Phillips 66 has agreed to sell its 25% stake in the Rockies Express Pipeline (REX) to a subsidiary of Tallgrass Energy for an enterprise value of around $1.28bn.

Tallgrass Energy, the operator of REX, will acquire full ownership of the common equity interest in the pipeline following the transaction.

As part of the agreement, Phillips 66 is set to receive pre-tax cash proceeds of $685m after adjustments related to REX’s debt and preferred equity balances.

The proceeds are expected to support the company’s strategic priorities, including returning value to shareholders.

Phillips 66 chairman and CEO Mark Lashier said: “This sale is an important step in our commitment to deliver over $3bn in asset divestitures.

“We are committed to managing our portfolio and monetising assets that no longer fit our long-term strategy.”

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The sale forms part of Phillips 66’s efforts to raise approximately $3bn from asset sales within the current year. 

REX is a significant natural gas pipeline, spanning 1,714 miles. It provides a bi-directional transportation service.

With a capacity of more than five billion cubic feet per day, the natural gas pipeline provides services between the Rockies, Appalachia and the north-eastern US.

In March this year, Reuters first reported that Phillips 66 was considering the sale of its 25% stake in REX to fetch more than $1bn, including debt.