Phillips 66 (PSX) Acquires Lucrative Midland Basin Assets

Diversified downstream operator, Phillips 66 PSX has entered into an agreement to acquire Pinnacle Midland in an all-cash deal worth $550 million. Pinnacle Midland is a midstream energy company owned by a private equity firm, Energy Spectrum Capital. Pinnacle Midland’s assets in the Midland Basin will complement and expand PSX’s processing capabilities in one of the most prolific oil and natural gas regions in the United States.

Notably, the Dos Picos natural gas complex, owned by Pinnacle Midland, has a processing capacity of 220 million cubic feet per day (mmcfd). In addition, the complex boasts 80 miles of pipelines, making it a significant asset for natural gas processing and transportation. The system covers 50,000 acres, sourcing gas from high-quality producers in a key focus basin for Phillips 66. The complex has the potential to be scaled to a second 220 mmcfd gas plant.

The deal is anticipated to conclude by mid-2024.

The acquisition is a strategic move by PSX in enhancing its overall wellhead-to-market strategy. Per Pinnacle Midland’s statement, its assets can integrate seamlessly into Phillip 66's existing downstream infrastructure, thereby strengthening PSX’s operations. Furthermore, this acquisition will also support its expansion in the natural gas liquids (NGL) value chain, aligning with the company’s long-term goals.

Phillips 66 owns 11 NGL fractionation plants, in addition to natural gas and NGL storage facilities and NGL pipelines. The company also manages a vast network of pipelines spanning over 22,000 miles and owns interest in 13 refineries located in the United States and in Europe.

Zacks Rank and Key Picks

Currently, PSX carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are Archrock Inc. AROC, SM Energy SM and Eni SpA E.Archrock and SM Energy presently sport a Zacks Rank #1 (Strong Buy) each, while Eni carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.

Eni is a leading global integrated energy company with a prominent focus on liquefied natural gas businesses. As natural gas has a lesser carbon footprint compared with other fossil fuel, it will play an important role in the global energy transition process. Eni’s participation in the natural gas market will allow it capitalize on the mounting global demand in the future.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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