Phillips 66 Doubles Capex to Bolster Midstream Growth, Beefs Up Refining and Chemicals Capacity on Gulf Coast

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Researched by Industrial Info Resources (Sugar Land, Texas)--Solid growth in its Refining segment and lower costs helped Phillips 66 (NYSE:PSX) (Houston, Texas) avoid the fate of other oil & gas companies in second-quarter 2015, as the company boasted solid profits amid continued weakness in commodity prices. Phillips 66 is upping its Midstream and Chemicals investments, particularly in the profitable Gulf Coast. Industrial Info is tracking $67.71 billion in active projects related to Phillips 66.

Capital expenditures for the quarter more than doubled from the same period last year to $1.21 billion. Almost all of the increase was attributed to the Midstream segment, where spending increased from $298 million to $899 million. Phillips 66's capital spending projection for full-year 2015 now stands at $4.6 billion, up from $3.4 billion at the beginning of the year.

Among the Phillips 66 Midstream projects tracked by Industrial Info is a $500 million, 243-mile condensate pipeline that will transport condensate produced at the company's refinery in Sweeny, Texas, to multiple destinations along the Gulf Coast, including Lone Star NGL's fractionator in Mont Belvieu, Texas, and Dow Chemical's (NYSE:DOW) (Midland, Michigan) polymer chemicals plant in La Porte, Texas. Troy Construction LLC (Houston, Texas) is serving as general contractor.

Phillips 66 also continued the development of two other major projects during the quarter: the 100,000-barrel-per-day (BBL/d) Sweeny Fractionator I and the 150,000-BBL/d Freeport LPG Export Terminal, both on the Texas Gulf Coast. The company said that the Sweeny and Freeport projects are 90% and 50% complete and are expected to begin production in the fall of 2015 and the second half of 2016, respectively. They are valued at $100 million and $1 billion, respectively.

Industrial Info is tracking $12.15 billion in projects related to Phillips 66 along the Gulf Coast.

Net income was reported to be $1.01 billion, a 17.27% increase from second-quarter 2014, despite revenues of $29.08 billion, a 37.25% drop. Like other companies in the Oil & Gas Industry, Phillips 66 attributed the lower revenues to low commodity prices, particularly for natural gas and natural gas liquids (NGL). Nonetheless, the company saw a 37% decline in purchased crude oil and products, which more than offset the declines.

The Midstream segment incurred net losses, with seasonally lower propane volumes and lower realized margins pummeling the NGL business, and losses from the sale of the Benedum gas-processing plant in Texas negatively affecting DCP Midstream LLC (NYSE:DPM) (Houston), which Phillips 66 co-owns with Spectra Energy (NYSE:SE) (Houston). The Chemicals segment benefited from stronger polyethylene sales prices and volumes, and lower ethylene feedstock costs.

The Refining segment reported the strongest improvement, with notably higher margins for processed gasoline and a 90% rate for refining crude utilization worldwide.

"Our Refining, Chemicals, and Marketing & Specialties businesses delivered a strong quarter, providing solid earnings and cash flow," said Greg Garland, chairman and chief executive officer of Phillips 66, in a quarterly press release. "We operated well, executed major turnaround activity, and progressed our capital projects."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, five offices in North America and 10 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.