Phillips 66 (NYSE:PSX) inked a deal to acquire Pinnacle Midland Parent LLC from Energy Spectrum Capital for a cash consideration of $550 million.

The strategic move reflects the expansion of its natural gas gathering and processing footprint in the Midland Basin.

Pinnacle's assets include the recently built Dos Picos natural gas gathering and processing system. It is a 220 MMcf/d gas processing plant, 80 miles of gathering pipeline, and 50,000 dedicated acres through high-quality producers in one of Phillips 66's core basins.

The Dos Picos processing complex and related infrastructure is easily scalable toward a second 220 MMcf/d gas plant and integrates well into the company's existing downstream infrastructure.

The transaction is expected to close around mid-year of 2024, following satisfaction of customary closing conditions.

Mark Lashier, Chairman and CEO said, "We are growing our Midstream business in the Permian to further strengthen and expand our service offerings to customers while driving operational and commercial synergies."

"Pinnacle is a bolt-on asset that advances our wellhead-to-market strategy and complements our diversified and integrated asset portfolio. Further, this transaction aligns with our long-term objectives to build out our natural gas liquids value chain, be disciplined with our capital allocation and create sustainable value for our shareholders."

Last month, Phillips 66 reported first-quarter FY24 revenue of $36.436 billion, exceeding the consensus of $33.075 billion, and adjusted EPS of $1.90, missing the consensus of $2.17.

As of March-end, the company had cash and cash equivalents of $1.6 billion and committed capacity available under its credit facility worth $3.5 billion.

Investors can gain exposure to the stock via IShares U.S. Oil & Gas Exploration & Production ETF (BATS:IEO) and VanEck Oil Refiners ETF (NYSE:CRAK).

Price Action: PSX shares are down 0.15% at $144.20 premarket at the last check Tuesday.