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Phillips 66 Acquires Units of Pipeline Operator DCP Midstream for $3.8 Billion
01/26/2023![Phillips-66-Acquires-Units-of-Pipeline-Operator-DCP-Midstream-for-3-8-Billion](https://images2.rextag.com/public/blog/118Blog_Phillips66_acquires_units_of_DCP Midstream (1).png)
Deal will help boost US refiner's liquefied natural gas business. The transaction will increase Phillips 66's ownership stake in DCP Midstream to 86.8%.
In press releases dated January 6, Phillips 66 announced that it plans to acquire more than 43% of DCP Midstream LP. The deal is worth $3.8 billion. The main goal is to expand the business in the oil & gas business.
What is known about the details of the Phillips 66 deal:
- Barclays is the exclusive financial advisor.
- Bracewell LLP is the legal advisor,
- Morris, Nichols, Arsht & Tunnell LLP acted as special advisors in Delaware.
The deal, the first major move by Mark Lashier, who took over as Phillips 66's chief executive, will double the Houston-based company's stake in US pipeline operator DCP Midstream to 86.8%.
DCP Midstream has integrated its platform for accumulating and processing with approximately 4,500 miles of liquefied natural gas liquids (NGL) pipelines and nearly 1,800 miles of natural gas transmission pipelines. The company's diversified Southern Hills, Sand Hills, Front Range and Texas Express pipelines connect the liquids-rich G&P regions with the growing petrochemical and energy markets of the Gulf Coast.
According to the President and CEO of Phillips 66, the company is committed to developing its upstream business. Further integration of DCP Midstream will expand opportunities for their growth.
Last month, Phillips pledged to increase spending on new projects by about 6% in 2023, focusing on maintaining its pipeline business.
The DCP transaction is expected to be accretive to Phillips 66's adjusted EBITDA by $1 billion, the refiner said in a statement.
Phillips said it expects to save at least $300 million by integrating DCP into its existing petroleum products transportation business. The company plans to finance the deal with cash and debt.
DCP Midstream is engaged in the gathering, compression, processing, refining, transportation, storage, and sale of natural gas. The Denver, Colorado-based company also specializes in the production, fractionation, transportation, storage, and sale of natural gas liquids and condensate and propane in the wholesale markets.
DCP Midstream operates in three segments:
- The Gathering & Processing segment gathers and processes raw gas to make it suitable for sale.
- The Logistics & Marketing segment consists of several downstream assets, including fractionators, NGL pipelines, and NGL storage facilities.
- The Growth Projects segment includes Mewbourn 3, which is a cryogenic natural gas processing facility in the DJ (Northeast Colorado and Southeast Wyoming) Basin.
What are the logistics assets for NGL transportation owned by DCP Midstream?
- Southern Hills pipeline with a length of 980 miles and a capacity of 192 million barrels per day. A joint venture between DCP Midstream (two-thirds) and Phillips 66 (one-third).
- Sand Hills Interstate Pipeline, 1,400 miles long with a capacity of 500 million barrels per day. A joint venture between DCP Midstream (two-thirds) and Phillips 66 (one-third).
- Marysville gas storage facility - 11 underground salt caverns with a capacity of 8 million barrels.
- Black Lake interstate pipeline, 300 miles long with a capacity of 80 million barrels per day.
- Wattenberg interstate pipeline, 500 miles long with a capacity of 112 million barrels per day.
- Panola domestic gas pipeline. DCP Midstream owns 15% of the company. The pipeline is 250 miles long and has a processing capacity of 100 million barrels per day,
- 450-mile-long interstate Front Range pipeline with a capacity of 260 million barrels per day. The company is shared equally among DCP Midstream, Western Gas Partners, and Enterprise Products Partners.
- The Texas Express pipeline, 600-mile pipeline with a capacity of 370 million barrels per day. DCP Midstream owns 10% of the company.
DCP Midstream has agreed to acquire the James Lake system owned by Woodland Midstream II. This system covers production assets in the Central Permian Basin Platform in Ector, Andrews, and Winkler counties, Texas. The Denver-based company has acquired assets valued at $160 million to increase DCP's gathering capacity in the Permian Basin.
The company said in a press release that the agreement to expand DCP's Permian Basin business will provide additional volumes for downstream assets. The James Lake system is located about 3 miles from DCP's Goldsmith processing plant in the Permian Basin. According to the company, the acquisition is an accretive transaction representing an EBITDA multiple of approximately 5.5 times.
The James Lake system includes 230 miles of gathering pipelines and a processing facility with a capacity of 120 MMcf/day. The Woodland Midstream II transaction and asset acquisition create a significant combination with Goldsmith's processing plant in Texas.
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Keystone XL Pipeline Controversy and Wildlife Disaster: From Trump's Green Light to Biden's Red Light on the $15 Billion Project
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/297_Blog_Keystone XL Pipeline Controversy and Wildlife Disaster From Trump's Green Light to Biden's Red Light on the 15 Billion Project.jpg)
The pipeline industry in the USA faced and still faces a range of regulatory challenges, including permitting delays, environmental requirements, and public opposition to pipeline projects. In recent years, pipeline projects like the Keystone XL and Dakota Access pipelines had legal and regulatory obstacles that delayed or canceled their construction. Keystone XL Pipeline, proposed by TransCanada in 2008, aimed to transport crude oil from Canada (around Calgary and Edmonton) to refineries on the Gulf Coast (Port Arthur). The project faced opposition from environmental groups and indigenous communities, who argued that it would contribute to climate change and pose a risk to water resources. In 2015, President Obama rejected the project, citing concerns about its environmental impact. However, in 2017, President Trump revived the project, leading to further legal challenges. In June 2021, U.S. President Joe Biden officially canceled the project on his first day in office.
EIA: Permian Basin Oil and Gas Output is Thought to Beat Record in June
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/66Blog_Permian_Production_Forecasted_2Q_2022_Rextag.png)
The EIA forecasts that total output in the main U.S. shale oil basins will increase 142,000 bbl/d to 8.761 million bbl/d in June, the most since March 2020. Oil productivity in the Permian Basin in Texas and New Mexico is supposed to go up 88,000 bbl/d to a record 5.219 million bbl/d in June, as the U.S. Energy Information Administration (EIA) announced in its report on May 16. In the largest shale gas basin, the productivity in Appalachia in Pennsylvania, Ohio and West Virginia will grow up to 35.7 Bcf/d in June, its highest since beating a record 36 Bcf/d in December 2021. Gas output in the Permian Basin and the Haynesville in Texas, Louisiana and Arkansas will rise to record highs of 20 Bcf/d and 15.1 Bcf/d in June, respectively. Speaking of the Permian future output, putting hands on upcoming changes in production has recently been made easier with the new Rextag's service - Pad Activity Monitor. Thanks to satellite imagery and artificial intelligence, customers are able to monitor the oil and gas wells and are provided with near real-time activity reports related to drilling operations. However, it is noticed that productivity in the largest oil and gas basins has decreased every month since setting records of new oil well production per rig of 1,544 bbl/d in December 2020 in the Permian Basin, and new gas well production per rig of 33.3 MMcf/d in March 2021 in Appalachia.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/297_Blog_Keystone XL Pipeline Controversy and Wildlife Disaster From Trump's Green Light to Biden's Red Light on the 15 Billion Project.jpg)
The pipeline industry in the USA faced and still faces a range of regulatory challenges, including permitting delays, environmental requirements, and public opposition to pipeline projects. In recent years, pipeline projects like the Keystone XL and Dakota Access pipelines had legal and regulatory obstacles that delayed or canceled their construction. Keystone XL Pipeline, proposed by TransCanada in 2008, aimed to transport crude oil from Canada (around Calgary and Edmonton) to refineries on the Gulf Coast (Port Arthur). The project faced opposition from environmental groups and indigenous communities, who argued that it would contribute to climate change and pose a risk to water resources. In 2015, President Obama rejected the project, citing concerns about its environmental impact. However, in 2017, President Trump revived the project, leading to further legal challenges. In June 2021, U.S. President Joe Biden officially canceled the project on his first day in office.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/282_Blog_Renewable Natural Gas How RNG Changes the Industry.jpg)
The renewable natural gas (RNG) industry in the United States is showing promising signs of growth. As of 2019, the U.S. consumed 261 billion cubic feet (BCF) of RNG, primarily utilized by independent power producers, electric utilities, and various commercial and industrial entities. However, this figure represents only a small fraction of its potential. Research indicates that the U.S. could theoretically produce up to 2,200 BCF of RNG through anaerobic digestion alone, which would equate to about 11% of daily national natural gas consumption.
![$data['article']['post_image_alt']](https://images2.rextag.com/public/blog/295_Blog_Renewable Efforts Lag as Global Oil and Gas Demand Continues to Rise.jpg)
Recently, the progress toward an energy transition is hitting a snag. Sales of electric vehicles are decelerating, and the growth in wind and solar power needs to be keeping pace with expectations. To make matters more challenging, electricity prices are climbing when they were expected to fall. Amidst these setbacks, the oil and gas sectors are proving resilient. According to BP's latest energy outlook, not only are these energy mainstays here to stay, but their demand is expected to remain relatively high even after reaching a peak. Interestingly, BP forecasts that oil demand will reach its zenith next year, marking a critical moment in energy consumption trends. This isn't the first time BP has projected a peak in oil demand. Back in 2019, their review anticipated a decline in demand growth, but the prediction fell flat. Instead, oil demand surged to unprecedented levels following the end of the global pandemic lockdowns, defying previous forecasts and underscoring the enduring dominance of traditional energy sources in the global market.