Phillips 66 Sells Stake in Permian Gas Pipeline

Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Phillips 66 (NYSE:PSX) (Houston, Texas) is selling a non-controlling interest in a Permian Basin gas pipeline as part of an effort to streamline its portfolio, the head of Phillips 66 said on Monday.

Phillips agreed to sell DCP GCX Pipeline LLC, a subsidiary that owns a 25% non-operating interest in Gulf Coast Express LLC, to an affiliate of ArcLight Capital Partners (Boston, Massachusetts) for a pre-tax cash value of $865 million.

Gulf Coast Express LLC operates a pipeline that moves 2 billion cubic feet per day of natural gas from the Permian Basin to a gas hub in Aqua Dulce, Texas. With the sale, the pipeline, called Gulf Coast Express, and its controlling entity are in the hands of Kinder Morgan Incorporated (NYSE:KMI) (Houston) and ArcLight. Inland shale basins, which account for the bulk of the oil and gas production in the U.S., are evolving. The so-called gas-to-oil ratio in a reservoir increases as pressure declines due to production. As the pressure drops, heavier hydrocarbons get trapped in subsurface pores, allowing room for lighter products such as natural gas to move into the production well.

That means basins such as the Permian are yielding more natural gas along with oil, while other gas-heavy reserves are seeing production growth diminish.

The Appalachia region, covering mostly Pennsylvania and West Virginia, is the most productive by volume at 35.3 billion cubic feet per day (Bcf/d) of natural gas. That, however, is about 1.5% lower than year-ago levels.

By contrast, the Permian is expected to yield 24.8 Bcf/d this year, a 9.3% increase over last year.

For Phillips 66, the company said the divestments on the Permian gas pipeline put it over its goal of shedding $3 billion from its portfolio.

"We intend to continue to optimize the portfolio and rationalize non-core assets going forward," said Mark Lashier, the chief executive officer of Phillips 66. "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 company reported $346 million in earnings during the three-month period ending September 30, a whopping 65% below the previous quarter. Hammered along with those in the downstream sector, Phillips 66 took a hit on weaker refinery margins.

On Monday, the company unveiled a capital budget plan for 2025 of $2.1 billion, with more than half of that designated for capital growth. That's about $1 million less than this year. Spending in its refining segment was pegged at $822 million, compared to $1.1 billion in 2024.

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