Why Tesoro's Shares Jumped

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Tesoro (NYS: TSO) jumped 10% today after the company announced the purchase of a BP (NYS: BP) refinery.

So what: Tesoro is buying BP's California oil refinery and 800 gas stations for $1.8 billion, plus about $1.3 billion for inventory. According to analysts, the company is paying below market value, partly because California is a difficult operating environment with very strict environmental regulations.


Now what: Management expects the deal to be immediately accretive to earnings and expects it can save $250 million per year through synergies with its other plants. At the reduced price, the company should get a nice boost in earnings for very little cost. I think this deal can continue to drive earnings, and long term this will be a big catalyst for the stock.

Interested in more info on Tesoro? Add it to your watchlist byclicking here.

The article Why Tesoro's Shares Jumped originally appeared on Fool.com.

Fool contributor Travis Hoium does not have a position in any company mentioned. You can follow Travis on Twitter at @FlushDrawFool, check out his personal stock holdings or follow his CAPS picks at TMFFlushDraw.Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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