DCP Midstream, LLC, a 50/50 joint venture between Phillips 66 and Spectra Energy, and DCP Midstream Partners, LP, have signed and closed a transaction combining all of the assets and debt of both companies, simplifying the corporate structure and creating the largest natural gas liquids producer and gas processor in the United States. On January 23, 2017, the combined company will be renamed DCP Midstream, LP and the New York Stock Exchange stock ticker symbol will be changed to “DCP.”
Under terms of the transaction, DCP Midstream, LLC has contributed subsidiaries owning all of its assets to DCP Midstream Partners plus $424 million of cash, in exchange for approximately 31.1 million DCP Midstream Partners units ($1.125 billion) and DCP Midstream Partners, LP assuming $3.15 billion of DCP Midstream, LLC debt, for an estimated transaction multiple of approximately eight times based on current commodity strip prices. The cash proceeds of $424 million contributed to DCP Midstream Partners will be used to repay its revolver, fund its growth projects or prefund repayment of debt maturing in December 2017. Phillips 66 and Spectra Energy have retained their 50/50 joint ownership of DCP Midstream, LLC, which owns the incentive distribution rights (IDRs) and 38 percent of the outstanding DCP Midstream Partners general and limited partner units. The terms of the transaction were unanimously approved by the Board of Directors of DCP Midstream and DCP Midstream Partners based on the unanimous approval and recommendation of the Conflicts Committee, which is comprised of independent directors.
“This transformational transaction provides a platform of premier assets with strong growth opportunities in the key U.S. producing basins at a multiple that paves the way towards future distribution growth,” said Wouter van Kempen, chairman, president and CEO of both DCP Midstream and DCP Midstream Partners. “Our combined diversified portfolio provides highly accretive bolt-on expansion opportunities starting with the DJ Basin, where we will build a new 200 million-cubic-feet-per-day (MMcf/d) processing plant that is expected to come online in late 2018 with an additional 200 MMcf/d plant in 2019, resulting in a 50 percent increase in DJ Basin capacity. Additionally, we are expanding our Sand Hills NGL pipeline to its full 365 thousand barrels per day (BPD) of capacity by the end of 2017, an increase of 30 percent.”