Phillips 66 announced October 12 its 2016 capital budget of $3.6 billion, excluding Phillips 66 Partners’ capital program. The Houston-based refiner’s capital budget is broken down into nearly $1.3 billion in sustaining capital, mostly for its refining upgrades and modernization project, and roughly $2.3 billion for growth capital, which includes more than $1.8 billion for its midstream expansions. Nearly 80% of Phillips 66’s growth capital is directed toward its midstream expansions in pipelines, storage and export terminals.
Phillips 66 plans $1.2 billion of capital expenditures in refining, with approximately 70% to be invested in reliability, safety and environmental projects, including compliance with the new Tier 3 gasoline specifications. In addition, the company emphasized these near-term projects will improve product yields, such as for diesel, and lower feedstock costs. These refining investments include a modernization of the fluid catalytic cracking (FCC) unit at the 251,000 bbl/day Bayway refinery in Linden, New Jersey, and a vacuum tower upgrade at the 62,600 bbl/day Billings, Montana refinery. As of press time, the detailed timing of these near-term projects weren’t known, but approximately $400 million in discretionary spending of the total $1.2 billion planned for refining has been allotted for the Billings vacuum tower and the Bayway FCC unit modernization.
On October 7, the Deutsche Bank rating agency commented on the Phillips 66 near-term projects that could affect their earnings before interest, taxes, depreciation and amortization (EBITDA), including the previously noted FCC unit and vacuum tower projects that would contribute towards EBITDA growth. The agency anticipates $100 million in EBITDA from the FCC modernization project alone at Bayway. Furthermore, the Billings vacuum tower project is expected to generate $100 million in EBITDA.
In marketing and specialties, Phillips 66 plans to invest about $135 million of growth and sustaining capital. According to the Phillips 66 announcement, this furthers Phillips 66’s plans to expand and enhance its fuel marketing business, including new retail sites in Europe.