ACQUISITIONS

Carson Terminal Assets Acquisition

We purchased the Carson Terminal Assets, effective June 1, 2013, in exchange for total consideration of $640.0 million, comprised of $544.0 million in cash financed with borrowings under the Revolving Credit Facility and the remaining $96.0 million in partnership units. The equity was comprised of 1,445,561 common units and 29,501 general partner units. The Carson Terminal Assets were part of BP's Southern California refining and marketing business that Tesoro acquired on June 1, 2013 and included six marketing and storage terminals located in Southern California and certain assets and properties related thereto. The Carson Terminal Assets Acquisition occurred immediately after Tesoro's acquisition of the assets from BP.

Commercial Agreements. We entered into commercial agreements with Tesoro in connection with the Carson Terminal Assets Acquisition under which Tesoro commits to provide us with minimum throughput volumes of refined products and minimum fees for dedicated storage. See Note C for additional information regarding commercial agreements and amendments to other agreements with related parties in connection with this acquisition.

Financial Information. Tesoro retained responsibility for remediation of known environmental liabilities due to the use or operation of the Carson Terminal Assets prior to the acquisition ("Pre-Closing"), and has indemnified the Partnership for any losses incurred by the Partnership arising out of those remediation obligations. The indemnification for unknown Pre-Closing remediation liabilities is limited to five years. The property, plant and equipment was recorded by TLLP at Tesoro's historical cost, which is equal to the fair value of the Carson Terminal Assets on June 1, 2013, based on a preliminary assessment of the fair value of the assets acquired and liabilities assumed pending the completion of an independent valuation. Based on the preliminary analysis performed, Tesoro's historical cost was estimated to be $400.0 million, pending the completion of an independent valuation. Any subsequent adjustments as a result of the completion of the independent valuation will be reflected as adjustments to the equity of the Partnership. The following was recorded as of June 1, 2013, the date of the Carson Terminal Assets Acquisition (in thousands):



Prepayments and other	$	208
Property, plant and equipment	400,000
Capital lease obligation	(1,185		)
Preliminary value of Carson Terminal Assets	$	399,023

We have not provided disclosure of pro forma revenues and earnings as if the Carson Terminal Assets had been operating as part of our operations during all periods presented in these financial statements. BP managed and operated the Carson Terminal Assets as part of its refining operations and historical U.S. GAAP financial information specific to the Carson Terminal Assets is not available. As a result, preparing pro forma information was determined to be impracticable.

Northwest Products System Acquisition

On June 19, 2013, TLLP acquired the Northwest Products System consisting of a regulated common carrier products pipeline running from Salt Lake City, Utah to Spokane, Washington (the "Northwest Products Pipeline"), and a jet fuel pipeline to the Salt Lake City International Airport. It also includes the Boise and Pocatello, Idaho and Pasco, Washington refined products terminals. The Northwest Products System Acquisition is consistent with our business strategy to pursue accretive acquisitions of complementary assets and provides an opportunity to provide additional fee-based logistics services to Tesoro and third parties.

The purchase price for the Northwest Products System was $354.8 million. The amount paid at closing was reduced by an advance deposit of $40.0 million that was paid in December 2012 upon execution of the asset sale and purchase agreements. The Partnership financed the acquisition with proceeds from the public offering of common units on January 14, 2013 (the "January Offering").

In accordance with the amended asset sale and purchase agreements, for a period of two years, Chevron retained financial and operational responsibility to remediate the site of the release of diesel fuel that occurred at the Northwest Products System near Willard, Utah on March 18, 2013 (the "Diesel Pipeline Release") in addition to paying any monetary fines and penalties assessed by any government authority arising from this incident. See Note H for additional information regarding the environmental liabilities associated with the Northwest Products System Acquisition. Pursuant to the regulatory review process associated with the Northwest Products System Acquisition, we agreed to divest our current refined products terminal in Boise, Idaho within approximately six months of the closing date. We have classified the carrying value of the Boise terminal as assets held-for-sale in other current assets in our condensed consolidated balance sheet as of June 30, 2013.

Commercial Agreements. All third-party terminal agreements and any contracts between Chevron and other Chevron affiliates were assigned to TLLP for the Northwest Products System. The refined products pipeline and the jet fuel pipeline are common carrier pipelines regulated by the Federal Energy Regulatory Commission.

Financial Information. We accounted for the Northwest Products System Acquisition using the acquisition method of accounting, which requires, among other things, that assets acquired at their fair values and liabilities assumed be recognized on the balance sheet as of the acquisition date. Our condensed consolidated balance sheet as of June 30, 2013 reflects the purchase price allocations based on a preliminary assessment of the fair value of the assets acquired and liabilities assumed, pending the completion of an independent valuation, the review of environmental liabilities assumed, final determination of any post-closing adjustments, as defined in the purchase agreements, and other valuations. The table below presents the preliminary acquisition date purchase price allocation (in thousands):



Prepayments and other	$	53
Property, plant and equipment	358,362
Goodwill	8,738
Other noncurrent assets	4,500
Other current liabilities	(12,196		)
Noncurrent liabilities	(4,700		)
Preliminary purchase price	$	354,757

The Partnership recognized an estimated $16.6 million of environmental liabilities assumed in connection with the Northwest Products System, which are included in other current liabilities and noncurrent liabilities. Other current liabilities also include adjustments for accrued property tax liabilities that we assumed on the acquisition date.

The following unaudited pro forma condensed combined consolidated results of operations for the three and six months ended June 30, 2013 and 2012 are presented as if the Northwest Products System Acquisition had been completed on January 1, 2012.



	Three Months Ended June 30,				Six Months Ended June 30,
	2013		2012		2013		2012
	(Dollars in thousands, except per unit amounts)
Revenues	$	69,960	$	49,240	$	133,236	$	89,518
Net income	20,486		18,145		42,010		28,502
Net income attributable to partners	20,486		16,004		42,010		29,873

Net income per limited partner unit:
Common - basic and diluted	$	0.41	$	0.44	$	0.84	$	0.78
Subordinated - basic and diluted	$	0.39	$	0.28	$	0.83	$	0.62

The pro forma condensed consolidated results of operations reflect adjustments to the Partnerships condensed combined consolidated statements of operations to give effect to the following:


•	historical revenues and direct operating expenses for the Northwest Products System;


•	the indemnification of remediation efforts in response to the Diesel Pipeline Release; see Note H for additional discussion on the Diesel Pipeline Release;


•	depreciation expense based on the acquisition date fair value of the Northwest Products System; and


•	the impact of units issued in the January Offering to the weighted average units outstanding.

Carson Terminal Assets and Northwest Products System Post-Acquisition Financial Information

The operations of the Carson Terminal Assets and the Northwest Products System are reported in our Terminalling, Transportation and Storage segment. The following amounts associated with the Carson Terminal Assets Acquisition and the Northwest Products System Acquisition, subsequent to each respective acquisition date, are included in our condensed statements of combined consolidated operations of TLLP (in thousands):



	Six Months Ended June 30, 2013
Carson Terminal Assets:
Total operating revenues	$	7,180
Net income attributable to partners	2,783
Costs associated with the acquisition (a)	1,267
Northwest Products System:
Total operating revenues	1,715
Net income attributable to partners	449
Costs associated with the acquisition (a)	2,730

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(a)	Costs associated with the acquisitions, including costs to integrate the business, are included in the general and administrative expenses of TLLP in our condensed statements of combined consolidated operations.

2012 Acquisitions

We completed the Martinez Marine Terminal Acquisition, the Long Beach Assets Acquisition and the Anacortes Rail Facility Acquisition in 2012 from Tesoro and entered into commercial agreements in connection with these acquisitions under which Tesoro commits to provide us with minimum monthly throughput volumes of crude oil and refined products. See our Annual Report on Form 10-K for the year ended December 31, 2012 for additional information regarding these acquisitions and the commercial agreements with related parties in connection with these acquisitions.