Tesoro Corporation (NYSE: TSO) is set to have its Initial Public Offering this week for its Tesoro Logistics LP (NYSE: TLLP).  Tesoro is looking to move to a more of a pure-play and moving to unlock shareholder value.

Tesoro Logistics LP (NYSE: TLLP) was formed by Tesoro as a play that owns crude oil and refined products logistics assets, with initial assets being a crude gathering in the Bakken shale as well as terminals for refined products and several pipelines.

The most recent data showed that the company planned to raise approximately $250 million.  The 12.5 million shares offering has an expected price range of $19.00 to $21.00.  The market cap is now expected to be more than $600 million on a fully diluted basis.

Tesoro Logistics LP is expected to have a distribution rate (dividend yield alternative) of about 6.75%.  The parent Tesoro will continue to hold the 2% general partner interest and will also continue to hold a majority stake in the units after the offering.  For a new offering, it will have a higher payout than many of the current LP’s that have risen so much in value.

Effectively, this gets Tesoro closer to looking more like a pure-play in the refining sector and much more similar to Valero Energy Corporation (NYSE: VLO).  The lead underwriters are Citi, Bank of America Merrill Lynch, and Wells Fargo.

We admit that the comparison may be like comparing a mole hill to a mountain and that Tesoro Logistics LP IPO would be considered an inverse relationship in comparison…  Kinder Morgan Inc. (NYSE: KMI) was very well received in its IPO this year, got a premium pricing, and investor demand was strong.  Unfortunately, its shares were fully priced after opening and they have fallen back to under $29.00.  Those shares have even hit a post-IPO low of $28.23 today.

Tesoro’s shares were at $18.00 less than three-months ago and shares hit $28.00 just a couple of weeks ago.  After a 2.3% drop mid-Monday, shares are trading just under $26.00.  Valero shares peaked north of $30.00 in recent weeks and its stock is now back under $26.00.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG

Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.