Phillips 66 Case Study
Phillips 66
Since reporting its latest results on January 29 this year, shares of Phillips 66 have rallied 7%. In fact, its shares are up approximately 5% since year-to-date, due to persistent low oil price that kept improving refining margins for midstream & downstream companies. Last year, the crack spreads (profit from a barrel of oil) were strong except in the fourth-quarter that witnessed larger inventory builds. This is due to the fact that the steep decline in the crude oil price had a negative impact on fuel price and related products that more than matched the drop in the crude oil price. The table below illustrates the crack spreads in the United States and other regions. These data were published in a weekly refining report by Scotia …show more content…
However, Phillips 66 should benefit from the strong demand for Alpha Olefin market products such as 1-Butene, 1-hexene, 1-octane and C10 & higher olefins, offsetting the lower crack spreads. According to a report by markets and markets, the size of total olefin product market will reach approximately $19.85 billion by 2020. This means that the olefin market will grow at the compounded average growth rate of 6.2% from 2016 to 2020.
This strong demand for olefin products is largely driven by the increasing use of plastics for packaging applications as well as growing demand for automobile industry. Phillips 66 remains on track to tap this growth in chemical through constructing innovative facilities. For instead, Its Gulf Coast petrochemicals project in United States is nearing completion and the company expects this project to start up in the mid 2017. This project consists of an ethane cracker and related polyethylene facilities that will increase CPChem's U.S. ethylene and polyethylene capacity by more than …show more content…
In fact, the company will be completing several other midstream projects in 2016 that should contribute to its growth this year. For instance, its Freeport LPG export terminal is now 80% complete. The company expects the startup for this project to take place in the fourth quarter of 2016. Also, the Dakota Access and ETCOP pipeline projects also continue to make good progress and remain on schedule for completion by the end of this year.
Therefore, operationally the company remains solid as it is able to generate strong cash flow from its midstream as well as chemical segments that can easily cover its overall expenditure. Moreover, its balance sheet provides the financial flexibility to further strengthen its growth in the coming years. Its balance sheet carries total cash of $3.07 billion and has total debt of $8.89 billion.
Conclusion
Although, Phillips 66’s stock market performance has been that great but the company has done well during the course of 2015. The completions of its midstream and chemical projects this year and in the coming years should drive its growth in the long-run. Moreover, the demand for the chemical products stay at peak due to lower crude oil prices that should play a positive role in driving its bottom line performance this
Since reporting its latest results on January 29 this year, shares of Phillips 66 have rallied 7%. In fact, its shares are up approximately 5% since year-to-date, due to persistent low oil price that kept improving refining margins for midstream & downstream companies. Last year, the crack spreads (profit from a barrel of oil) were strong except in the fourth-quarter that witnessed larger inventory builds. This is due to the fact that the steep decline in the crude oil price had a negative impact on fuel price and related products that more than matched the drop in the crude oil price. The table below illustrates the crack spreads in the United States and other regions. These data were published in a weekly refining report by Scotia …show more content…
However, Phillips 66 should benefit from the strong demand for Alpha Olefin market products such as 1-Butene, 1-hexene, 1-octane and C10 & higher olefins, offsetting the lower crack spreads. According to a report by markets and markets, the size of total olefin product market will reach approximately $19.85 billion by 2020. This means that the olefin market will grow at the compounded average growth rate of 6.2% from 2016 to 2020.
This strong demand for olefin products is largely driven by the increasing use of plastics for packaging applications as well as growing demand for automobile industry. Phillips 66 remains on track to tap this growth in chemical through constructing innovative facilities. For instead, Its Gulf Coast petrochemicals project in United States is nearing completion and the company expects this project to start up in the mid 2017. This project consists of an ethane cracker and related polyethylene facilities that will increase CPChem's U.S. ethylene and polyethylene capacity by more than …show more content…
In fact, the company will be completing several other midstream projects in 2016 that should contribute to its growth this year. For instance, its Freeport LPG export terminal is now 80% complete. The company expects the startup for this project to take place in the fourth quarter of 2016. Also, the Dakota Access and ETCOP pipeline projects also continue to make good progress and remain on schedule for completion by the end of this year.
Therefore, operationally the company remains solid as it is able to generate strong cash flow from its midstream as well as chemical segments that can easily cover its overall expenditure. Moreover, its balance sheet provides the financial flexibility to further strengthen its growth in the coming years. Its balance sheet carries total cash of $3.07 billion and has total debt of $8.89 billion.
Conclusion
Although, Phillips 66’s stock market performance has been that great but the company has done well during the course of 2015. The completions of its midstream and chemical projects this year and in the coming years should drive its growth in the long-run. Moreover, the demand for the chemical products stay at peak due to lower crude oil prices that should play a positive role in driving its bottom line performance this