Thursday, September 10, 2015
Houston-based Phillips 66 and Spectra Energy, 50/50 joint venture owners of DCP Midstream LLC (Denver), have signed a nonbinding letter of intent to contribute assets to strengthen DCP Midstream. The transaction is expected to provide DCP with a stronger balance sheet and increased financial flexibility, and position the company to grow through commodity price cycles.
Spectra Energy has agreed to contribute its ownership interests in both the Sand Hills and Southern Hills NGL pipelines. Phillips 66 has agreed to contribute $1.5 billion in cash, which is expected to pay down a portion of DCP Midstream’s revolving credit facility debt. The transaction, anticipated to close in the fourth quarter of this year, is subject to the parties entering into a definitive agreement and customary consents, including approval by Spectra Energy Partners’ board of directors and regulatory approvals.
The proposed transaction complements efforts at DCP Midstream to reduce operating costs, sell certain non-core assets, and convert certain contracts from commodity-price-sensitive to fee-based agreements. Following the transaction, Phillips 66 and Spectra Energy will remain 50/50 joint venture owners. DCP Midstream has assets in liquids-rich developments and is reported to be among the top natural gas processors and natural gas liquids producers in the U.S. In addition, DCP Midstream LLC has a midstream master limited partnership, DCP Midstream Partners LP. The partnership is engaged in all stages of the midstream business.
“DCP Midstream is a valuable portion of our NGL value chain and part of our plans to grow,” said Greg Garland, chairman and CEO of Phillips 66. “This infusion of cash and operating assets by the joint venture owners will enhance the credit profile of DCP Midstream, provide stability to the existing business, and allow pursuit of growth opportunities.” “The contribution of the one-third interests in Sand Hills and Southern Hills will diversify DCP Midstream by enhancing the balance of fee-based assets while building on the re-contracting work already under way,” added Greg Ebel, chairman and CEO of Spectra Energy. “In addition, the infusion of cash to pay down debt will result in DCP Midstream bank credit metrics that will be much stronger, allowing DCP to continue providing excellent service to customers and retain its number one position in gas processing and NGL production. This deal also retains the upside for owners as commodities improve.”
Spectra Energy has agreed to contribute its ownership interests in both the Sand Hills and Southern Hills NGL pipelines. Phillips 66 has agreed to contribute $1.5 billion in cash, which is expected to pay down a portion of DCP Midstream’s revolving credit facility debt. The transaction, anticipated to close in the fourth quarter of this year, is subject to the parties entering into a definitive agreement and customary consents, including approval by Spectra Energy Partners’ board of directors and regulatory approvals.
The proposed transaction complements efforts at DCP Midstream to reduce operating costs, sell certain non-core assets, and convert certain contracts from commodity-price-sensitive to fee-based agreements. Following the transaction, Phillips 66 and Spectra Energy will remain 50/50 joint venture owners. DCP Midstream has assets in liquids-rich developments and is reported to be among the top natural gas processors and natural gas liquids producers in the U.S. In addition, DCP Midstream LLC has a midstream master limited partnership, DCP Midstream Partners LP. The partnership is engaged in all stages of the midstream business.
“DCP Midstream is a valuable portion of our NGL value chain and part of our plans to grow,” said Greg Garland, chairman and CEO of Phillips 66. “This infusion of cash and operating assets by the joint venture owners will enhance the credit profile of DCP Midstream, provide stability to the existing business, and allow pursuit of growth opportunities.” “The contribution of the one-third interests in Sand Hills and Southern Hills will diversify DCP Midstream by enhancing the balance of fee-based assets while building on the re-contracting work already under way,” added Greg Ebel, chairman and CEO of Spectra Energy. “In addition, the infusion of cash to pay down debt will result in DCP Midstream bank credit metrics that will be much stronger, allowing DCP to continue providing excellent service to customers and retain its number one position in gas processing and NGL production. This deal also retains the upside for owners as commodities improve.”
