Phillips 66 Boosts Natural Gas Liquid Bet with $2.2 Billion Acquisition
In a strategic move to strengthen its natural gas liquid (NGL) position, Phillips 66 has agreed to acquire various pipelines and distribution systems from EPIC NGL, a pipeline operator backed by Ares, in an all-cash deal worth $2.2 billion.
Expanding NGL Capabilities
The acquisition will see Phillips 66 take ownership of EPIC Y-Grade GP, EPIC Y-Grade, and its subsidiaries, which is expected to have an immediate positive impact on earnings per share. This deal marks a significant step forward in the company’s NGL strategy, as it seeks to capitalize on growing demand from petrochemical makers.
Optimizing the Permian NGL Value Chain
According to Phillips 66 CEO Mark Lashier, “This transaction optimizes our Permian NGL value chain, provides comprehensive flow assurance to producers, and is expected to deliver attractive returns in excess of our hurdle rates.” The company’s focus on NGLs is driven by its expectation that NGL output will outpace crude oil growth by the end of the decade.
Permian Basin: The NGL Hub
The Permian Basin oil field is the epicenter of U.S. NGL production, accounting for around 85% of total output. The majority of these NGLs are exported, highlighting the region’s critical role in meeting global demand.
Phillips 66’s NGL Expansion Strategy
This acquisition is the latest in a series of moves by Phillips 66 to expand its NGL capabilities. Last year, the company acquired Pinnacle Midland from Energy Spectrum Capital in a $550 million all-cash deal, further solidifying its presence in the midland basin.
A Record-Breaking Wave of Deal-Making
The U.S. shale industry has witnessed unprecedented M&A activity in recent times, as energy companies scramble to expand their oil and gas drilling inventories, particularly in the Permian Basin. Phillips 66’s acquisition of EPIC NGL is a testament to the company’s commitment to growth and its confidence in the long-term potential of NGLs.
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