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Phillips 66 explores sale of REX interstate pipeline stake worth over $1 billion, sources say

March 26, 20241:40 PM Reuters0 Comments

Steel long pipes in crude oil factory during sunset U.S. oil refiner Phillips 66 is exploring a sale of its 25% stake in the Rockies Express Pipeline that it hopes could be worth more than $1 billion, including debt, people familiar with the matter said on Tuesday.

The Rockies Express Pipeline (REX) is a 1,700-mile interstate natural gas pipeline, stretching from Wyoming and Colorado in the Western U.S. to Eastern Ohio.

Phillips 66 is working with its advisers on talks with potential buyers, which include private equity firms and infrastructure funds, the sources said, requesting anonymity as the discussions are confidential.

The Houston-based company is hoping to command a premium to the stake’s current book value of $451 million, the sources said, adding bidders would also need to assume debt obligations worth more than $500 million associated with the stake.

A spokesperson for Phillips 66 did not immediately respond to a request for comment.

Phillips 66, which has a market value of $67 billion, is aiming to raise about $3 billion from asset sales this year.

In an interview earlier on Tuesday, Chief Executive Mark Lashier said the company was in discussions with potential buyers for asset sales, but it was not in a rush to complete divestments.

The company has come under pressure in recent months from Elliott Management, which disclosed a stake in November and pushed for Phillips 66 to improve its refining operations and revamp its board of directors.

The activist investor last month agreed to a standstill after Phillips 66 added a new board member approved by the investment firm and said it would work with Elliott to identify a second director.

The remainder of the REX pipeline is controlled by privately owned Tallgrass Energy.

Stakes in pipelines, such as REX, are attractive to financial investors as they like businesses with steady cash flow, the sources said, adding stakes in interstate pipelines are not marketed to buyers often.

(Reporting by David French in New York; Editing by Anirban Sen and Andrea Ricci)

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