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Phillips 66 to Strengthen NGL Foothold With $2.2B EPIC NGL Deal
NGLNGL Energy Partners LP(NGL) ZACKS·2025-01-07 20:16

Acquisition Overview - Phillips 66 (PSX) has announced a 2.2billionall−cashacquisitionofEPICY−GradeGP,LLCandEPICY−Grade,LP,whichisexpectedtobeimmediatelyaccretivetoitsEPSandstrengthenitspresenceintheNGLmarket[1]StrategicBenefits−TheacquisitionwillexpandPhillips66′sPermianBasinNGLvaluechainandprovideextensiveflowassurancetoproducers,connectingkeyfractionationsitesnearCorpusChristi,Sweeny,andMontBelvieu,TX[3]−Thedealisexpectedtogeneratereturnsexceedingthecompany′shurdlerates,indicatingstrongfinancialconfidence[4]EPICNGL′sAssets−EPICNGLownstwofractionatorswithacapacityof170,000bpdnearCorpusChristi,350milesofpuritydistributionpipelines,andan885−mileNGLpipelinewithacapacityof175,000bpd[5]−ThepipelineassetsconnectproductionfromtheDelaware,Midland,andEagleFordbasinstofractionationfacilitiesandPSX′sSweenyHub[5]FutureExpansionPlans−EPICNGLisexpandingitspipelinecapacityto225,000bpd,withasecondexpansionapprovedtoreach350,000bpd,thoughthiswillnotimpactPhillips66′s2025capitalprogram[6]−Athirdfractionationfacilityisplanned,whichcouldincreasefractionationcapacityto280,000bpd,enhancingconnectivitytoGulfCoastrefiners,petrochemicalfirms,andglobalexportmarkets[7]IndustryContext−TechnipFMCplc(FTI)hasagrowingbacklogof2.2 billion all-cash acquisition of EPIC Y-Grade GP, LLC and EPIC Y-Grade, LP, which is expected to be immediately accretive to its EPS and strengthen its presence in the NGL market [1] Strategic Benefits - The acquisition will expand Phillips 66's Permian Basin NGL value chain and provide extensive flow assurance to producers, connecting key fractionation sites near Corpus Christi, Sweeny, and Mont Belvieu, TX [3] - The deal is expected to generate returns exceeding the company's hurdle rates, indicating strong financial confidence [4] EPIC NGL's Assets - EPIC NGL owns two fractionators with a capacity of 170,000 bpd near Corpus Christi, 350 miles of purity distribution pipelines, and an 885-mile NGL pipeline with a capacity of 175,000 bpd [5] - The pipeline assets connect production from the Delaware, Midland, and Eagle Ford basins to fractionation facilities and PSX's Sweeny Hub [5] Future Expansion Plans - EPIC NGL is expanding its pipeline capacity to 225,000 bpd, with a second expansion approved to reach 350,000 bpd, though this will not impact Phillips 66's 2025 capital program [6] - A third fractionation facility is planned, which could increase fractionation capacity to 280,000 bpd, enhancing connectivity to Gulf Coast refiners, petrochemical firms, and global export markets [7] Industry Context - TechnipFMC plc (FTI) has a growing backlog of 14.7 million in Q3 2024, up 11.1% YoY, indicating strong revenue growth potential [9] - Sunoco LP (SUN) is a major motor fuel distributor in the U.S., offering a distribution yield higher than the industry average, ensuring consistent returns for unitholders [10] - Oceaneering International (OII) provides integrated offshore oilfield technology solutions, supporting client retention and new business opportunities for steady revenue growth [11]