Phillips 66, Kinder Morgan, and HF Sinclair: Western Gateway FID

Research evidence excerpt

J P M O R G A N

North America Equity Research

11 August 2026

Phillips 66, Kinder Morgan, and

HF Sinclair

Western Gateway FID

JPM View. Phillips 66, Kinder Morgan, and HF Sinclair announced a final

investment decision for the Western Gateway Pipeline system, a 1,300-mile

refined products pipeline that would create a new fuel supply path from St. Louis,

Missouri, and expanded Gulf Coast origin points to Arizona and California. The

FID is consistent with what PSX management guided to on the 2Q26 earnings call,

where EVP Baldridge said the company expected to FID the project "in a month

or so" following finalization of definitive documents and project scope, and is

therefore not a surprise to the market. That said, we view the announcement as a

meaningful positive for all three companies, as it provides the first concrete look

at project economics, ownership splits, capital contributions, and contract

underpinning that the market has been waiting for since the open season process

concluded.

The project carries an implied cost of ~$5.0 B, which is underpinned by 10-year

take-or-pay contracts, and is targeting completion in 2029. Under the joint venture,

PSX will own 49.9%, KMI will own 35.1%, and DINO will own 15%, with cash

contributions of ~$2.5 B from PSX, ~$750 MM from DINO, and ~$250 MM from

KMI. KMI will also contribute its existing SFPP East Line and West Line pipeline

assets at a value of ~$1.5 B. The design capacity of 230 Mb/d is developed to allow

for future expansion to 320 Mb/d with limited capital and no new pipe as demand

requires, which we view as an important optionality feature given the long-term

demand uncertainty in California.

For PSX, Western Gateway is the most strategically significant midstream project

in its current backlog, directly connecting its Central Corridor and Gulf Coast

refining assets to its West Coast and Southwest marketing assets and extending the

commercial reach of its integrated business model into markets where reliable,

secure supply is structurally needed. PSX's cash contribution of approximately

$2.5 B is the largest of the three partners, consistent with its 49.9% ownership stake

…