A Strategic Move to Strengthen NGL Operations
Phillips 66, a major U.S. oil refiner, announced a significant acquisition on Monday, agreeing to purchase various pipelines and distribution systems from EPIC NGL in a $2.2 billion all-cash deal. Backed by private equity firm Ares Management, EPIC NGL’s assets will enhance Phillips 66’s natural gas liquids (NGL) portfolio. The company emphasized that the acquisition aligns with its long-term strategy to bolster its NGL operations, which include hydrocarbons extracted from natural gas used in petrochemical production, heating, and cooking.
Phillips 66 will acquire EPIC Y-Grade GP, EPIC Y-Grade, and their subsidiaries as part of the transaction. The company expects the deal to be immediately accretive to earnings per share, further reinforcing its confidence in NGLs as a growth area. Mark Lashier, CEO of Phillips 66, noted that the acquisition will optimize the company’s NGL value chain in the Permian Basin, a key region for U.S. natural gas liquids production.
Betting Big on NGL Growth
Phillips 66’s focus on NGLs stems from its belief that demand for these hydrocarbons will outpace crude oil growth by the end of the decade. This projection is fueled by increased demand from petrochemical manufacturers. Lashier highlighted that the deal would enhance flow assurance for producers and deliver strong returns, exceeding the company’s investment hurdles.
The company also stated it would not alter its 2025 capital program despite the acquisition. EPIC NGL’s plans to increase pipeline capacity align with Phillips 66’s existing operations, ensuring a seamless integration. Analysts from RBN Energy estimate that approximately 85% of U.S. NGL production is concentrated in the Permian Basin, with a substantial portion exported globally.
Expanding Presence in the Permian Basin
This acquisition is not Phillips 66’s first step toward expanding its presence in the Permian Basin. Last year, the company purchased Pinnacle Midland for $550 million in cash from Energy Spectrum Capital. That deal significantly expanded its natural gas gathering and processing capabilities in the region.
The U.S. shale industry has seen an unprecedented surge in mergers and acquisitions recently, with energy firms racing to secure more drilling inventory in prolific regions like the Permian Basin. Phillips 66’s latest move reflects its commitment to leveraging this trend and positioning itself as a leader in the NGL market.
