HOUSTON - Energy company Phillips 66 (NYSE: NYSE:PSX) has announced a definitive agreement to purchase Pinnacle Midland Parent LLC, a midstream service provider in the Midland Basin, from private equity firm Energy Spectrum Capital for $550 million. This acquisition is part of Phillips 66's strategy to expand its natural gas services and underscores the company's commitment to its wellhead-to-market approach.
The deal, expected to close around mid-year 2024, will enhance Phillips 66's Midstream business, particularly in the Permian Basin, and aims to deliver operational and commercial synergies. Mark Lashier, Chairman and CEO of Phillips 66, stated that the addition of Pinnacle aligns with the company's long-term objectives of building out its natural gas liquids value chain and creating sustainable value for shareholders.
Pinnacle's assets notably include the Dos Picos natural gas gathering and processing system, which features a 220 million cubic feet per day (MMcf/d) gas processing plant, 80 miles of gathering pipeline, and 50,000 dedicated acres with high-quality producers. The Dos Picos system is scalable, with potential for an additional 220 MMcf/d gas plant, and integrates seamlessly into Phillips 66's existing downstream infrastructure.
J. Greg Sargent, CEO of Pinnacle, expressed pride in the company's achievements in the basin and community, highlighting its status as a premier midstream provider with top-notch operations and world-class customers.
The closing of the transaction is subject to customary conditions, including approval under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR).
Phillips 66, headquartered in Houston, is a diversified and integrated downstream energy provider with a global presence. The company's portfolio spans Midstream, Chemicals, Refining, and Marketing and Specialties businesses, all aimed at delivering energy and improving lives while pursuing a lower-carbon future.
Pinnacle Midstream II LLC, also based in Houston, is an independent midstream energy company serving the Midland Basin with quality natural gas services.
Energy Spectrum Capital, backing Pinnacle Midstream II LLC, is a Dallas-based firm investing in energy assets across North America.
This press release contains forward-looking statements, and the actual outcomes may differ materially from those projected. The information provided in this article is based on a press release statement.
InvestingPro Insights
As Phillips 66 (NYSE: PSX) positions itself for strategic growth through the acquisition of Pinnacle Midland Parent LLC, investors may find the following InvestingPro Data and Tips insightful. With a market capitalization of $61.25 billion, Phillips 66's financial health and performance metrics offer a window into the company's potential to leverage this acquisition for future growth.
The company's P/E ratio stands at 10.96, with an adjusted P/E ratio for the last twelve months as of Q1 2024 at a slightly lower 10.39, suggesting a stable earnings outlook relative to its share price. Despite a revenue decline of 11.53% in the last twelve months as of Q1 2024, Phillips 66 has shown a quarterly revenue growth of 4.11% in Q1 2024, indicating a potential turnaround or seasonal fluctuation in its earnings trajectory.
InvestingPro Tips highlight the company's robust dividend yield of 3.13% as of mid-April 2024, paired with a notable dividend growth of 9.52% in the last twelve months as of Q1 2024. This suggests that Phillips 66 has not only maintained but also increased shareholder returns, which could be attractive to investors seeking income in addition to growth.
For those interested in exploring further insights and metrics, InvestingPro offers additional tips on Phillips 66, which could help investors make more informed decisions. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription to access these valuable resources.
With the next earnings date set for July 26, 2024, potential investors and current shareholders of Phillips 66 may look to these metrics and tips to assess the company's financial health following the acquisition and its ability to capitalize on the opportunities within the natural gas sector.
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