Phillips 66 (PSX) Tops Q3 EPS by 30c

Phillips 66 (NYSE: PSX) reported Q3 EPS of $2.02, $0.30 better than the analyst estimate of $1.72.

Strategic Update

Phillips 66 is continuing to grow its more highly valued businesses, while enhancing refining returns. The company's Midstream segment is pursuing multiple growth opportunities to further integrate its portfolio and benefit from increasing production in North America.

Phillips 66 recently announced its participation in two joint ventures to develop the Dakota Access Pipeline (DAPL) and Energy Transfer Crude Oil Pipeline (ETCOP). Phillips 66 owns 25 percent interests in both projects and its estimated share of construction cost is approximately $1.2 billion. DAPL is expected to deliver 450,000 BPD of crude oil from the Bakken/Three Forks production area in North Dakota to market centers in the Midwest. ETCOP will provide crude oil transportation service from the Midwest to the Gulf Coast, including Phillips 66's Beaumont Terminal. The DAPL and ETCOP projects are expected to begin commercial operations in the fourth quarter of 2016.

In support of its advantaged crude oil strategy, the company ordered an additional 500 rail cars during the quarter and began operations at its 75,000 BPD rail rack at the Bayway Refinery. The 30,000 BPD rail rack at the Ferndale Refinery is expected to begin operations in the fourth quarter of 2014. In addition, Phillips 66 is constructing a rail-loading facility on land recently acquired in North Dakota. The facility is expected to have up to 200,000 BPD of capacity and further expand Phillips 66 and third-party access to Bakken crude oil.

As recently announced, Phillips 66 Partners LP will acquire the new rail-unloading facilities at Bayway and Ferndale, as well as the Cross-Channel Connector Pipeline, from Phillips 66. The $340 million transaction is anticipated to close in early December 2014.

Construction continued on the Sweeny Fractionator One and Freeport LPG Export Terminal, with startup expected in the second half of 2015 and second half of 2016, respectively. The company also plans to develop a second NGL fractionator and a crude and condensate pipeline in Texas to meet growing demand for domestic crude oil and global market demand for U.S.-supplied products. In addition, the company is considering condensate processing options to meet customer demand.

The proposed 110,000 BPD Sweeny Fractionator Two will be located near the company’s Sweeny Refinery and Sweeny Fractionator One. The planned crude and condensate pipeline will connect Eagle Ford production to the Sweeny Refinery and Phillips 66’s terminal in Freeport, Texas. The pipeline, including gathering systems, will have an initial capacity of 200,000 BPD with the capability to expand to over 400,000 BPD.

The pipeline and Sweeny Fractionator Two projects are currently in the engineering design and permitting phase. Final investment decision for both projects is anticipated in mid-2015, with startup planned for late 2016 for the pipeline and 2017 for Sweeny Fractionator Two.

CPChem is investing in domestic growth projects to realize the benefits of low-cost petrochemical feedstocks in the U.S. Gulf Coast (USGC). Construction continued on its world-scale USGC Petrochemicals Project consisting of an ethane cracker and related polyethylene facilities, with startup anticipated in 2017. In addition, the ethylene production expansion project to add a tenth furnace at CPChem's Sweeny facility is expected to start up in the fourth quarter of 2014.

For earnings history and earnings-related data on Phillips 66 (PSX) click here.

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