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The Wall Street Journal: Tesoro Acquires Shell Refinery Near L.A. for $1.63 Billion

January 29, 2007 9:29 a.m.

HOUSTON — Tesoro Petroleum Corp. acquired Royal Dutch Shell PLC’s Los Angeles-area refinery for $1.63 billion, in a move to enhance its position as the leading West Coast refiner.

Tesoro Chief Executive Bruce Smith announced plans to acquire the 98,000 barrel a day refinery on Monday. The company acquired the refinery, located in Wilmington, Calif., as well as 250 gasoline stations from Shell. Additionally, Tesoro purchased 140 California gasoline stations from USA Petroleum.

“It doesn’t take much of an imagination to see how well these assets fit with our profile,” Mr. Smith said Monday

The acquisition gives the San Antonio-based independent refiner a position in Los Angeles, the only West Coast market where it was not previously represented.

“We’re going to have assets that are going to be significantly and immediately accretive to earnings,” Mr. Smith said.

Although some analysts had suggested that the acquisition could be blocked by federal regulators, Mr. Smith said the company was not concerned about the deal clearing the Federal Trade Commission. “This has been reviewed by a lot of attorneys who are familiar with what the potential problems are with an acquisition or acquisitions of this sort,” he said.

After the deal closes the company plans to aggressively invest in the refinery. Tesoro plans to invest $325 million to $350 million on improvements over the next five years, $375 million to $400 million on regulatory costs over the next five years, and $80 million a year on maintenance costs. Overall, approximately $1 billion will be invested in the refinery, Mr. Smith said.

The company anticipates $100 million in synergies with its other refineries in the first 12 months, he said.

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