DCP Stock Pops on Phillips 66 Acquisition News

Investorplace · 01/06/2023 16:08

You’ve probably heard of Texas-based energy behemoth Phillips 66, but you might not be familiar with DCP Midstream. That company hails from Colorado and specializes in midstream energy assets, including natural gas liquids (NGL).

That’s highly relevant to Phillips 66 President and CEO Mark Lashier. He declared, “We are delivering on our commitment to grow our NGL business.” Thus, integrating DCP Midstream will enable Phillips 66 to unlock “significant synergies and growth opportunities.”

Perhaps this explains why Phillips 66 sweetened its bid for DCP Midstream. This previous offer for DCP Midstream was $34.75 per share, but now Phillips 66 is preparing to pay $41.75 per share, or $3.8 billion in total, for all of DCP’s public units.

What’s Happening with DCP Stock?

By 10:30 a.m. Eastern, DCP stock was up 6.5% while shares of Phillips 66 were up 2.5% It’s a typical scenario, as the business that’s being acquired often benefits more than the acquiring company does.

Still, it looks like a win-win situation. The deal with DCP Midstream is anticipated to generate an incremental $1 billion worth of adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) for Phillips 66. Moreover, it will help Phillips 66 delve deeper into the NGL industry.

As Lashier put it, “Our wellhead-to-market platform captures the full NGL value chain.” DCP Midstream will evidently assist Phillips 66 with this endeavor, and as a result, investors of both companies are enjoying a profitable trading session so far.

On the date of publication, David Moadel  did not have (either directly or indirectly) any positions in the securities mentioned in this article.  The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com  Publishing Guidelines.

David Moadel has provided compelling content – and crossed the occasional line – on behalf of Motley Fool, Crush the Street, Market Realist, TalkMarkets, TipRanks, Benzinga, and (of course) InvestorPlace.com. He also serves as the chief analyst and market researcher for Portfolio Wealth Global and hosts the popular financial YouTube channel Looking at the Markets.

More From InvestorPlace