Phillips 66 announces capital budget of $2.7bn for next year

Energy manufacturing and logistics company Phillips 66 has announced a capital budget of $2.7bn in 2017.

The plan comprises $1.3bn for midstream growth and the remaining $0.9bn will be used to improve refining returns and support operating excellence.

Phillips 66 chairman and CEO Greg Garland said: “The 2017 capital programme is consistent with our disciplined approach to capital allocation.

"Returns on our investments are important, and the reduction in capital spending from prior years reflects that fewer projects meet our return thresholds in the current business environment. We continue to invest sustaining capital to ensure our assets run safely and reliably.”

“We are committed to maintaining a strong balance sheet and financial flexibility, which allows us to return significant capital to shareholders through the business cycle, in the form of share repurchases and a growing, secure dividend.”

In the midstream sector, the company intends to invest $1.5bn in its natural gas liquids and transportation businesses.

About 85% of this allocation will target growth projects.

Based on its existing infrastructure, Phillips 66 focuses on development. Accordingly, it plans to expand the Beaumont Terminal and invest in other pipelines and terminals.

The allocated capital for midstream business comprises $437m, including $56m as maintenance capital, which is expected to be spent by its partners.

The expansion capital will support organic projects such as the Bayou Bridge Pipeline that will connect the Beaumont Terminal with St. James, Louisiana.

The western leg of the pipeline began operating in April, while the eastern leg will serve Lake Charles to St. James and is expected to be completed by the second half of next year.

Phillips 66 plans $905m of capital expenditures in refining. About 65% of this investment will be spent to improve reliability and safety of these projects.

Growth capital in refining will be invested in small, high-return projects to reduce feedstock costs and enhance clean product yields.

The company will invest $132m in marketing and specialties with a separate funding of $112m towards projects based on information technology.

Headquartered in Houston, Phillips 66 serves midstream, refining, chemical and specialties businesses. The company has 14,000 employees.