Phillips 66 to Cut Capex by $1 Billion for 2016

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Researched by Industrial Info Resources (Sugar Land, Texas)--Phillips 66 (NYSE:PSX) (Houston, Texas) is reducing its planned capital expenses for 2016 to $3.6 billion from $4.6 billion this year, the company announced Monday. The capital budget includes a substantial decrease for midstream projects, but an increase for refineries. Industrial Info is tracking 87 active Phillips 66 projects worth $3.79 billion. This includes 34 projects, worth $901 million, that are scheduled to kick off in 2016.

Excluding capital spending for Phillips 66 Partners (NYSE:PSXP) (Houston, Texas), the company plans to invest $2 billion in its midstream business lines next year, according to a press statement. In comparison, the capital budget for this year (including $207 million for Phillips 66 Partners) totaled $3.16 billion for midstream projects.

The company noted it was continuing construction of the 4.4 million-barrel-per-month liquefied petroleum gas (LPG) terminal in Freeport, Texas, with completion expected in the second half of 2016. The 2016 budget also earmarks spending on the expansion of the Sweeny natural gas liquids (NGL) midstream hub. The company said it also was making investments in the new Dakota Access Pipeline Project (DAPL) and Energy Transfer Crude Oil Company Pipeline (ETCOP) projects to move Bakken crude oil from North Dakota to market centers throughout the United States. It was also adding storage capacity the Beaumont terminal in Nederland, Texas; and investing in the Bayou Bridge pipeline project to move crude oil from Texas to Louisiana markets.

For related information, see October 2, 2015, article - Phillips 66's Bayou Bridge Pipeline Seeks Customers for $300 Million Second Phase, as First Begins to Wrap Up, and September 17, 2015, article - Top 10 U.S. Pipeline Project Kickoffs in Fourth Quarter: Regulatory Issues, Low Oil Prices Pose Challenges.

Phillips 66 said it plans $1.2 billion in capital expenditures for its refining operations in 2016. In comparison, the company earmarked about $1.1 billion for refinery capital expenditures for this year.

About 70% of the 2016 refinery capital expenditures will go into reliability, safety and environmental projects, the company said, including compliance with new gasoline specifications. About $400 million in discretionary refining capital will be used to improve product yields and lower feedstock costs, the company said. It noted modernization of the fluid catalytic converter at its 230,000-barrel-per-day (BBL/d) Bayway refinery, located on New York Harbor in Linden, New Jersey; and modernization of the vacuum tower at its 55,000-BBL/d refinery in Billings, Montana.

Next year's capital-expenditure budgets for Phillips 66 Partners--and for self-funded joint ventures DCP Midstream (Denver, Colorado), Chevron Phillips Chemical Company (The Woodlands, Texas), and WRB Refining (Borger, Texas)--will be announced later this year, the company said. Including those entities, the capital program for 2015 totaled $6.8 billion.

Phillips 66's board of directors have also approved a $2 billion increase to the company's share repurchase program.

Industrial Info is tracking 62 Phillips projects, worth $2.26 billion, which are in the engineering and construction phases. The remaining 25 projects, valued at $1.54 billion, are in the planning phases, where plenty of factors could still alter their timing or ultimate outcome.

For related information, see August 3, 2015, article - Phillips 66 Doubles Capex to Bolster Midstream Growth, Beefs Up Refining and Chemicals Capacity on Gulf Coast.

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