Phillips 66 and Spectra to strengthen DCP Midstream

Phillips 66 (NYSE: PSX) and Spectra Energy (NYSE: SE), 50/50 joint venture owners in DCP Midstream LLC, have entered into a nonbinding letter of intent for contributing assets to strengthen DCP Midstream. This transaction is expected to provide DCP Midstream with a stronger balance sheet and increased financial flexibility, and positions DCP to grow through commodity price cycles.

Spectra Energy has agreed to contribute its ownership interest in both the Sand Hills and Southern Hills NGL pipelines. Phillips 66 has agreed to contribute $1.5 billion in cash, which is expected to be used to pay down a portion of the DCP Midstream revolving credit facility. The transaction, anticipated to close in the fourth quarter of this year, is subject to the parties entering into a definitive agreement and customary consents, including approval by Spectra Energy Partners’ board of directors and regulatory approvals.

The proposed transaction complements efforts at DCP Midstream to reduce operating costs, sell certain non-core assets, and convert certain contracts from commodity price sensitive to fee-based.

Following this transaction, Phillips 66 and Spectra Energy will remain 50/50 joint venture owners of DCP Midstream.

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