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Phillips 66 (PSX) to Acquire All Public DCP Midstream Units

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Phillips 66 (PSX - Free Report) entered an agreement to increase its stake in DCP Midstream LP , one of Colorado’s largest oil and gas businesses.

Phillips 66 will purchase all of the public common units of DCP Midstream for $3.8 billion. The acquisition will double its stake in DCP Midstream to 86.8%.

Phillips 66 focuses more on midstream, renewables and chemical operations, making its business model more stable. Last month, it pledged to boost spending on new projects by 6% in 2023, with a primary focus on strengthening its pipeline businesses. 

DCP Midstream’s assets gather, process and transport natural gas and natural gas liquids from the major U.S. shale plays, including the Permian Basin, Eagle Ford, the Ardmore and Anadarko Basins in Oklahoma, and the Denver-Julesburg Basin in Colorado.

The latest acquisition will bolster Phillips 66’s natural gas liquid business. The transaction is expected to generate an incremental $1 billion of adjusted EBITDA for the company. The refiner expects to save at least $300 million by integrating DCP Midstream into its existing midstream business.

Phillips 66 plans to fund the deal through a combination of cash and debt. The deal, subject to closing conditions, is expected to complete in the second quarter of 2023.

Price Performance

Shares of Phillips 66 have outperformed the industry in the past six months. The stock has gained 29.3% compared with the industry’s 16.9% growth.

 

Zacks Investment Research
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Zacks Rank & Other Key Picks

Phillips 66 currently carries a Zack Rank #2 (Buy).

Investors interested in the energy sector might look at the following companies that presently flaunt a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.

Eni SpA (E - Free Report) , based in Rome, Italy, is among the leading integrated energy players in the world. Eni’s third-quarter adjusted earnings from continuing operations of $2.14 per American Depository Receipt beat the Zacks Consensus Estimate of $2.04.

Eni is expected to see an earnings rise of 171% for 2022. Eni raised its share buyback after profits surged amid rising oil and natural gas prices. The company increased its share buyback program to an annual total of €2.4 billion.

Cactus, Inc. (WHD - Free Report) is involved in manufacturing, designing and selling wellhead and pressure control equipment. WHD’s third-quarter adjusted earnings of 52 cents per share beat the Zacks Consensus Estimate of 49 cents.

Cactus is expected to see an earnings surge of 148.6% for 2022. At the third-quarter end, WHD had cash and cash equivalents of $320.6 million. It had no bank debt outstanding as of Sep 30, 2022.


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