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Analyzing Phillips 66 Partners’ 2017 Growth Drivers

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Part 3
Analyzing Phillips 66 Partners’ 2017 Growth Drivers PART 3 OF 9

PSXP Has Offered Annual Distribution Growth of 36% from the Start

PSXP’s capital expenditure

Phillips 66 Partners’ (PSXP) capital expenditure was $113.2 million in 3Q16, compared to $32.9 million during the same period in 2015.

In October 2016, Phillips 66 Partners completed its largest acquisition so far from Phillips 66 (PSX). PSXP acquired crude, refined products, and NGLs (natural gas liquids) logistics assets from Phillips 66 for a total consideration of $1.3 billion. The acquired assets support the Bayway, Billings, Borger, and Ponca City refineries operated by PSX.

PSXP Has Offered Annual Distribution Growth of 36% from the Start

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In 3Q16, Phillips 66 Partners also announced the formation of the STACK Pipeline, a 50-50 joint venture with Plains All American Pipeline (PAA) to own and operate a crude oil pipeline from northwestern Oklahoma to Cushing. Under the joint venture agreement, PAA contributed storage and pipeline assets, and PSXP contributed $50 million.

Additionally, in August 2016, PSXP increased its equity investment in the Explorer Pipeline by 2.5%–~22%.

Distributable cash flow

The above graph shows Phillips 66 Partners’ distributable cash flows and capital expenditures over the last three years. The right axis shows PSXP’s per-unit distribution.

Phillips 66 Partners’ distributable cash flow in 3Q16 was significantly higher than it was in 3Q15. The rise was primarily due to its acquisition of the remaining 75% interest in the Sweeny fractionator and Clemens Caverns, as well as the Standish Pipeline in May 2016.

PSXP’s earnings also rose due to increased throughput volumes on its Explorer Pipeline and a full quarter’s throughput on the first leg of the Bayou Bridge Pipeline.

PSXP’s distributions

PSXP increased its 3Q16 distributions by 5% over the previous quarter’s distribution of $0.51 per unit. This was its 12th consecutive quarterly increase since its initial public offering. The distribution increase was consistent with its previous guidance, in which PSXP expected its distributions to rise at a CAGR (compound annual growth rate) of 30% from the last quarter of 2013 through 2018.

PSXP has increased its distributions every quarter since its inception at a CAGR of 36%. PSXP is currently trading at a distribution yield of nearly 4.2%. In comparison, Tesoro Logistics (TLLP) is currently trading at a distribution yield of nearly 6.5%.

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