Tesoro Announces Intention to Offer $925 Million in Senior Notes

Contributes Tesoro Refining & Marketing terminal, pipelines to Tesoro Logistics

SAN ANTONIO -- Tesoro Corp. last week announced that it is proposing to offer in a registered offering $925 million aggregate principal amount of senior unsecured notes due 2017 and senior unsecured notes due 2022, subject to market conditions.

The company said it intends to use the net proceeds from the notes offering together with cash on hand to fund its cash tender offers for the repurchase of any and all of its outstanding 6.625% senior notes due 2015 and 6.5% senior notes due 2017.

In the event that there are remaining proceeds after funding the cash tender offers, Tesoro intends to use any such remaining proceeds for general corporate purposes, which may include financing the retirement of any outstanding Tender Offer Notes not purchased in the cash tender offers through redemption, open market purchases or by other means, and may also include the repayment or the refinancing of other indebtedness, capital expenditures and working capital.

In other company news, Tesoro said that it has contributed the Long Beach, Calif., marine terminal and Los Angeles short-haul pipelines owned by its subsidiary, Tesoro Refining & Marketing Co., to Tesoro Logistics LP for total consideration of $210 million.

"This transaction marks Tesoro's second sale of assets to the partnership and represents the first significant addition of third-party volumes into the TLLP system, one of the partnership's primary business objectives," said Greg Goff, Tesoro president and CEO and Tesoro Logistics' chairman and CEO. "We are committed to capturing the full value of our logistics assets and growing the Partnership's distributions."

These assets, located near Tesoro's Wilmington, Calif., refinery, consist of a two-vessel berth dock leased from the City of Long Beach, six storage tanks with combined capacity of 235,000 barrels and six related pipelines with 70,000 barrels per day throughput connecting the marine terminal, Tesoro's refinery and other third-party facilities.

The purchase price of $210 million included cash of $189 million and Tesoro Logistics equity valued at approximately $21 million. The cash consideration was financed with borrowings under Tesoro Logistics' recent 5.875% senior notes offering. The equity consideration was based on the average daily closing price of common units for the 10 trading days prior to today, or $44.47 per unit, with 98% in the form of common units and 2% in the form of general partner units.

Also, Tesoro Logistics consummated its previously announced offering of $350 million aggregate principal amount of 5.875% Senior Notes due in 2020. The partnership intends to use the proceeds from the offering to fund its acquisition of Tesoro's Long Beach marine terminal and Los Angeles short-haul pipelines and to repay all of its outstanding indebtedness under its revolving credit facility, with any remaining amounts to be used for working capital and general partnership purposes.

San Antonio-based Tesoro is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates seven refineries in the western United States with a combined capacity of approximately 675,000 barrels per day. Tesoro's retail-marketing system includes approximately 1,375 branded retail stations, of which approximately 570 are company operated under the Tesoro, Shell and USA Gasoline brands.