Phillips 66 to buy remaining stake in partnership for $3.4 billion
Reuters
Published Oct 27, 2021 23:37
Updated Oct 28, 2021 01:53
By Laura Sanicola
(Reuters) -Phillips 66 said on Wednesday it will buy the remaining units of Phillips 66 (NYSE:PSX) Partners it does not already own for $3.4 billion, as the refiner aims to simplify its governance and corporate structure.
Phillips 66 Partners was formed by the refiner to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum products and natural gas liquids pipelines, terminals and other midstream assets.
"We believe this acquisition will allow both PSX shareholders and PSXP unitholders to participate in the value creation of the combined entities, supported by the strong financial position of Phillips 66," Chief Executive Officer Greg Garland said in a statement.
The all-stock deal, expected to close in the first quarter of 2022, will offer each outstanding Partnership common unitholder 0.50 shares of PSX common stock for each PSXP common unit.
The oil and gas industry has financed billions of dollar in pipeline and storage products under Master Limited Partnerships (MLPs) since former President Ronald Reagan signed legislation in 1986 allowing them as a way to spur energy investment.
However, several pipeline companies, largely oil and natural gas pipeline firms, have restructured in recent years after U.S. regulators said they will no longer be allowed to recover an income tax allowance as part of fees they charge to shippers under a "cost-of-service" rate structure.
"The Phillips 66 Complex has been frustrated with the midstream valuation and acknowledged the environment has shifted dramatically since the MLP was first conceived," Spiro Dounis, analyst at Credit Suisse (SIX:CSGN), said in a note.
The Alerian MLP Index, a gauge of energy infrastructure MLPs, is currently valued at nearly $200 billion.
The U.S. refining and midstream industries have consolidated in recent years, a process which accelerated after the coronavirus pandemic drastically reduced demand for transportation fuels.
"This roll-up suggests Phillips 66 may have not seen Phillips 66 Partners as a useful vehicle for industry consolidation, particularly given this likely would have required capital raises," Jason Gableman, analyst at Cowen, said in a note.
Get The App
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.