The mutually beneficial Phillips 66 Partners-Phillips 66 alliance




As you saw in the previous parts of this series, Phillips 66 Partners’ (PSXP) assets are integral to the operation of Phillips 66’s (PSX) refineries.

PSX accounted for 97% of PSXP’s revenues in the year ended December 2013.

PSXP is a component of the Global X MLP & Energy Infrastructure ETF (MLPX) and the First Trust North American Energy Infrastructure Fund (EMLP). PSX is a component of the Energy Select Sector SPDR Fund (XLE) and the Vanguard Energy ETF (VDE).

PSX operations require the large-scale movement of crude oil to its refineries, as well as the large-scale movement of refined products from its refineries to various markets.

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Stable cash flows for PSXP

To this end, PSXP has entered into multiple commercial agreements with Phillips 66, including minimum volume commitments. These agreements are the major source of PSXP revenues and mean predictable cash flows for the company.

Under these long-term, fee-based agreements, PSXP provides transportation, terminalling, and storage services to Phillips 66. In return, PSX commits to providing PSXP with minimum quarterly volumes of crude oil and refined petroleum products.

Promise of further growth

Second, PSX’s midstream assets could be potential dropdowns and present growth opportunities for PSXP. As PSX pursues several growth projects related to its midstream asset base, we could see dropdowns occurring more frequently in the future.

In the recent 3Q2014 earnings call, President of Phillips 66 Partners Tim Taylor said, “there’s a lot of options but I think we’ve got a great pool of assets in the midstream at PSX and so the sponsor has got a great pipeline of projects and I would anticipate that that’ll help be a key part of the growth story for PSXP.”

In the next part of this series, we’ll recap PSXP’s earnings for 2014.


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