Phillips 66 Announces Sale of 25% Equity Interest in Rockies Express Pipeline to Tallgrass Energy Subsidiary
Phillips 66 (NYSE: PSX) announced the sale of its 25% non-operated common equity interest in Rockies Express Pipeline (REX) to Tallgrass Energy subsidiary for an enterprise value of $1.275 billion.
This transaction will generate pre-tax cash proceeds of $685 million for Phillips 66 after adjustments. The sale is a part of the company’s initiative to deliver over $3 billion in asset divestitures.
The proceeds will support Phillips 66's strategic priorities, including returns to shareholders. The transaction, expected to close today, will result in Tallgrass Energy owning 100% of REX.
- Sale generates $685 million in pre-tax cash proceeds.
- Supports the company’s goal of $3 billion in asset divestitures.
- Proceeds are earmarked for strategic priorities, including shareholder returns.
- Reduces involvement in non-core assets, aligning with long-term strategy.
- Loss of 25% equity interest in a major pipeline asset.
- May reduce future revenue derived from REX.
- Dependency on proceeds to meet strategic goals could indicate underlying financial pressure.
Insights
Phillips 66's decision to sell its 25% equity interest in the Rockies Express Pipeline for an enterprise value of
By monetizing an asset that no longer aligns with its strategy, Phillips 66 can reinvest the proceeds into higher-return projects or use them to improve its balance sheet. Additionally, with Tallgrass Energy assuming full ownership of the pipeline, operational efficiencies might be realized, benefiting both companies.
For investors, the immediate cash influx and potential for increased shareholder returns through dividends or buybacks are promising. However, it's essential to monitor how Phillips 66 reallocates these funds and whether the sale impacts its long-term revenue generation.
This transaction marks a strategic shift in the energy infrastructure landscape, with Tallgrass Energy now owning 100% of one of the largest natural gas pipelines in the U.S. For the industry, this consolidation under a single operator might lead to more streamlined decision-making and operational efficiencies, potentially benefiting the market dynamics for natural gas transportation.
From an investor's perspective, Phillips 66's divestiture indicates a focused approach toward optimizing its asset portfolio. The company's ability to generate substantial cash from the sale can be seen as a proactive step to enhance its financial resilience and shareholder value. However, it's vital to consider the implications on Phillips 66's revenue streams, as the Rockies Express Pipeline was a significant asset in their portfolio.
This move also reflects broader trends in the industry, where companies are increasingly looking to divest non-core assets to focus on core operations and improve financial metrics. Investors should keep an eye on further divestitures and strategic investments by Phillips 66 to gauge the long-term impact.
“This sale is an important step in our commitment to deliver over
The expected proceeds will support Phillips 66’s strategic priorities, including returns to shareholders.
REX, a 1,714-mile pipeline system, is one of the largest natural gas pipelines in
The transaction is expected to close today.
About Phillips 66
Phillips 66 (NYSE: PSX) is a leading diversified and integrated downstream energy provider that manufactures, transports and markets products that drive the global economy. The company’s portfolio includes Midstream, Chemicals, Refining, and Marketing and Specialties businesses. Headquartered in
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This news release contains forward-looking statements within the meaning of the federal securities laws. Words such as “anticipated,” “estimated,” “expected,” “planned,” “scheduled,” “targeted,” “believes,” “continues,” “intends,” “will,” “would,” “objectives,” “goals,” “projects,” “efforts,” “strategies” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements included in this news release are based on management’s expectations, estimates and projections as of the date they are made. These statements are not guarantees of future performance and you should not unduly rely on them as they involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Forward-looking statements contained in this release include, but are not limited to, statements regarding the expected benefits of the transaction to Phillips 66 and its shareholders and the anticipated consummation of the transaction and the timing thereof. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include: fluctuations in NGL, crude oil, refined petroleum product and natural gas prices, and refining, marketing and petrochemical margins; changes in governmental policies or laws that relate to NGL, crude oil, natural gas, refined petroleum products, or renewable fuels that regulate profits, pricing, or taxation, or other regulations that limit or restrict refining, marketing and midstream operations or restrict exports; the effects of any widespread public health crisis and its negative impact on commercial activity and demand for refined petroleum products; Phillips 66’s ability to timely obtain or maintain permits necessary for capital projects; changes to worldwide government policies relating to renewable fuels and greenhouse gas emissions that adversely affect programs including the renewable fuel standards program, low carbon fuel standards and tax credits for biofuels; Phillips 66’s ability to achieve the expected benefits of the integration of DCP Midstream, LP, including the realization of synergies; the success of Phillips 66’s business transformation initiatives and the realization of savings and cost reductions from actions taken in connection therewith; unexpected changes in costs for constructing, modifying or operating Phillips 66’s facilities; Phillips 66’s ability to successfully complete, or any material delay in the completion of, asset dispositions or acquisitions that we may pursue; unexpected difficulties in manufacturing, refining or transporting Phillips 66’s products; the level and success of drilling and production volumes around Phillips 66’s midstream assets; risks and uncertainties with respect to the actions of actual or potential competitive suppliers and transporters of refined petroleum products, renewable fuels or specialty products; lack of, or disruptions in, adequate and reliable transportation for Phillips 66’s NGL, crude oil, natural gas, and refined products; potential liability from litigation or for remedial actions, including removal and reclamation obligations under environmental regulations; failure to complete construction of capital projects on time and within budget; Phillips 66’s ability to comply with governmental regulations or make capital expenditures to maintain compliance with laws; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets, which may also impact Phillips 66’s ability to repurchase shares and declare and pay dividends; potential disruption of Phillips 66’s operations due to accidents, weather events, including as a result of climate change, acts of terrorism or cyberattacks; general domestic and international economic and political developments, including armed hostilities (such as the
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Jeff Dietert (investors)
832-765-2297
jeff.dietert@p66.com
Owen Simpson (investors)
832-765-2297
owen.simpson@p66.com
Thaddeus Herrick (media)
855-841-2368
thaddeus.f.herrick@p66.com
Source: Phillips 66
FAQ
What does the sale of Phillips 66's equity interest in Rockies Express Pipeline entail?
How much pre-tax cash will Phillips 66 receive from the sale?
What is the strategic significance of Phillips 66's asset sale?
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