ACQUISITIONS

Martinez Marine Terminal Acquisition

Effective April 1, 2012, we purchased the Martinez Crude Oil Marine Terminal in exchange for consideration of $75.0 million, comprised of $67.5 million in cash financed with borrowings under our amended revolving credit facility (the "Revolving Credit Facility") and the remaining $7.5 million in partnership units. The equity was comprised of 206,362 common units, representing an approximate 1% limited partner interest in the Partnership, and 4,212 general partner units. The assets included in the Martinez Marine Terminal Acquisition include a single-berth dock and related crude oil storage tanks, short-haul pipelines and other assets and properties associated with the facility.

The single-berth dock and related leasehold improvements are situated on an offshore parcel of land that is currently being leased by Tesoro from the California State Lands Commission under a term lease (the "Martinez Terminal Lease"). The Martinez Terminal Lease, related leasehold improvements and the short-haul pipelines will be legally transferred to TLLP when the Martinez Terminal Lease is renewed and extended, and the transfer is approved by the California State Lands Commission. We consider our acquisition date to be April 1, 2012, which is the date we commenced operating the Martinez Crude Oil Marine Terminal under the agreements between the Partnership and Tesoro.

Long Beach Assets Acquisition

Effective September 14, 2012, we purchased the Long Beach Assets from Tesoro in exchange for total consideration of $210.0 million, comprised of $189.0 million in cash and the remaining $21.0 million in partnership units. The equity was comprised of 462,825 common units, representing an approximate 1% limited partner interest in the Partnership, and 9,446 general partner units.

The Long Beach marine terminal includes a wharf with a two-vessel berth dock that receives and loads crude oil, intermediate feedstocks and refined products, six storage tanks and three related short-haul pipelines that connect our Long Beach marine terminal to Tesoro's Wilmington refinery (the "Wilmington Refinery"). The Los Angeles short-haul pipelines consist of two short-haul pipelines that transport refined products from the Wilmington Refinery to other third-party facilities and one short-haul pipeline that is currently leased to a third party. Tesoro currently leases the Long Beach marine terminal from the City of Long Beach.

Long Beach Terminal Operating Agreement. The Partnership entered into an operating agreement (the "Operating Agreement") with Tesoro, effective September 14, 2012, which governs the Partnership's operation of the Long Beach marine terminal on behalf of Tesoro beginning on September 14, 2012 until the later of the date of the: (i) assignment or sublease of the Long Beach terminal lease; or (ii) Partnership's issuance of the Certificate of Financial Responsibility to the California Department of Fish and Game. Under the Operating Agreement, Tesoro is subject to the same throughput commitments and fees as outlined in the Long Beach Berth Access, Use and Throughput Agreement (see Note C for further information).

Anacortes Rail Facility Acquisition

Effective November 15, 2012, we purchased the Anacortes Rail Facility from Tesoro in exchange for total consideration of $180.0 million, comprised of $162.0 million in cash and the remaining $18.0 million in partnership units. The equity was comprised of 93,289 general partner units and 309,838 common units, representing slightly less than a 1% limited partner interest.

The Anacortes Rail Facility includes a four-track unloading platform, two receiving and departing tracks capable of handling a 100-car unit train and two additional short track spurs, as well as other related assets and properties associated with the facility. The facility, which was placed in service in September 2012, delivers crude oil to Tesoro's Washington refinery.

We entered into an agreement with Tesoro to lease the real property under the Anacortes Rail Facility for a term of ninety-nine years in connection with the Anacortes Rail Facility Acquisition. In addition, we entered into a right of first refusal, option agreement and agreement of purchase and sale in connection with the Anacortes Rail Facility Acquisition, giving Tesoro the right to repurchase the Anacortes Rail Facility under certain conditions.

Commercial Agreements in Connection with Recent Acquisitions

We entered into commercial agreements with Tesoro in connection with the Acquisitions from Tesoro under which Tesoro commits to provide us with minimum monthly throughput volumes of crude oil and refined products. See Note C for additional information regarding commercial agreements and amendments to other agreements with related parties in connection with these acquisitions.

Northwest Products System Acquisition

On December 6, 2012, we executed definitive agreements to purchase Chevron Pipe Line Company's and Northwest Terminalling Company's (collectively, "Chevron") northwest products system (the "Northwest Products System") for a total purchase price of $400.0 million. The transaction is subject to regulatory approval and is expected to close late in the first quarter or early in the second quarter of 2013. The Partnership paid a deposit of $40.0 million upon execution of the purchase agreements, which may be retained by Chevron upon certain contract termination events. The Northwest Products System consists of a common carrier products pipeline running from Salt Lake City, Utah to Spokane, Washington, and a separate jet fuel pipeline to the Salt Lake City International Airport. It also includes certain assets of the Northwest Terminalling Company consisting of the Boise and Pocatello, Idaho and Pasco, Washington refined products terminals. The operations of the Northwest Products System will be reported in our Terminalling, Transportation and Storage segment upon closing. Pre-acquisition transaction costs of $0.4 million associated with the acquisition of the Northwest Products System are included in the general and administrative expenses of TLLP in our statements of combined consolidated operations for the year ended December 31, 2012.

Financial Results

Tesoro retained any current assets, current liabilities and environmental liabilities related to the Martinez Crude Oil Marine Terminal, Long Beach Assets and the Anacortes Rail Facility as of the dates of each acquisition. The only historical balance sheet item that transferred to the Partnership in the acquisitions was property, plant and equipment, which was recorded by TLLP at historical cost of $38.1 million as of April 1, 2012 for the Martinez Crude Oil Marine Terminal, $22.3 million as of September 14, 2012 for the Long Beach Assets and $50.7 million as of November 15, 2012 for the Anacortes Rail Facility.

Our historical financial statements have been retrospectively adjusted to reflect the results of operations, financial position, cash flows and equity attributable to the Martinez Crude Oil Marine Terminal, the Long Beach Assets and the Anacortes Rail Facility as if we owned the assets for all periods presented. There was no financial statement impact related to the Anacortes Rail Facility prior to 2012 as the costs of construction were recorded in 2012. The results of the Acquisitions from Tesoro are included in the Terminalling, Transportation and Storage segment.

The following amounts associated with the Acquisitions from Tesoro, subsequent to each respective acquisition date, are included in the combined consolidated statements of operations of TLLP (in thousands):



	Year Ended December 31, 2012
Martinez Crude Oil Marine Terminal:
Total operating revenues	$	10,969
Net income attributable to partners	4,991
Costs associated with the acquisition (a)	981
Long Beach Assets:
Total operating revenues	6,879
Net income attributable to partners	5,135
Costs associated with the acquisition (a)	977
Anacortes Rail Facility:
Total operating revenues	2,985
Net income attributable to partners	2,014
Costs associated with the acquisition (a)	510

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(a)	Costs associated with the acquisitions are included in the general and administrative expenses of TLLP in our statements of combined consolidated operations.

The results of the Martinez Crude Oil Marine Terminal operations, the Long Beach Assets operations and the Anacortes Rail Facility operations, prior to April 1, 2012, September 14, 2012 and November 15, 2012, respectively, have been included in their respective Predecessor results in the table below. The results of the Martinez Crude Oil Marine Terminal, subsequent to April 1, 2012, the results of the Long Beach Assets, subsequent to September 14, 2012, and the results of the Anacortes Rail Facility, subsequent to November 15, 2012, have been included in TLLP's results.

The following tables present our financial position and results of operations, with the effect of including the results of the Acquisitions from Tesoro and the adjusted total amounts included in our combined consolidated financial statements.

Statement of Combined Consolidated Operations for the Year Ended December 31, 2012



	Tesoro Logistics LP (Partnership)			Martinez Crude Oil Marine Terminal (Predecessor)			Long Beach Assets (Predecessor)		Anacortes Rail Facility (Predecessor)			Total Tesoro Logistics LP
REVENUES	(Dollars in thousands)
Affiliate	$	142,667		$	—		$	—	$	—		$	142,667
Third-party	6,181			—			7,991		—			14,172
Total Revenues	148,848			—			7,991		—			156,839
COSTS AND EXPENSES
Operating and maintenance expenses	66,273			1,558			3,976		962			72,769
Imbalance settlement gains	(9,686		)	—			—		—			(9,686		)
Depreciation and amortization expenses	10,969			526			931		631			13,057
General and administrative expenses	15,266			97			328		22			15,713
Loss on asset disposals	291			236			8		—			535
Total Costs and Expenses	83,113			2,417			5,243		1,615			92,388
OPERATING INCOME (LOSS)	65,735			(2,417		)	2,748		(1,615		)	64,451
Less: Interest and financing costs, net	8,992			—			—		—			8,992
Add: Interest income	48			—			—		—			48
NET INCOME (LOSS)	56,791			(2,417		)	2,748		(1,615		)	55,507
Less: Income (loss) attributable to Predecessors	—			(2,417		)	2,748		(1,615		)	(1,284		)
Net income attributable to partners	$	56,791		$	—		$	—	$	—		$	56,791

Statement of Combined Consolidated Operations for the Year Ended December 31, 2011



	Tesoro Logistics LP (Partnership and TLLP Predecessor)			Martinez Crude Oil Marine Terminal (Predecessor)			Long Beach Assets (Predecessor)			Total Tesoro Logistics LP
REVENUES	(Dollars in thousands)
Affiliate	$	77,443		$	—		$	—		$	77,443
Third-party	3,503			—			6,391			9,894
Total Revenues	80,946			—			6,391			87,337
COSTS AND EXPENSES
Operating and maintenance expenses	42,474			6,079			5,749			54,302
Imbalance settlement gains	(7,153		)	—			—			(7,153		)
Depreciation and amortization expenses	8,078			2,049			1,150			11,277
General and administrative expenses	7,990			394			392			8,776
Loss on asset disposals	1			25			—			26
Total Costs and Expenses	51,390			8,547			7,291			67,228
OPERATING INCOME (LOSS)	29,556			(8,547		)	(900		)	20,109
Less: Interest and financing costs, net	1,610			—			—			1,610
NET INCOME (LOSS)	27,946			(8,547		)	(900		)	18,499
Less: Loss attributable to Predecessors	(6,622		)	(8,547		)	(900		)	(16,069		)
Net income attributable to partners	$	34,568		$	—		$	—		$	34,568

Statement of Combined Operations for the Year Ended December 31, 2010 (Predecessors)



	Tesoro Logistics LP (TLLP Predecessor)			Martinez Crude Oil Marine Terminal (Predecessor)			Long Beach Assets (Predecessor)			Total Tesoro Logistics LP
REVENUES	(Dollars in thousands)
Affiliate	$	19,477		$	—		$	—		$	19,477
Third-party	3,823			—			5,757			9,580
Total Revenues	23,300			—			5,757			29,057
COSTS AND EXPENSES
Operating and maintenance expenses	35,710			8,493			6,074			50,277
Imbalance settlement gains	(3,250		)	—			—			(3,250		)
Depreciation and amortization expenses	8,006			2,050			1,177			11,233
General and administrative expenses	3,198			380			390			3,968
Loss on asset disposals	512			318			—			830
Total Costs and Expenses	44,176			11,241			7,641			63,058
NET LOSS	$	(20,876	)	$	(11,241	)	$	(1,884	)	$	(34,001	)

Combined Consolidated Balance Sheet as of December 31, 2011



	Tesoro Logistics LP (Partnership)			Martinez Crude Oil Marine Terminal (Predecessor)		Long Beach Assets (Predecessor)		Total Tesoro Logistics LP
	(Dollars in thousands)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	18,326		$	—	$	—	$	18,326
Receivables
Trade	542			—		2,827		3,369
Affiliate	11,312			—		805		12,117
Prepayments	637			—		141		778
Total Current Assets	30,817			—		3,773		34,590
NET PROPERTY, PLANT AND EQUIPMENT	136,264			37,825		22,058		196,147
DEPOSITS	1,527			—		—		1,527
OTHER NONCURRENT ASSETS	1,545			—		—		1,545
Total Assets	$	170,153		$	37,825	$	25,831	$	233,809

LIABILITIES AND EQUITY
CURRENT LIABILITIES
Accounts payable
Trade	$	5,727		$	753	$	263	$	6,743
Affiliate	2,759			56		46		2,861
Deferred revenue - affiliate	1,775			—		—		1,775
Accrued interest and financing costs	18			—		—		18
Other current liabilities	860			1,366		849		3,075
Total Current Liabilities	11,139			2,175		1,158		14,472
OTHER NONCURRENT LIABILITIES	44			2,621		—		2,665
DEBT	50,000			—		—		50,000
EQUITY
Equity of Predecessors	—			33,029		24,673		57,702
Common unitholders	250,430			—		—		250,430
Subordinated unitholders	(143,048		)	—		—		(143,048		)
General partner	1,588			—		—		1,588
Total Equity	108,970			33,029		24,673		166,672
Total Liabilities and Equity	$	170,153		$	37,825	$	25,831	$	233,809