UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant
to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 19, 2014
TESORO CORPORATION
(Exact name of registrant as specified in its charter)
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| Delaware |
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1-3473 |
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95-0862768 |
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of incorporation) |
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(Commission
File Number) |
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(IRS Employer
Identification No.) |
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| 19100 Ridgewood Pkwy
San Antonio, Texas |
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78259-1828 |
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(Zip Code) |
(210) 626-6000
(Registrant’s telephone number, including area code)
Not Applicable
(Former
name or former address, if changed since last report)
Check the appropriate box below
if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2.):
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 7.01 |
Regulation FD Disclosure |
On October 19, 2014, Tesoro Corporation
(“Tesoro”) issued a press release announcing that its affiliate, Tesoro Logistics LP (the “Partnership”) has executed a definitive agreement to acquire QEP Resources, Inc.’s wholly owned natural gas gathering
and processing business, QEP Field Services, LLC, including its 58% partnership interests in QEP Midstream Partners, LP. The press release related to this announcement is attached hereto as Exhibit 99.1 and incorporated herein by reference.
On October 20, 2014, Tesoro will jointly participate in conference call with the Partnership, which will be open to the public, to
discuss the acquisition. A slide presentation will be provided to any investors who participate in the conference call (the “Slide Presentation”). The Slide Presentation, available on the Partnership’s website at
www.tesorologistics.com, is filed as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated herein by reference.
The
information above is being furnished, not filed, pursuant to Item 7.01 of Form 8-K. Accordingly, the information in Item 7.01 of this Current Report, including Exhibit 99.1 and Exhibit 99.2, will not be subject to liability under
Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and will not be incorporated by reference into any registration statement or other document filed by the Company under the Securities Act or
the Exchange Act, unless specifically identified therein as being incorporated by reference.
| Item 9.01 |
Financial Statements and Exhibits. |
(d) Exhibits.
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| Exhibit
Number |
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Description |
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| 99.1** |
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Press release of Tesoro issued on October 19, 2014, announcing acquisition of QEP Field Services, LLC. |
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| 99.2** |
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Slide Presentation dated as of October 20, 2014. |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
Date: October 20, 2014
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TESORO CORPORATION |
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By: |
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/s/ STEVEN STERIN |
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Steven Sterin |
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Executive Vice President and Chief Financial Officer |
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Index to Exhibits
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| Exhibit
Number |
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Description |
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| 99.1** |
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Press release of Tesoro issued on October 19, 2014, announcing acquisition of QEP Field Services, LLC. |
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| 99.2** |
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Slide Presentation dated as of October 20, 2014. |
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Exhibit 99.1
Tesoro Corporation Creates Full-Service Logistics Company
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Tesoro Logistics LP agrees to acquire QEP Field Services for approximately $2.5 billion, including 58% ownership in QEP Midstream Partners |
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Strategically located, high-quality natural gas gathering and processing assets in the Rockies, Uinta and North Dakota |
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Expands growth opportunity into natural gas midstream business |
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Increases logistics third-party revenue from 12% to approximately 50% |
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Transaction includes Tesoro investing over $350 million in TLLP |
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Significantly grows Tesoro’s value in TLLP |
SAN ANTONIO – October 19, 2014 - Tesoro
Corporation (NYSE: TSO) (“Tesoro”) today announced that its affiliate, Tesoro Logistics LP (NYSE: TLLP) (the “Partnership” or “TLLP”) has executed a definitive agreement to acquire QEP Resources, Inc.’s wholly
owned natural gas gathering and processing business, QEP Field Services, LLC (“QEPFS”), including its 58% partnership interests in QEP Midstream Partners, LP (“QEPM”). In conjunction with the transaction, Tesoro has committed to
investing $350 million in TLLP common units as well as maintaining its 2% general partner interest. The investment is expected to generate significant value through Tesoro’s ownership interests in TLLP.
“This is another transformational acquisition for Tesoro and TLLP, which enables our logistics company to offer a full-suite of services to third-party
customers and enhances the growth of our midstream operations,” said Greg Goff, President and CEO of Tesoro. “This acquisition advances our distinctive strategy to build a customer-focused logistics business, broadening our capabilities
across the value chain to deliver enhanced shareholder value.”
The acquisition, valued at approximately $2.5 billion, including approximately $230
million to refinance QEPM’s debt, provides TLLP access to strategically located, high-quality assets that provide product and service diversification within our geographic footprint. The transaction is anticipated to close in the fourth quarter
of 2014, and is subject to regulatory approval. It is expected to be accretive to TLLP unitholder distributions in the first year, which will continue to drive Tesoro shareholder value through its interests in the Partnership.
Public Invited to Listen to Conference Call
At 7:00 a.m. CT (8:00 a.m. ET) tomorrow, Monday, October 20, 2014, Tesoro and TLLP will live broadcast a conference call to discuss the transaction.
Interested parties may listen to the conference call and access accompanying slides by logging on to http://www.tsocorp.com.
Tesoro Corporation, a
Fortune 100 company, is an independent refiner and marketer of petroleum products. Tesoro, through its subsidiaries, operates six refineries in the western United States with a combined capacity of over 850,000 barrels per day and ownership in a
logistics business which includes a 33% interest in Tesoro Logistics LP and ownership of its general partner. Tesoro’s retail-marketing system includes over 2,200 retail stations under the ARCO®, Shell®, Exxon®, Mobil®, USA
Gasoline™ and Tesoro® brands.
This press release contains certain statements that are “forward-looking” statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. You can identify forward-looking statements by the use of words such as “may,” “should,” “could,”
“estimates,” “predicts,” “potential,” “continue,” “anticipates,” “believes,” “‘plans,” “expects,” “future” and “intends” and similar expressions
which are intended to identify forward-looking statements. These forward-looking statements include statements concerning the expected completion of the transaction, additional capital investments, cash flow, unitholder diversification and other
benefits of the transaction. For more information concerning factors that could affect these statements see our annual report on Form 10-K and quarterly reports on Form 10-Q, filed with the Securities and Exchange Commission (the “SEC”).
We undertake no obligation to publicly release the result of any revisions to any such forward-looking statements that may be made to reflect events or circumstances that occur, or which we become aware of, after the date hereof.
Contact:
Investors:
Brian Randecker, Senior Director, Investor Relations, (210) 626-4757
Media:
Tesoro Media Relations, media@tsocorp.com,
(210) 626-7702
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| Exhibit 99.2
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Exhibit 99.2
TESORO CREATES FULL-SERVICE
LOGISTICS COMPANY
TLLP ACQUIRES QEP FIELD SERVICES ASSETS
October 20, 2014
FORWARD LOOKING STATEMENTS
This Presentation
includes forward-looking statements. These statements relate to, among other things, the following: execution of our strategy, including growth and expansion projects, asset optimization opportunities, and growth in third party business and
revenues; cash flows; earnings diversification; the timing and amount of capital expenditures; our leverage targets and anticipated cost of capital; our ability to consummate the acquisition of QEP Field Services and anticipated financing
transactions in connection therewith; changes in the expected benefits of our transactions relating to Tesoro Logistics’ acquisitions from Tesoro Corporation and acquisitions from third parties, including the acquisition of QEP Field Services
or our ability to integrate the operations we have acquired or expect to acquire in such transactions; our intentions regarding a contracting arrangement with Tesoro Corporation to maintain minimum commodity exposure; and other aspects of future
performance. We have used the words “anticipate,” “appears,” “are likely,” “attempt,” “believe,” “could,” “estimate,” “expect,” “intend,” “forecast,”
“foresee,” “may,” “outlook,” “plan,” “predict,” “project,” “should,” “will,” “potential,” “would” and similar terms and phrases to identify
forward-looking statements in this Presentation.
Although we believe the assumptions upon which these
forward-looking statements are based are reasonable, any of these assumptions could prove to be inaccurate and the forward-looking statements based on these assumptions could be incorrect. Our operations involve risks and uncertainties, many of
which are outside of our control, and any one of which, or a combination of which, could materially affect our results of operations and whether the forward-looking statements ultimately prove to be correct.
Actual results and trends in the future may differ materially from those suggested or implied by the forward-looking
statements depending on a variety of factors which are described in greater detail in our filings with the SEC. Please see our Risk Factor disclosures included in our 2013 Annual Report on Form 10-K and our quarterly reports on Form 10-Q. All future
written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the previous statements. Except as required by law, we undertake no obligation to update any information
contained herein or to publicly release the results of any revisions to any forward-looking statements that may be made to reflect events or circumstances that occur, or that we become aware of, after the date of this Presentation.
TESORO CREATES FULL-SERVICE LOGISTICS COMPANY
Expands growth opportunity into natural gas
Immediate capabilities to offer integrated crude oil and natural gas services
Tesoro’s execution track record applied to QEPFS growth potential
Diversifies revenue: basins, commodities, customers
Increases logistics third-party revenue from 12% to approximately 50%
Significantly grows value in TLLP doubling expected cash distributions to Tesoro to approximately $150 million in 20151
Continues Tesoro’s journey to create shareholder value through a growing, integrated logistics business
1) Compared to actual annualized distributions for the first half of 2014
3
TRANSACTION OVERVIEW
Acquisition of QEP Field
Services (“QEPFS”) for $2.5 billion by TLLP
– Leading provider of natural gas logistics
services in the Rockies
– Includes 58% interest in QEP Midstream Partners (NYSE: QEPM)
Immediately accretive to TLLP unitholders
Expected close fourth quarter 2014
Interconnected
Assets
2,200 miles of natural gas and crude oil gathering and transmission pipelines with 3,000 receipt points
2.9 Bcf/d of natural gas throughput capacity
1.5 Bcf/d of inlet processing capacity
54 MBD crude oil pipeline throughput capacity
15
MBD of NGL fractionation capacity Talented organization with proven expertise in natural gas gathering and processing business 4
EXPANDING INTO NATURAL GAS LOGISTICS
Shale
revolution driving significant opportunities in logistics infrastructure
Acquisition provides platform to
deliver growing natural gas production to market
Transforms TLLP from crude oil and products to full-service
integrated logistics provider
Enables significant organic growth opportunities
Crude Oil and Refined Products Infrastructure Requirement1
($ billions)
Access to natural gas production enhances Tesoro’s ability to grow full-service logistics business
1) IHS Global report to American Petroleum Institute, Dec 2013
2010A 2015E 2016E 2017E 2018E 2019E Avg.
2020-2025E
Natural Gas and NGL Infrastructure Requirement1
($ billions)
2010A 2015E 2016E 2017E 2018E 2019E Avg.
2020-2025E
45 30 15 0
45 30 15 0
EXECUTION DRIVES SHAREHOLDER VALUE
450%
TSO Shareholder Return
350% 7 8 9
Return 250% 6
5
Shareholder 150% TSO
2 3 S&P 500
4
1
50%
2011 2012 2013 2014
1) Mandan Expansion Project Announced 6) TLLP Northwest Products System Acquisition Announced
2) TLLP IPO 7) Vancouver Energy Announced
3) Salt
Lake City Expansion Project Announced 8) Carson Acquisition Finalized, Hawaii Divestiture
4) First Asset Sale
to TLLP 9) TLLP QEPFS Acquisition Announced 6
5) Carson Acquisition Announced
INTEGRATED VALUE CHAIN CREATES OPPORTUNITIES
Strategy to develop superior logistics around Tesoro’s assets strengthens integrated value chain
Complementary business allows Tesoro to leverage competencies in logistics and processing
Advantaged logistics drives value for core refining and marketing business
Acquisition fits existing operating and commercial competencies
TESORO DRIVING GROWTH WITH TLLP
Tesoro Logistics
Journey:
– Formed to leverage value of logistics assets
– Utilized for transformational growth
– Becoming full-service logistics company
Driven to significantly grow Tesoro’s value
– Expand access to advantaged feedstocks
– Focus on third-party business drives
distribution growth
Tesoro’s driving a
distinctive integrated growth strategy with TLLP
TRANSACTION SUMMARY
Structure • All cash
transaction for 100% of QEP Field Services including 58%
interest in QEP Midstream Partners
• Total consideration to QEP Resources, Inc. of approximately $2.5
Purchase Price billion, including approximately $230 million to refinance debt at QEP
Midstream Partners
LP Accretion Expected to be immediately accretive to unitholder distributions in
first year
• Total consideration to be
funded with proceeds from public equity,
Financing notes offering, revolver draw and $350 million Tesoro
investment in
TLLP common units
Pro-Forma • Intend to enter into agreements with Tesoro to significantly reduce
Commodity
Exposure existing QEPFS commodity
exposure
Pro-Forma • Tesoro Logistics: Debt to EBITDA Expected to be 4.0x by Q1 2015
Leverage
Closing • Expected close fourth quarter 2014
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FINANCING OVERVIEW
Total consideration of
approximately $2.5 billion expected to be funded with:
– Equity offering $1.3 billion of TLLP common
units, including Tesoro Corporation investment of $350 million for TLLP common units, GP will also maintain its 2% general partner interest
– Senior unsecured notes offering of $1.3 billion
– Expansion of existing TLLP revolver to $900 million, with approximately $210 million drawn
Expected to be immediately accretive to TLLP LP unitholders in first year
Tesoro will waive certain GP distributions of $10 million with respect to 2015
TLLP also announced expectation to increase third quarter regular distribution by 4%
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STRATEGIC FIT IN EXISTING GEOGRAPHIC FOOTPRINT
Green River Basin Williston Basin
Pinedale
Gathering
Rendezvous ND
Gas Services
Rendezvous WY Williston Basin
Pipeline Gathering
Company
Blacks Fork
Processing
Complex UT CO
Emigrant Trail
Processing
Moxa Arch
Plant Gathering
24B Processing Vermillion
Plant Gathering
Uinta
Three Rivers Gathering
Gathering Vermillion
Processing Plant
Stagecoach/Iron
Horse Processing
Complex
Uintah Basin
Field Services Vermillion Basin
Uinta Basin
QEP Field Services QEP Midstream Partners Green River Processing
QEP Midstream Partners owns:
78% interest in Rendezvous Gas Services, LLC; 50% interest in Three Rivers Gathering, LLC; 40% interest in Green River Processing, LLC 11
QEP Field Services owns:
71% interest in Vermillion Processing Plant; 60% interest in Green River Processing, LLC; 38% interest in Uinta Basin Field Services, LLC
58% partnership interest in QEP Midstream Partners, including the general partner
ACQUISITION SUPPORTS TLLP STRATEGY
Long-term,
fee-based contracts
Focus on Stable,
Strong diversified customer base
Fee-Based
Business • TLLP intends to enter into agreements with Tesoro to significantly reduce existing QEPFS
commodity exposure
Optimize Existing • Increase utilization of gathering and processing assets Asset Base
• Expect $20 million of annual synergies
Pursue Organic • Over $400 million of organic growth
capital projects
Expansion
Opportunities • Enhances growth potential with full-service offering Grow Through • Strategic fit within Western footprint
Strategic
Acquisitions • Leverage highly skilled and talented workforce
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PRODUCING EXCEPTIONAL UNITHOLDER RETURNS
350%
TLLP Total Unitholder Return
9
10
250% 5
6
7 8
Return TLLP
150% 4
Unitholder Alerian
3
50% 2
1
2011 2012 2013 2014
-50%
1) IPO 6) Northwest Products System Acquisition Announced
2) Stockton Expansion Project Completed 7) Southern California Terminaling Expansion Announced
3) High Plains Pipeline Interconnects Announced 8) Los Angeles Logistics Assets Acquired
4) High Plains Reversal Announced 9) Connolly Gathering Announced
5) Los Angeles Terminal Asset Acquired 10) QEPFS Acquisition Announced
13
TRACK RECORD OF VALUE GROWTH
High Plains Pipeline
Gathering TLLP Terminalling Volume Natural Gas Throughput
(MBD) (MBD) Acquired Assets (Bcf/d)
Tesoro
3rd Party
Up 240%
Up 700%
Potential Potential Potential
IPO 2012 2013 3Q14
Future IPO 4Q12 4Q13 3Q14 Future 2011 2012 2013 2014E Future
Proven track record of growing the business
TLLP intends to drive growth through acquired assets
Expands strategic platform for optimization and organic growth
TLLP execution record combined with acquired assets
expected to drive value growth 14
ACCELERATED ORGANIC GROWTH
TLLP Income Capital
Outlook
($ million)
400
370
100
110 Rockies Natural Gas
300
260 TLLP Base Business
160
62
2013A 2014E 2015E 2016E
Enhancing organic growth potential through
expanded capability and basin presence 15
TESORO CREATES FULL-SERVICE LOGISTICS COMPANY
Proforma Key Metrics
Anacortes
Natural Crude Oil, Gas Refined
Pipelines Product, and 3,500+ miles Kenai Bakken
Natural Gas Throughput Capacity 2,900+ MMcf/d
Powder Mandan
Natural Gas Inlet Processing River
Capacity
1,500+ MMCf/d
Green
High Plains Pipeline Throughput 100+ MBD Salt Lake City River
Denver
High Plains Trucking Volume 50+ MBD
Julesburg
Martinez Uinta (Niobrara)
Marketing Terminal Capacity 645+ MBD San
Marine
Terminal Capacity 795 MBD Los Angeles Juan
Rail Terminal Capacity 50 MBD
Dedicated Storage Capacity 9,200+ MBBLS
Tesoro Logistics
Crude Oil Gathering
High Plains pipeline
Trucking Acquired Assets Tesoro Corporation
Terminalling and Transportation Gathering Pipeline Refinery
Northwest Products System pipeline Gas Processing Plant
Crude oil and refined product terminal
Marine terminal
Rail unloading facility 16
Pipeline
TLLP INVESTMENT HIGHLIGHTS
Stable Cash Flow
Well-Positioned Assets Strong Sponsorship
Attractive, Visible Growth Experienced
Opportunities Management Team
17
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