Phillips 66 (PSX.US) and EPIC NGL reach a $2.2 billion agreement to increase bets on NGL business

The Zhitong Finance App learned that US refining giant Phillips 66 (PSX.US) said on Monday that it will use an all-cash transaction of 2.2 billion US dollars to acquire various pipelines and distribution systems from ARES-supported pipeline operator Epic NGL to support its bets on the natural gas condensate (NGL) business.

According to information, NGLs include a group of hydrocarbons extracted from natural gas in processing plants to be used as raw materials in petrochemical plants for heating, cooking, and various other applications.

The company said in a statement that the deal will allow Phillips 66 to acquire EPIC Y-Grade GP, EPIC Y-Grade and several of their subsidiaries, and is expected to immediately increase earnings per share.

Phillips 66 has been betting heavily on NGLs, and the company previously said that NGL production is expected to grow faster than crude oil by the end of this decade, supported by demand from petrochemical manufacturers.

Mark Lashier, CEO of Phillips 66, said: “This transaction optimizes our Permian NGL value chain, enables Phillips 66 to provide full supply guarantees to producers and is expected to deliver attractive returns that exceed our expected returns.”

The company added that as EPIC NGL is increasing its pipeline production capacity, the company does not expect to increase its capital plan for 2025 after the deal.

According to RBN Energy analysts, about 85% of US NGL production is concentrated in the Permian Basin oil fields, most of which are exported.

Last year, the refiner acquired Pinnacle Midland from private equity firm Energy Spectrum Capital in an all-cash transaction of $550 million to expand its gas collection and processing business in the Midland Basin.

In recent years, as energy companies scramble to expand oil and gas drilling inventories, particularly in the Permian Basin, the US shale industry has seen a record wave of transactions.