By ALISON SIDER and SAABIRA CHAUDHURI
Phillips 66 announced
plans to allocate some of its transportation assets to form a
master limited partnership and also unveiled a $3.7 billion
capital program for next year, up 6% from 2012's estimate.
The Houston-based downstream-energy company plans to sell a
minority stake in the master limited partnership and expects to
raise $300 million to $400 million in gross proceeds from an
initial public offering slated for the second quarter of
"We expect to use the master limited partnership as an
efficient vehicle to fund growth investments in the
transportation and midstream sectors," CEO Greg Garland
Master limited partnerships, or MLPs, are similar to real
estate investment trusts. They are designed to reduce corporate
tax liabilities and provide shareholders with a steady income
Several oil and gas companies have used MLPs to remove
assets, and their debt, from company balance sheets while
keeping some control over them and the income they provide.
Phillips 66 hasn't yet decided which of its pipelines,
terminals, rail cars and other rail infrastructure, or
natural-gas liquids assets will be dropped into the
Raymond James analysts wrote in a note Thursday morning that
the MLP announcement confirmed their expectations, but they
were awaiting additional details from the company's analyst day
"The company will sell a minority interest in the MLP,
providing room to drop down additional interest as well as
assets," the analysts wrote.
Though MLPs traditionally own energy infrastructure assets
such as pipelines, which have low risk profiles and provide a
steady income stream, new partnerships have been formed in
recent years that own upstream or refining assets.
Simmons analysts wrote that it isn't clear yet what parts of
Phillips 66's refining and marketing segment could
potentially be contributed to the MLP.
Phillips 66 became an independent downstream company with refining and marketing, midstream
and chemical businesses in May after separating from
In its first full year as a standalone company, Phillips 66
said it plans to improve capital efficiency and strengthen its
margins by bringing less expensive crude oil from the Eagle
Ford shale formation in south Texas to its Gulf Coast
The company said it has signed agreements for marine vessels
to bring Eagle Ford crude to the Alliance and Bayway
refineries. In total, the company plans to replace 500,000 bpd
of higher-cost crude with new sources of price-advantaged crude
over the next several years.
The company has projects in the works to increase
export capacity at its Gulf Coast and West Coast refineries by
100,000 bpd by 2014.
"We will continue to primarily serve domestic markets and
will explore opportunities to meet growing demand overseas,"
Mr. Garland said.
In October, Phillips reported that its efforts to use less
expensive sources of crude oil paid off in the third quarter,
offsetting losses in its midstream segment and pushing the
company's profits up 52% from the past year.
The company's $3.7 billion capital program for 2013 includes
$1.8 billion in spending by partially owned subsidiaries, which
won't require cash outlays by Phillips 66.
Dow Jones Newswires