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Phillips 66 Sets 2018 Capital Expenditure at $2.3 Billion

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Phillips 66 (PSX - Free Report) has released capital budget of an estimated $2.3 billion for 2018, up 15% from 2017 capex of $2 billion. Of this, $1.4 billion will be allocated to growth capital and the remaining $0.9 billion will be for sustaining capital.

Phillips 66 has apportioned $1.2 billion toward the Midstream segment, of which $1 billion is for growth capital and $218 million is for sustaining capital. The company will allocate growth capital for natural gas liquids and transportation businesses.  The development projects are also integrated with current assets and infrastructure. This includes the expansion of the Beaumont Terminal that is underway, expansion of the Gulf Coast fractionation plant capacity and investment in pipelines and other terminals.

In the Midstream segment, budgeted spending of $595 million will be directed towards Phillips 66 Partners. The partnership would spend $510 on growth capital. Organic projects, such as expansion of the Sand Hills Pipeline, completion of the Bayou Bridge Pipeline eastern segment, and an isomerization unit at the Phillips 66 Lake Charles Refinery will be supported by the partnership under the capital.

The company plans to invest $827 million in the Refining segment, with $541 million going to consistency, security and environmental projects. Refining growth capital of $286 million is for small, high return, rapid payout projects to boost clean product yields. Such projects consist of conclusion of the fluid catalytic cracking (FCC) unit modernization at the Bayway Refinery and FCC optimization at the Sweeny Refinery.

Phillips 66 has allocated $140 million of the total capital spending to Marketing and Specialties. The company will invest $75 million for growth projects with emphasis on enhancing retail sites in Europe.

The company intends to fund $116 million in Corporate and Other projects, related to information technology and facilities.

Phillips 66’s proportionate share of capital spending by joint ventures — Chevron Phillips Chemical Company LLC (CPChem), DCP Midstream, LLC (DCP Midstream) and WRB Refining LP (WRB) — is estimated at $946 million. Including these equity associates, the company’s total 2018 capital program is projected at $3.2 billion.

Phillips 66’s share of CPChem’s 2018 capital expenditures is anticipated at $398 million, down about 45% from 2017. The decline is due to the conclusion of the U.S. Gulf Coast Petrochemicals Project. The new polyethylene units, part of this project, were commissioned during the third quarter of 2017, while the ethane cracker at the Cedar Bayou facility is expected to be brought online in first-quarter 2018.

Phillips 66’s expected share of DCP Midstream’s 2018 capital spending is $405 million, with $350 million targeted toward growth projects including the Sand Hills Pipeline expansion and two DJ Basin gas processing plants.

The company’s allocation toward WRB’s capital expenditures is projected at $143 million. The projects to be funded include completion of the Wood River Refinery FCC unit to boost clean product yield. Capital spending by these three major joint ventures is likely to be self-funded.

Price Performance

Shares of the company have gained 16.8% compared with the industry’s rally of 18.1% in the last three months.



 

Zacks Rank & Key Picks

Phillips 66 currently carries a Zacks Rank 3 (Hold). Some better-ranked players in the energy sector include Holly Energy Partners, LP , SunCoke Energy Inc (SXC - Free Report) and Northern Oil and Gas Inc (NOG - Free Report) . All these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Holly Energy Partners, owner and operator of refined product pipelines and terminals, delivered an average positive earnings surprise of 57.14% in the preceding quarter.

SunCoke Energy produces metallurgical coke in the United States. The company delivered an average positive earnings surprise of 113.52% in the last four quarters.

Northern Oil and Gas, based in Minnetonka, MN, is an independent energy company. The company delivered an average earnings surprise of 175.00% in the last four quarters.

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