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An Overview of Phillips 66: A Fully Integrated Downstream Player

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Part 4
An Overview of Phillips 66: A Fully Integrated Downstream Player PART 4 OF 9

Phillips 66’s Segment Dynamics and Capex Plan for 2016

Phillips 66’s segment analysis

Besides refining, Phillips 66 (PSX) has a presence in the midstream, chemicals, and marketing segments. Before we delve deeper into these segments, let’s consider each segment’s contribution to PSX’s adjusted income.

In 3Q15, the refining segment contributed $1,052 million, or 64%, to adjusted net income, followed by the marketing and specialty segments, which contributed $344 million, or 21%. The chemicals segment contributed $272 million, or 17%, and the midstream segment contributed $91 million to adjusted net income.

Phillips 66’s Segment Dynamics and Capex Plan for 2016

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PSX plans to incur capital expenditure (capex) of $3.6 billion in 2016, of which $1.2 billion will go toward its refining segment. In the refining segment, $833 million is expected to be spent on sustenance activities including safety, reliability, environmental, and compliance projects. $384 million will be for growth projects such as the modernization of the fluid catalytic converter at the Bayway refinery and the upgrade of the vacuum towers at the Billings refinery complex.

Midstream segment

PSX’s midstream segment transports crude oil to refineries and refined products to markets. It also provides storage for crude oil and refined products. It gathers, processes, and transports natural gas, and it fractionates, transports, and markets natural gas liquids (or NGLs).

The company’s midstream segment is subdivided into transportation, DCP Midstream, and NGL. Transportation includes Phillips 66 Partners (PSXP), which was formed to own, operate, grow, and acquire fee-based transportation and midstream assets.

On September 30, 2015, Phillips 66 held 71% interest in PSXP, including 2% general partner interest. Phillips 66 plans to incur $2 billion of capex in its midstream segment, the highest of all its segments. This is excluding PSXP capex, the bulk of which will go toward growth projects.

Chemicals and marketing segments

PSX’s chemicals segment manufactures and markets petrochemicals and plastic products globally. The segment includes 50% equity investment in Chevron Phillips Chemical Company.

In its marketing segment, PSX markets refined and specialty products such as base oils and lubricants in the United States and Europe. PSX plans to put $137 million toward growth and sustenance projects in its marketing segment.

The Energy Select Sector SPDR ETF (XLE) can give you a combined exposure of ~13% to Phillips 66 (PSX), Valero Energy (VLO), Marathon Petroleum (MPC), and Tesoro (TSO).

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