Phillips 66 (PSX) Declares $6.8B Capital Budget for 2015 - Analyst Blog

Independent refiner, Phillips 66 (PSX) announced its 2015 capital budget of $4.6 billion. This investment is focused on midstream business, including that of the company's master limited partnership, Phillips 66 Partners LP (PSXP).

Including the company's portion of capital spending by Spectra Energy Corporation (SE) JV – DCP Midstream LLC – Chevron Corporation (CVX) JV – Chevron Phillips Chemical Company – and Canopus Energy Inc. (CVE) JV – WRB Refining LLC – the company's total 2015 capital program is expected at $6.8 billion.

In Midstream business, excluding DCP, Phillips 66 plans to invest $3.2 billion in its Natural Gas Liquids (NGL) and Transportation business lines. In NGL, the company focuses on construction of the 100,000 barrel-per-day Sweeny Fractionators One and the 4.4 million-barrel-per-month Freeport LPG Export Terminal on the U.S. Gulf Coast.

In Transportation, the company is investing in pipeline and rail infrastructure projects to move crude oil from the Bakken/Three Forks production area of North Dakota to market hubs throughout the U.S. In addition, expansion of the Beaumont Terminal and related infrastructure opportunities are being pursued.

Additional Midstream investments are planned within DCP, which will leverage its infrastructure to launch new gathering, processing, and NGL growth projects, mainly in the Niobrara, Denver-Julesburg, Eagle Ford and Permian basins. DCP also expects to increase natural gas processing capacity in these basins and complete other gathering system expansions during 2015.

In the JV with the Chevron, focus is on projects aimed at capturing cost-advantaged petrochemical feedstocks on the U.S. Gulf Coast. Phillips 66 plans $1.1 billion of capital expenditures in Refining, approximately 75% of which will be sustaining capital.

Houston, TX based Phillips 66 is an independent publicly traded company. In addition to the refining, marketing and transportation businesses, it has emerged as an integrated downstream company with most of the Midstream and Chemicals segments, as well as power generation and certain technology operations included in the Emerging Businesses segment.

Phillips 66, one the largest independent oil refiners in the U.S., has easy access to West Texas Intermediate (WTI) crude. Notably, WTI is light and of very high quality. As the major portion of the company's refining capacity uses light/sweet crude oil as feedstock, the company is unable to take advantage of the attractive crude quality spread, which is the price differential between the low-cost heavy/sour and the higher-priced light/sweet grades of crude oil. Currently, Phillips 66 carries a Zacks Rank #3 (Hold).