Phillips 66 Outlines Budget Cuts

Phillips 66 on Tuesday unveiled its plan for responding to the market downturn.

“Phillips 66 is well positioned to manage through the challenging environment with our high-quality, diversified asset base and strong balance sheet,” Greg Garland, the company’s chairman and CEO, remarked in a written statement. “Our top priorities remain the well-being of our employees, our communities and safe and reliable operations … We remain focused on disciplined capital allocation and creating long-term value for our shareholders.”

Garland noted the company is taking a series of actions to maintain its financial strength to ensure the security of its dividend, execute capital growth projects nearing completion and maintain its strong credit rating.

The plan includes reducing 2020 consolidated capital spending by $700 million to $3.1 billion, Phillips 66 stated. Elements of the capex cuts include:

• Deferring the Red Oak Pipeline and Sweeny Frac 4 midstream projects as well as Phillips 66 Partners’ Liberty Pipeline, and postponing the master limited partnership’s final investment decision for the Liberty Pipeline
• Deferring (by Phillips 66 Partners) the final investment decision on the ACE Pipeline project
• Deferring and cancelling certain discretionary refining projects.

Philips 66 noted that other elements of its budgetary action plan include:

• Cutting operating and administrative costs by $500 million this year
• Temporarily suspending share repurchases effective March 18 after having repurchased approximately $440 million in shares in the first quarter of 2020
• Adding liquidity and financial flexibility by securing a new $1 billion, 364-day term loan facility that augments Phillips 66’s existing $5 billion revolving credit facility.

“We will continue to closely monitor market conditions and evaluate the impact on our portfolio,” commented Garland. “We are prepared to take additional action as needed. During these times of uncertainty, the people of Phillips 66 remain fully committed to providing energy and improving lives.”

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