HOUSTON - Phillips 66 (NYSE: NYSE:PSX) has finalized the sale of its 25% non-operated common equity interest in the Rockies Express Pipeline (REX) to a subsidiary of Tallgrass Energy, LP (TGE), as announced today. The deal, valued at an enterprise value of approximately $1.275 billion, will result in Tallgrass Energy owning 100% of the common equity interest in REX, a major natural gas pipeline in the United States.
The transaction, which is expected to close today, will provide Phillips 66 with pre-tax cash proceeds of $685 million after accounting for the company’s share of REX’s debt and preferred equity balances.
Mark Lashier, Chairman and CEO of Phillips 66, stated that the sale is a key part of the company's strategy to divest over $3 billion in assets. He emphasized that the move aligns with managing the portfolio effectively and divesting from assets that no longer fit the company's long-term strategy.
The Rockies Express Pipeline is a significant infrastructure asset, spanning 1,714 miles and providing over 5 billion cubic feet per day of bi-directional natural gas transportation service. It connects the Rockies, Appalachia, and the northeastern United States, playing a critical role in the distribution of natural gas across these regions.
The proceeds from this divestiture are expected to support Phillips 66’s strategic priorities, which include shareholder returns. This transaction marks a notable shift in the company's asset allocation and follows its broader commitment to a lower-carbon future.
Phillips 66 is a diversified and integrated downstream energy provider with businesses in Midstream, Chemicals, Refining, and Marketing and Specialties. Headquartered in Houston, the company is focused on safely and reliably delivering energy, while aiming for improvements in energy efficiency and reductions in carbon emissions.
The information provided in this article is based on a press release statement from Phillips 66.
In other recent news, Phillips 66, a diversified energy manufacturing and logistics company, has been the focus of several developments.
The company has seen varied analyst outlooks, with Piper Sandler maintaining an Overweight rating and setting a price target of $170.00, while Barclays (LON:BARC) Capital Inc. assigned an Equal Weight rating with a price target of $139.00. The potential sale of Phillips 66's 25% interest in the Rockies Express Pipeline has been highlighted as a significant factor that could influence the company's valuation.
In addition, Phillips 66 has announced a definitive agreement to acquire Pinnacle Midland Parent LLC from Energy Spectrum Capital for $550 million. This acquisition is set to enhance Phillips 66's Midstream business and aligns with the company's long-term objectives of building out its natural gas liquids value chain.
In terms of financial performance, Phillips 66 reported a revised EPS/EBITDA of $2.02 per share/$1,979MM from a previous estimate of $2.83 per share/$2,429MM. The company also reported progress on strategic priorities and asset monetization plans during its first-quarter earnings call of 2024, despite facing maintenance issues and the impact of rising commodity prices.
These are among the recent developments that have shaped the current status of Phillips 66.
InvestingPro Insights
As Phillips 66 (NYSE: PSX) embarks on its strategic shift with the sale of its stake in the Rockies Express Pipeline, InvestingPro data provides a snapshot of the company's financial health and market position. With a solid market capitalization of $58.37 billion and a price-to-earnings (P/E) ratio of 10.43, which adjusts to 9.9 on a last twelve months basis as of Q1 2024, Phillips 66 is valued favorably in the market relative to its earnings.
The company's revenue for the last twelve months as of Q1 2024 stands at $148.81 billion, despite a downward trend of -11.53% in revenue growth during the same period. On the upside, the quarterly revenue growth shows a positive turn with a 4.11% increase in Q1 2024. This indicates a potential stabilization or improvement in the company's revenue streams, which may reassure investors about the company's financial resilience and the efficacy of its strategic decisions, such as the REX pipeline sale.
InvestingPro Tips suggest that investors should consider the company's dividend yield, which is a healthy 3.34%, coupled with a dividend growth of 9.52% in the last twelve months as of Q1 2024. This reflects Phillips 66's commitment to returning value to shareholders, a key aspect of the company's strategic priorities. Additionally, the fair value estimated by analysts stands at $162, which is higher than the current InvestingPro fair value of $129.26, suggesting potential upside according to market analysts.
For those interested in further insights, InvestingPro offers additional tips on Phillips 66 and other companies. By using the coupon code PRONEWS24, readers can receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking access to a wealth of investment data and analysis.
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