At an investor conference this morning, the CEO of Phillips 66 (NYSE: PSX) that the company will commit some of its oil and gas transportation (midstream) assets to the formation of a new master limited partnership (MLP). CEO Greg Garland said an IPO in the second half of 2013 would offer a minority stake in the new MLP and is expected to raise $300 to $400 million in cash.

The company was not specific about what assets it would contribute to the new MLP, but said that it is “evaluating assets for contribution to the MLP, which may include certain product and crude pipelines and terminals, rail cars and other rail infrastructure, as well as natural gas liquids (NGL) assets.”

The company’s principal midstream asset its its 50% stake in DCP Midstream Partners LP (NYSE: DPM). The midstream division generated revenues of $1.35 billion in the third quarter and a net loss of $77 million due to collapsing prices for NGLs. Phillips 66 has also written down $303 million in impairment charges in the last two quarters related to its 25% equity stake in the Rockies Express pipeline.

Phillips 66 also plans to complete the acquisition of one-third stakes in two new pipelines with partners Spectra Energy Corp. (NYSE: SE) and DCP Midstream. The cost to the company is expected to be $700 to $800 million.

As for the rail cars and other assets, in the company’s most recent quarterly SEC filing, Phillips 66 said the value of midstream property, plant, and equipment was $14 million, including accumulated depreciation and amortization of $49 million.

What Phillips 66 chooses to dump into the new MLP remains to be seen, but let’s hope that there’s something better than this stuff.

Shares of Phillips 66 are down 2.5% shortly after noon today, at $51.72 in a 52-week range of $28.75 to $54.32.

Paul Ausick

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