(Reuters) -U.S. oil refiner Phillips 66 (NYSE:PSX) said on Monday it will acquire various pipelines and distribution systems from Ares-backed pipeline operator EPIC NGL in an all-cash deal for $2.2 billion, as it seeks to prop its natural gas liquid bet.
NGLs include a group of hydrocarbons extracted from natural gas in a processing plant, and are used as feedstocks in petrochemical plants, for heating, cooking and various other applications.
The deal would see Phillips 66 acquiring EPIC Y-Grade GP, and EPIC Y-Grade, and its various subsidiaries, which is expected to be immediately accretive to earnings per share, it said in its statement.
Phillips 66 has been betting big on NGLs, after previously saying it expects NGL output to grow faster than crude oil by the end of the decade, supported by demand from petrochemical makers.
"This transaction optimizes our Permian NGL value chain, allows Phillips 66 to provide producers with comprehensive flow assurance and is expected to deliver attractive returns in excess of our hurdle rates," said Phillips 66 CEO Mark Lashier.
The company added that it does not expect to increase its 2025 capital program after the deal, in connection to EPIC NGL's process of increasing its pipeline capacity.
Around 85% of U.S. NGL production is centred in the Permian Basin oil field and a majority of them are exported, according to RBN Energy analysts.
Last year, the oil refiner acquired Pinnacle Midland from private equity firm Energy Spectrum CapitalEnergy Spectrum Capital in a $550 million all-cash deal to expand its natural gas gathering and processing footprint in the midland basin.
The U.S. shale industry has witnessed a record-breaking wave of dealmaking in the recent past, as energy companies have rushed to expand oil and gas drilling inventories, especially in the Permian Basin.