Phillips 66 cuts 2017 capex by 10%

Phillips 66 has set a 2017 capital budget of $2.7 billion. In its third-quarter earnings report, the firm said it expected $3 billion in capex for 2016.

Of the total planned capex for next year, $1.5 billion will go toward the firm’s NGL and transportation businesses, with 85% targeting growth projects. The firm says it’s focused on development around its existing infrastructure’s footprint, including continued expansion of the Beaumont terminal and investment in pipelines and other terminals.

Included in midstream capex is $437 million for Phillips 66 Partners LP, including $56 million of maintenance capital.

Expansion capital at the partnership will support organic projects such as the Bayou Bridge pipeline, which will connect the Beaumont terminal with St. James, La. The western leg of the pipeline began operation in April, while the eastern leg, with service from Lake Charles, La., to St. James, is expected to be completed in second-half 2017.

Phillips 66’s refining segment is expected to receive $905 million, 65% of which will go to reliability, safety, and environmental projects.

The firm says growth capital in refining will be directed toward small, high-return, quick pay-out projects, primarily to reduce feedstock costs and improve clean product yields. Included is a project at the Billings refinery to increase heavy crude processing capabilities and yield improvement projects at the Bayway and Ponca City refineries.

Phillips 66’s proportionate share of capital spending by joint ventures Chevron Phillips Chemical Co. LLC (CPChem), DCP Midstream LLC, and WRB Refining LP is expected to be $1.1 billion. Including these equity affiliates, the company’s total 2017 capital program is projected at $3.8 billion.

Phillips 66’s share of CPChem’s 2017 capital expenditures is expected to be $675 million. Funding will support completion of CPChem’s 3.3 billion-lb/year ethane cracker and two 1.1 billion-lb/year polyethylene facilities under construction on the US Gulf Coast. The project has been beset by weather and construction delays (OGJ, Nov. 14, 2016, p. 14).

Expected startup for the polyethylene facilities is mid-2017, with the ethane cracker expected to be in operation in the second half of next year. Once completed, the facilities will increase by one-third CPChem’s global ethylene and polyethylene capacity.

Phillips 66’s expected share of DCP Midstream’s 2017 capital spending is $243 million, while its anticipated share of WRB’s capital expenditures is $135 million. Capital spending by these three joint ventures is expected to be self-funded.

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