PSX’s move has more to do with NGL integration than battling over pipeline space, said Ajay Bakshani, director of midstream equity for East Daley Analytics. (Source: Shutterstock)
Phillips 66’s (PSX) $2.2 billion deal with EPIC bolstered a company that’s focused on integrating its NGL business from the Permian to the Gulf Coast, an analyst said.
On Jan. 6, PSX announced an acquisition of EPIC Y-Grade’s Texas NGL assets. The deal includes 175,000 bbl/d capacity NGL pipeline that links production in the Permian to the Gulf Coast, particularly South Texas refining centers near Corpus Christi.
Permian NGL capacity is near an overbuilt status. Several projects are expected to add almost 1 MMbbl/d capacity to the region by 2026.
PSX’s move has more to do with NGL integration than battling over pipeline space, said Ajay Bakshani, director of midstream equity for East Daley Analytics.
“The assets would not make as much sense for other potential strategic buyers, given EPIC’s hub at Corpus instead of (Mont) Belvieu,” Bakshani said. “However, it makes sense for PSX given its refinery operations and petrochemical ties via CPChem, and the fact that EPIC already has connections with Sand Hills and other PSX pipes to deliver NGLs to PSX’s Sweeny hub.”
Phillips 66 Sweeny Complex is located on the Texas Gulf Coast, between Mont Belvieu and Corpus Christi. The purchase of EPIC’s network will give the company ties to fractionation production and shipping facilities at three spots along the coast.
“Investors discounted EPIC’s assets as its pipes delivered into Corpus, where its fractionators were, rather than Mont Belvieu,” Bakshani said. “However, integrating it more heavily with PSX’s Sweeny hub and Mont Belvieu assets and PSX’s own demand (CPChem crackers and refineries) removes that discount.”
Other analysts said the deal made financial sense for Phillips 66.
PSX bought EPIC’s NGL assets at about a 10x EBITDA multiple. Future projects and synergies could reduce the multiple to about 8x after 2027, said Sunil Sibal, an analyst for Seaport Research Partners.
EPIC’s two fractionators near Corpus Christi have a combined 170,000 bbl/d. The company’s NGL pipeline is currently undergoing expansion to raise its capacity to 350,000 bbl/d, while EPIC has a third fractionator in the planning stages, TPH&Co analyst Matthew Blair wrote on Jan. 7.
“We think the valuation is appealing for a full (and expanding NGL pipe), long-term commitments, and accompanying fracs,” Blair said.
EPIC’s other primary operation is the 1 MMbbl/d EPIC Crude pipeline that connects the Permian with the Eagle Ford Shale and refineries in the Corpus Christi area. The crude line ran at capacity for much of 2024, RBN Energy noted in October. EPIC did not answer an email from Hart Energy regarding its plans for the line.
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