Shell (SHEL) and Phillips 66 (PSX) are testing interest in their combined 60.5% stake in Explorer Pipeline at a valuation near $3.5B, Reuters reports. The majors would be trimming their non-operating stakes in a refined products pipeline that has seen its performance decline recently, though also brings upside potential.
MPLX holds ~25% and Energy Transfer (ET) roughly 15% of the remaining Explorer interest. Both could contribute their stakes if demand supports a sale of the full asset, Reuters reports. The process is early and a transaction is not guaranteed.
The 1,872-mile Explorer Pipeline moves refined products from the Gulf Coast to Midcontinent and Midwest markets, supplying Houston, Dallas, Tulsa, St. Louis and the greater Chicago area. The 28-inch southern mainline carries up to 660 Mb/d to Tulsa; the 24-inch northern segment is rated at 450 Mb/d to Hammond, IN. More than 60 shippers move over 72 product specifications on the system.
East Daley Analytics’ PSX Financial Blueprint shows Explorer’s performance has been in decline, with both volume and revenue contracting in 2025 (see figure). Average throughput fell 9.5%, from 638 Mb/d in 2024 to 578 Mb/d in 2025. The blended transportation rate softened from ~$2.38/bbl in 2024 to $2.21 in 2025. The blended rate further declined to $1.94 in 4Q25, about 18% below the 2024 average.
Explorer’s revenue tracked the same path, down 15.9% in 2025 to a $468MM average vs $557MM in 2024. At $3.5B, the headline valuation runs about 13.3x 2025 EBITDA of ~$264MM, before accounting for whether the 4Q25 rate is a temporary dip or the new run-rate.
Energy Information Administration (EIA) data shows Midwest gasoline, distillate and jet fuel demand all grew in 2025, which rules out weaker regional consumption as the explanation. That leaves system-specific causes: a shift in Gulf Coast refinery supply, a change in shipper routing, or a competing transportation option gaining market share. Public disclosures do not identify which factor has driven the decline, so that is an open question a buyer would need to answer before considering the fourth-quarter rate as a floor or a trend.
East Daley’s refinery-level data shows Motiva is Explorer’s largest supplier, shipping products out of its 730 Mb/d Port Arthur refinery. Motiva is wholly owned by Saudi Aramco, so a sale of Shell’s Explorer stake has no bearing on Motiva’s shipping decisions, and Shell’s historical relation with Motiva provides no governance protection over those volumes. The durability of Explorer’s largest supply relationship rests on a commercial arrangement, and is a risk that only shows up once refinery-level shipment data is connected directly to the pipeline itself.
Explorer’s diluent expansion that entered service in July 2025 drives the growth case. It connects Gulf Coast supply to the Irwin/Cochin and Manhattan/Southern Lights terminals in Illinois, the same corridor that carries up to 180 Mb/d of condensate toward Edmonton on the Southern Lights system. The expansion could bring take-or-pay and incentive-rate revenue untied to refined products throughput. Explorer has not disclosed the expansion’s capacity, volumes or utilization, so none of that upside is in the numbers yet.
Base case: Throughput and rate stabilize near the 2025 exit level, with the diluent expansion adding a modest, still-undisclosed layer of contracted revenue.
Upside case: The 4Q25 rate proves to be a trough, the cause of the 2025 decline reverses, and diluent volumes ramp toward a meaningful share of the Edmonton corridor’s capacity.
Downside case: Explorer’s 4Q25 rate is the new normal, the still-unidentified cause of the decline is structural, and Motiva’s shipping stays intact so long as its commercially advantageous for Aramco.
Investor Takeaway: Explorer has many advantages, including scale and Gulf Coast-to-Midwest connectivity. The question is whether a buyer would pay 13.3x for a shrinking base, or 13.3x at a trough that a market-based tariff and a new diluent corridor are about to reverse. That is a question East Daley’s company-level financial models and refinery-level supply data can answer well before it shows up in a filing. – Keland Rumsey and Jaxson Fryer Tickers: ET, MPLX, PSX, SHEL.
Demand is Coming. Where Will the Supply Come from — and Who’s Going to Deliver?
The largest growth cycle in US energy demand is on deck, and the infrastructure required to meet it could reshape US energy markets over the next decade.
LNG infrastructure in the Lower 48 and Mexico could grow by 45 Bcf/d by 2035, while gas-fired power generation serving data centers could add another 7.6 Bcf/d of natural gas demand. More than 32 Bcf/d of major pipeline expansions and newbuild projects have already been proposed to connect growing supply with LNG, power, residential and commercial demand.
And natural gas is only part of the story.
- Midstream consolidation is accelerating as operators position themselves from wellhead to water, including Williams’ move to acquire Momentum.
- Nearly 1,200 Mb/d of Y-grade and purity product expansions are proposed out of the Permian alone, while Mont Belvieu could face more than 1,000 Mb/d of fractionation constraints by 2032.
- A possible ATEX conversion project from liquids to gas could unleash more Northeast supply and reshape NGL flows in the region.
- Permian crude oil takeaway is already running tight, with routes to Corpus Christi at 99% utilization and Cushing/Houston routes at 92%. With only about 75 Mb/d of expansions on the books, takeaway capacity could become a constraint on future Permian growth.
- Roughly $32B per year of infrastructure has been sanctioned and underwritten by long-term contracts through 2031 — representing more than $191B of committed capital over the next five years.
Where are the biggest infrastructure gaps? Which projects get built? And which companies are positioned to capture the opportunity?
Join East Daley Analytics on August 26 at 10:00 AM MT as we connect the dots across natural gas, NGLs, crude oil and capital investment to map the infrastructure buildout ahead. Click here to register now and reserve your spot.
One Market, One Model: Gain a Holistic View of North America Supply & Demand
East Daley Analytics is pleased to announce the Canada Supply & Demand report. The Canada S&D completes our North American model, providing a fully integrated supply and demand forecast for crude oil and natural gas. East Daley follows molecules from Canadian production through US infrastructure to end-markets. Clients now have a continental view to anticipate trends, from how Canadian gas is reshaping Midwest markets, to how crude imports flow to Gulf Coast refiners. The Canada S&D report and dataset is available exclusively in Energy Data Studio. Reach out to learn more about East Daley’s North American energy model.
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