NET INCOME PER UNIT

The following is a summary of net income (loss) for the nine months ended September 30, 2011, (in thousands) disaggregated between the Predecessor and the Partnership:



	Tesoro Logistics LP Predecessor			Tesoro Logistics LP			Nine Months Ended
	Tesoro Logistics LP Predecessor			Tesoro Logistics LP			September 30, 2011
	Through April 25, 2011			From April 26, 2011
REVENUES	$	8,198		$	44,965		$	53,163
COSTS AND EXPENSES
Operating and maintenance expenses	10,907			13,324			24,231
Depreciation and amortization expense	2,353			3,701			6,054
General and administrative expenses	1,560			3,855			5,415
Loss on asset disposals	—			1			1
Total Costs and Expenses	14,820			20,881			35,701
OPERATING INCOME (LOSS)	(6,622		)	24,084			17,462
Interest and financing costs, net	—			(1,062		)	(1,062		)
NET INCOME (LOSS)	$	(6,622	)	$	23,022		$	16,400

Net income per unit applicable to limited partners (including subordinated unitholders) is computed by dividing limited partners’ interest in net income, after deducting the general partner’s 2% interest and incentive distributions, by the weighted-average number of outstanding common and subordinated units. Our net income is allocated to the general partner and limited partners in accordance with their respective partnership percentages, after giving effect to priority income allocations for incentive distributions, if any, to our general partner, the holder of the IDRs, pursuant to our partnership agreement, which are declared and paid following the close of each quarter. Net income per unit is only calculated for the Partnership after the Offering as no units were outstanding prior to April 26, 2011. Earnings in excess of distributions are allocated to the general partner and limited partners based on their respective ownership interests. Payments made to our unitholders are determined in relation to actual distributions declared and are not based on the net income allocations used in the calculation of net income per unit. As of September 30, 2011, the weighted-average number of units outstanding equals the total number of units outstanding.

In addition to the common and subordinated units, we have also identified the general partner interest and IDRs as participating securities and use the two-class method when calculating the net income per unit applicable to limited partners, which is based on the weighted-average number of common units outstanding during the period. We intend to purchase units in the open market or purchase common units from Tesoro to settle the phantom unit awards. Therefore, basic and diluted net income per unit applicable to limited partners are the same because there are no potentially dilutive units outstanding. We also disclose limited partner units outstanding. There have been no additional changes to the outstanding shares after the closing of the Offering.

The calculation of net income per unit is as follows (in thousands, except unit and per unit amounts):



	Three Months Ended		Nine Months Ended
	September 30, 2011		September 30, 2011
Net income subsequent to initial public offering	$	15,127	$	23,022
Less: General partner's interest in net income subsequent to initial public offering	303		460
Limited partners' interest in net income subsequent to initial public offering	$	14,824	$	22,562

Net income per limited partner unit:
Common	$	0.49	$	0.74
Subordinated - Tesoro	$	0.49	$	0.74

Limited partner units outstanding:
Common units - Public	14,950,000		14,950,000
Common units - Tesoro	304,890		304,890
Subordinated units - Tesoro	15,254,890		15,254,890