Phillips 66 sells stake in Rockies Express Pipeline to Tallgrass Energy for $1.3bn

Phillips 66 (NYSE: PSX) has finalized a deal to sell its 25% non-operated common equity interest in the Rockies Express Pipeline LLC (REX) to a subsidiary of Tallgrass Energy, LP (TGE). The transaction, valued at an enterprise value of approximately $1.275 billion, will result in Tallgrass Energy assuming full ownership of the common equity interest in REX. Following the adjustments for Phillips 66‘s allocation of REX’s debt and preferred equity balances, the sale will yield pre-tax cash proceeds of $685 million for Phillips 66.

Strategic Implications of the Sale

This move is part of Phillips 66’s broader strategy to streamline its portfolio and focus on core operations that align with its long-term strategic goals. Mark Lashier, Chairman and CEO of Phillips 66, emphasized the significance of this transaction, stating, “This sale is an important step in our commitment to deliver over $3 billion in asset divestitures. We are committed to managing our portfolio and monetizing assets that no longer fit our long-term strategy.” The proceeds from the sale are intended to support key strategic initiatives, including enhancing shareholder returns.

Tallgrass Energy Takes Full Control of Rockies Express Pipeline from Phillips 66 Amid Strategic Shifts

Details About Rockies Express Pipeline

The Rockies Express Pipeline, one of the largest natural gas pipelines in the United States, spans approximately 1,714 miles. It plays a crucial role in the bi-directional transportation of natural gas, offering over 5 billion cubic feet per day of service between the Rockies, Appalachia, and the northeastern United States. Operational since November 2009, REX has a capacity of 1.8 billion cubic feet per day and provides a range of services including firm and interruptible transportation, as well as pooling, wheeling, and a park and loan service.

Impact and Future Outlook

With Tallgrass Energy now at the helm with 100% ownership, the pipeline’s operational efficiency and service scope are expected to maintain or even increase. This consolidation under Tallgrass Energy could streamline operations and potentially lead to further enhancements in service delivery across the pipeline’s extensive network.

The sale not only signifies a strategic repositioning for Phillips 66 but also marks a significant expansion for Tallgrass Energy, enabling it to bolster its infrastructure footprint and enhance its service capabilities across key natural gas markets in the United States.

This transaction represents a pivotal development in the U.S. energy sector, reflecting ongoing shifts in investment and strategic priorities among leading energy companies. For Phillips 66, the divestiture aligns with its strategy of optimizing asset portfolio and focusing on higher return opportunities. For Tallgrass Energy, acquiring full control of REX underscores its commitment to growing its core pipeline operations and enhancing energy transportation infrastructure in the United States.