Phillips 66 PSX will host its inaugural Analyst Meeting today in New
York to update investors and analysts on plans to enhance returns, deliver
profitable growth and increase distributions to shareholders. Company
executives will discuss Phillips 66's strategy to capitalize on the North
American oil and gas production revolution through its formation of a master
limited partnership (MLP), $3.7 billion total capital program, and increased
use of advantaged feedstocks. With a geographically-advantaged portfolio of
refining and marketing (R&M), midstream and chemicals assets, Phillips 66 is
uniquely positioned to benefit from these developing market opportunities.
In support of growth and value creation, Phillips 66 intends to contribute a
portion of its transportation assets to form an MLP. The company is evaluating
assets for contribution to the MLP, which may include certain product and
crude pipelines and terminals, rail cars and other rail infrastructure, as
well as natural gas liquids (NGL) assets. A registration statement for an
initial public offering (IPO) is expected to be filed with the Securities and
Exchange Commission in the second quarter of 2013. Subject to market
conditions and final approval by Phillips 66's board of directors, the company
anticipates selling a minority interest in the MLP in an IPO in the second
half of 2013. Phillips 66 expects the offering to raise approximately $300
million to $400 million of gross cash proceeds.
Phillips 66's 2013 planned capital program is $3.7 billion. This includes
Phillips 66's portion of planned capital spending by DCP Midstream, Chevron
Phillips Chemical Company (CPChem) and WRB Refining totaling $1.8 billion,
which is not expected to require cash outlays by Phillips 66. The other $1.9
billion represents Phillips 66's consolidated investments in R&M, Midstream
and Corporate and Other. The 2013 capital program represents a 6 percent
increase over expected 2012 capital spend of $3.5 billion.
DCP Midstream plans to invest $2.2 billion primarily for new logistics
infrastructure and NGL production during 2013. Similarly, CPChem plans $1.1
billion of investment including several growth projects planned or under
construction, such as its U.S. Gulf Coast petrochemicals complex and 1-hexene
plant.
Phillips 66 is executing plans to improve capital efficiency in its R&M
segment. The company has identified sources of additional advantaged crudes
and is taking steps to move these lower cost feedstocks to its refineries.
Currently, eight of the company's domestic refineries are processing shale
crudes. Additionally, as part of this ongoing initiative, Phillips 66 recently
signed time charter agreements for two medium-range Jones Act marine vessels
that will supply the Alliance and Bayway refineries, and potentially the
company's other Gulf Coast refineries, with Eagle Ford crude beginning in
early 2013. Over the next several years, the company expects to replace
500,000 BPD of higher cost feedstocks with new or increasingly advantaged
crudes.
Margins are also expected to improve as the company increases its ability to
serve the growing international refined products markets where opportunities
exist. Phillips 66 has several projects planned or in execution to increase
export capability from its Gulf Coast and West Coast refineries by 100,000 BPD
by 2014.
Other initiatives to improve margins include increasing clean product yields
in refining, as well as controlling costs. Across the company, Phillips 66 is
targeting cost reductions and value capture in excess of $200 million
before-tax by the end of 2013.
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