Phillips 66 and Phillips 66 Partners Announce Elimination of Incentive Distribution Rights
July 26 2019 - 6:45AM
Business Wire
- Reinforces Phillips 66 Partners as a premier MLP
- Permanently reduces cost of capital
- Aligns Phillips 66 and public unitholders economic
interests
Phillips 66 (NYSE: PSX) and Phillips 66 Partners (PSXP or
Partnership) (NYSE: PSXP) today announced execution of a definitive
agreement to eliminate all of Phillips 66’s incentive distribution
rights (IDRs) and general partner (GP) economic interests in PSXP
in exchange for 101 million newly issued PSXP common units. The
newly issued PSXP common units have a total equity value of
approximately $5.4 billion based on the PSXP common unit closing
price of $53.95 on July 25, 2019, or $5.2 billion based on a 30-day
volume weighted average price of $51.18. Using forecasted 2020
GP/IDR cash flow, these equity values represent multiples of 16.7x
and 15.8x, respectively. This transaction is expected to be
accretive to PSXP distributable cash flow per common unit by the
fourth quarter of 2020. Following the close of the transaction,
Phillips 66 will hold a non-economic GP interest in PSXP and own
approximately 170 million PSXP common units, representing
approximately 75% of PSXP’s outstanding common units. The
transaction is expected to close on Aug. 1, 2019.
This press release features multimedia. View
the full release here:
https://www.businesswire.com/news/home/20190726005086/en/
“We are pleased to announce the elimination of IDRs,” said Greg
Garland, chairman and CEO of Phillips 66 and Phillips 66 Partners.
“Phillips 66 is the largest unitholder in PSXP and will continue to
utilize the Partnership as a key component of its midstream growth
strategy. The lower cost of capital enhances PSXP’s ability to grow
through organic projects, dropdowns and third-party
acquisitions.”
“Given the Partnership’s robust growth platform, high
distribution coverage and strong financial position, we believe the
transaction is attractive for both parties and will benefit the LP
unitholders. This transaction reinforces PSXP as a premier MLP, and
we remain committed to competitive and growing distributions,”
added Garland.
BofA Merrill Lynch acted as financial advisor to Phillips 66,
and Latham & Watkins LLP acted as legal advisors.
The terms of the transaction were unanimously approved by the
board of directors of the general partner of Phillips 66 Partners
based on the unanimous approval and recommendation of its conflicts
committee, comprised entirely of independent directors. The
conflicts committee engaged Evercore as its financial advisor and
Vinson & Elkins LLP as its legal advisor.
About Phillips 66
Phillips 66 is a diversified energy manufacturing and logistics
company. With a portfolio of Midstream, Chemicals, Refining, and
Marketing and Specialties businesses, the company processes,
transports, stores and markets fuels and products globally.
Phillips 66 Partners, the company’s master limited partnership, is
integral to the portfolio. Headquartered in Houston, the company
has 14,400 employees committed to safety and operating excellence.
Phillips 66 had $58 billion of assets as of June 30, 2019. For more
information, visit http://www.phillips66.com/ or follow us on
Twitter @Phillips66Co.
About Phillips 66 Partners
Headquartered in Houston, Phillips 66 Partners is a
growth-oriented master limited partnership formed by Phillips 66 to
own, operate, develop and acquire primarily fee-based crude oil,
refined petroleum products and natural gas liquids pipelines,
terminals and other midstream assets. For more information, visit
http://www.phillips66partners.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This news release contains forward-looking statements as defined
under the federal securities laws, including projections, plans and
objectives. Although Phillips 66 and Phillips 66 Partners believe
that expectations reflected in such forward-looking statements are
reasonable, no assurance can be given that such expectations will
prove to be correct. In addition, these statements are subject to
certain risks, uncertainties and other assumptions that are
difficult to predict and may be beyond the parties’ control. If one
or more of these risks or uncertainties materialize, or if
underlying assumptions prove incorrect, actual results may vary
materially from what was anticipated, estimated, projected or
expected. Factors that could cause actual results or events to
differ materially from those described in the forward-looking
statements include the ability of Phillips 66 and Phillips 66
Partners to consummate the proposed transaction; the continued
ability of Phillips 66 to satisfy its obligations under Phillips 66
Partners’ commercial and other agreements; the volume of crude oil,
refined petroleum products and NGL Phillips 66 Partners or its
joint ventures transport, fractionate, terminal and store; the
tariff rates with respect to volumes that we transport through our
regulated assets, which rates are subject to review and possible
adjustment by federal and state regulators; fluctuations in the
prices for crude oil, refined petroleum products and NGL;
liabilities associated with the risks and operational hazards
inherent in transporting, fractionating, terminaling and storing
crude oil, refined petroleum products and NGL; potential liability
from litigation or for remedial actions, including removal and
reclamation obligations under environmental regulations; the
failure to complete construction of announced and future capital
projects in a timely manner and any cost overruns associated with
such projects; and other economic, business, competitive and/or
regulatory factors affecting Phillips 66 Partners’ businesses
generally as set forth in its filings with the Securities and
Exchange Commission. Phillips 66 and Phillips 66 Partners are under
no obligation (and expressly disclaims any such obligation) to
update or alter its forward-looking statements, whether as a result
of new information, future events or otherwise. In light of these
risks, uncertainties and assumptions, the events described in the
forward-looking statements might not occur or might occur to a
different extent or at a different time than as described.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190726005086/en/
Jeff Dietert, 832-765-2297 (investors) jeff.dietert@p66.com or
Brent Shaw, 832-765-2297 (investors) brent.d.shaw@p66.com or Dennis
Nuss, 855-841-2368 (media) dennis.h.nuss@p66.com
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