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Phillips 66 plans growth projects in all segments

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Phillips 66 increases capital expenditure

In 2014, Phillips 66 plans to increase capital expenditure (or capex) 50% to ~$2.7 billion, from $1.8 billion in 2013. More than 50% of 2014 estimated capital spending is allocated to the Midstream segment, followed by Refining (37%).

In July 2014, Phillips 66 (PSX) increased its projected 2014 capital expenditure dedicated to the midstream segment from $2.7 billion to $3.9 billion, an increase of 44%.

Capex

Recently announced midstream projects

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Phillips 66 (PSX) recently formed two joint ventures with Energy Transfer Partners (ETP) and Energy Transfer Equity (ETE) to develop the Dakota Access Pipeline (or DAPL) and Energy Transfer Crude Oil Pipeline (or ETCOP). Phillips 66 owns 25% interests in both projects and will spend approximately $1.2 billion to develop the projects. DAPL is expected to deliver 450,000 barrels per day (or bpd) of crude oil from the Bakken/Three Forks production area in North Dakota to market centers in the Midwest. ETCOP will transport crude oil from the Midwest to the Gulf Coast, including Phillips 66’s Beaumont Terminal. The projects are expected to begin operations in 1Q16.

Additional midstream capacity

During 3Q14, Phillips 66 (PSX) ordered an additional 500 railcars for support at its Bayway Refinery in New Jersey. Its 30,000 bpd railrack at the Ferndale Refinery is expected to begin operations in 4Q14. In addition, the company is constructing a rail-loading facility in North Dakota to support Bakken production.

Phillips 66 Partners to acquire property from its parent

Phillips 66 Partners (PSXP) has recently agreed to acquire new rail-unloading facilities and Cross-Channel Connector Pipeline from Phillips 66 (PSX), its parent company. The transaction is valued at $340 million and is expected to close in December 2014.

The other projects under construction and proposed include:

  1. The acquisitions of a U.S. Gulf Coast crude oil and refined products terminal and a specialty lubricants company
  2. The construction of the Sweeny Fractionator One
  3. The Freeport liquified petroleum gas (or LPG) export terminal
  4. Two plants at the Permian basin
  5. 1-hexene plant at its Cedar Bayou facility in Baytown, Texas
  6. Alpha olefins production capacity expansion at Cedar Bayou

For further details on these projects read our article on What drives Phillips 66’s growth plans.

Key stocks and ETFs

Other companies engaged in the refining business include Valero Energy Corp. (VLO), Tesoro Corp. (TSO), and Marathon Petroleum Corporation (MPC). Some of these are components of Energy Sector Select Master Limited Partnership (or MLP) exchange-traded fund (or ETF) (XLE).

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