Phillips 66 and Spectra Energy have entered into a nonbinding letter of intent for contributing assets to strengthen their 50-50 joint venture DCP Midstream.
Spectra plans to contribute its ownership interest in both the Sand Hills and Southern Hills natural gas liquids pipelines. Phillips 66 plans to contribute $1.5 billion in cash, which is expected to be used to pay down a portion of the DCP revolving credit facility.
The companies say the transaction is expected to provide DCP with a stronger balance sheet and increased financial flexibility, and positions the JV to grow through commodity price cycles. DCP hopes to convert certain contracts from commodity price sensitive to fee-based.
The deal is expected to close in the fourth quarter, after which Phillips 66 and Spectra will remain 50-50 joint venture owners of DCP.
Earlier this year, Phillips 66 Partners LP acquired one-third equity interest in the limited liability companies that respectively own the Sand Hills and Southern Hills systems from Phillips 66 as part of a $1.01-billion deal (OGJ Online, Feb. 16, 2015).