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Phillips 66 (PSX) Cuts '21 Capital Budget, Focuses on Renewables

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Zacks Equity Research
·3 min read
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Phillips 66 PSX recently announced the 2021 capital budget program of $1.7 billion, reflecting almost 43% decline from the 2020 estimated amount. The decision of capital reduction came at a time when the market is in recovery mode from coronavirus woes. Importantly, the total amount incorporates $300 million for Phillips 66 Partners LP PSXP.

Phillips 66 intends to invest $610 million in Midstream operations, of which Phillips 66 Partners will get $300 million. Notably, Phillips 66 will likely use $160 million for midstream sustaining purposes and $150 million for growth. The construction of Sweeny Frac 4 and the C2G Pipeline is also included in the midstream budget.

It is expected to deploy $521 million for sustaining refining activities. Moreover, the refining budget incorporates $255 million that will be used to fund high-return growth projects like the San Francisco Refinery reconfiguration. The company will make use of the facility to produce 50,000 barrels per day of renewable fuel, once it comes online in early 2024. Phillips 66 expects renewable diesel demand to increase in the coming days.

For marketing and specialities, the company intends to use $116 million. It also has plans to use $55 million for DCP Midstream, $410 million for CPChem and $242 million for WRB Refining. Phillips 66’s budget plan is devised for prioritizing projects that are currently underway and the renewable fuels project completion.

The company’s disciplined budget plan takes into account the challenging market conditions. It focuses on long-term value creation through investing in high-return assets and sustaining reliable properties amid the current market uncertainties. Notably, it reported adjusted pre-tax refining loss of $970 million for the third quarter against the year-ago earnings of $839 million due to weak demand on account of the coronavirus pandemic.

Price Performance

The company has gained 11.1% in the past three months compared with 19.1% rise of the industry it belongs to.

Zacks Rank & Key Picks

The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Covanta Holding Corporation CVA and Murphy USA Inc. MUSA, each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Covanta Holding’s bottom line for 2021 is expected to rise 95.3% year over year.

Murphy USA’s sales for 2021 are expected to rise 12.8% year over year.

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Phillips 66 (PSX) : Free Stock Analysis Report
 
Covanta Holding Corporation (CVA) : Free Stock Analysis Report
 
Murphy USA Inc. (MUSA) : Free Stock Analysis Report
 
Phillips 66 Partners LP (PSXP) : Free Stock Analysis Report
 
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