Limited Partnership IPO From Tesoro (TSO, TLLP, VLO)

The oil refining business was a tough business for much of 2010 and 2009.  Now that some of the stocks have recovered, there is a move happening which could be used to further unlock shareholder values.  This morning came an SEC filing from Tesoro Corporation (NYSE: TSO) showing the planned IPO for its Tesoro Logistics LP, a Tesoro subsidiary that was formed by Tesoro to own, operate, develop and acquire crude oil and refined products logistics assets.

The common units represent limited partner interests of and it is applying to list on the New York Stock Exchange under the ticker “TLLP.”  The terms of the deal have not been decided and the price and number of common units has not been determined.  All that has been listed so far in the filing is that unit sale will be up to $230,000,000 in common units.  That figure is of course subject to change and is likely just for filing purposes.  As far as how it compares to Tesoro as a whole, Tesoro’s market cap was $2.65 billion before the softness today.

Tesoro’s LP unit is based in in San Antonio, Texas and its initial assets will consist of a crude oil gathering system in the Bakken Shale/Williston Basin area, eight refined products terminals in the Midwestern and Western United States, and a crude oil and refined products storage facility and five related short-haul pipelines in Utah.

The LP noted in the filing that it intends to expand through organic growth via constructing new assets and increasing the utilization of its existing assets.  The company also plans to acquire assets from Tesoro and third parties.

Citi is currently listed as the sole lead book-running manager for the proposed offering.

Tesoro shareholders are not exactly giving the greatest cheer today as the stock is down 2.4% at $18.40.  Keep in mind that the 52-week trading range was $10.40 to $19.10.  Much of 2010 was tough for refiners.  Valero Energy Corporation (NYSE: VLO) has recovered handily off its lows of under $16.00 last year and the stock hit a 52-week high this morning.  Valero shares are currently down about 2.5% at $23.14.

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JON C. OGG