01-05-2012

Phillips 66 debuts as advantaged downstream company

Phillips 66 today emerges as an independent downstream energy company with industry-leading businesses in refining and marketing, midstream, and chemicals. Created through a spin-off of these assets from ConocoPhillips, Phillips 66 begins regular trading on the New York Stock Exchange this morning under the ticker symbol PSX. 
 
Greg C. Garland, the new chairman and chief executive officer of Phillips 66, has more than 30 years of experience in the oil and gas and chemicals industries. 
 
"Our strategic approach combines one of the world's most competitive  refining and marketing operations with rapidly growing midstream and  chemicals businesses," Garland said. "Phillips 66 will be clearly  differentiated from pure-play refining companies with specific plans for  enhancing returns and growing shareholder distributions. We have an  exciting future ahead of us." 
 
Refining and Marketing 
Phillips 66's plans to enhance returns in Refining and Marketing include  disciplined capital allocation, portfolio optimization and increased  margins through building access to advantaged feedstocks and improving  clean product yield. The company's Refining and Marketing operations  include 15 refineries with a net crude oil capacity of 2.2 million  barrels per day, 10,000 branded marketing outlets, and 15,000 miles of  pipeline systems. 
 
Phillips 66 owns or has an interest in 11 refineries in the United States, three in Europe and one in Asia. Its Transportation business provides strategic, timely and environmentally safe delivery of crude oil, refined products, natural gas and natural gas liquids (NGL) throughout the United States. Phillips 66 markets gasoline, diesel, aviation fuel and lubricants, under the brand names Phillips 66(R), Conoco(R), 76(R), JET(R) and Kendall(R). 
 
Midstream 
Phillips 66 primarily conducts its Midstream operations through DCP  Midstream, LLC, a 50 percent joint venture with Spectra Energy and one of the largest natural gas gatherers and processors in the United States, as well as the largest producer of NGL in North America. Now in its 13th year of operations, DCP Midstream is a full-service provider of gathering, processing and NGL logistics services with strategically located assets in liquids-rich developments. The gas collected by DCP Midstream is processed at 61 owned or operated plants and treaters. Growth in liquids-rich developments in the United States is driving infrastructure demand and expansion opportunities for our Midstream segment. DCP Midstream has $4 billion in major projects currently in execution, including two major pipeline projects. The Southern Hills Pipeline will run more than 900 miles to Mont Belvieu, Texas, with a target capacity of more than 150,000 barrels per day of NGL. The project is expected to start up in mid-2013. The Sand Hills Pipeline is a  720-mile NGL line that will run through the Permian and Eagle Ford  basins to market centers along the U.S. Gulf Coast. Initial capacity  will be 200,000 barrels per day, and service may be expanded to 350,000 barrels per day. The Sand Hills Pipeline will be phased into service, with the first phase completed by the third quarter of 2012 and the  second phase expected as soon as the third quarter of 2013. 
 
Phillips 66's Midstream business also consists of directly held assets and other equity affiliates. These include natural gas gathering and processing operations, NGL fractionation and marketing businesses and a 25 percent interest in Rockies Express Pipeline. 
 
Chemicals 
Phillips 66's Chemicals business is conducted through its 50 percent  interest in Chevron Phillips Chemical Company LLC (CPChem), a joint venture with Chevron U.S.A. Inc., a wholly-owned subsidiary of Chevron Corporation. Now in its 12th year of operations, CPChem is one of the world's top producers of olefins and polyolefins with more than 30 billion pounds of net annual chemicals processing capacity across its product lines. 
 
Like the Midstream business, the rapid development of natural gas and  NGL from shale formations in the United States is driving major growth  opportunities for CPChem. At its Cedar Bayou Chemical Complex in Baytown, Texas, CPChem is building the world's largest on-purpose 1-hexene plant capable of producing up to 250,000 metric tons (551,000,000 lbs.) per year. Construction of the 1-hexene plant is expected to begin in the first half of 2012, and the project is anticipated to start up during 2014. CPChem also aims to construct a world-scale ethane cracker at its Cedar Bayou facility in Baytown, Texas, and two polyethylene facilities near its Sweeny facility in Old Ocean, Texas, with anticipated startup in 2017, pending final investment decisions. 
 
"Phillips 66 starts out with a clear advantage over many other downstream companies," said Garland. "We have a robust portfolio of businesses that already rank among the best-performing players in their industry segments, a strong financial position, an extraordinary global workforce, and a continued commitment to safety and operating excellence. We have an unparalleled foundation for success." 
 
After the market closed yesterday, shareholders of ConocoPhillips received one share of Phillips 66 common stock for every two shares of  ConocoPhillips common stock held as of the April 16 record date. 
 
Garland will join other Phillips 66 employees tomorrow on the floor of  the New York Stock Exchange to mark the first week of regular trading as  a downstream company. They will ring the opening bell to begin trading  at 8:30 a.m. CT.