Phillips 66 Case Analysis

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Phillips 66-
For Phillips 66 (NYSE: PSX) things have gone from bad to worse. After not so impressive start for the year, its shares have further crashed down nearly 6% as the company reported weak fourth quarterly results on January 29. The refining giant posted earnings of $1.31 per share for the quarter, a 20% lower than its earnings of $1.63 per share in the fourth-quarter of 2014. But, its earnings topped the consensus estimates by 5% for the quarter.
The fall in its earnings can be attributed to the fact that PSX reported weak adjusted income for its midstream, chemicals and marketing. These segments reported drop of 57%, 33% and 30% respectively in their adjusted income over the fourth-quarter of 2014. However, this was partially offset
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For instance, its Gulf Coast petrochemicals project is advancing well for its CPChem in the United States. This project is expected to increase ethylene and polyethylene capacity by over 40%. More than 70% of work on this project has been completed and the company expects this project to commence in the mid-2017.
This is a good move as the completion of this project will help the company to tap the growing demand for gasoline efficiently. According to opec.org, the demand for refining products will grow significantly in the developing countries driven by expanding fleets of trucks and buses as well as diesel light-duty vehicles and cars. In addition to gasoil and diesel the growing demand for jet and kerosene will contribute significantly to the future importance of middle distillates. The chart below illustrates refining product growth from 2013 to 2040 across the
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For example, the company recently announced interest in the Bayou Bridge Pipeline project, which will be acquired by Phillips 66 Partners. This project is expected to provide a consistent fee based earnings upon completion. Also, it should provide a support of PSXP stated growth objective of a five-year 30% distribution CAGR through 2018. Investing in the midstream business
Phillips 66 meanwhile looks pretty strong on its midstream businesses. It has nearly $20 billion backlog of projects for midstream that it plans to complete by 2018. The company has variety of projects and expansions. For instance, its Sweeny Fractionator project is almost complete and the company expects the start up of this project by this year end.
Likewise, it has other great projects such as Freeport LPP export terminal and The Dakota Access and ETCOP pipeline projects. In fact, approximately 60% of Freeport LLP project has been completed and the company expects this project to come online in the second-half of 2016.
These investments should drive its midstream growth going forward. In fact, PSX expects its EBITDA for midstream segment to grow $2.3 billion in 2018 from mere $0.3 million at the current level. This is tremendous growth for its midstream segment that should undeniably improve its bottom line

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