US based energy firms Phillips 66 and Spectra Energy have signed deal to strengthen their equally owned natural gas joint venture, DCP Midstream by contributing $1.5bn in cash and additional assets.
Spectra Energy will offer its stakes in the Sand Hills and Southern Hills NGL pipelines for the JV entity, while Phillips 66 will offer $1.5bn cash boost to the company.
The cash will be used by DCP Midstream to pay off a portion of its revolving credit facility.
Spectra Energy chairman and CEO Greg Ebel said: “The contribution of the one-third interests in Sand Hills and Southern Hills will diversify DCP Midstream by enhancing the balance of fee-based assets while building on the re-contracting work already underway.”
The deal, which is expected to close by the end of the year, needs approval from Spectra Energy’s board of directors and regulatory bodies to be turned into definitive agreement and receive customary consents.
This transaction is in line with DCP Midstream’s initiatives to bring down its operating costs through sale of some of its non-core assets, and conversion of certain contracts from commodity price sensitive to fee-based.
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By GlobalDataInfusion of additional cash and assets will strengthen DCP Midstream’s balance sheet and increase financial flexibility, the companies said.
Phillips 66 chairman and CEO Greg Garland said: “DCP Midstream is a valuable portion of our NGL value chain and part of our plans to grow.
“This infusion of cash and operating assets by the joint venture owners will enhance the credit profile of DCP Midstream, provide stability to the existing business and allow pursuit of growth opportunities.”
The partners, Phillips 66 and Spectra Energy, will retain their 50:50 stakes in the entity following the completion of the transaction.
Image: Phillips 66 and Spectra Energy to forward assets to DCP Midstream. Photo: courtesy of DCP Midstream, LLC.
