Chevron To Sell NGL Logistics Assets To Phillips 66 Partners

Leading integrated energy player,Chevron Corporation (NYSE:CVX) , has entered into an agreement to sell its natural gas liquids (NGL) logistics system in southeast Louisiana to Phillips 66 (NYSE:PSX) Partners LP (NYSE:PSXP) . The logistics system consists of approximately 500 miles of pipelines and a storage space that connects multiple fractionation facilities, refineries and a petrochemical facility.

The deal is expected to be completed in the fourth quarter of 2016, subject to certain regulatory approvals. Though terms of the transaction remain undisclosed, Phillips 66 Partners announced plans to finance the acquisition with cash and borrowings under its revolving credit facility.

With the acquisition, Phillips 66 Partners will gain access to an approximately 300-mile TENDS pipeline system – a bidirectional NGL pipeline system connected to third-party fractionators and refineries. In addition to this, the partnership will gain access to a nearly 200-miles of regulated pipelines that transport raw liquids from a third-party natural gas processing plant to pipeline and fractionation infrastructure. Moreover, the deal includes acquirement of Sorrento Cavern, a salt dome cavern which is located in Ascension Parish and has a NGL storage capacity of nearly 1.5 million barrels.

CHEVRON CORP Price

Phillips 66 Partners expects this deal is to help expand its NGL footprint across the Louisiana market. The partnership estimates earnings before interest, taxes, depreciation and amortization (EBITDA) from the acquired assets to be approximately $25 million in 2017.

Phillips 66 Partners is a growth-oriented master limited partnership which owns, operates, develops and acquires primarily fee-based crude oil, refined petroleum product and natural gas liquids pipelines and terminals and other transportation and midstream assets.

On the other hand, San Ramon, CA-based Chevron is one of the largest global publicly traded oil and gas companies, based on proved reserves. It is engaged in oil and gas exploration and production, refining and marketing of petroleum products, manufacturing of chemicals, and other energy-related businesses.

Both Phillips and Chevron currently carry a Zacks Rank #3 (Hold), which implies that the stocks will perform in line with the broader U.S. equity market over the next one to three months.

Investors may take a look at some better-ranked players from the energy sector like NGL Energy Partners LP (NYSE:NGL) and Devon Energy Corporation (NYSE:DVN) , both of which sport a Zacks Rank #1 (Strong Buy).