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Tesoro plans purchase of Bakken facilities

MANDAN, N.D.--Should the deal go through, Tesoro will add capacity to pump roughly 65,000 barrels of oil per day out of the Bakken. Awaiting regulatory approval, Tesoro agreed last week to acquire Great Northern Midstream LLC and its crude oil pi...

MANDAN, N.D.-Should the deal go through, Tesoro will add capacity to pump roughly 65,000 barrels of oil per day out of the Bakken.

Awaiting regulatory approval, Tesoro agreed last week to acquire Great Northern Midstream LLC and its crude oil pipeline, gathering system, storage and rail loading facilities in the state.

Assets include the 97-mile BakkenLink crude oil pipeline, which connects to several third-party gathering systems, a 28-mile gathering system in the core of the Bakken, where most of the drilling in today's low price environment is being done, a 154,000 barrel-per-day rail loading and a 657,000 barrel storage facility in Fryburg.

Tesoro already has the Tesoro High Plains Pipeline, which pumps crude oil directly into the company's 68,000 barrel-per-day refinery in Mandan.

"This acquisition would not substantially change the way we move product to our Mandan Refinery. We expect our enhanced system to provide Tesoro's West Coast facilities with cost-effective access to advantaged crude oil and provide producers additional market access. Customers gain additional flexibility from the rail loading and storage facility, which can provide outbound deliveries to the West, East and Gulf coasts," Tesoro spokesperson Brendan Smith said in an emailed statement.

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The High Plains Pipeline already granted the company access to the Bakken's core, said Justin Kringstad of the North Dakota Pipeline Authority. What BakkenLink adds is capacity: 65,000 barrels daily of it, according to 2014 filings with the state.

Kringstad said the rail terminal and storage are another major benefit. It gives the company the flexibility to hold crude oil in the state if the added cost of transportation makes the product unprofitable. With the terminal, the company can store it without having to stop pipeline flow or oil production.

"Our acquisition of Great Northern Midstream is aligned with our strategy to grow our logistics business, supply advantaged crude oil to our refineries and make these assets available to third-party customers," Greg Goff, CEO of Tesoro Corporation, said in a statement. "Combining the Great Northern Midstream assets with our Tesoro High Plains Pipeline will create a leading crude oil pipeline system in the most prolific region of the Bakken."

A price is not being named for the deal but, according to a Tesoro statement, the acquisition represents five to six times Tesoro's estimated future earnings before interest, taxes and amortization for the Great Northern Midstream business. The company expects it to immediately add to earnings.

The deal is expected to close in the first quarter of 2016.

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