NEW YORK (MarketWatch) — Tesoro Corp. rallied Monday after the refining firm said its $1.2 billion acquisition of BP PLC’s refining and marketing operations in southern California will boost its earnings per share by 24% in its first two years, but the broad energy sector fell with losses by WPX Energy and First Solar.
Tesoro Corp. TSO jumped 9.5% to $38.87 a share at the closing bell as the top gainer among components of the S&P 500 SPX on the heels of the San Antonio energy company’s plan to buy up BP PLC’s BP refining assets centered near Los Angeles.
The deal is valued at about $2.48 billion including about $1.3 billion in inventory.
Tesoro Corp. will purchase BP’s 266,000-barrel-per-day Carson refinery south of Los Angeles, as well as 800 dealer-operated gas stations, ownership of the Arco brand, pipelines, and an integrated anode coke calcining operation.
Tesoro said the deal will add to its earnings per share by about 24% in the first two years after it closes as expected in the middle of 2013.
“Given Tesoro’s existing operations on the West Coast and our understanding of the complexities and challenges of operating in California, we are well positioned to generate significant operational efficiencies, increase our ability to satisfy market demand and reduce stationary source air emissions,” Tesoro said.
The Tesoro deal comes as a refinery fire by Chevron Corp. CVX in the San Francisco Bay area has driven up retail prices of gasoline in California.
Sweetening the deal for Tesoro is a plan for its Tesoro Logistics TLLP unit to buy $1 billion worth of BP’s infrastructure assets from Tesoro in the first year.
Tesoro will also benefit from proximity to BP’s Carson refinery, with its Wilmington refinery located next door.
The combined operations offer Tesoro a potential $250 million in annual cost savings, after an additional capital investment of $225 million, the company said.
Elsewhere in the energy sector, stocks moved lower with the broad equities market.
Exxon Mobi Corp. XOM dipped 0.3% and Chevron Corp. CVX slipped 0.2%. The two oil companies are components of the Dow Jones Industrial Average DJIA, which fell 39 points.
The NYSE Arca Oil Index XOI declined by 0.8%, the NYSE Arca Natural Gas Index XNG dropped 1.2% and the Philadelphia Oil Service Index OSX slipped 1%.
The Energy Select Sector SPDR Fund XLE, which includes energy stocks in the S&P 500, dropped 0.4%.
Among movers, First Solar Inc. FSLR lost 4.4%, WPX Energy WPX lost 3.4% and Denbury Resources DNR fell 3.2%.
Among energy stocks in the spotlight, Midstates Petroleum Company Inc. MPO dipped 2.3% after it said it’ll pay $650 million in cash and stock to buy oil acreage in the Mississippian Lime region of Oklahoma and Kansas, from Riverstone Holdings LLC AP4.
The purchase price includes $325 million in cash and $325 million in preferred stock. The deal includes wells that are already producing oil as well as exploration areas.
“The properties we are acquiring in the Mississippian Lime play are particularly appealing because they are in a market-recognized, emerging horizontal oil play with good predictability and solid economics,” the company said.
Midstates held its initial public offering on April 20, when it raised $312 million.
Entities managed by private equity firm First Reserve emerged with a 41% stake in Midstates after its IPO.
