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Phillips 66 Announces 2013 Capital Program And Intent To Form MLP

Stocks in this article: PSX

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.

“Our ability to capture advantaged feedstocks, coupled with the growing international demand for refined products, enables us to maintain high utilization rates and reduce costs per unit,” said Garland. “We will continue to primarily serve domestic markets and will explore opportunities to meet growing demand overseas. Export markets support a more positive balance of trade and promote economic benefits, and jobs, here in the United States.”

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