Phillips 66 to Acquire Pinnacle Midstream from Energy Spectrum Capital
Phillips 66 (NYSE: PSX) announced it will acquire Pinnacle Midland Parent from Energy Spectrum Capital for $550 million. This move aims to expand Phillips 66's natural gas gathering and processing capabilities in the Midland Basin. Pinnacle's assets include the Dos Picos natural gas system, featuring a 220 MMcf/d gas processing plant, 80 miles of pipeline, and 50,000 dedicated acres. The acquisition aligns with Phillips 66's strategy to enhance its midstream business, integrate its asset portfolio, and create sustainable value for shareholders. The deal is expected to close by mid-2024, pending customary closing conditions and regulatory approvals.
- Phillips 66 to acquire Pinnacle for $550 million, expanding natural gas processing capacity.
- Pinnacle's assets include a scalable 220 MMcf/d gas processing plant and 80 miles of pipeline.
- Acquisition aligns with Phillips 66's strategy to strengthen midstream operations and integrate assets.
- Transaction supports long-term objectives of capital discipline and shareholder value creation.
- Closing expected by mid-2024, offering a clear timeline for integration.
- High acquisition cost of $550 million could impact short-term financials.
- Pending regulatory approvals and customary closing conditions could delay transaction.
- Integration risks with new assets and operations in the Midland Basin.
Insights
Phillips 66's acquisition of Pinnacle Midland Parent LLC for
The cash transaction reflects a disciplined capital allocation strategy. By leveraging existing infrastructure, Phillips 66 can optimize operational costs and achieve synergies. The scalability of the Dos Picos complex offers long-term growth potential, making this a positive indicator for sustained value creation for shareholders.
From a financial perspective, the acquisition complements Phillips 66’s diversified portfolio, aligning with their long-term objectives of strengthening their natural gas liquids value chain. Investors should monitor quarterly earnings reports to assess the financial integration and impact on overall margins.
This acquisition is a strategic fit for Phillips 66, enhancing their midstream capabilities in the Permian Basin. The Permian Basin is a significant source of natural gas and expanding their presence here positions Phillips 66 well to capitalize on the growing demand for natural gas and natural gas liquids (NGLs). This move aligns with market trends towards increased NGL utilization, providing a strong growth avenue.
The integration of Pinnacle’s assets into Phillips 66’s existing infrastructure will likely drive operational efficiencies and commercial synergies. For the retail investor, this signifies enhanced competitive positioning and potential upside in share value as the company leverages new growth opportunities. The scalability of the Dos Picos system suggests a proactive approach to future demand, making this a forward-looking investment.
Transaction advances company’s wellhead-to-market strategy
“We are growing our Midstream business in the Permian to further strengthen and expand our service offerings to customers while driving operational and commercial synergies,” said Mark Lashier, Chairman and CEO of Phillips 66. “Pinnacle is a bolt-on asset that advances our wellhead-to-market strategy and complements our diversified and integrated asset portfolio. Further, this transaction aligns with our long-term objectives to build out our natural gas liquids value chain, be disciplined with our capital allocation and create sustainable value for our shareholders.”
Pinnacle’s assets include the recently built Dos Picos natural gas gathering and processing system: a 220 MMcf/d gas processing plant, 80 miles of gathering pipeline and 50,000 dedicated acres through high-quality producers in one of Phillips 66’s focus basins. The Dos Picos processing complex and related infrastructure is easily scalable toward a second 220 MMcf/d gas plant and integrates well into Phillip 66’s existing downstream infrastructure.
“Pinnacle has established itself as one of the premier midstream providers in the Midland Basin, with a top-notch talented team, first-class operations and infrastructure, and world-class customers,” said J. Greg Sargent, CEO of Pinnacle. “I am incredibly proud of what we have achieved as a team in the basin and in the community.”
The transaction is expected to close around mid-year of 2024 following satisfaction of customary closing conditions, including under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR).
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
About Pinnacle Midstream II LLC
Pinnacle Midstream II LLC is an independent midstream energy company headquartered in
About Energy Spectrum
Pinnacle Midstream II LLC is backed by Energy Spectrum Capital, a
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
Rich Johnson (media)
832-765-1016
rich.johnson@p66.com
Source: Phillips 66
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