Phillips 66 (NYSE: PSX) has taken a significant step to strengthen its position in the Permian Basin midstream sector by announcing a definitive agreement to acquire EPIC Y-Grade GP, LLC and EPIC Y-Grade, LP (collectively referred to as “EPIC NGL”). The acquisition is valued at $2.2 billion in cash, subject to customary purchase price adjustments. The transaction, expected to be immediately accretive to Phillips 66’s earnings per share, is anticipated to enhance the company’s natural gas liquids (NGL) infrastructure and provide further integration opportunities across its asset portfolio.

Key Transaction Details

Buyer: Phillips 66 (NYSE: PSX)
Seller: EPIC Y-Grade GP, LLC and EPIC Y-Grade, LP
Transaction Value: $2.2 billion (cash consideration)
Assets Acquired:
- Two fractionation facilities near Corpus Christi, Texas, with a total capacity of 170,000 barrels per day (MBD)
- Approximately 350 miles of purity NGL distribution pipelines
- An 885-mile NGL pipeline with a capacity of 175 MBD, connecting key production areas in the Delaware, Midland, and Eagle Ford basins to Gulf Coast fractionation hubs

Strategic Rationale for the Acquisition

Phillips 66’s acquisition of EPIC NGL represents a strategic move to optimize its midstream operations in the Permian Basin. According to Mark Lashier, chairman and CEO of Phillips 66, this deal will improve the company’s ability to provide comprehensive flow assurance to producers and increase its NGL fractionation capabilities in Texas.

Key Benefits of the Transaction:

Optimizing the Permian NGL Value Chain:
- The acquisition will enhance Phillips 66’s ability to transport NGLs from production sites in the Delaware, Midland, and Eagle Ford basins to major fractionation hubs near Corpus Christi, Sweeny, and Mont Belvieu, Texas.
- By acquiring EPIC NGL’s assets, Phillips 66 will be better positioned to serve Permian Basin producers, providing greater connectivity to Gulf Coast refiners, petrochemical companies, and export markets.
Capacity Expansion Potential:
- EPIC NGL is currently increasing its pipeline capacity from 175 MBD to 225 MBD.
- The company has also sanctioned a second expansion to boost capacity to 350 MBD.
- Additionally, EPIC NGL has identified plans for a third fractionation facility that could increase its total fractionation capacity to 280 MBD.
Earnings and Returns:
- The transaction is expected to be immediately accretive to Phillips 66’s earnings per share.
- Phillips 66 anticipates that the acquired assets will deliver returns exceeding its hurdle rates, contributing to the company’s long-term growth and profitability.

Infrastructure Overview

The EPIC NGL infrastructure consists of key assets that are essential for transporting and processing natural gas liquids in the Permian Basin:

Fractionation Facilities:
- Two facilities located near Corpus Christi with a combined capacity of 170 MBD.
- These facilities are strategically positioned to serve Gulf Coast markets.
Purity Distribution Pipelines:
- Approximately 350 miles of pipelines that distribute purity NGL products to various customers along the Gulf Coast.
Long-Haul NGL Pipeline:
- An 885-mile pipeline linking production sites in the Delaware, Midland, and Eagle Ford basins to fractionation hubs.
- The pipeline currently has a capacity of 175 MBD, with plans to increase capacity to 350 MBD.

Integration with Phillips 66’s Existing Assets

Phillips 66’s existing infrastructure in the Gulf Coast region will be highly integrated with the newly acquired EPIC NGL assets. The Sweeny Hub, one of Phillips 66’s key NGL processing centers, will benefit from the additional supply of natural gas liquids transported through the EPIC NGL pipeline system. The integration will improve flow assurance, reduce bottlenecks, and enhance the company’s ability to serve end markets.

The Sweeny Hub currently includes:

Three fractionation units with a total capacity of over 400 MBD
Cavern storage facilities
Connectivity to major pipelines and export terminals

The EPIC NGL acquisition will complement these assets, increasing Phillips 66’s overall processing capacity and market reach.

Financial and Regulatory Considerations

The transaction is subject to customary closing conditions, including regulatory approvals. Once completed, Phillips 66 expects the acquisition to contribute positively to its financial performance without requiring an increase in its previously announced 2025 capital program.

Phillips 66 remains committed to disciplined capital allocation, focusing on investments that deliver attractive returns and strengthen the company’s core businesses.

Broader Market Implications

This acquisition underscores the ongoing consolidation trend in the midstream sector as companies seek to optimize their operations and improve connectivity across key production basins and end markets. The Permian Basin continues to be a focal point for midstream investments due to its prolific production growth and strategic importance to the U.S. energy sector.

Phillips 66’s investment in EPIC NGL highlights the importance of integrating upstream, midstream, and downstream operations to achieve greater efficiencies and value creation. By securing additional NGL transportation and processing capacity, Phillips 66 is well-positioned to capitalize on growing demand for natural gas liquids in both domestic and international markets.

About Phillips 66

Phillips 66 is a leading integrated downstream energy provider that manufactures, transports, and markets products essential to the global economy. The company’s portfolio includes Midstream, Chemicals, Refining, Marketing and Specialties, and Renewable Fuels businesses. Headquartered in Houston, Texas, Phillips 66 has a global workforce committed to safely and reliably providing energy while pursuing a lower-carbon future.

For more information, visit phillips66.com or follow @Phillips66Co on LinkedIn.

Conclusion

The acquisition of EPIC NGL represents a transformative move for Phillips 66, solidifying its position as a major player in the Permian Basin midstream sector. With expanded NGL transportation and processing capabilities, the company is poised to deliver long-term value to its shareholders while enhancing its service offerings to producers and customers in the Gulf Coast region. The deal reflects Phillips 66’s commitment to strategic growth and its focus on integrated operations that drive efficiency and profitability.