Q15 revenue grew by ~17% YoY.

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At the same time, the revenue for Buckeye Partners, Sunoco Logistics, and NuStar Energy fell by ~45%, ~43%, and ~35%, respectively. Together the four MLPs account for ~15.11% of the Alerian MLP ETF (AMLP). Sunoco Logistics and Tesoro Logistics are subsidiaries of Energy Transfer Partners (ETP) and Tesoro (TSO).

Revenue drivers

The revenue drivers in the midstream transportation and terminaling business are:

  • pipeline throughput – Pipeline throughput is the most important revenue driver for the companies operating in the commodity transportation business. Sunoco Logistics, Buckeye Partners, NuStar Energy, and Tesoro Logistics’ 1Q15 total pipeline throughput—which includes crude oil, refined products, and NGLs (natural gas liquids)—rose by ~8.6%, ~5.4%, ~21.7%, and ~1.4%, respectively.
  • pipeline revenue per barrel – The next most important revenue driver for transportation MLPs is the average pipeline revenue per barrel. Average pipeline revenue per barrel is based on FERC (Federal Energy Regulatory Commission) regulated tariffs. The tariffs may vary across different products and pipeline systems.
  • terminaling throughput – It’s the most important revenue driver for MLPs that provide terminaling services. Sunoco Logistics’ 1Q15 terminaling throughput fell by ~3.2%, while Buckeye Partners, NuStar Energy, and Tesoro Logistics’ throughput rose by ~6.6%, ~7.2%, and ~1.8%, respectively.

The above revenue drivers show that transportation and storage revenue are mostly fee-based with very little exposure to crude oil (USO), natural gas (UNG), and NGL prices.

The reason for the revenue fall for Buckeye Partners, Sunoco Logistics, and NuStar Energy in 1Q15 is their involvement in commodity distribution and marketing businesses, apart from transportation and terminaling services. In commodity marketing and distribution operations, the revenue and the cost of goods sold fell when energy prices were falling.

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