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Phillips 66 Partners Midstream Deal Valued at $1B

Phillips 66 Partners LP (PSXP) has agreed to acquire equity interests in three pipeline systems from its general partner, Phillips 66 (PSX), in a transaction valued at more than $1 billion.

On Monday, PSXP said it will acquire PSX's one-third equity interests in the Sand Hills and Southern Hills natural gas liquids (NGL) pipeline systems, and its 19.46% stake in the Explorer Pipeline Co., in exchange for $1.01 billion: $880 million in cash and about 1.73 million newly issued units of PSXP. The deal is expected to close in early March.

"This acquisition will expand our fee-based portfolio into NGL transportation and provide us with an interest in one of the largest refined products pipeline systems in the U.S.," said PSXP CEO Greg Garland. "Our addition of these diversified assets demonstrates our commitment to providing strong growth for our unitholders."

Sand Hills is a 720-mile NGL pipeline system that provides takeaway service in the Permian Basin and the Eagle Ford Shale, while Southern Hills is an 800-mile NGL pipeline system that serves the Midcontinent. Both transport NGL to fractionation facilities on the Texas Gulf Coast and the market hub at Mont Belvieu, TX, and both entered into service in mid-2013 (see Shale Daily, June 18, 2013).

Meanwhile, the Explorer Refined Products Pipeline System is an 1,830-mile refined products pipeline system that connects refineries and market centers from the Gulf Coast to the Midwest. The system has a capacity of 660,000 b/d.

According to PSXP, Sand Hills has a capacity of 200,000 b/d of NGL but is expandable to 350,000 b/d with additional pumping stations. Southern Hills has a capacity of 175,000 b/d of NGL.

In a separate note Tuesday, PSXP announced a public offering of 5.25 million common units. The partnership said it plans to use the proceeds from the sale to fund part of its deal with PSX, with the remainder going toward general partnership purposes.

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