Phillips 66, Kinder Morgan and HF Sinclair approve $5B pipeline project

Phillips 66 (NYSE: PSX), Kinder Morgan (NYSE: KMI) and HF Sinclair Corporation (NYSE: DINO) have finalized a joint venture agreement and made a final investment decision to proceed with the Western Gateway Pipeline system, a proposed 1,300-mile refined products pipeline with an enterprise value of approximately $5.0 billion.

Under the joint venture, Phillips 66 will hold a 49.9% ownership stake, Kinder Morgan 35.1% and HF Sinclair 15%. Phillips 66 will make cash contributions of approximately $2.5 billion, HF Sinclair approximately $750 million, and Kinder Morgan approximately $250 million in cash. Kinder Morgan will also contribute its existing SFPP East Line and West Line pipeline assets, valued at approximately $1.5 billion, upon completion of the new-build segment.

The system is designed to create a new fuel supply route from St. Louis, Missouri, and Gulf Coast origin points to Arizona and California, with a design capacity of 230,000 barrels per day. The project includes approximately 900 miles of new 20-inch and 24-inch pipeline from Borger, Texas, to Phoenix, Arizona, to be constructed and operated by Phillips 66. Kinder Morgan's existing SFPP pipelines and Phillips 66's Gold Pipeline, which will be reversed to direct flow toward Borger, will also be part of the system.

The project is underpinned primarily by 10-year, take-or-pay contracts. The system is also being developed to allow for future capacity expansion with limited additional capital and no new pipe required.

The Western Gateway project is targeting a completion date of 2029, subject to receipt of all required permits and regulatory approvals.

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