Shell and Phillips 66 Consider Selling Stakes in $3.5B Explorer Pipeline
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Shell and Phillips 66 are exploring the potential sale of their stakes in the Explorer refined products pipeline, according to sources familiar with the matter. A deal could value the critical U.S. energy infrastructure asset at approximately $3.5 billion.
Together, Shell and Phillips 66 own roughly 61% of the legal entity that operates the 1,800-mile pipeline, which transports gasoline, diesel, and jet fuel from Texas through the Midwest to the Chicago area. The remaining ownership is held by Energy Transfer and MPLX.
Investment banks Greenhill (a Mizuho affiliate) and RBC Capital Markets have been hired to manage the auction process, which is currently in its early stages. While marketing is initially focused on the Shell and Phillips 66 stakes, sources noted that Energy Transfer and MPLX could potentially add their holdings to the sale if there is strong demand for full ownership of the pipeline. However, the sources cautioned that a transaction is not guaranteed.
Shell, Phillips 66, and MPLX declined to comment, while Explorer, Energy Transfer, Mizuho, and RBC did not respond to requests for comment.
The potential divestment comes amid strong demand and high valuations for energy infrastructure, particularly from financial buyers attracted to the steady cash flows of midstream assets. This environment has prompted energy companies to cash in on non-core holdings to reinvest in higher-growth areas.
Operating since the early 1970s, the Explorer pipeline system has a capacity of 660,000 barrels per day on its southern segment and 450,000 barrels per day on its northern segment. Alongside the Colonial pipeline, Explorer is considered one of the most vital fuel conduits in the United States. Last year, Colonial was acquired by Brookfield Infrastructure Partners for approximately $9 billion in a similar transaction where initial stake sales eventually led to a full buyout.
