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Tesoro Logistics Investing $1.1 Billion to Strengthen Position as a Leading Integrated Midstream Services Company

Tesoro Logistics LP, November 22, 2016

Tesoro Logistics LP (TLLP) has announced that the Company has agreed to acquire crude oil, natural gas and produced water gathering systems and two natural gas processing facilities for total consideration of $700 million. Additionally, the Company has acquired terminalling and storage assets located in Martinez, California from a subsidiary of Tesoro Corporation (TSO) for total consideration of $400 million. These acquisitions strengthen TLLP's position as a leading integrated midstream service provider and are expected to support distribution growth.

"These two acquisitions strengthen TLLP's portfolio of logistics assets that provide full-service capabilities to both upstream and downstream customers," said Greg Goff, Chairman and Chief Executive Officer of TLLP's general partner. "TLLP is on target to achieve its 2017 goal of $635 million of net earnings and $1 billion of annual EBITDA. Further, these assets provide optimization and organic investment opportunities that support future growth."

Acquisition of North Dakota Gathering and Processing Assets
TLLP has agreed to acquire crude oil, natural gas and produced water gathering systems and two natural gas processing facilities from Whiting Oil and Gas Corporation, GBK Investments, LLC and WBI Energy Midstream, LLC for total consideration of approximately $700 million. The North Dakota Gathering and Processing Assets include over 650 miles of crude oil, natural gas, and produced water gathering pipelines, 170 MMcf per day of natural gas processing capacity and 18,700 barrels per day of fractionation capacity in the Sanish and Pronghorn fields of the Williston Basin in North Dakota.

The revenue from the assets is approximately 90% fee-based and backed by acreage dedications from ten producers. The assets are well utilized based on current production levels and provide organic expansion opportunities that support continued drilling in existing well locations with attractive production economics.

The acquisition, which is subject to customary closing conditions including regulatory approval, is anticipated to close early in the first quarter of 2017. The North Dakota Gathering and Processing Assets are expected to contribute $79 to $89 million of annual net earnings and $100 to $110 million of annual EBITDA. TLLP expects the acquisition to be immediately accretive to unitholders.

Acquisition of Northern California Terminalling and Storage Assets
TLLP has acquired terminalling and storage assets located in Martinez, California from a subsidiary of Tesoro for total consideration of $400 million. The Northern California Terminalling and Storage Assets include 5.8 million barrels of crude oil, feedstock, and refined product storage capacity at Tesoro's Martinez Refinery along with a marine terminal capable of handling up to 35,000 bpd of feedstock and refined product throughput. The Northern California Terminalling and Storage Assets are expected to provide annual net earnings of $28 to $33 million and annual EBITDA of $45 to $50 million. TLLP expects to generate higher revenues over the next several years by improving asset utilization by 10% to 15% as well as pursuing related organic growth opportunities. The transaction is expected to be immediately accretive to unitholders.

In connection with the acquisition, Tesoro and TLLP entered into long-term, fee-based storage and throughput and use agreements which are expected to provide stable cash flows to TLLP.

Northern California Terminalling and Storage Assets Acquisition Financing
In consideration for the Northern California Terminalling and Storage Assets, TLLP paid $400 million, including $360 million of cash financed with borrowings on TLLP's revolving credit facility and $40 million in common and general partner units to Tesoro. The equity consideration was based on the average daily closing price of TLLP's common units for the 10 trading days prior to closing, or $45.53 per unit, with 860,933 units in the form of common units and 17,570 units in the form of general partner units.

Incentive Distribution Rights Waiver and 2017 Distribution Growth Guidance
Tesoro has agreed to waive $100 million of general partner incentive distributions with respect to 2017 and 2018, or $12.5 million per quarter, to support the balanced growth of the general and limited partners' interests and maintain strong financial metrics. With these transactions, the Company now expects annual distribution growth of 12% to 15% for 2017.

Advisors
RBC Capital Markets is serving in a financial advisory capacity to Tesoro Logistics and Norton Rose Fulbright US LLP is serving as its legal advisor for the transaction.

About Tesoro Logistics LP

Tesoro Logistics LP is a leading full-service logistics company operating primarily in the western and mid-continent regions of the United States. TLLP owns and operates a network of crude oil, refined products and natural gas pipelines. TLLP also owns and operates crude oil and refined products truck terminals, marine terminals and dedicated storage facilities. In addition, TLLP owns and operates natural gas processing and fractionation complexes. TLLP is a fee-based, growth oriented Delaware limited partnership formed by Tesoro Corporation and is headquartered in San Antonio, Texas.


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