Phillips 66, Enbridge Swap US Pipeline Stakes Through JV Merger

(Bloomberg) — Phillips 66 and Enbridge Inc . swapped stakes in two major US pipelines as part of a joint venture merger deal between the companies.

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Phillips 66 increased its ownership in DCP Midstream LP to 43.3% from 28.3%, while reducing its stake in Gray Oak Pipeline LLC to 6.5% from 42.3%, the crude refiner said in a statement . The company will pay Enbridge $400 million in cash as part of the deal.

Enbridge’s stake in Gray Oak will increase to 58.5 percent from 22.8 percent, while its stake in DCP will drop to 13.2 percent from 28.3 percent, the Calgary-based company said. Enbridge also agreed to operate the pipeline, currently operated by Phillips 66, starting in the second quarter of 2023.

In a separate announcement, Phillips 66 said it has made a non-binding offer to buy all of the publicly held common shares of DCP Midstream, a master limited partnership, for $34.75 each. That means Phillips 66 could spend about $3.1 billion on the acquisition. DCP units rose 9.8 percent to $38.16 as of 9:34 a.m., suggesting expectations that the offer will be upgraded.

Shares of Phillips 66 fell 2.4%, while Enbridge rose 0.9%.

With the realignment, Phillips 66 aims to further expand production of liquefied natural gas, a key feedstock used by refineries and petrochemical plants. In the meantime, the deal allows Enbridge to focus on bringing crude oil from the Permian Basin to the Gulf Coast.

Phillips 66 and Enbridge currently share ownership of DCP and Gray Oak through two separate joint ventures, which will now be combined into one entity. The deal was struck and closed on Wednesday.

(Updates with stock price movements starting in the fourth paragraph)

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