$PSX $DNB $ENB Tending To Their Knitting

Seeking Alpha headline: Phillips 66 Makes A Big Move, But Enbridge Benefits More
Aug. 22, 2022 3:33 AM ETP

Michael Fitzsimmons


Last week, Phillips 66’s (NYSE:PSX) new CEO Mark Lashier made a big move to significantly increase the company’s stake in DCP Midstream (DCP) - one of America’s largest natural gas gathering & processing companies and a significant producer of NGLs (see graphic below). This is likely part of a long-term strategy to position PSX and Enbridge (ENB) to fully dissolve its DCP 50/50 joint venture. This makes a lot of sense for both companies. PSX is a leading logistics company with substantial NGL demand pull for its large-scale Gulf Coast fractionation & chemicals facilities. That being the case, it can more fully integrate DCP’s NGLs production into its value chain. It also makes sense for Enbridge because the extra working interest in the Gray Oak pipeline it received will give it a bigger share of Permian & Eagle Ford producers’ oil transported directly to ENB’s Gulf Coast export terminal. That is, the Gray Oak pipeline is a much better fit for Enbridge’s liquids pipeline business as compared to NGLs gathering and processing. In effect, the transaction will allow both companies to do what they do best and align their long-term strategic interests. Or, to use an old saying, “stick to their knitting”.