Yahoo Finance Phillips 66 (PSX) Eyes Pipeline Stake Sale Worth More Than $1B
Phillips 66 PSX, a leading energy company, has initiated discussions regarding the potential sale of its 25% stake in the Rockies Express Pipeline (“REX”), a move that could fetch more than $1 billion, per a Reuters report. The company, which aims to generate approximately $3 billion from asset sales this year, is reportedly working with advisors to engage potential buyers, including private equity firms and infrastructure funds.
REX is structured as a limited liability company, with 25% ownership held by a Phillips 66 subsidiary and 75% owned by Tallgrass Energy Partners, L.P.’s division. Operations of the pipeline are managed by Tallgrass NatGas Operator, LLC.
The REX pipeline, stretching more than 1,700 miles as an interstate natural gas pipeline, spans from Wyoming and Colorado to eastern Ohio. Phillips 66 hopes to secure a premium to the stake's current book value of $451 million, per the report. However, bidders interested in acquiring the stake would need to assume debt obligations exceeding $500 million associated with the asset.
Mark Lashier, CEO of PSX, confirmed in an interview with Reuters that the company is engaged in discussions with potential buyers for asset sales. However, he emphasized that the company is not in a rush to finalize any deals. This measured approach underscores Phillips 66's commitment to securing favorable terms and maximizing value in the divestment process.
Primarily controlled by privately owned Tallgrass Energy, the remaining portion of the REX pipeline represents a significant asset in the energy landscape. Financial investors find stakes in pipelines like REX attractive due to their stable cash flow nature, although interstate pipeline stakes are relatively rare in the market.
Zacks Rank & Key Picks
Currently, Phillips 66 carries a Zack Rank #3 (Hold).
Some better-ranked stocks in the energy sector are Sunoco LP SUN, Murphy USA Inc. MUSA and Energy Transfer LP ET. While Sunoco and Murphy USA sport a Zacks Rank #1 (Strong Buy) each, Energy Transfer carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Sunoco is among the biggest motor fuel distributors in the U.S. wholesale market in terms of volumes. By distributing more than 10 fuel brands via 10,000 convenience stores under long-term distribution contracts, the partnership will continue to generate stable cash flow.
The Zacks Consensus Estimate for SUN’s 2024 earnings per share (EPS) is pegged at $4.96. The stock has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
Murphy USA is a leading independent retailer of motor fuel and convenience merchandise in the United States.
The Zacks Consensus Estimate for MUSA’s 2024 EPS is pegged at $26.32. The company has a Zacks Style Score of B for Growth and B for Value. It has witnessed upward earnings estimate revisions for 2024 and 2025 in the past seven days.
Energy Transfer is a publicly traded limited partnership, focused on diverse energy assets in the United States. The company’s core operations involve natural gas midstream services, transportation, storage, crude oil facilities and marketing assets.
The Zacks Consensus Estimate for ET’s 2024 earnings per unit is pegged at $1.44. The company has witnessed upward earnings estimate revisions for 2024 in the past 30 days. ET’s 2024 earnings are expected to rise 32.1% year over year.
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