Phillips 66 has agreed to sell DCP GCX Pipeline, which holds a 25% non-operated equity interest in the Gulf Coast Express Pipeline, to an affiliate of ArcLight Capital Partners.
The transaction is valued at $865m in pre-tax cash proceeds, subject to standard purchase price adjustments.
The 800km long Gulf Coast Express Pipeline transports approximately two billion cubic feet per day (Bcf/d) of natural gas from the Permian Basin to the Agua Dulce market in Texas, US.
Following the completion of the transaction, the pipeline will be jointly owned by Kinder Morgan subsidiaries and affiliates of ArcLight Capital Partners. Kinder Morgan is the operator of the midstream facility.
Phillips 66 indicated that the sale reflects an enterprise value-to-EBITDA multiple of 10.6x based on the pipeline’s projected 2025 earnings. The proceeds will be used to advance the company’s strategic initiatives, including reducing debt and returning capital to shareholders.
Phillips 66 chairman and CEO Mark Lashier said: “With this transaction, we have exceeded our $3bn asset divestiture target established in our strategic priorities. We intend to continue to optimise the portfolio and rationalise non-core assets going forward.
“The evolution of our portfolio underscores our position as a leading integrated downstream energy provider, enhancing shareholder value and positioning the company for the future.”
The deal is scheduled to close in January 2025.
The Gulf Coast Express Pipeline, which entailed an investment of around $1.75bn, broke ground in May 2018. The system began full commercial in-service in September 2019.
In October 2024, Kinder Morgan approved a $455m expansion project for the pipeline to increase its capacity by 570 million cubic feet per day (MMcf/d) to serve South Texas markets.
ArcLight Capital Partners has expanded its position in the Gulf Coast Express Pipeline over recent years.
In June 2024, Kinetik completed the sale of its 16% equity stake in the pipeline to an affiliate of ArcLight Capital Partners for $510m in upfront cash. The deal also includes an additional $30m deferred payment contingent on the final investment decision for the capacity expansion.
ArcLight Capital Partners’ first investment in the pipeline occurred in 2022 when it acquired a 25% equity interest from Targa Resources for $857m.
