Phillips 66 has realigned joint venture midstream assets and has offered to buy out remaining interest in DCP Midstream that it believes enhances its existing NGL platform through value chain integration, the company said in releases Aug. 17.
The company entered and closed a transaction Aug. 17 realigning economic and governance interests in DCP Midstream LP and Gray Oak Pipeline LLC through the merger of existing joint ventures owned with Enbridge Inc.
Phillips 66’s economic interest in DCP Midstream increased to 43.31% from 28.26%. Phillips 66 will oversee and manage the joint venture’s interest in DCP Midstream, including the general partner. Phillips 66’s economic interest in Gray Oak Pipeline decreased to 6.50% from 42.25%. Enbridge will oversee and manage the joint venture’s interest in Gray Oak Pipeline, and transfer of operatorship to Enbridge is expected to occur in second-quarter 2023. As part of the transaction, Phillips 66 contributed about $400 million of cash.
“DCP is a valued business in our portfolio and enhances our existing value chain from wellhead to market, creating a platform for future NGL growth.” said Mark Lashier, president and chief executive officer, Phillips 66.
DCP Midstream is a master limited partnership engaged in the business of gathering, processing, transporting, storing and marketing natural gas, as well as transporting, fractionating, and marketing natural gas liquids. Phillips 66 and Enbridge hold their DCP Midstream general and limited partner interests through DCP Midstream LLC.
Gray Oak Holdings LLC, a joint venture between Phillips 66 and Enbridge, has been merged with and into DCP Midstream LLC. The joint venture continues to own 65% of the Gray Oak Pipeline crude oil system with capacity of 900,000 b/d of crude oil from the Permian and Eagle Ford basins in West Texas to the US Gulf Coast.
Proposal
Concurrently, Phillips 66 has made an offer to the board of directors of the general partner of DCP Midstream to acquire all publicly held common units of DCP Midstream for cash (about $3.2 billion according to Cowen estimates). The deal would be structured as a merger of DCP Midstream with an indirect subsidiary of Phillips 66 with DCP Midstream as the surviving entity.
The proposed merger is subject to negotiation, execution, and approval of a definitive agreement and closing of the proposed transaction would also be subject to customary closing conditions.