Phillips 66 Sees Optimism for Future as It Carries Out Growth Projects
Midstream company Phillips 66 (NYSE:PSX) (Houston, Texas) suffered financially amid the economic downturn and lack of demand for petroleum products brought about the COVID-19 pandemic in 2020. The company finished the year with an adjusted loss of $382 million. While Phillips 66 lowered its planned 2020 capital spending plans by $700 million during the year, it nevertheless completed significant projects and continues work on other ones.
In Friday's earnings conference call, Chief Executive Officer Greg Garland said, "At the start of this last year, we could not have envisioned the unprecedented challenges that we faced in 2020. ... We're optimistic about the positive effect vaccines will have on economic recovery in the months ahead. ... Market conditions remain challenged. Our refining business continues to be affected by demand destruction associated with the pandemic."
Garland said Phillips 66's 2021 capital budget included $1.1 billion for sustaining capital expenses, which includes environmental projects, and $600 million of growth capital, some of which is designated toward its investment in renewable fuels.
Garland also spoke of the company's growth projects. Among those completed in 2020 was its Gray Oak Pipeline, which moves 900,000 barrels per day (BBL/d) of crude oil from the Permian Basin and Eagle Ford Shale to the Texas Gulf Coast. Click here to view related project reports. The pipeline will connect to the South Texas Gateway Terminal near Ingleside, in which spinoff company Phillips 66 Partners (NYSE:PSXP) has an interest.
"At the South Texas Gateway Terminal, the second dock commenced crude oil export operations in the fourth quarter," Garland said. "On expected completion in the first quarter of 2021, the terminal will have 8.6 million barrels of storage capacity and up to 800,000 BBL/d of dock throughput capacity." For more information, see Industrial Info's project report.
Also completed in 2020 was the addition of second and third fractionators at the company's Sweeny Hub in Old Ocean, Texas. Garland said, "At the Sweeny Hub, Frac 2 commenced operations in September, and Frac 3 started operations in October. We plan to resume construction of our fourth fractionator in the second half of 2021. On completion, the Sweeny Hub will have 550,000 BBL/d of fractionation capacity supported by long-term customer commitments." For more information, see Industrial Info's project reports on Frac 2, Frac 3 and Frac 4.
Like some other refiners, Phillips 66 is venturing into the world of renewable fuels with its Rodeo Renewed project at its refinery near San Francisco, California. Garland said, "We expect to complete the diesel hydrotreater conversion in mid-2021, which will produce 8,000 BBL/d. Full conversion of the facility in early 2024 could produce over 50,000 BBL/d of renewable fuels. This capital-efficient investment is expected to deliver strong returns and will reduce the plant's greenhouse gas emissions by 50%." For more information, see Industrial Info's project reports on the diesel hydrotreater conversion and full refinery conversion.
Garland also spoke of environmental milestones reached by Chevron Phillips Chemical Company LLC (CP Chem), which is jointly owned by Phillips 66 and Chevron Corporation (NYSE:CVS) (San Ramon, California). He said, "During the quarter, CP Chem announced its first production of polyethylene from recycled plastics at its Cedar Bayou [Texas] facility and received ISCC Plus certification." The International Sustainability and Carbon Certification is a certification system for sustainable and environmentally friendlier practices.
Other Phillips 66 projects of note include the upgrade of the 26,000-BBL/d Fluid Catalytic Cracker Unit 4 at the company's Ponca City Refinery in Oklahoma. Although delayed because of COVID-19, the project is now underway and is expected to be completed this quarter. The project will improve the unit's yields of gasoline, propylene, butylene and isobutene. For more information, see Industrial Info's project report.
Phillips 66 reported a net loss of $539 million in fourth-quarter 2020, compared with a net profit of $736 million in the same quarter of 2019.