An Independent Evaluation of Phillips 66, its Business Strategy, and Execution

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A photo of part of Marland Refinery in Ponca City, Oklahoma taken in 1919. An article from Petroleum Age in 1922 said that Marland Refinery in Ponca City had a production of 10,000-barrel per day and Marland Refinery included nearly two million barrels of steel storage for crude and finished products. An article from Petroleum Age in 1928 said "Marland refinery at Ponca City is one of the largest complete plants in the Mid-Continent field with a crude capacity of 35,000 barrels per day of which approximately half can be run down to wax. The plant is equipped with four large Dubbs units, two Cross units, and 18 Fleming stills." Derivative Photo: Hugh Pickens
A photo of Marland Refinery in Ponca City in 1921. By 1921 EW Marland had consolidated all of his oil operations under the auspices of the Marland Oil Company. Headquartered in Ponca City the firm continued its phenomenal growth pattern by absorbing numerous small oil companies including the Comar Oil Company, Tom Jones Oil Company, Kenney-Cleary Oil Company, Francoma Oil Company, John S. Alcorn Oil Company, and many others whose highly competent executives Marland's company usually retained. Photo: Oklahoma Historical Society
Willie Cries was the first successful oil well drilled by EW Marland in 1911. Photo: Wikipedia

by Hugh Pickens, Ponca City Oklahoma


The purpose of this report is to provide a comprehensive overview of Phillips 66 that documents and explains the company's business strategy and execution of that strategy with a particular emphasis on Phillips 66's Refinery and Marketing Business Segment.

Major Sections of this report include:


Corporate


Strategic and Financial


Stock Market


Safety, Environment, Legal, Labor


Refineries and Marketing Business Segments


Detailed Look at Ponca City Refinery


Other Business Segments


Other Locations


Reference



On May 1, 2012 ConocoPhillips split into two separate publicly-traded companies: an upstream company that will retain the name ConocoPhillips and concentrate on exploration and production, and a downstream company, to be named Phillips 66, that will include refining and marketing (R&M), chemicals, and midstream business segments. The refinery in Ponca City, with over 700 employees the single largest employer in Ponca City, is part of the R&M segment and will go into Phillips 66. Phillips 66 will be a publicly traded company (PSX) and a number of independent financial analysts will be following the company.

The purpose of this web site is to follow Phillips 66 to document and understand the company's plans and policies particularly with respect to its Refinery and Marketing Business Segment with a special emphasis on evaluating the impact of Phillips 66 business decisions on the refinery in Ponca City, Oklahoma. Some of the conclusions I have reached after analysis of publicly available information on Phillips 66 include the following:

  • The Refining and Marketing Business Segment will be more important to Phillips 66 than it was to ConocoPhillips.
  • The refinery in Ponca City will be more important to Phillips 66 than it was to ConocoPhillips.
  • The Refining and Marketing Business Segment is the least profitable Business Segment and will be de-emphasized with unprofitable refineries closed or sold off.
  • There will be a reduction in the capital allocated to the Refining and Marketing Segment.
  • Although Phillips 66 sold the Trainer refinery on May 1, 2012 and has tried to sell the Alliance refinery, the refinery in Ponca City is unlikely to be closed or sold for at least three to five years as margins have been strong in the Mid-Continent Segment and are expected to remain high for the medium term.
  • Profits are presently very high for the Mid-Continent refineries of which the refinery at Ponca City forms a part. The Ponca City Refinery earned profits in excess of $500 million in 2011 and based on Phillips' third quarter earnings report for 2012 with a realized crack spread of $31.83 for mid-continent refineries and a capacity utilization of 102%, the Marland Refinery in Ponca City will contribute at an annualized rate of over $1 billion ($1.032 B) of net profits in 2012 to Phillips bottom line. But these profits are due to the glut of crude oil pouring into the region from newly tapped shale oil like North Dakota’s Bakken and the high Brent to West Texas Intermediate differential and these high profits are not expected to persist for more than three to five years.
  • Phillips 66 plans and strategy to increase profitability by moving away from the low COBE and cyclical Refining and Marketing Business Segment and making massive investments in the high COBE Chemical Business Segment and Midstream Business Segment appear sound. The question for Phillips 66 now becomes now becomes one of executing the plan.[1][2]


Contents

Creation of Phillips 66

On May 1, 2012 Phillips 66 issued a press release announcing that Phillips 66 had emerged 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. "Our strategic approach combines one of the world's most competitive refining and marketing operations with rapidly growing midstream and chemicals businesses," said CEO Greg Garland. "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."[3] Graphic Created by: Granger Meador Used with permission
"Phillips 66 has strong brand recognition and value and it provides a link between our rich history and our exciting future," says Greg Garland, designated chairman and chief executive officer of Phillips 66. The new company's name capitalizes on public awareness and gives tribute to history, adds Garland. Photo: ConocoPhillips

Rationale for the ConocoPhillips Split

There are two ways to look at the decision to split off the downstream segment from ConocoPhillips with the creation of Phillips 66. According to Christopher Helman writing in Forbes magazine the ConocoPhillips’ split can be seen as the upstream guys seizing an opportunity to jettison their lower-returning downstream assets all at once rather than piecemeal, as they’ve been doing. On the other hand, the split "liberates downstream to pursue its own growth opportunities," according to incoming Philips 66 CEO Greg Garland. "As an integrated oil company we were pushing a lot of our capital to the Exploration and Production (E&P) space, which was the right thing to do as an integrated oil company."[4]

"If Phillips 66 has been left with the wrong end of the deal, then Greg Garland is putting in a spirited effort to persuade investors otherwise. He says the creation of Phillips 66 represents an opportunity to ensure that his company is in a strong position to make the best of the uncertain conditions in the downstream sector," writes Shaun Polczer in "The Petroleum Economist on May 25, 2012. "The company hopes that ...Phillips 66 will be better able to capitalise on its options to maintain a steady income stream from mid and downstream operations. "[5]

Simone Sebastian and Emily Pickrell writes in the Houston Chronicle that Mulva abandoned the super-major model that its retiring leader helped engineer a decade ago leaving behind "a more modest oil exploration and production company, streamlined by the aggressive asset sell-off that has defined his final years at the helm." Mulva is the last of a group of oil executives who orchestrated the model of building companies that delivered fuel from the ground to gas tanks through their own international networks of exploration, refining and distribution assets. "He appreciated the changing paradigm in the industry a decade ago when all the oil companies were combining," said Doug Terreson, head of energy research for ISI. "The oil industry is shifting toward a new competitive paradigm now and separation makes a great deal of logic."[6]

Rod Walker writes in the Tulsa World on April 28, 2012 that "the separation of ConocoPhillips and Phillips 66 is the final achievement of CEO Jim Mulva's eight-year reign atop the integrated company" although questions abound regarding the rationale behind the split one decade after the merger that created ConocoPhillips. "Why was it better to get bigger 10 years ago and not now?" asks Bruce DeShazo, assistant vice president and investment adviser at American Heritage Bank of Sapulpa. "I would think the reason they'd do something like this is to divest those losing assets. They're just having a hard time making money in refining." Outgoing ConocoPhillips CEO Jim Mulva wants to reduce the company's exposure to refining by spinning off Phillips 66. "We said sell non-core assets, position for growth. Essentially, 90 percent of our capital spending is directed towards exploration and production, and reduce our exposure to refining."[7]

According to Mulva in his presentation to financial analysts on July 14, 2011, the question is why would you spin out the downstream versus to stay integrated. "We believe more value is created in the formation of two very clear, standalone companies versus accomplishing our objectives of rationalizing our downstream within the integrated oil structure. There is generally greater external transparency of the business performance when the marketplace looks at the pure plays versus being accomplished in the integrateds. And we also believe there is more focus and attention and greater probability of success by the management team by having pure-play separate upstream and downstream companies. Our investors, we believe, have the better ability to adjust to overweight or underweight their views of investing in these segments of integration, upstream and downstream. And as I just said, there is greater management focus to customize strategies, both upstream and downstream. And we also believe with this, it really allows us to attract, retain and compensate the talent we need to create the highest probability of success upstream and downstream."[8][9]

"I think that world and that marketplace has pretty well changed. So if we look out the medium- and the long-term, we face this challenge, whether we are viewed as independent or viewed as an integrated company, the issue of competitive growth is the same, whether it is a company bigger than ourselves or it is an independent smaller than ourselves. So it doesn't change with the accomplishment of doing this transaction and spinning out the downstream. We are faced with the same challenge. Some also could argue that the larger you are, the more difficult it is, given the access issues, and in many places in the world, an emphasis of trying to move IOCs or independents more towards service contracts than it is taking equity interest. So all we are saying is whether we are classified as independent or classified as an integrated, or however we are classified and what we are structured, we still have the issue of how do we take our current reserve position and our production, how do we grow it and do it with competitive finding and development cost. So we have got the same challenge. Now, if we do that well, whether we are integrated or we are viewed as independent pure plays, if we do that well, it will be recognized in the marketplace. And that is really where we are coming from. We are not doing something cleverly just to get a higher PE multiple, but we do think the pure plays are better understood in the marketplace, and it is going to put a lot more focus on our management and our leadership to accomplish the objective, which is to convert the resources that we have. We like to always get more resource, but convert those resources to reserves, and do that really well with competitive finding and development cost, we will grow our production and we will do it in a value-creating way."[10][11]

"The other thing is we look at our Company in the marketplace, we have a number of investors that would say you are making the investment decision for us. You are putting us in both the upstream and downstream business, where we would like to make that investment decision ourselves. So by being separated, you can take your choice. You want to invest in the downstream, you want to invest in the upstream. So if you look at the integrated company, you can say, well, I think the downstream part of the company is holding back on the value creation and recognition of your E&P business. And then on the other hand, those people who are interested in the downstream would say, you are not getting recognition for the quality or the contribution of the downstream. And then there is another issue that we have seen, unfortunately. But from an enterprise risk management point of view, having two separate companies is -- we think is something that makes a lot of sense. And so it is for these different reasons and putting more focus both upstream and downstream at attention, and clear peer plays, not so much that the market can look and make the decision where they want to invest, but the leadership of the company knows clearly what business they are in and they dedicate their attention to doing it in a value-creating way."[12][13]

See also

Implementation of the ConocoPhillips Split

On May 1, 2012 Phillips 66 issued a press release announcing that Phillips 66 had emerged 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. "Our strategic approach combines one of the world's most competitive refining and marketing operations with rapidly growing midstream and chemicals businesses," said CEO Greg Garland. "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."[16]

On November 11, 2011 the Tulsa World reported that Phillips 66 would be the name for the new independent oil and gasoline refining and marketing firm, created as ConocoPhillips splits into two companies. ConocoPhillips will keep the current name of the company and will concentrate on the exploration and production side while Phillips 66 will include refining and marketing portions of the company. Each company will be run independently and will have different tocker names in the stock market. The refinery in Ponca City employs about 700 people while Bartlesville will be the global center for the Phillips 66 technology organization as well as the transaction services organizations for both companies.[17] ConocoPhillips CEO Jim Mulva will resign once the split is complete and Greg Garland will be the new CEO of Phillips 66.[18] The decision to name the new entity for Phillips 66 is because of name recognition and branding. "Phillips 66 has strong brand recognition and value, and it provides a link between our rich history and our exciting future," Garland said Thursday in a news release. "Our name reflects an independent spirit and drive."[19]

On April 4, 2012 ConocoPhillips' board of directors gave its final approval for the spin-off of its downstream businesses into Phillips 66.[20] ConocoPhillips executive vice president and CFO Jeffrey Sheets announced on April 23, 2012 that ConocoPhillips is putting its final touches on its spinoff of Phillips 66 this week, and the transaction will take place as scheduled on May 1, 2012.[21]

Garland Says the Spin-off of Phillips 66 Was Executed Flawlessly

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that spin-off of Phillips 66 was executed flawlessly. "I think it's a real tribute to the dedication and the capability of the Phillips 66 employees. They did a great job of getting our feet underneath this. The Company has stood up. We're ready to go. The systems are operating well. We've been running well and capturing good opportunities in the market.[22]

Decision to Name the Downstream Company Phillips 66

ConocoPhillips announced on November 11, 2011 that the new independent downstream company created through its previously announced strategic repositioning will be named Phillips 66. "With a history that goes all the way back to petroleum industry "birthplace," in Bartlesville, Oklahoma in 1917, the company will be a leading independent company with refining, marketing, midstream and chemicals businesses operating across the globe. "Phillips 66 has strong brand recognition and value and it provides a link between our rich history and our exciting future," said Greg Garland, designated chairman and chief executive officer of Phillips 66. "Our name reflects an independent spirit and drive--two attributes of our future company."[23] According to the ConocoPhillips web site "the name Phillips 66 was chosen [for the new downstream company] because it has strong brand recognition and value, which allows us to link our rich history and our exciting future. The name represents the independent spirit and drive that will be part of the culture of Phillips 66."[24] The new company's name capitalizes on the public awareness and gives tribute to history, Garland added.[25]

The company launched a new Phillips 66 website: www.phillips66.com, that provides some history of the brand:

Frank and L.E. Phillips were two of the original experts in gas. They started prospecting for oil in 1903 and founded Phillips Petroleum Company in 1917. Since then, the company has grown considerably and has expanded its product offerings through its commitment to innovation and meeting customer needs. That’s fancy talk for "we keep making it better." Phillips 66® also has a history with US Highway 66. In 1927, on the "Mother Road" during a test drive of a newly developed high-octane gasoline, the vehicle reached a cruising speed of 66 mph. The new fuel was named Phillips 66. Even the logo was inspired by the road signs that dot the length of the historic highway. And the rest is history. And gas. Very High quality gas.[26]

The Houston Chronicle reported on November 10, 2011 that according to ConocoPhillips spokesman John Roper, while Phillips 66 products will retain the traditional logo, executives haven't decided whether to make it the corporate logo as well.[27]

The Bartlesville Examiner-Enterprise editorialized on April 29, 2012 that "the downstream energy company — named Phillips 66 in a tip of the cap to its product lineage begun right here in Bartlesville — will be a leading independent refining, marketing, midstream and chemicals business."[28]

Strategic Vision for Phillips 66

There are three leading operating segments in the new company: Chemicals, Midstream, and Refining and Marketing. The refinery in Ponca City falls in the Refining and Marketing Business Segment (R&M) which in 2011 had a much lower ROCE (Return on Capital Employed) than the other two Phillips 66 business segments. ROCE is a ratio used in finance, valuation, and accounting that compares earnings with capital invested in the company is used to prove the value the business gains from its assets and liabilities. Derivative Photo: Hugh Pickens
Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that he expects a 15% ROCE in the R&M Business Segment going forward. "My view is that, refining historically has been kind of a 10% to 12% business," said Garland. "We think we have plans in place to advantage crude capture, yields, cost reduction, that we can move it 400 basis points. So it’s a 15% business going forward for us versus a 30% return business in Chemicals. And probably Midstream business 15% to 17% returns is kind of what we’re looking in fact. So, to the extent that we have 30% and 40% return projects in refining, we’re going to do those. I think, I mean we do get challenged by people all the time or we under investing in refining. At this point, we don’t think so. I don’t think there’s any opportunities out there, we feel that we’ve missed in terms of an investment opportunity in the refining space. Our focus is going to be very disciplined. We’re going to restrict capital in this space. We’re going to improve returns in this space. And so we don’t see a change required in our strategy at this point in time."[29] Derivative Photo: Hugh Pickens
In 2011 about 84% of Phillips 66 capital was allocated to Refinery and Marketing with 11% allocated to Chemicals and 5% to Midstream. Phillips 66 plans a major change in this allocation. "Long-term we have a vision that about 50% of our capital employed will be directed towards the R&M segment. And the other 50% will be directed towards Midstream and Chemicals." Derivative Photo: Hugh Pickens

On April 9, 2012, Greg Garland, the designated CEO of Phillips 66, presented an overview of the new company and his plans for Phillips 66. There are three leading operating segments in the new company: Chemicals, Midstream, and Refining and Marketing.[30][31][32]

The basic Phillips 66 strategy to increase profitability is to focus on the business segments that have the highest return on capital invested which are the Chemical Business Segment and the Midstream Business Segment. This means that the Refining and Marketing Business Segment which has the lowest profitability will be de-emphasized. Capital allocations for the business segments with the highest profitability will be increased. Capital allocation for the R&M business segment will be reduced. Unprofitable refineries in the R&M Business Segment will be sold or closed. Ponca City falls into the Refining and Marketing business segment of Phillips 66.

See also:

Benefits of Being an Independent Company

Garland talked about the benefits of Phillips 66 being an independent company. "As I think about the spin and really the strategy and the rationale behind the spin, it creates opportunity for Phillips 66 to create value that we just couldn't pursue as part of the integrated ConocoPhillips. Our existing R&M business, our Chemicals and Midstream business, all provide good, solid cash flow and we can use this cash flow to fund strategic growth. We can use it to improve returns, and also for distributions to shareholders. I think another benefit of the spin is you will see greater granularity regarding asset performance and the financial results in all three segments."[33][34][35]

Simon Moore wrote at Seeking Alpha on May 10, 2012 that ConocoPhillips was a slower, more lumbering entity but with Phillips 66 newly reduced size, its growth should accelerate.[36]

The Houston Business Journal reported on August 10, 2012 in a profile of Chevron Phillips CEO Pete Cella that with the ConocoPhillips split of its upstream and downstream business in May, Chevron Phillips makes up a more prominent part of the Phillips 66 business, which is good because the company gets more attention, said Cella.[37]

Laurie Winslow reported in the Tulsa World on October 3, 2012 that with Phillips 66 up 40.3 percent in the five months since its divestiture on May 1, 2012, the market has applauded the move by ConocoPhillips to split its exploration and production company from its refining business, creating Phillips 66. "In past years, refiners have been the dogs of the energy sector, and in 2012 they find themselves the darling of the energy sector. Phillips 66 really has spread its wings since the spinoff from ConocoPhillips, and it's gotten quite a bit of international attention," says Jake Dollarhide, CEO of Longbow Asset Management Co. "A lot of people felt that ConocoPhillips with all of the businesses together wasn't getting the market valuation it deserved."[38]

Differentiated Portfolio Creates Value Through Lower Risk, Lower Cost of Capital, and Ability to See Across Entire Value Chain

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that the three pieces of Phillips 66 business, the Refining and Marketing; the Midstream business, and the Chemicals business are more valuable together and that value is created through lower risk, lower cost of capital, the ability to see across the entire value chain. "We think we have a clear strategy in terms of capturing growth opportunities, margin enhancement opportunities, and driving return improvement in our business. I would also say that we are very purposeful and thoughtful. We're very purposeful and thoughtful about the assets that we've put in to Phillips 66 as we started the Company. We think that the three pieces of our business, the Refining and Marketing, Specialties, Transportation; the Midstream business, and the Chemicals business are more valuable together. We think value is created through lower risk, lower cost of capital, the ability to see across the entire value chain. We think it makes us better allocators of capital ultimately. We think you'll see the benefits of our management of these three businesses as we go forward."[39]

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that a differentiated portfolio is a competitive advantage for Phillips. "I would just say over the last 3.5 years, about 40% of our adjusted earnings came out of R&M or specifically refining. Then you can see 60% came out of marketing specialties and other businesses, our Chemicals business and Midstream business. The point here, we have a differentiated portfolio. We like this portfolio. We think it's a competitive advantage for us."[40]

Enhance the Return on Capital Employed (ROCE)

ROCE (Return on Capital Employed) is a ratio used in finance, valuation, and accounting that compares earnings with capital invested in the company is used to prove the value the business gains from its assets and liabilities.[41] The three operating segments of Phillips 66 have very different ROCE's. In 2011 the ROCE of the Refining and Marketing segment was 12%, the ROCE of the Midstream segment was 30%, and the ROCE of the Chemical segment was 28%. Because the ROCE of the Chemical segments and the Midstream segments is so much higher than the ROCE in the R&M segment, Garland plans to plans to aggressively grow the Chemicals and Midstream segments of Phillips 66 and de-emphasize the Refining and Marketing segments of the company.

"Here's how we plan to enhance returns on capital," says Garland in the April9, 2012 financial analysts meeting. "I think you will see continued portfolio optimization, margin improvement from us. We will drive our capital employed to higher returning businesses. You can see on the chart on the right in 2012 we plan to high grade, to move more investment to Chemicals and Midstream. And by the way, these are our equity share of the investments in Chemicals and Midstream. While we're pursuing aggressive growth at both the DCP Midstream and the Chemicals Midstream, our view is that they're going to be self funding and at the same time they will dividend cash back to Phillips 66."

Allocation of Capital to More Profitable Business Segments

Garland says that long-term Phillips 66 has "a vision that about 50% of our capital employed will be directed towards the R&M segment. And the other 50% will be directed towards Midstream and Chemicals.We'll preferentially invest in the higher return businesses and we will be very selective in how we invest in the lower return businesses."

Garland told financial analysts at an investors conference on June 5, 2012 that Phillips 66 would keep investments in its refining assets to a minimum, instead focusing on expanding its chemical-and-logistics business and that Phillips 66 will spend $2 billion on capital projects in its midstream-logistics segment, including natural-gas-liquids processing and exports infrastructure.[42]

Molly Ryan reported in the Houston Business Journal on February 11, 2014 that Phillips' decision to move forward with more than $3 billion worth of projects reflects the company’s strategic decision to chase higher-margin markets. "Midstream spending is expected to pick up in 2014 since energy companies are increasingly realizing the profits that can be found in moving the massive amount of oil and gas coming from U.S. shale plays," writes Ryan. "Phillips 66 specifically hopes to cash in on this through its new liquefied petroleum gas terminal, which will store and transport fluids, and its new fractionator facility, which will supply and transport natural gas liquid products to petrochemical companies."[43]

Plan to Aggressively Grow Chemicals and Midstream segments of Phillips 66

Garland plans to aggressively grow the Chemicals and Midstream segments of Phillips 66 and de-emphasize the Refining and Marketing segments of the company. "Over the past three years we've reduced refining capacity about 450,000 barrels a day. In our Chemicals segment we've been growing primarily through investments in the Middle East. In our Midstream segment, growth has come from expansions around the shale liquids and gas producing areas."[44][45][46] "The refining business is currently a difficult business and one where the outlook doesn't change a lot going forward," said Mark Gilman, an independent oil and gas analyst. "Phillips 66's asset quality in the refining space is, at best, kind of average."[47] The best performing divisions for Phillips 66 are expected to be its midstream joint venture and a petrochemicals company.[48]

Simon Moore wrote on Seeking Alpha on May 10, 2012 that now that Phillips 66 is no longer part of ConocoPhillips, management is planning a clear cut move to greater emphasis on Midstream and Chemicals Business Segments. "New management's long term plan is to move to 50% Refining and Marketing, 25% Chemicals, and 25% Midstream. These latter two businesses have a much higher ROCE (return on capital employed) for PSX."[49]

Phillips Capital Programs

Capital Program for Refining and Marketing Business Segment. Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips wants to try to hold sustaining capital in the Refining Business Segment to depreciation or less, or about $700 million a year. "We've got about a $1 billion program in 2014. So we've got about $300 million of high return, quick hit, fast payout projects that we're going to do. These are 40% type return projects. So these are the, what I would call, is a value accretive project that we're going to do in refining. Around export facilities, increasing yields, it's around incremental investments to process more light sweet crude. It's around capturing more LPG streams and upgrading the value of LPG streams."[50] Graphic from Phillips Presentation to USB Global Oil and Gas Conference May 21, 2013.
Capital Program for Midstream Business Segment. Phillips reported on December 6, 2013 that they plan to invest $2.167 Billion in 2014 in their Midstream Business Segment including $1.417 in direct investment and $0.750 Billion in investment with affiliate groups. Phillips expects to begin construction of a 100,000 barrel-per-day NGL fractionator and a 4.4 million-barrel-per-month liquefied petroleum gas export terminal on the U.S. Gulf Coast. In addition, several rail offloading facilities and other crude handling projects will increase the company’s access to advantaged refining feedstocks. Phillips 66 Transportation is also developing pipeline expansion and connection projects that will grow capacity and allow for greater refined product exports.[51] Graphic from Phillips Presentation to USB Global Oil and Gas Conference May 21, 2013.
Capital Program for Chemical Business Segment. Phillips reported on December 6, 2013 that they plan to invest $1.0 Billion in 2014 in their Refining and Marketing Business Segment down from $1.149 in 2013. Approximately 70 percent of the investment will be for sustaining capital related to reliability and maintenance, safety and environmental projects, including those to comply with Tier 3 emission standards. Other Refining capital investments will be directed toward relatively small, high-return projects, primarily to enhance use of advantaged crudes, as well as to improve product yields, increase energy efficiency and expand export capability.[52] Graphic from Phillips Presentation to USB Global Oil and Gas Conference May 21, 2013.

Phillips Capital Program for 2014

On December 6, 2013 Phillips announced their plans for capital expenditures in 2014 at a level of $2.7 billion, approximately 40 percent higher than its 2013 capital target. Phillips total 2014 capital program including investments in joint ventures with DCP Midstream (DCP), Chevron Phillips Chemical Company (CPChem) and WRB Refining is expected to be $4.6 billion. “The 2014 capital program is consistent with our plans to significantly grow our Midstream and Chemicals segments,” said Chairman and CEO Greg Garland. “These are businesses that can directly capitalize on North America’s energy renaissance. Our disciplined approach to capital allocation balances reinvestment in higher-valued businesses along with growing shareholder distributions. We continue to focus on funding the most attractive growth opportunities across our portfolio.”[53]

Phillips to Invest $1.0 Billion in 2014 in Refining and Marketing Business Segment

Phillips reported on December 6, 2013 that they plan to invest $1.0 Billion in 2014 in their Refining and Marketing Business Segment down from $1.149 in 2013. Approximately 70 percent of the investment will be for sustaining capital related to reliability and maintenance, safety and environmental projects, including those to comply with Tier 3 emission standards. Other Refining capital investments will be directed toward relatively small, high-return projects, primarily to enhance use of advantaged crudes, as well as to improve product yields, increase energy efficiency and expand export capability.[54]

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips wants to try to hold sustaining capital in the Refining Business Segment to depreciation or less, or about $700 million a year. "We've got about a $1 billion program in 2014. So we've got about $300 million of high return, quick hit, fast payout projects that we're going to do. These are 40% type return projects. So these are the, what I would call, is a value accretive project that we're going to do in refining. Around export facilities, increasing yields, it's around incremental investments to process more light sweet crude. It's around capturing more LPG streams and upgrading the value of LPG streams."[55]

Phillips to Invest $2.167 Billion in 2014 in Midstream Business Segment

Phillips reported on December 6, 2013 that they plan to invest $2.167 Billion in 2014 in their Midstream Business Segment including $1.417 in direct investment and $0.750 Billion in investment with affiliate groups. Phillips expects to begin construction of a 100,000 barrel-per-day NGL fractionator and a 4.4 million-barrel-per-month liquefied petroleum gas export terminal on the U.S. Gulf Coast. In addition, several rail offloading facilities and other crude handling projects will increase the company’s access to advantaged refining feedstocks. Phillips 66 Transportation is also developing pipeline expansion and connection projects that will grow capacity and allow for greater refined product exports.[56]

Phillips expects to invest $750 Million in DCP, a 50/50 joint venture with Spectra Energy. DCP anticipates leveraging its existing NGL infrastructure to initiate new gathering and processing growth projects, mainly in the North and Permian regions. DCP also expects to increase natural gas processing capacity in the Denver-Julesburg Basin and complete other gathering system expansions during 2014.[57]

Phillips to Invest $1.046 Billion in 2014 in Chemical Business Segment

Phillips reported on December 6, 2013 that they plan to invest $1.046 Billion in their 50/50 joint venture with Chevron, representing a substantial increase over 2013. The increase primarily reflects advancement of CPChem’s 3.3 billion-pound-per-year ethane cracker and two 1.1 billion-pound-per-year polyethylene facilities. The facilities are expected to start up in 2017. Additionally, CPChem plans to complete and start up its 550 million-pound-per-year 1-hexene plant in Baytown, Texas, in the first half of next year.[58]

Phillips to Invest $140 Million in 2014 in Marketing and Specialties

Phillips reported on December 6, 2013 that they plan to invest $140 Million in 2014 in Marketing and Specialties growth and sustaining capital. The growth investment reflects Phillips 66’s intent to expand its international fuel marketing business. The company plans to add approximately 200 new retail sites in Europe over the next five years.[59]

July 10, 2014: Phillips to Increase 2014 Budget for $1.2 Billion

FueldFix reported on July 10, 2014 that Phillips will increase its 2014 capital budget by $1.2 billion for 2014 in order to fund its liquefied petroleum gas project as well as a recent acquisition. The increase will allow the company to put more cash towards the development of a new fractionator at its Sweeny refinery and a liquid petroleum gas export terminal in Freeport, among other projects. The fractionator is expected to come online in the third quarter of 2015, and the export terminal is expected to be operational in mid-2016. The fracionator will separate natural gas liquids into components including ethane, propane and butane. Some of those products will then be exported as liquefied petroleum gas from Freeport. The entire project is slated to cost $3 billion.[60]

Phillips Capital Program for 2013

Phillips reported on December 13, 2012 that they had hosted their inaugural Analyst Meeting in New York to discuss their capital program of $3.7 billion for 2013, a 6 percent increase over the $3.5 billion capital spend for 2012, and how it will to enhance returns, deliver profitable growth and increase distributions to shareholders.[61]

Phillips to Invest $1.149 Billion in 2013 in Refining and Marketing Business Segment

Phillips 66 reported at their inaugural Analyst Meeting on December 13, 2013 that they intend to invest $1.149 Billion in 2013 in their Refining and Marketing Business Segment to improve capital efficiency. The company has identified sources of additional advantaged crudes and is taking steps to move these lower cost feedstocks to its refineries and expects to replace 500,000 BPD of higher cost feedstocks with new or advantaged crudes over the next few years.[62]

Other initiatives to improve margins in the R&M Business Segment include increasing clean product yields in refining and controlling costs, targeting cost reductions and value capture in excess of $200 million before-tax by the end of 2013. “Our ability to capture advantaged feedstocks, coupled with the growing international demand for refined products, enables us to maintain high utilization rates and reduce costs per unit,” said Garland. “We will continue to primarily serve domestic markets and will explore opportunities to meet growing demand overseas. Export markets support a more positive balance of trade and promote economic benefits, and jobs, here in the United States.”[63]

Phillips to Invest $2.2 Billion in 2013 in Midstream Business Segment

Phillips 66 reported at their inaugural Analyst Meeting on December 13, 2013 that DCP Midstream plans to invest $2.2 billion primarily for new logistics infrastructure and NGL production during 2013.[64]

Phillips to Invest $1.1 Billion in 2013 in Chemical Business Segment

Phillips 66 reported at their inaugural Analyst Meeting on December 13, 2013 that CPChem plans $1.1 billion of investment including several growth projects planned or under construction, such as its U.S. Gulf Coast petrochemicals complex and 1-hexene plant.[65]

Phillips to Transfer Transportation Assets To A Master Limited Partnership

Marketwatch reported on Decemeber 13, 2012 that Phillips will transfer transportation assets to a master limited partnership that will debut in the stock market in 2013. The assets could include crude and product pipelines and terminals, natural gas liquids assets, or rail cars and infrastructure, but it was unclear what portion of Phillips 66's business would go to the MPL, analysts at Simmons said in a note.[66] “We expect to use the master limited partnership as an efficient vehicle to fund growth investments in the transportation and midstream sectors,” said Phillips 66 Chairman and CEO Greg Garland. “We believe the proposed MLP will enable us to enhance value for our shareholders and increase the transparency of our business.”[67]

Governance of Phillips 66

Jim Mulva is the chairman and chief executive officer of ConocoPhillips and conceived and executed the idea of splitting up ConocoPhillips. The Houston Chronicle reported on April 23, 2012 that Jim Mulva retired on May 1, 2012 when ConocoPhillips' refining, pipelines and chemicals units spun off to form an independent, publicly traded company called Phillips 66.[68] "The separation of ConocoPhillips and Phillips 66 is the final achievement of CEO Jim Mulva’s eight-year reign atop the integrated company," writes Rod Walton. "Mulva helped oversee the 2002 merger as head of Phillips Petroleum and now walks offstage into retirement as the one company becomes two."[69] Photo: by EnergyTomorrow Flickr Creative Commons. Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

Jim Mulva, Chairman and CEO of ConocoPhillips

Although Jim Mulva will not be a corporate officer of Phillips 66, Mulva was the chairman and chief executive officer of ConocoPhillips who conceived and executed the idea of splitting up ConocoPhillips which resulted in the creation of Phillips 66. Mulva retired on May 1, 2012 when the split was accomplished.

Mulva served as president and chief executive officer of ConocoPhillips from 2002 to 2004. Prior to that, he served as chairman and chief executive officer of Phillips Petroleum Company from 1999 to 2002. Mulva served as Phillips’ president and chief operating officer beginning in May 1994 and executive vice president since January 1994. Mulva had been senior vice president in 1993 and chief financial officer since 1990, at which time he joined the company's management committee. Mulva began his career with Phillips in 1973.

Mulva graduated from the University of Texas in 1968 with a bachelor's degree and a master's degree in business administration finance in 1969.[70]

The Houston Chronicle reported on April 23, 2012 that Jim Mulva retired May 1, 2012 when ConocoPhillips' refining, pipelines and chemicals units spun off to form an independent, publicly traded company called Phillips 66.[71]

Rod Walton writes in the Tulsa World on April 28, 2012 that ConocoPhillips decided that bigger was better when Phillips Petroleum Co. and Conoco Inc. merged in 2002, but now has turned 180 degrees around in 10 short years now believing that smaller is what investors want. ConocoPhillips, the nation’s third-largest integrated energy firm, will now become known as a “pure play” independent when the refining and chemical side is spun off into a new company called Phillips 66. "Mulva helped oversee the 2002 merger as head of Phillips Petroleum and now walks offstage into retirement as the one company becomes two," writes Walton.[72] "Outgoing Chairman and CEO Jim Mulva, who has expertly led the company for a decade — and several years prior to that as Chairman and CEO of Bartlesville-based Phillips Petroleum Co. — steps into retirement having proven to be a true friend to the City of Bartlesville," editorialized the Bartlesville Examiner-Enterprise.[73]

Mulva's Post-ConocoPhillips Activities

The Detroit News reported on April 26, 2012 that Mulva has been asked to join the board of directors of General Motors. "Jim's extensive experience and expertise in the energy industry and in-depth background in finance will be invaluable to GM," said General Motors Co. CEO and Chairman Dan Akerson. Mulva already serves on the board for GE, which has a partnership with GM to accelerate deploying electric vehicle charging stations in China.[74] Your Houston News reported on September 4, 2012 that Mulva will be headlining the Adult Learning Program’s Fall Session at St. John Vianney Church in Houston by speaking on the oil industry and its future in Texas on September 25, 2012.[75]

Greg Garland, Chairman, President and CEO of Phillips 66

Greg Garland was designated the Chairman and CEO of Phillips 66, the new Downstream company created with the split-up of ConcoPhillips on May 1, 2012. Garland is expected to take charge on May 1, 2012. Greg Garland was senior vice president, Exploration and Production, Americas for ConocoPhillips at the time of the split. Photo: ConocoPhillips
Ponca City resident Hugh Pickens (left) speaks with Phillips 66 CEO Greg Garland (right) about the disposition of the North Tower, South Tower, and Research West in the Ponca City Refinery after Garland's speech to the Bartlesville Chamber of Commerce on August 13, 2014.
A sculpture of Phillips 66 in front of the Price Tower (designed by Frank Lloyd Wright) in Bartlesville, a city in NorthEast Oklahoma that was formerly the headquarters of Phillips Petroleum Company. “I picked this company because of Bartlesville,” said Phillips 66 CEO Greg Garland. “Four times over the course of 32 years I’ve lived here. We have good memories of Bartlesville, Oklahoma, and it’s always going to be a very special place to me personally.” Bartlesville has the same pride in Frank Phillips and of its century-long oil heritage as Ponca City has of oil pioneer EW Marland.

On October 7, 2011, Greg Garland was designated the Chairman and CEO of Phillips 66, the new Downstream company created with the split-up of ConcoPhillips on May 1, 2012. Greg Garland was senior vice president, Exploration and Production, Americas for ConocoPhillips at the time of the split. Garland was previously president and chief executive officer of Chevron Phillips, a joint venture between ConocoPhillips and Chevron, with approximately 5,000 employees that is one of the world’s top producers of olefins and polyolefins and a leading supplier of aromatics, alpha olefins, styrenics, specialty chemicals, piping, and proprietary plastics.[76][77]

According to George Pilko, founder of Pilko & Associates, a Houston- based company that advises chemical and energy companies on risk, Garland understands strategy, is a good leader and has a demeanor that makes him well liked by people who work for him. “He’s got a very effective, relaxed manner,” says Pilko. “Many CEOs are so hyper and wound tight, and Greg is always relaxed and in control.”[78]

Garland's Education and Background

Garland was the first in his family to go to college.[79] Garland received a Bachelor of Science degree in chemical engineering from Texas A&M University in 1980.

Garland has more than 30 years of industry experience in technical and executive leadership positions with ConocoPhillips, its predecessor Phillips Petroleum Company, and Chevron Phillips Chemical Company. Garland has been with Phillips for his entire 32-year career. Garland was previously president and chief executive officer of Chevron Phillips, a joint venture between ConocoPhillips and Chevron. Before his election to that position, Garland served Chevron Phillips as senior vice president, Planning & Specialty Chemicals.[80][81]

Garland served as general manager of Qatar/Middle East for Phillips, a position he assumed in 1997.[82] Garland said that taking the job in Qatar in 1997 to manage one of the first oil operations in the Middle East for Phillips was a turning point in his career. Garland says that although he didn’t want to take the job initially, he learned to view the company with a broad perspective.[83]

From 1995 to 1997, he served as general manager of natural gas liquids after serving as manager of planning and development in planning and technology. From 1992 to 1994, he was manager of the K-Resin® business unit. Garland began his career with Phillips in 1980 as a project engineer for the Plastics Technical Center. He later worked as a sales engineer for Phillips' plastics resins, business service manager for advanced materials, business development director, and olefins manager for chemicals.[84]

How Garland Was Selected for CEO of Phillips

By October 2010, CEO James Mulva was expected to retire within two years and wanted to establish a cabinet of possible successors. On October 7, 2010, ConocoPhillips announced a sweeping overhaul of its executive suite. The executive changes included the departure of the president and chief operating officer, John Carrig, and the chief financial officer, Sigmund Cornelius, as well as two senior level vice presidents. ConocoPhillips spokeswoman Cathy Cram said the changes are part of a plan to provide for a smooth transition in anticipation of Mulva’s retirement. “You can assume the next leader will come from this team,” Cram said. “They’ve been taking a lot of steps to position the company as well as they can for Mulva’s successor,” said Phil Weiss, an energy analyst with Argus Research who said he was pleased the company had lined up management with strong operations experience. “One of the biggest issues that many people believe Conoco faces is a somewhat lackluster production portfolio, as compared to other large integrated companies,” he said. “I was of the opinion that to have someone with an operating background would be better than somebody that doesn’t.”[85]

Tom Fowler reported in FuelFix on October 7, 2010 that the management team reporting to Mulva at the end of the shakeup consisted of:

  • Alan Hirshberg, senior vice president, planning & strategy; formerly vice president, worldwide deep-water and Africa projects, for Exxon Mobil;
  • Greg Garland, senior vice president, exploration and production-Americas; formerly president and CEO of Chevron Phillips Chemical Co;
  • Jeff Sheets, senior vice president, finance and chief financial officer; formerly senior vice president, commercial and planning and strategy;
  • Willie C.W. Chiang, senior vice president, refining, marketing & transportation, adding responsibility for the company’s commercial business activities;
  • Ryan Lance, senior vice president, exploration and production, international, and
  • Larry Archibald, senior vice president, exploration and business development, continuing in those roles.[86]

Tom Fowler reported in FuelFix on October 7, 2010 that since 2006 about a dozen executive-vice-president-level staff members moved on from ConocoPhillips, for a wide range of reasons and that a number of observers note there’s been an oversized churn of talented executives from ConocoPhillips who one might have expected to stick around longer. According to Fowler some observers think the turnover may have more to do with the command-and-control management style of Chairman and CEO Jim Mulva than the day-to-day stress of working at an oil major. “It sounds like the head coach firing all the assistant coaches for a bad season, when it’s really the head coach who’s the problem,” said one analyst. A former ConocoPhillips executive puts it another way: The company is seen by many as a major international corporation with an Oklahoma mentality (he’s referring to the Bartlesville, Okla. roots of Phillips Petroleum, where Mulva worked when the firm merged with Conoco in 2002). "The latest round of departures is to clear the way for a likely successor to Mulva, who is expected to leave in a couple of years," writes Fowler. "It appears outgoing COO John Carrig didn’t have the operations background the company wanted to fill that role."[87]

Brian Youngberg, an analyst with Edward Jones, says Garland's selection as CEO of Phillips was likely due to Garland's experience as chief executive officer of Chevron Phillips because he brings a wider view to Phillips including chemicals, the likely growth engine for the downstream company. Youngberg said Phillips will continue to de-emphasize refining over time, so "having someone with a broader background like Garland makes sense." ConocoPhillips brought in Garland in 2010 to oversee exploration and production in a management shake-up that included the retirement of former Chief Operating Officer John Carrig, who had been seen as Mulva's successor.[88]

Garland, who formerly headed Chevron Phillips Chemical, was selected to head the new company over Willy Chiang, senior vice president of ConocoPhillips' refining division.[89] Oxy reported on May 23, 2012 that Chiang left Phillips 66 and went to work as Executive Vice President, Operations at Occidental Petroleum Corporation with responsibility for oversight of Occidental’s Midstream businesses.[90] Kristen Hays wrote at Reuters on October 7, 2011 that according to Deutsche Bank analyst Paul Sankey "we believe that Chiang sees himself as a future CEO, and he would have to find that role in a different company."[91]

Bartlesville a Special Place for Garland

The Tulsa World reported on September 12, 2012 that Garland spoke on September 11, 2012 at a packed Bartlesville Area Chamber of Commerce Forum at the city's community center downtown carrying on a tradition started several years ago by his predecessor, ConocoPhillips CEO Jim Mulva. Garland was adamant that Bartlesville's value as a global web center, combined with its heritage as home city of the original Phillips Petroleum Co. always make it important to the company's future plans. "We have deep roots here," Garland said adding that he visits the company's local operations several times a year. "It's a cost-efficient place for us to do business. I think we made the right decision." Garland noted that office space is almost maxed out locally, so he does not see more than "modest growth" adding to the 2,000 jobs Phillips 66 already has in Bartlesville. Garland was recruited out of Texas A&M by Phillips and lived many years in Bartlesville with his wife and four children.[92]

The Bartlesville Examiner-Enterprise reported on September 12, 2012 that Garland went to work for Phillips 66 as his first job out of college because of Bartlesville. “I picked this company because of Bartlesville. Four times over the course of 32 years I’ve lived here. We have good memories of Bartlesville, Oklahoma, and it’s always going to be a very special place to me personally," said Garland. “As we were approaching the repositioning and spinning Phillips 66 out of ConocoPhillips, there was never any question that Bartlesville would continue to be a strategic and important part of our company, in the support of our company operations, for a very long time."[93]

Conoco the Only Company That Didn't Offer Garland a Job

In an anecdote that reveals Garland's humorous side and long memory, Garland told members of the Bartlesville Chamber of Commerce during his speech in September 2012 that when Garland was looking for his first job as a chemical engineer after graduating with honors from Texas A&M in 1980, Garland interviewed with 17 companies but only received job offers from 16 of the companies. More than thirty years later, Garland was still able to quote from memory to his Bartlesville audience the contents of the rejection letter he received from the only company that did not offer him a job. According to Jessica Miller writing in the Bartlesville Examiner-Enterprise, when Garland disclosed the name of the one company that did not offer him a job, "his revelation of the company — Conoco — garnered laughter from the audience."[94]

Garland Recognizes Contribution of E. W. Marland

ConocoPhillips announced on November 11, 2011 that the new independent downstream company created through its previously announced strategic repositioning would be named Phillips 66. When Phillips went public on May 1, 2012, Garland recognized the contribution of Frank and L.E. Phillips and the company's "birthplace" in Bartlesville, Oklahoma in 1917. "With a history that goes all the way back to petroleum industry "birthplace," in Bartlesville, Oklahoma in 1917, the company will be a leading independent company with refining, marketing, midstream and chemicals businesses operating across the globe. "Phillips 66 has strong brand recognition and value and it provides a link between our rich history and our exciting future," said Greg Garland, designated chairman and chief executive officer of Phillips 66. "Our name reflects an independent spirit and drive--two attributes of our future company."[95] According to the ConocoPhillips web site "the name Phillips 66 was chosen [for the new downstream company] because it has strong brand recognition and value, which allows us to link our rich history and our exciting future. The name represents the independent spirit and drive that will be part of the culture of Phillips 66."[96] The new company's name capitalizes on the public awareness and gives tribute to history, Garland added.[25]

On August 27, 2013 Garland spoke to the Bartlesville Chamber of Commerce and said that the reputation and success of Phillips were built from the “giants” who first created the company and recognized E. W. Marland's contribution for the first time. “We are standing on the shoulders of giants,” said Garland. “People like E. W. Marland, who started Marland Oil in 1911, and Frank and L. E. Phillips that started Phillips Petroleum in 1917. I could go on and on and list the giants that have come before us that have so well positioned this company for the success that we enjoy today.”[97]

Other Board Memberships

On October 16, 2013 Amgen Inc. announced the appointment of Garland to the Company's Board of Directors. Garland will serve on the Governance and Nominating Committee and the Audit Committee of the Board. "We are pleased to welcome Greg Garland to the Amgen Board," said Robert A. Bradway, Chairman and CEO of Amgen. "In addition to his leadership experiences as a chief executive officer, Greg brings more than 30 years of international experience in a highly regulated industry. At a time when Amgen is expanding its global presence to serve more patients, we look forward to Greg's contributions to the Board."[98]

Garland's Compensation as CEO of Phillips

Businessweek reports that as of the fiscal year 2012 Garland's Total Annual Calculated Compensation is $14,423,038 including his salary and stock options.[99]

John Lowe, Member of the Phillips 66 Board of Directors

Apart from Greg Garland, J.E. (John) Lowe is the only present or former employee of ConocoPhillips serving as a member of the Board of Directors of Phillips 66. Lower was executive vice president, planning, strategy and corporate affairs, of ConocoPhillips with responsibility for emerging businesses, as well as government affairs and communications. Lowe previously served as senior vice president, corporate strategy and development and was responsible for the forward strategy, development opportunities and public relations functions of Phillips Petroleum Company. Lowe was named to this position in 2001 after serving as senior vice president of planning and strategic transactions in 2000 and vice president of planning and strategic transactions in 1999. Lowe currently serves on the board of directors for Chevron Phillips Chemical Company, Duke Energy Field Services and the Houston Museum of Natural Science.

Lowe was born in 1959 in Oskaloosa, Iowa. Lowe received a bachelor of science degree in finance and accounting from Pittsburg State University in Pittsburg, Kansas, in 1981. Lowe is a certified public accountant.[100]

Board of Directors

On April 16, 2012 Phillips 66 announced the names of the seven members of its future board of directors. Greg Garland will serve as Phillips 66' chairman, president and CEO. He most recently served as senior vice president, Exploration and Production -- Americas for ConocoPhillips. The other members of the board will be:

  • Greg Garland, Phillips 66 chairman, president and CEO
  • John Lowe, who has served as assistant to the CEO of ConocoPhillips. Lower currently serves as assistant to the CEO of ConocoPhillips, a position he has held since 2008. He previously held a series of executive positions with ConocoPhillips, including executive vice president, Exploration & Production, from 2007 to 2008 and executive vice president, Commercial, from 2006 to 2007. He currently serves on the board of Agrium Inc.
  • J. Brian Ferguson, retired chairman and CEO of Eastman Chemical Co. Ferguson served as chairman of Eastman Chemical Company (Eastman) in 2010 until his retirement and as CEO of Eastman in 2009. He became the chairman and CEO of Eastman in 2002. He currently serves on the boards of Owens Corning and NextEra Energy Inc.
  • William Loomis Jr., an independent advisor who formerly served as CEO of Lazard LLC . Loomis has been an independent financial advisor since 2009. He was a general partner and managing director of Lazard Freres & Co. from 1984 to 2002, the CEO of Lazard LLC from 2000 to 2001 and a limited managing director of Lazard LLC from 2002 to 2004. He currently serves on the boards of Pacific Capital Bancorp and Limited Brands Inc., and is also a senior advisor to Lazard LLC and China International Capital Corporation.
  • Harold McGraw III, current chairman, president and CEO of The McGraw Hill Companies. McGraw currently serves as chairman, president and CEO of The McGraw-Hill Companies. Prior to his service as chairman, he served as president and CEO from 1998 to 2000 and president and chief operating officer from 1993 to 1998. He currently serves on the boards of The McGraw-Hill Companies, ConocoPhillips and United Technologies Corporation.
  • Glen Tilton, chairman of the Midwest and was formerly chairman and CEO of United Airlines. Tilton currently serves as chairman of the Midwest of JPMorgan Chase & Co. He was chairman and CEO of United Airlines Inc. from 2002 to 2010, having previously spent more than 30 years in increasingly senior roles with Texaco Inc. including chairman and CEO in 2001. He currently serves on the boards of United Continental Holdings Inc. (as non-executive chairman), Abbot Laboratories and Corning Inc.
  • Victoria Tschinkel, chairwoman of 1000 Friends of Florida. Tschinkel served as state director of the Florida Nature Conservancy from 2003 to 2006, was senior environmental consultant to Landers & Parsons, a Tallahassee, Florida law firm, from 1987 to 2002, and was the secretary of the Florida Department of Environmental Regulation from 1981 to 1987. She currently serves on the board of ConocoPhillips.
  • Dr. Marna C. Whittington, chief executive officer of Allianz Global Investors Capital, a diversified global investment firm, from 2002 until her retirement in January 2012. Whittington was chief operating officer of Allianz Global Investors, the parent company of Allianz Global Investors Capital, from 2001 to 2011. Prior to that, she was managing director and chief operating officer of Morgan Stanley Asset Management. Whittington started in the investment management industry in 1992, joining Philadelphia-based Miller Anderson & Sherrerd. The election of Dr. Whittington on May 9, 2012 increases the total number of Phillips 66 directors to eight.[101]

"We have assembled a strong board of directors, consisting of individuals with appropriate skills and experiences to meet their governance responsibilities and contribute effectively to our company," said Garland. "Our board reflects a range of talents, diversity and expertise, particularly in the areas of accounting and finance, domestic and international markets, government and regulatory affairs, management and leadership and petroleum-related industries, sufficient to provide sound and prudent guidance with respect to our operations and interests."[102][103]

Management and Governance Effectiveness at Phillips 66

December 3, 2012: Standard and Poor Judges Management and Governance to be 'Fair' at Phillips 66

Standard and Poor reported on December 3, 2012 that they judged Phillips 66 Co.'s management and governance to be 'fair' based on a consolidated approach to the Phillips 66 entities. "While the best positioned of Phillips 66 Co.'s refineries are highly competitive, the overall quality of its operations is mixed, with some facilities being, in our view, candidates for divestiture or closure over the next few years."[104]

Financial Stability of Phillips 66 and Risk Management

August 26, 2014: Moody's Upgrades Phillip from Baa1 to A3

Moody's reported on August 26, 2014 that they have upgraded Phillips from Baa1 to A3. The rating outlook is stable. "The upgrade of Phillips 66's senior unsecured ratings to A3 reflects the company's clearly delineated strategic focus and capital structure since its spinoff from ConocoPhillips (A1 stable) in May 2012," said Terry Marshall, Moody's Senior Vice President. "The company's significant equity investments in Chevron Phillips Chemical Company LLC (CPChem, A3 positive) and DCP Midstream LLC (Baa2 stable) add a material credit enhancement to Phillips 66's large and diversified refining assets." According to Moody's "Phillip 66's A3 senior unsecured rating is driven by the scope and diversity of its refining business, which represents about half of its proportionate EBITDA, coupled with the further diversity provided by ownership of fast-growing chemicals and midstream businesses and moderate financial leverage. The equity investments add business diversification and are two of the three principal growth vehicles for Phillips 66 along with its in-house midstream and transportation businesses. The rating is further supported by excellent liquidity, and management's commitment to balancing shareholder returns with a strong balance sheet."[105]

June 6, 2013: A.M. Best Affirms Excellent Rating for Phillips' Captive Insurer

The Fort Mills Times reported on June 6, 2013 that A.M. Best Co. has affirmed the financial strength rating of A (Excellent) and issuer credit rating of “a” of Spirit Insurance Company of Burlington, VT, the captive insurer for its ultimate parent, Phillips 66. "Business written by Spirit has a history of strong underwriting results and operating returns. The company’s loss experience has remained favorable due in part to its strong loss control program at the parent. Phillips 66 will conduct periodic reviews of Spirit’s potential loss exposures through a specialist in industrial risks," reads the report.[106]

However the report also observes that a single occurrence could result in a large loss that approaches Spirit’s limits, that partially offsetting A.M. Best's positive rating factors are Spirit’s exposure to large losses due to the limits offered on its policies as well as its significant dependence on reinsurance protection and that although the majority of Spirit’s capital is loaned to its parent, there is limited counterparty risk due to the affiliation of the two companies.[107]

December 3, 2012: Standard and Poor Assigns BBB/Stable/A-2 Corporate Credit Rating, Judges Financial Risk Profile as 'Intermediate'

Standard and Poor reported on December 3, 2012 that they had assigned a BBB/Stable/A-2 corporate credit rating to Phillips 66 Co. based on a consolidated approach to the Phillips 66 entities. "The rating on Phillips 66 Co. reflects Standard & Poor's assessment of the company's business risk profile as 'satisfactory' and financial risk profile as 'intermediate' (as our criteria define these terms)," says the report prepared by Primary Credit Analyst Mark Habib. "We view the refining sector as having significantly higher-than-average industry risk, given its exceptional degree of volatility and fixed- and working-capital intensity. Notwithstanding the relatively favorable market conditions at times over the past year, we view long-range industry fundamentals as difficult given persisting excess production capacity globally and a secular decline in demand for some key transportation fuel products in developed markets."[108]

Government Relations

Phil Brady, the president of National Automobile Dealers Association, was named senior vice president of government affairs for Phillips 66 on July 30, 2012. Brady, who will be based in Washington, will be responsible for the company's federal, state and international policy and governmental affairs efforts.[109] Photo: Businesswire

February 20, 2013: Phillips Retains Van Ness Feldman as New DC Lobbyists

Legal Times reported on February 20, 2013 that Phillips has retained Van Ness Feldman as their first outside firm to lobby in Washington to advocate for it on oil and gas industry matters, tax reform and the looming $85 billion in spending cuts known as the sequester, according to lobbying registration paperwork filed with Congress.[110]

February 20, 2013: Phillips Spent $1.5 million Lobbying Federal Government in 2012

Legal Times reported on February 20, 2013 that according to congressional records, Phillips has spent $1.5 million on federal government advocacy since it submitted lobbying registration paperwork to Congress in June 2012 and deployed three of its employees to lobby for it. In 2012 Phillips lobbied on U.S. Environmental Protection Agency issues concerning the oil and gas industry, the EPA's renewable fuel standard program and refinery rulemaking.[111]

November 14, 2012: Greg Garland Expects More Government Regulations During Second Obama Term

Fuel Fix reported on November 14, 2012 that Greg Garland expects President Barack Obama’s second term to bring a wave of regulations on their industry that portends another four years of policies that will reduce demand for their refineries’ petroleum-based fuels. “With the election now decided, I see a very active regulatory environment for the next four years,” says Garland. "There’s no question, between renewables and CAFE standards, over the next 10 to 20 years, you’re looking at a 10 to 20 percent reduction in gasoline demand. That’s something that concerns us.” Garland and Marathon Petroleum CEO Gary Heminger said new and expanded federal regulations, including the Renewable Fuel Standard and the Corporate Average Fuel Economy (CAFE) standards, have cost their companies billions over the years while cutting use of their products.[112]

July 30, 2012: Phil Brady Named Top Lobbyist for Phillips 66

The Detroit News reported on July 30, 2012 that Phil Brady, the president of National Automobile Dealers Association, has been named senior vice president of government affairs for Phillips 66. Brady, who will be based in Washington, will be responsible for the company's federal, state and international policy and governmental affairs efforts. Brady has previously served in senior White House positions for President Ronald Reagan and President George H.W. Bush and also served as general counsel at the U.S Transportation Department, and in senior positions with the U.S. Justice Department and Congress.[113] “It is important that our key constituents understand the economic value that energy companies like Phillips 66 bring to our country as a U.S. manufacturer, and Phil will help us to effectively share that story,” says Phillips 66 CEO Greg Garland. “Over just the past few months as an independent company, Phillips 66 has already put together an exceptional management team and strategy to grow in meeting the energy needs of this country,” says Brady. “I look forward to joining the team to help re-introduce this iconic energy company to our government leaders.”[114]

Public Relations and Media Relations

January 2, 2013: Gregg Laskoski at US News and World Report is Critical of Lack of Tranparency at Phillips 66

Gregg Laskoski wrote at US News and World Report on January 2, 2013 that after Reuters reported that some 7,700 gallons of fuel spilled from Phillips 66's Bayway refinery in Linden, N.J., after Hurricane Sandy in November, 2012, New Jersey environmental protection officials said they were not made aware of a major spill at the Bayway plant, and the refinery failed to respond to inquiries from Reuters reporters. "Too many times, history has shown us, the Phillips 66 response or lack thereof characterizes the standard practice of the oil industry. Refineries often fail or are slow to communicate problems that create significant disruptions to fuel supplies and spikes in retail gasoline prices. More often than not, scant information is provided reluctantly, if at all," writes Laskoski. "When such things occur is silence from refineries acceptable? Or does our government and the electorate who put them there have a right to know what's really going on? "[115]

November 5, 2012: Motor Trend Journalist Takes Money To Be Spokesperson For Phillip 66

Matt Hardigree reported on Jalopnik on November 5, 2012 that Motor Trend's Jessi Lang is being paid to represent oil company Phillips 66 as a spokesperson who is trying to help influence young people to buy their gas, "something Motor Trend doesn't appear to be telling its readers." Last month a PR firm hired by Phillips 66 reached out to reporters with the results of a survey designed to evaluate the buying habits of "millenials" and offered a quote from Lang, who they identified as a spokesperson and host of Motor Trend's weekly automotive news roundup "Wide Open Throttle" on YouTube. "Taking payment from a potential newsmaker is a generally frowned upon practice, but Lang, and the PR firm representing Phillips 66, say Motor Trend approves of her simultaneously representing an automotive publication and a company that's part of the automotive industry," writes Hardigree who asked Lang if it was proper for her to take money from Phillips 66 and work as a journalist for Motor Trend at the same time. "I get paid by Motor Trend to be a journalist and to help educate others and that doesn't at all call into question my integrity as a writer," said Lang adding that "anyone within a capitalist society" should be compensated for their work. Motor Trend's Editor-in-Chief Ed Loh declined to comment if there is a conflict of interest. "In the case of Lang, Motor Trend, and Phillips 66 it seems they've skipped ahead from trying to woo car writers with free trips to paying them outright," writes Hardigree.[116]

September 6, 2012: Motor Trend's Jessi Lang says Drivers Can Clean Their Engines with Top Tier Gas Like Phillips 66

PR Newswire reported on September 6, 2012 that Jessi Lang, host of Motor Trend's "Wide Open Throttle" and Phillips 66 spokesperson, says that "millennials think they're saving money by seeking out cheaper gas, but what they don't realize is that the unbranded gasoline they're buying actually can cost them money in the long run by compromising their fuel economy and causing build-up in their engine. "By using branded TOP TIER gas like Phillips 66, 76 and Conoco, these drivers can clean up their engines and accrue significant savings over time -- especially now that these brands have had the detergent additive treat rate increased by more than 25 percent in all fuel grades."[117]

New Phillips 66 Headquarters

November 22, 2013: Phillips Breaks Ground on New Headquarters Building

The Houston Business Journal reported on November 22, 2013 that Phillips broke ground on November 22, 2013 on its new 1.1 million-square-foot corporate campus in the Westchase District that will house all of the company’s 1,800 Houston-area employees once construction is finished in about three years.[118]

July 23, 2013: Phillips Shares Conceptual Rendering of New HQ

The Houston Chronicle reported on July 23, 2013 that Phillips' new headquarters, still in "conceptual design phase,” will include about 1.1 million square-feet of space in multiple buildings, along with a cafeteria, fitness center, coffee shop and conference center. The new facility, located on about 14 acres, will provide office space for the 1,800 employees that work for the company in Houston. Construction is expected to start by the end of the year. We are excited about our new state-of-the art Phillips 66 headquarters facility, which when built, will provide a location for all of our Houston employees to work together at one location, and it will provide our global employees with a place to meet, train and grow,” said spokeswoman Janet Grothe.[119]

September 12, 2012: Phillips Selects Site for New Global Headquarters

Phillips reported on September 9, 2012 that the company will build its new global headquarters at a 14-acre site located off Beltway 8 West, between Westheimer Road and Briar Forest Drive. “We searched for several months for the right site to build a headquarters campus where our employees and future employees can come together to work, and develop their skills and talents,” said Greg C. Garland, chairman and chief executive officer of Phillips 66. “This property is conveniently located in the Westchase District and a location that aligns with our commitment to making our company a great place to work.” Once ground is broken at the new site, construction is expected to take between 24-36 months.[120]

July 9, 2012: Interim Headquarters Selected

CSPNet reported on July 9, 2012 that Janet Grothe, senior adviser for health, safety and the environment at Phillips 66, confirmed that Phillips 66 has settled on a temporary headquarters in the Pinnacle Westchase building near ConocoPhillips' home office in the Houston "Energy Corridor." ConocoPhillips' headquarters is about eight miles away. In March, 2012 it sent an email to employees that said the new headquarters would be constructed near Interstate 10, within 10 miles of ConocoPhillips' current headquarters. The Pinnacle Westchase building fits that general description.[121]

March 20, 2012: Phillips 66 Headquarters to be Located in Houston

Houston Business Journals reported on March 20, 2012 that according to an email sent to employees, the new headquarters of refining and marketing spin-off company Phillips 66 will be near Interstate 10 and Beltway 8, within 10 miles of ConocoPhillips' current headquarters at 600 N. Dairy Ashford Road. The decision to locate in Houston was made because the company’s oil and gas infrastructure is already present. During the two- to three-year construction period on the new facility, Phillips 66 employees will be located in temporary locations in the company’s current space.[122]

Bartlesville Technology Hub

August 13, 2014: Phillips Has No Plans to Close Any Bartlesville Facilities

Nathan Thompson reported in the Bartlesville Examiner-Enterprise on August 13, 2014 that Greg Garland told a group of community leaders at the Bartlesville Regional Chamber of Commerce forum on August 12, 2014 that the company’s commitment to Bartlesville continues and that there are no plans to close any of the Bartlesville facilities. “Bartlesville is a special and unique place,” said Garland. “It has a rich part of our heritage and our legacy. It is important today. It will be important in the future of Phillips 66… A big part of the day-to-day operations and the successes of Phillips 66 are born by the people here in Bartlesville.” Garland mentioned an expansion that is currently underway at the Research Center to continue the development of polyethylene technologies. We also have a world-class research facility here in Bartlesville,” Garland said. “That differentiates us from a Valero (Energy Corporation), or a Marathon (Oil Corporation). It is very unique to our space (in the market).” Even with expansion at the Houston headquarters, Garland said the the space is already at capacity — and the Bartlesville facilities continue to be full as well.[123]

August 13, 2014: Phillips Pledges $1,700,000 to Support STEM Education in Bartlesville

The Tulsa World reported on August 13, 2014 that Phillips will be giving $1.7 million to Bartlesville Public Schools to create new innovative laboratories on three school campuses to support science, technology, engineering and math classes and research projects. “We want to create a place where our students will come and be excited, be challenged and hopefully be encouraged to follow a career at a place like Phillips 66,” he said. “We want to put the right kind of tools in the hands of students in Bartlesville so they can be more successful.”[124]

The funds came through a Phillips 66 Signature Community Initiative grant application submitted to the company under an effort spearheaded by Scott Bilger, a Bartlesville school board member and Phillips 66 employee, and Granger Meador, a physics teacher who heads up Bartlesville High’s science department. The new laboratories and major new course offerings will be at the high school, along with Madison and Central Middle Schools. “We are just really, really excited about the opportunity this is going to provide our students,” Superintendent Gary Quinn said. “It cannot be overstated what this is going to mean to our students.” Phillips 66 has about 2,000 workers in Bartlesville.[125]

September 1, 2013: Garland Praises Bartlesville

The Bartlesville Examiner-Enterprise reported on September 1, 2013 that Garland praised the Bartlesville and state of Oklahoma for its “rich heritage” and as a source of employee talent it provides to the company. “Oklahoma is a special place to Phillips 66,” Chairman/CEO Greg Garland told a crowd at the first forum in a series hosted by the Bartlesville Regional Chamber of Commerce held Tuesday afternoon. “This is where it all started for us. It became a rich heritage.” Of the company’s 13,500 employees worldwide, Garland said Bartlesville and Houston are the two largest population centers for employees. The headquarters in Houston employs approximately 1,800. “We have nearly three thousand employees in Oklahoma today — two thousand right here in Bartlesville,” he said. “… It’s where our global services are headquartered out of, and really the service is a machine that runs Phillips 66 each and every day, so it is a very important place.” Garland also said the reputation and success of the company were built from the “giants” who first created it, and that success continues because of those giants. “We are standing on the shoulders of giants,” said Garland. “People like E. W. Marland, who started Marland Oil in 1911, and Frank and L. E. Phillips that started Phillips Petroleum in 1917. I could go on and on and list the giants that have come before us that have so well positioned this company for the success that we envoy today.”[126]

October 27, 2012: Bartlesville Research Center Dodges a Bullet

Rod Walton reported in the Tulsa World on October 27, 2012 that with Phillips decision not to build a long-planned major research and training center in Colorado, Bartlesville employees are breathing a sigh of relief because many feared that their piece of the company might be headed to the Rocky Mountains. "Any time a major employer in the community makes a sizable investment in another location, it generates concerns," said David Wood, president of Bartlesville Development Corp. "The formal announcement that Phillips 66 will be selling the Louisville property puts this issue to rest." The Bartlesville research center has a long history. Phillips Petroleum Co. had its headquarters in the city from the early 20th century until the merger with Conoco Inc. in 2002. Now it looks like the research center is safe and sound for some years to come. "Without being complacent, indications are that the research center will continue to be a large, high-wage employer in Bartlesville for the foreseeable future," Wood said. "We couldn't be more pleased with that outcome."[127]

September 12, 2012: Bartlesville a Special Place for Garland

The Tulsa World reported on September 12, 2012 that Garland spoke on September 11, 2012 at a packed Bartlesville Area Chamber of Commerce Forum at the city's community center downtown carrying on a tradition started several years ago by his predecessor, ConocoPhillips CEO Jim Mulva. Garland was adamant that Bartlesville's value as a global web center, combined with its heritage as home city of the original Phillips Petroleum Co. always make it important to the company's future plans. "We have deep roots here," Garland said adding that he visits the company's local operations several times a year. "It's a cost-efficient place for us to do business. I think we made the right decision." Garland noted that office space is almost maxed out locally, so he does not see more than "modest growth" adding to the 2,000 jobs Phillips 66 already has in Bartlesville. Garland was recruited out of Texas A&M by Phillips and lived many years in Bartlesville with his wife and four children.[128]

The Bartlesville Examiner-Enterprise reported on September 12, 2012 that Garland went to work for Phillips 66 as his first job out of college because of Bartlesville. “I picked this company because of Bartlesville. Four times over the course of 32 years I’ve lived here. We have good memories of Bartlesville, Oklahoma, and it’s always going to be a very special place to me personally," said Garland. “As we were approaching the repositioning and spinning Phillips 66 out of ConocoPhillips, there was never any question that Bartlesville would continue to be a strategic and important part of our company, in the support of our company operations, for a very long time."[129]

May 1, 2012: Phillips Has 'Deep Roots' in Bartlesville

ConocoPhillips CEO Ryan Lance and Phillips 66 CEO Greg Garland reassured its employees in Oklahoma in an op-ed they wrote for the Bartlesville Examiner-Enterprise titled "ConocoPhillips, Phillips 66 have deep roots in Bartlesville" that "ConocoPhillips and Phillips 66 together employ nearly 4,500 people in Oklahoma, an increase in recent years. Going forward, we will both maintain Global Services Centers in Bartlesville providing essential finance, information technology and other vital support to our personnel around the world. Elsewhere, Phillips 66 will continue operating the Ponca City Refinery, by far Oklahoma’s largest, and will remain the leading gasoline marketer. ConocoPhillips will continue producing oil and natural gas from the Anadarko Basin and the Panhandle area." Lance and Garland added that "we continue encouraging both current and incoming employees to maintain our proud tradition of community service. Bartlesville is a special place to work, live and raise a family, and we want to help keep it that way. This is an exciting time for ConocoPhillips and Phillips 66. All of our Oklahoma communities are great homes to our people and businesses, and we both look forward to long and bright futures here."[130]

April 29, 2012: Jim Mulva is a "True Friend of Bartlesville

The Bartlesville Examiner-Enterprise editorialized on April 29, 2012 that Jim Mulva has "proven to be a true friend to the City of Bartlesville."[131] According to Rod Walton, Bartlesville was a big beneficiary of the ConocoPhillips merger and seems to have lived a charmed life economically over the past ten years. Although the home of Frank Phillips doesn't employ 9,000 company workers as it did in the early days, the 1,000 employees added since 2002 have kept downtown buildings such as Plaza and Adams full of mid-level computer, credit and other support personnel. But now Bartlesville operations are in flux and there is much uncertainty about the future. "All employees are being moved to one of the two companies, with co-workers who once sat side to side now literally shifted to separate buildings," writes Walton. ConocoPhillips will employ about 1,700 people in the downtown Plaza and Frank Phillips Tower Center buildings and in the Adams warehouse. Phillips 66's Bartlesville workforce will number 1,900 people, housed in the main Adams and Phillips buildings and the Research and Development Center on the west edge of the city.[132] The Bartlesville Examiner-Enterprise reported on April 29, 2012 that the "split or 'repositioning' as it has been called by company officials, has required many existing local employees to shift jobs and even physically move from one building to another within the extensive downtown Bartlesville office complex" adding that "while no one can predict the future with perfect clarity, Bartlesville appears no worse for the wear during this complex process."[133]

Litigation and Legal Issues with Phillips

August 5, 2014: Yellowstone County Distributes Protested Taxes From Phillips 66

The Billings Gazette reported on August 5, 2014 that with the settlement of several major tax disputes, millions of dollars in protested taxes have been distributed throughout Yellowstone County in one-time payments. Three of the recently resolved tax disputes involved Charter Communications, which protested tax years 2010-2013; Verizon Wireless, which protested years 2009-2013; and Phillips 66, which protested years 2010-2012. Phillips 66 protested a total of about $6.48 million and received a refund of $2 million, or about 32 percent. Tax protests remaining unresolved include about $3.29 million from Phillips 66 for 2013. While it is good to have the disputes resolved and taxes disbursed, said Yellowstone County Finance Director Scott Turner, there will be an overall decrease in the county’s base value because of the settlements. That means one mill levied will raise fewer tax dollars.[134]

July 30, 2014: Judge Grants Phillips Pipeline Access From Canada to Billings

Cheminfo reported on July 30, 2014 that Phillips will be able to continue operating three pipelines that transport crude oil from Canada after a judge granted access to the final land parcel whose easement had expired. Phillips 66 had negotiated access agreements with about 600 landowners and the tribe where the pipelines cross the Blackfeet Reservation, but filed a condemnation complaint in federal court against the owners of one parcel when negotiations failed. U.S. District Judge Sam Haddon ruled in favor of Phillips 66 and ordered the company to pay the landowners $1,450 in compensation for access to the final parcel concluding that the pipeline locations are reasonable and they are necessary for public use. The company said relocating the 8-inch and two 12-inch pipelines would have cost $2 million.[135]

May 28, 2014: International Tribunal Supports Phillips' Takeover of Coker at Sweeny Refinery

Fuelfix reported on May 28, 2014 that the International Chamber of Commerce’s Court of Arbitration has upheld Phillips 66’s right to exercise a call option in 2009 and assume Petroleos de Venezuela SA's (PDVSA) interest in Merey Sweeny LP. The partnership owns a 70,000-barrel- per-day delayed coker and related facilities at the refinery. “Certain defaults by PDVSA with respect to supply of crude oil to the Sweeny refinery triggered the right to acquire PDVSA’s 50 percent ownership interest,” says Phillips spokesman Rich Johnson. State-owned PDVSA initiated arbitration with the ICC, claiming the exercise of the call right was invalid. “Since there is not a lot of crude imported into the U.S. anymore, this decision hurts PDVSA on several fronts. First, the company loses the refinery and production, and secondly it loses the opportunity to bring crude into the refinery,” says Carl Larry.[136]

April 16, 2014: Health and Safety Specialists at Santa Maria Refinery Claim They Were Punished for Unionizing

Colin Rigley reported at the New Times on April 16, 2014 that health and safety specialists at Phillips' Santa Maria Refinery allege Phillips officials warned them in January, 2012 that if they joined the United Steelworkers Union they would lose hours, be stripped of managerial powers, and as many as three of them could lose their jobs. “The insinuation here was that, ‘We may not need all of you,’” one of the specialists said in a written statement submitted to the labor board.[137]

When the newly unionized group went to the bargaining table in December, 2012, the specialists say in a complaint filed with the National Labor Relations Board that Phillips management carried out its threats. Phillips' proposed contract on December 10, 2012 allegedly included the threatened reductions of hours and responsibilities. The refinery’s health and safety specialists serve as organizers of the plant’s emergency response crew. Though none of the health and safety specialists was fired, three of them were transferred from their primary roles into regular plant operations, according to the complaint. The union is seeking to recover lost wages for the health and safety specialists, and to have their original job functions restored. Those lost wages totaled as much as $17,000 per year for some employees. In its complaint, the union further alleges that Phillips 66 bargained in bad faith when it imposed the 2012 contract.[138]

Phillips 66, in its responses to the union’s complaint, said the company reduced the five health and safety specialists to two as part of regular staffing changes, and the job functions were distributed across other personnel. “There is no value more important in our company than ensuring the safety of everyone who works at our sites as well as the safety of our neighboring communities,” Phillips spokesman Dennis Nuss said in a written statement to New Times. “In 2012, Phillips 66 redistributed certain safety-related functions and responsibilities among personnel at the Santa Maria Refinery, and there were no staff reductions. These changes have helped maintain and improve the refinery’s high standards for safety performance.”[139]

In addition to the reduced contract for health and safety specialists, the union alleges that the company violated federal labor laws when it implemented “news media guidelines” in October 2012. Those guidelines instructed employees not to speak to news media and, “It is against company policy for anyone but an authorized company spokespersons [sic] to speak to the news media.” The company defends its policy as a routine business practice that violated no labor laws.[140]

March 26, 2014: Phillips Pays $500,000 Fine for Clean Air Violations at Five Refineries

CSP Daily News reported on March 26, 2014 that Phillips will pay a $500,000 penalty for violations of the Clean Air Act at the Sweeny Refinery in Old Ocean, Texas, the Alliance Refinery in Belle Chasse, La., the Wood River Refinery in Roxana, Ill., the Lake Charles Refinery in Westlake, La., the Borger Refinery in Borger, Texas, and several terminals across the country. Phillips also agreed to retire more than 21 billion sulfur credits that could have been used in the production of gasoline, which could potentially lead to significantly less pollution from vehicles. In a administrative settlement agreement, the EPA alleged that the company generated invalid sulfur credits between 2006 and 2012 and that Phillips failed to comply with recordkeeping, reporting, sampling and testing requirements at the five refineries. EPA discovered these violations during facility inspections and through a review of company records, which included the results of third-party company audits required by the Clean Air Act.[141]

March 10, 2014: Phillips Fined $239k for Air Quality Violations at Rodeo Refinery in 2008 and 2009

Denis Cuff reported in the Contra Costa Times that the Bay Area Air Quality Management District announced on March 10, 2014 that it had reached a civil settlement with Phillips for the payment of $230,900 in air pollution penalties for 19 air quality violations at their Rodeo Refinery in 2008 and 2009 that included late or missed flare gas samples, failure to install and inspect required emission controls on the wastewater system, and operating a storage tank while control valves were open.The refinery also exceeded hydrogen sulfide limits in fuel gas. "The air district has the responsibility to ensure that refineries operate their facilities in full compliance of air quality regulations to protect the health of local residents," said Jack Broadbent, the air district's executive officer. "Any violation of these regulations, no matter how minor, will not be tolerated."[142] Officials at Phillips said the company had disclosed most of the violations to the air district and fixed the problems quickly. "We continue to make improvements in our procedures, training and monitoring to minimize if not eliminate the likelihood of recurrence," said Janet Grothe, a spokeswoman for Phillips.[143]

February 28, 2014: Phillips Faces Compliance Hearing for Pollution Monitoring System at Rodeo Refinery

The Contra Costa Times reported on February 28, 2014 that the Contra Costa County Zoning Administrator will hold a compliance meeting on March 3, 2014 on the land use permit of the Phillips 66 Rodeo Refinery to determine if the fence line pollution monitoring system, deemed deficient in October, has been fixed. The system is supposed to function 95 percent of the time, according to an agreement between the refinery and an environmental working group that is a condition of a Clean Fuels Expansion Project. According to the staff report, a contractor found the monitoring system exceeded the 95 percent standard during four months of a 10-month period, and failed to meet the standard during six of those months.[144]

January 29, 2014: Phillips Settles Claim for Water Pollution Violations from Rodeo Refinery

The Contra Costa Times reported on January 29, 2014 that Phillips has agreed to pay $6,000 in fines to the state for exceeding discharge limits for selenium on two different occasions at its Rodeo refinery along San Pablo Bay that occurred on July 2, 2012 and September 5, 2012. Phillips agreed to waive its right to a hearing and to settle the matter under the board's Expedited Payment Program. The settlement is pending acceptance by the board's executive officer following a public comment period that runs until 5 p.m. on February 28, 2014.[145]

January 14, 2014: Phillips Settle Claims of Defrauding Utah State Fund of $25 Million for Cleanups of Leaking Underground Tanks

The Insurance Journal reported on January 14, 2014 that Phillips has paid $2 million to settle allegations it helped itself to Utah’s Petroleum Storage Tank Fund for cleaning up damage from leaking fuel storage tanks even though it had insurance to cover the cleanups. Phillips was said to have relied on the fund for cleanups at 82 service stations. Consistently, these guys were saying, ‘No, we don’t have any insurance,” said Therron Blatter, a branch manager for underground storage tanks at the Utah Division of Environmental Response and Remediation. “Clearly, they did have the insurance.”[146]

According to the Salt Lake City Tribune Phillips was accused of defrauding the Utah’s Petroleum Storage Tank Fund to the tune of $25 million for cleanups associated with leaking underground tanks. In its lawsuit filed in 2012, the division alleged ConocoPhillips collected $25 million in payouts to cover cleanups at 82 service stations by falsely reporting that these sites were not covered by independent insurance. The suit sought to recover this money, plus punitive damages and fines totalling $10,000 for every day ConocoPhillips violated the law. But as lawyers gathered evidence it became apparent some of the claims were not that strong, said Brent Everett, director of the state Division of Environmental Response and Remediation. Officials said they are satisfied with the $2 million settlement, which amounts to less than 10 percent of what they originally claimed was misappropriated.[147][148]

May 31, 2013: Phillips Continues Tax Protest of Billings Refinery

Clair Johnson reported in the Billings Gazette on May 31, 2013 that Phillips paid its second-half 2012 Yellowstone County property taxes of $3.9 million with $1.3 million protested while its long-running tax dispute with the state of Montana continues. Taxes paid under protest are held in an escrow account pending resolution of the dispute. Taxing jurisdictions can demand distribution of the protested taxes but may have to repay the money depending on how the issues are resolved. Phillips 66 appealed its tax assessment to the Yellowstone County Tax Appeals Board, which sided with the company. The Revenue Department then appealed that decision to the Montana State Tax Appeals Board, which has not yet ruled. Another oil refiner, CHS refinery in Laurel, paid $4.08 million, with $1.6 million paid under protest.[149]

April 19, 2013: DCP Pipeline Awaits Approval in Colorado

Steve Block reported in the Trinidad Times on April 19, 2013 that a proposed 13.75-mile pipeline section planned to go through northeast Las Animas County, Colorado is awaiting approval from the county planning commission and then the county board. As designed, the pipeline has a capacity of 150,000 barrels per day, which could be readily expanded to approximately 230,000 barrels per day and could begin service in the fourth quarter of 2013. Permit land agent Mike Rutherford said the company thought it only needed a special-use permit from the county for the project, which it had in hand before the state gave its final approval. It later turned out that it also needed a 1041 permit under county regulations. “We thought it was just going to be an SUP only and we already had that,” Rutherford said. “I guess if we’d known it was going to be a full-blown 1041, we could have gotten that four or five months ago, and been through this temporary approval process months ago.” The permitting process requires public notice of the application, followed by a 30-day period for comment from interested parties to the county board. Meanwhile, the application must work its way through the planning department approval process. Fourteen days after that, the planning commission and county board can approve the application at the same time, thus speeding up the process. Dixie Newnam, county attorney, said the entire process could take 45 – 60 days from the time the application was submitted.[150]

April 2, 2013: DCP Midstream Withdraws Plan to Build Megatank in Searsport

Abigal Curtis reported in the Bangor Daily News on April 2, 2013 that DCP Midstream is withdrawing thire application to build a controversial liquid propane gas terminal and storage tank project at Mack Point in Searsport. “We really, really wanted to do business in Maine,” said Roz Elliott, spokesperson for Denver-based DCP Midstream, citing the Searsport Planning Board’s initial meetings last week to review the $40 million project before issuing a final decision later this spring. “It’s unfortunate, but with these local circumstances, we don’t forsee doing future capital development in Maine.” The board members found that certain elements of the project did not meet the town’s ordinances. “Very extensive time, resources, passion — we really believed in this,” Elliott said, adding that the company decided to withdraw the application “as a courtesy” to the Searsport Planning Board.[151]

January 2, 2013: California Sues Phillips for Environmental Violations at Gas Stations

Bloomberg reported on January 2, 2013 that California Attorney General Kamala Harris and and seven county district attorneys filed a complaint on January 2, 2013 in state court seeking an order to force ConocoPhillips and Phillips 66 to comply with California’s laws for underground gasoline storage tanks as well as unspecified civil penalties for violating the state’s health and safety code. “The state’s hazardous waste laws help protect our residents from contaminated groundwater,” Harris said in a statement. “This lawsuit safeguards public health by ensuring proper maintenance of the tanks that store fuel beneath many California communities.” The People v. Phillips 66, RG13661894, Superior Court of California, Alameda County (Oakland) accuses the two companies of improperly monitoring, inspecting and maintaining underground storage tanks.[152]

November 12, 2012: Proposed Consent Decree Reached over Contamination at Cahokia Site

The Madison Record reported on November 12, 2012 that the federal government last week sued and reached a proposed settlement with thePhillips 66 Pipeline LLC in St. Clair County seeking to recover some of the money it spent on cleaning up the Rogers Cartage Site in Cahokia after the Environmental Protection Agency (EPA) issued an enforcement action memorandum in 2011 noting the presence of polychlorinated biphenyls (PCBs) at the site and directing Phillips 66 to excavate and remove about 16,575 tons of soil. Rogers Cartage Co. and its corporate parent, Tankstar Inc., were listed as potentially responsible parties to the contamination in a 2009 EPA liability notice. Phillips 66 received the notice as the current owner of the site. In 2011, Phillips 66 sued Rogers Cartage for cost recovery and injunctive relief. Phillips 66 will amend its complaint to pursue a claim for contribution if the proposed decree is approved.[153]

October 24, 2012: Louisiana Supreme Court Asked to Review Phillips 66 I-10 Bridge Case

KPLC reported on October 24, 2012 that the Louisiana Department of Transportation and Development (DOTD ) hopes the Louisiana Supreme Court will reverse the decision by Judge Clayton Davis to postpone the trial against Phillips 66 on a lawsuit for spilling an estimated 1.7 million pounds of ethylene dichloride (EDC). Judge Clayton Davis continued the lawsuit until a three-year environmental impact study is done. DOTD officials have said when a new bridge is built, they must avoid hitting the underground plume of chemical contamination to avoid spreading it and estimates the state's damages from the spill are $235-million, including the increased cost of a bridge with spans long enough to bypass the spill. "DOTD would like to move forward with the case and get a trial date," said DOTD Attorney Patrick McIntire. "Phillips 66 believes the trial court's [original] ruling was well-reasoned and fair," said a spokesman for Phillips 66.[154]

October 6, 2012: Roxana School District Receives $10 million More in Property Tax Revenue from Reassessment of the Wood River Refinery

The Telegraph reported on October 6, 2012 that for the 2012 fiscal year, the Roxana School District received $10 million more in property tax revenue from the reassessment of the Wood River Refinery, operated by Phillips 66, with about $9.5 million of the increase attributable to the district's operating funds. The district still is working toward securing a long-term agreement with the refinery, said Superintendent Deb Kreutztrager.[155]

On March 31, 2012 the St. Louis Post-Dispatch reported that at issue is the completion of a $3.8 billion expansion at the Wood River Refinery in 2011. Phillips 66 sought to blunt an expected increase in its assessed valuation — on which property taxes are based — by claiming that the vast majority of its operation is dedicated to pollution control. A pollution control facility designation means significantly smaller assessment increases, which mean that school districts and other taxing bodies get smaller increases in revenue. Plaintiffs in the lawsuit include the village of Roxana and the school districts in Roxana, Wood River and East Alton. They say they were not initially aware of the move because the Pollution Control Board and Illinois EPA did not provide proper information and public access to meetings, in violation of the Open Meetings Act and Freedom of Information Act. As a result, the suit claims, the local governments have not been able to formally dispute what they say is an obviously suspect claim: that $3 billion of the project's $3.8 billion expansion was dedicated to pollution control rather than the business of refining fuel.[156]

The refinery and a larger group of affected taxing bodies negotiated an agreement in 2005 that established tax valuation through 2010. That agreement set the value at about $265 million — an increase of about $85 million — and provided for annual increases at a rate 1 percentage point below any increase of the Consumer Price Index. The refinery also agreed to supplemental payments of more than $3 million for previous tax years. In March 2012, the Madison County Board of Review set the 2011 assessed value at $402.2 million, reflecting a market value of $1.2 billion. It would affect taxes payable this year. That is up sharply from the 2010 valuation of $93.4 million, based on a market value of $280 million.[157][158]

The huge expansion increased the refinery's oil-processing capacity by about a third, to 356,000 barrels per day, and enabled it to process heavy crude from the oil sands of Alberta, Canada. The oil arrives via the 2,100-mile-long Keystone Pipeline, which opened last year. Melissa Erker, a spokeswoman for the refinery, would not comment on litigation specifics but said the pollution control exceptions are part of the state's tax code and "allow us to remain competitive relative to property taxes as compared to other refineries in the Midwest."[159]

September 19, 2012: Phillips Sues Yellowstone County over Property Taxes on Billing Refinery

Equities.com reported on September 19 that Phillips 66 has taken its property tax protest involving its Billings refinery to court in Yellowstone County filing a complaint that the Montana Department of Revenue illegally or improperly raised the refinery's market value for 2010, resulting in a tax bill that was $623,715 higher. Phillips asked Yellowstone District Judge Ingrid Gustafson to block its revised tax assessment, saying it will "suffer irreparable injury absent the issuance of a preliminary injunction." The complaint also said Montana is improperly trying to retroactively raise the refinery's tax assessment from 2003 through 2010 in order to collect more taxes. The refinery's market value in 2010 should be $379,718,534, said Phillips, not the department's retroactive change to $508,333,155. Revenue Department officials in Helena says they conducted a routine audit in July and found that Phillips 66 refinery property that had “either escaped assessment, been erroneously assessed or omitted from taxation” from 2003 to 2010, said department spokeswoman Mary Ann Dunwell. Revenue Department officials in Helena said that they are reviewing the complaint and plan to file a response by the end of next week.[160]

September 7, 2012: Maine Fuel Board Approves Permit for DCP Midstream's Searsport Megatank

The Free Press reported on September 7, 2012 that the Maine Fuel Board has issued a permit to DCP Midstream to build a 22.7 million gallon propane storage tank in Searsport, the final permitting hurdle at the state and federal levels. The next step is for the company to submit the complete site application, including all state and federal permits, to the Searsport planning board for review.[161]

July 14, 2012: Phillips Protests Property Tax for Billings Refinery

The Missoulian reported on July 14 that Phillips is one of seven refinery, utility and communications companies in Yellowstone County that is protesting their property tax bill for the 2011 tax year. When a company protests its tax bill, the money is placed in an escrow account, earning interest, until the argument is settled. Schools and other taxing entities who were counting on the funds can tap into these “frozen” taxes, but must repay some or all of the money with interest if the taxpayer wins the protest.[162]

June 26, 2012: Court Hearing held on I-10 Bridge contamination from Chemical Spill that Caused $235 million Damage twenty years ago

KPIC.TV reported on June 272, 2012 that there's been almost no progress on a new I-10 calcasieu river bridge because state highway officials say they need to avoid hitting the underground plume of chemical contamination from a chemical spill nearly twenty years ago for which Conoco Phillips and Sasol are responsible and the State Department of Transportation and Development estimates the state's damages from the spill are $235 million including the increased cost of a bridge with spans long enough to bypass the spill. They don't want to drive pilings through the plume for fear of spreading the contamination. The state has filed suit to get that added cost and the jury trial is set for October. "There's contamination in the ground and the groundwater where we need to build the bridge. It's going to cost extra to stay out of the contamination when the bridge is built and that's the damages that the state is requesting that be awarded in the lawsuit. The state would like to stay out of the contamination and span the contamination and that's what drives up the extra cost," says Attorney Patrick McIntire representing the state of Lousiana.[163]

Conoco Phillips and Sasol say it's uncertain what kind of bridge should be built--and that the trial on that part of damages should be delayed until an environmental impact study which will take at least three years. "We are a valued member of this community, and are committed to being a part of the solution for this project in a manner that is consistent with the on-going federal environmental review process. The resolution of the motion presented today will not delay this project in any way," says Phillips 66 in an official statement.[164]

June 1, 2012: Plan for DCP Midstream's Giant Propane Gas Tank in Maine Generates Opposition

The Maine Public Broadcasting Company reported on June 1, 2012 that DCP Midstream's plan to build a 137-foot high, 23-million gallon liquid propane gas tank next to the Mack Point industrial area has generated heated opposition in communities along the midcoast as selectmen on the island community of Islesboro added their names to the list of people raising concerns about the tank. "Concerns about the project on the mainland have fallen into several categories," writes Jay Field. "There are those who say the tank is simply an eyesore that dwarfs all other industrial facilities in the area and threatens the sense of place on the midcoast. Others dread the large increase in truck traffic on Route 1 that will come if the project moves forward. Still others worry about the safety hazards of storing so much highly-flammable, liquid petroleum gas in one place." Even if it's approved, the project is all but certain to be challenged in court by opponents for years to come.[165]

May 29, 2012: Illinois’ Attorney General Sues Owners of Wood River Refinery for Ground Water Pollution

Saint Louis Today reported on May 29, 2012 that Illinois’ Attorney General Lisa Madigan is suing the current and past owners of the Wood River Refinery in Roxana, Illinois claiming they're responsible for polluted groundwater around the refinery. The suit comes just months after the Village of Roxana filed a similar lawsuit alleging contamination from the plant. The lawsuit claims the companies have allowed oil, gasoline and other toxins to permeate the groundwater and spread beyond the plant’s property line. "These companies must be held accountable for the environmental and public health damage caused by this contamination,” said the attorney general in a statement. The refinery is jointly owned by Cenovus Energy and Phillips 66, which operates the plant. Melissa Erker, a Phillips 66 spokeswoman, said the company has been working with Shell and state environmental regulators to allow access for remediation of historical contamination. "It is our belief that we are named because of our direct relationship with the former owner," Erker said.[166][167][168]

May 26, 2012: Oklahoma Property Owners Fight DCP's Gas Pipeline

The Daily Oklahoman reported on June 18, 2012 that DCP Midstream has filed lawsuits in district court that seek eminent domain judgments against 14 property owners in Oklahoma County as landowners have rejected DCP offers to pay for a portion of their land and say they will fight to keep the company off their land. “It’s not a matter of money for most of us, it’s a matter of principle,” says Joe Freund, a retired physician who lives on 40 acres of forestland about a mile east of Arcadia who is concerned that clearing a 75-foot wide strip of forest that runs the length of his property would tarnish the aesthetics that attracted him to this plot in the first place. “They claim that it’s for the public good and perhaps it is, but they won’t even move their pipeline one inch to avoid taking down trees a hundred years old.” DCP Midstream says the pipeline would tie gathering and processing systems across central and western Oklahoma to their existing line and is part of $2 billion in capital investments currently under development by DCP. “It’s about de-bottlenecking for the producers and finally giving them an opportunity to get their product to market," says Roz Elliott, vice president at DCP Midstream, adding that DCP hopes to run 250 million cubic feet of liquid natural gas to coastal markets every day by the middle of 2013.[169]

The Stock Market and Investor Relations

Phillips 2013 Stock Performance. Phillips 66 (PSX) finished 2013 with its stock price at 77.34 up 24.24 points from its clsoing price of 53.10 on December 31, 2012 for an appreciation of 45.6% over its closing price for 2013.[170] Graphic: Hugh Pickens
Phillips 2012 Stock Performance. Phillips 66 (PSX) finished 2012 with its stock price at 53.10 up 19.36 points from its opening price of 33.74 on May 1, 2012 for an appreciation of 57.4% over its opening price for 2012.[171] Graphic: Hugh Pickens

Stock Performance

January 1, 2014: Phillips Stock Appreciates 45.6% in 2013

Phillips 66 (PSX) finished 2013 with its stock price at 77.34 up 24.24 points from its closing price of 53.10 on December 31, 2012 for an appreciation of 57.4% over its closing price for 2013.[172]

January 1, 2013: Phillips Stock Appreciates 53.10% in 2012

Phillips 66 (PSX) finished 2012 with its stock price at 53.10 up 19.36 points from its opening price of 33.74 on May 1, 2012 for an appreciation of 57.4% over its opening price for 2012.[173]

Dividends and Stock Repurchase

July 10, 2014: Phillips Declares Quarterly dividend of 50 Cents

Watchlist News reported on July 10, 2014 that Phillips announced that investors of record on August 15th will be paid a dividend of 0.50 per share on September 2nd.[174]

May 7, 2014: Phillips Declares Quarterly Dividend of 50 Cents

Reuters reported on May 7, 2014 that Phillips declared a dividend of 50 cents payable on June 2 to common shareholders of record by May 19 raising its quarterly dividend by 28 percent.[175]

February 14, 2014: Garland Says Phillips Believes in Bulletproof Dividends

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips believes in bulletproof dividends. "We think that growing shareholder distributions is key to growing total shareholder return. We believe in bullet proof dividends. We believe in not only secure but growing dividends and competitive dividends. We nearly doubled the dividends since the spin."[176]

February 7, 2014: Phillips Declares Quarterly Dividend of 39 cents

Marketwatch reported on February 7, 2014 that the board of directors of Phillips has declared a quarterly dividend of 39 cents per share on Phillips 66 common stock payable on March 3, 2014, to shareholders of record at the close of business on Feb. 18, 2014.[177]

December 6, 2013: Phillips Announces New $2 Billion Share Repurchase Program

Businesswire reported on December 6, 2013 that Phillips' board of directors has approved a new $2 billion share repurchase program, consistent with the company's strategy to grow shareholder distributions. “Returning capital to our shareholders is fundamental to creating value and delivering superior total shareholder returns,” said Phillips 66 Chairman and CEO Greg Garland. “Our disciplined capital allocation process complements these distributions with capital spending and reinvestment in our higher-valued businesses.” The shares will be repurchased from time to time in the open market at the company's discretion, subject to market conditions and other factors, and in accordance with applicable regulatory requirements.[178]

October 2, 2013: Phillips Increases Quarterly Dividend to 39 cents

Seeking Alpha reported on October 2, 2013 that the board of directors of Phillips declared a quarterly dividend of 39 cents per share on Phillips 66 common stock, representing an increase of approximately 25 percent from the prior quarter. The dividend is payable on Dec. 2, 2013, to shareholders of record at the close of business on Nov. 14, 2013. "Our objective is to consistently increase shareholder distributions, while also capturing attractive opportunities to reinvest in our businesses and grow future returns," said Phillips 66 Chairman and CEO Greg Garland. Returning capital to our shareholders remains a priority for Phillips 66, and we are pleased to deliver another increase in our quarterly dividend."[179]

July 10, 2013: Phillips Declares Quarterly Dividend of 31.25 cents

istockanalyst reported on July 10, 2013 that Phillips declared a quarterly dividend of 31.25 cents per share payable on September 3, 2013, to shareholders of record at the close of business on August 16, 2013.[180]

May 8, 2013: Phillips Declares Quarterly Dividend of 31.25 cents

The Wall Street Journal reported on May 8, 2013 that Phillips declared a quarterly dividend of 31.25 cents per share payable on June 3, 2013, to shareholders of record at the close of business on May 20, 2013.[181]

February 11, 2013: Phillips Declares Quarterly Dividend of 31.25 cents

Investors Business Daily reported on February 11, 2013 that Phillips declared a quarterly dividend of 31.25 cents per share payable on March 1, 2013, to shareholders of record at the close of business on Feb. 18, 2013.[182]

December 7, 2012: Phillips Increases Quarterly Dividend from 25 cents to 31.25 cents

Bloomberg reported on December 7, 2012 that Phillips has announced that the company is raising its quarterly dividend to 31.25 cents per share from 25 cents. The new dividend will be paid in the first quarter of 2013. Phillips 66 also said it approved the repurchase of another $1 billion in company stock. It approved the repurchase of $1 billion shares during the third quarter as well.[183]

October 3, 2012: Phillips Increases Quarterly Dividend from 20 cents to 25 cents

Businesswire reported on October 3, 2012 that Phillips has declared a quarterly dividend of 25 cents per share on Phillips 66 common stock, representing a 25 percent increase from the prior quarter. “This 25 percent increase reinforces our objective to provide competitive and growing dividends,” said Phillips 66 Chairman and CEO Greg Garland. “Allocating capital to dividends and repurchases while continuing to invest in the growth of our business is fundamental to our philosophy of delivering shareholder value.”[184]

July 12, 2012: Phillips 66 Initiates $0.20 Quarterly Dividend

Michael Aneiro reported on Barrons on July 11, 2012 that Phillips 66 announced a quarterly common stock dividend of 20 cents per share, payable Sept. 4 to stockholders as of July 23. “Phillips 66 has a clear strategy to improve returns and to deliver a strong, competitive dividend program to our investors,” said compay chairman and CEO Greg C. Garland. “We are convinced that returns, growth and distributions create value.”[185]

Stockholder's Meetings

May 8, 2013: Phillips Holds First Stockholder's Meeting in Houston

Greg Garland told Phillips stockholders at the first meeting that Phillips had executed the spin-off from ConocoPhillips flawlessly. "When you think about the Company, we had a strong operating performance. We ran well," said Garland. "We stood up the Company in a very favorable margin environment, so all those things came together for really strong year of financial performance for our Company. We delivered $5.4 billion of [adjusted] net income in 2012. Our return on capital employed was 22%. We're so proud of our employees and what they accomplished in standing up the Company, but also for their commitment and their dedication in creating and capturing value for our shareholders."[186]

Garland received questions from stockholders John Pajak who works at the Bayway Refinery and commended Phillips for its repsonse to Hurricane Sandy. Stockholder Jimmie Dunn commended Phillips on its first year performance and asked why Phillips bought back stock rather than increasing the dividends. Stockholder Governor Clements said he was very pleased with Phillips' performance. Stockholder Jim White said he was a suppler to Phillips and commended Phillips for the response post superstorm Sandy and for Phillips ongoing commitment to family values and safety. Stockholder Michael Mulvany, the business manager for a local steamfitters union headquartered out of North New Jersey, thanked Phillips for their commitment to safety. "My union's relationship with that refinery goes back 103 years when Mr. John D. Rockefeller opened up Standard Oil," said Mulvany. "We've been there when it was Exxon, Tosco, ConocoPhillips and now Phillips 66. And we're hoping to be there another 103 years with all you fellows, and your good team of leadership." Stockholder Caroline Hockley asked about Phillips controlled pipelines and Garland responded that Phillips has "a state-of-the-art controlled facility, one of the newest and, I think, best in the industry in Bartlesville, Oklahoma." Stockholder Jimmie Dunn asked how he could get a tide in ConocoPhillips "beautiful hot air balloon."[187]

April 17, 2013: Phillips Announces First Annual Stockholder's Meeting

The Herald Online reported on April 17, 2013 that will host its First Annual Meeting of Stockholders on Wednesday, May 8, 2013 at 9:00 a.m. CDT at the Marriott Houston Westchase at 2900 Briarpark Drive, Houston 77042. Stockholders must present an admission ticket or proof of ownership of Phillips 66 stock, as well as valid picture identification, to enter the meeting. Phillips also encourages company employees to attend the meeting.[188]

Earnings Conferences

2014 Q2: July 30, 2014: Phillips Falls Short with 10% Drop in Earnings

The Houston Business Journal reported on July 30, 2014 that Phillips fell short of estimates with a nearly 10 percent drop in second-quarter earnings from the same period in 2013 with $863 million in earnings compared to $958 million for the the second quarter of 2013. The company was boosted by its growth in the chemical sector, but its refining revenues dipped noticeably decreasing 14 percent to $390 million partly to weaker refining margins . "Chemicals earnings were driven by strong olefin and polyolefin chain margins," said Garland. "Refining benefited from higher utilization; however, our market capture rate declined."[189][190]

Garland did not elaborate on a recent fire in July at a Chevron Phillips Chemical Company LLC plant in Port Arthur that involved injuries, but he did say the facility should not be shut down for much longer. "There's no reason for that unit to be down for a prolonged period of time," he said.[191]

Phillips also reported growth in its midstream segment growing earnings from $90 million in the April-June quarter of 2013 to $108 million this year. But Jeff Dietert, an analyst with Simmons & Company International, said the results fell short of his projection that the midstream segment would report $150 million in second-quarter profit.[192]

2014 Q1: April 30, 2014: Phillips Meet Expectations with First-Quarter Earnings of $1.6 Billion

The Wall Street Journal reported on April 30, 2014 that Phillips announced first-quarter earnings of $1.6 billion and adjusted earnings of $866 million excluding $706 million primarily related to the realized gain on the Phillips Specialty Products Inc. (PSPI) exchange. This compares with fourth-quarter 2013 earnings of $826 million and adjusted earnings of $808 million. "We delivered a strong quarter, with solid performance and improved margins in our Midstream and Chemicals businesses," said Greg Garland, chairman and CEO of Phillips 66. "Our Refining results were impacted by planned downtime at several of our Gulf Coast and Central Corridor refineries and tightening crude spreads."[193]

Midstream recorded $188 million of earnings during the first quarter of 2014, $67 million higher than the prior quarter. The Chemicals segment reflecting Phillips's equity investment in Chevron Phillips Chemical Company LLC (CPChem) reported first-quarter 2014 Chemicals earnings of$316 million, an increase of $55 million from the prior quarter. Refining earnings were $306 million during the first quarter of 2014, compared with earnings of $418 million during the previous quarter. The decrease was primarily attributed to lower volumes due to planned turnaround and maintenance activities, as well as weaker realized refining margins. Despite higher worldwide market crack spreads, realized margins decreased mostly due to tightening crude spreads, lower clean product realizations and negative inventory impacts.[194]

2013 Year: January 29, 2014: Phillips 2013 Earnings Beat Expectations But Fall Short Of The Prior Year

The Houston Business Journal reported on January 29, 2014 that Phillips reported full-year 2013 earnings of $3.7 billion, or $6.02 per share, and adjusted earnings of $3.6 billion, or $5.89 per share. Analysts had expected full-year earnings of $5.64 per share. In 2012, Phillips 66 had earnings of $4.1 billion, or $6.48 per share, and adjusted earnings of $5.3 billion, or $8.38 per share.[195]

The Refining Business Segment TBD

The Chemical Business Segment TBD

The Midstream Business Segment TBD

2013 Q4: January 29, 2014: Phillips Q4 Earnings Beat Expectations But Fall Short Of The Prior Year

The Houston Business Journal reported on January 29, 2014 that Phillips fourth-quarter earnings beat analysts’ expectations with earnings of $826 million, or $1.37 per share, and adjusted earnings of $808 million, or $1.34 per share. Analysts polled by Thomson Reuters had estimated earnings of $1.10 per share. In the fourth quarter of 2012, Phillips 66 had earnings of $708 million, or $1.11 per share, and adjusted earnings of $1.3 billion, or $2.04 per share.[196]

The Refining Business Segment earnings were up 24 percent to $450 million, but that’s also down 53 percent from adjusted earnings of $960 million in the fourth quarter of 2012. Phillips attributed the drop to lower margins in all regions except the Gulf Coast. "Margins were negatively impacted by weaker worldwide market crack spreads; however, this was partially offset by improved market capture compared with the same period last year," the company said. Marketing and specialties earnings were also down 35 percent to $73 million, due to the sale of its U.K. power generation business and lower marketing margins attributable to rising product prices in the U.S.[197]

The Chemicial Business Segment generated adjusted earnings of $261 million compared with $246 million in the comparable quarter last year. Higher polyethylene margins, equity earnings and ethylene volumes led to the increase. This was partially offset by higher costs and lower benzene margins.[198]

The Midstream Business Segment generated adjusted earnings of $450 million compared with earnings of $960 million in the year-ago quarter. The dismal results can be traced to lower realized refining margins, owing to decline in the average worldwide market crack spread. During the quarter, Phillips 66's refining utilization was at 92% and clean product yield was 84%.[199]

Segmental earnings for Marketing and Specialities were $73 million, down from $113 million from the comparable quarter last year. The decrease was primarily due to the sale of the U.K. power generation business in Jul 2013, and lower marketing margins. This was partially offset by reduced costs and higher volumes.[200]

In the reported quarter, Phillips 66 generated $865 million of cash from operations. It also returned $876 million of capital to shareholders. Of this, $232 million was disbursed as dividends while $644 million was used to repurchase 9.9 million shares of common stock.[201]

2013 Q3: October 30, 2013:Phillips Profits are Down in Third Quarter Due to Refining Losses

Olivia Pulsinelli reported in the Houston Business Journal that Phillips' earnings for the third quarter were $535 million, or 87 cents per share, compared to $1.6 billion, or $2.51 per share, a year earlier. Analysts polled by Thomson Reuters had expected a profit of 94 cents per share. Although the company’s midstream, chemicals, and marketing and specialties businesses were up compared to last year, the refining business posted a $2 million loss. "We ran well during the quarter," said Garland. "Weaker refining margins had a significant impact on our earnings. Chemicals posted strong earnings as a result of solid utilization rates and good margins."[202]

2013 Q2: July 31, 2013: Phillips Earnings Disappoint with 19% Drop in Earnings for 2nd Quarter

FuelFix reported on July 131, 2013 that Phillips underperformed in the second quarter as its earnings dropped 19 percent because of higher costs for oil and outages that shut down key facilities. “We should have run better and our earnings results reflect this,” said Garland. Phillips 66′s adjusted earnings per share of about $1.50 was well below analyst expectations of about $1. 81 for that figure.[203]

Garland cited two reasons for the disappointing earnings. First, Phillips' extended downtime at its facilities, including a refinery and a chemical plant, contributed to $175 million in lost profit. One of the outages, an extended maintenance period at a chemical plant in Port Arthur, lasted for 91 days, the duration of an entire quarter of the year. Second, higher domestic oil prices pushed down profits as the gap between the price of West Texas Intermediate, a benchmark for domestic crude, and Brent, a measure of international oil prices, narrowed substantially during the second quarter. That trend is expected to continue through the remainder of the year, with Brent currently around $107 and WTI at about $105. U.S. refiners had previously enjoyed a huge advantage over their foreign competitors because WTI prices were as much as $20 lower than Brent prices , with some U.S. crudes priced far lower because there was limited access to foreign markets.[204]

2013 Q1: May 1, 2013: Phillips' Profit in 1st Quarter Doubles from Previous Year to $2.23 per Share

Bloomberg reported on May 1, 2013 that Phillips net income for the 1st quarter rose to $1.41 billion, or $2.23 a share, from $636 million, or $1, a year earlier as the margin between oil costs and fuel prices widened and its chemical business improved. Greg Garland has said he’s focused on chemicals, pipelines and natural gas processing to reduce the volatility that comes with refining earnings. “This company is a different animal because the growth opportunities are not on the refining side of the business,” said Fadel Gheit, an analyst at Oppenheimer & Co. Refining profits rose as the margin between the cost of West Texas Intermediate oil and the price at which refiners sell fuel rose 20 percent to an average of $32.689 a barrel in the January-to-March period, according to data compiled by Bloomberg.[205]

Phillips 66 has been working to increase its use of relatively cheap crude by building rail capacity at its plants and buying rail cars to help bring crude from shale formations not yet reached by pipelines and the company has been inching toward the goal of processing only discounted crudes extracted in North America, a target they expect the company to hit within the next few years. "Certainly its an aspiration, but it is concrete and achievable," said Tim Taylor, executive vice president for commercial, transportation, business development and marketing. Phillips 66 said it boosted the share of discounted crude produced in the U.S. and Canada that its refineries process to 68% of its feedstock, up from 60% last year and during the quarter, it processed 221,000 barrels per day of crude from the Eagle Ford, Bakken and Mississippi Lime formations, up 120,000 barrels per day over last year's first quarter.[206]

2012 Q4: January 31, 2013: Phillips 66 Adjusted Profit Beats 4th Quarter Estimates But Gross Profits Down 65% When Including Impairment Charge

Bloomberg reported on January 31, 2013 that Phillips beat fourth-quarter profit estimates by 37 cents more than the $1.69 average of 16 analysts' estimates compiled by Bloomberg. Adjusted earnings for the quarter were $1.31 billion or $2.06 per share, compared to adjusted earnings of $379 million or $0.60 per share in the same period last year. However these adjusted profit figures exclude a writedown of the value of the company's interest in a plant in Malaysia of $2.06 a share. If the writedown is included, then the company reported a 65 percent decline in profit for the fourth quarter from last year as an impairment charge more than offset higher refining and chemical margins.[207][208]

The company has rallied along with other U.S. refiners by boosting access to a growing supply of domestic crude that has become cheaper than overseas oil. U.S. refiners in some regions paid an average of $17.48 less for every barrel they processed compared to the global benchmark oil price, according to data compiled by Bloomberg. "They're taking advantage of the God-given gift of very wide crude discounts and cheap natural gas," Fadel Gheit, a New York-based analyst with Oppenheimer & Co., said in a telephone interview. "They are putting the money to good use, and it's reflected in the stock price."[209]

2012 Q3: October 31, 2012: Phillips 66 Beats Analyst Expectations with 3rd Quarter Profits of $1.6 billion or $2.51 per share

Reuters reported on October 31, 2012 that Phillips announced 3rd quarters profits of $1.6 billion or $2.51 per share, compared with $1 billion or $1.65 per share a year earlier. Analysts on average had expected a profit of $2.35 per share, according to Thomson Reuters I/B/E/S.[210]

Increased access to cheaper crude oil from the United States and Canada boosted Phillips 66's quarterly profits above analyst expectations with more than half of the company's refining capacity in the central corridor of the U.S. with access to cheaper crudes in North Dakota, Texas, Kansas and other states, executives told analysts during Phillips 66's third-quarter earnings conference call. "Our U.S. advantaged crudes increased from 52 percent last year to 61 percent to date in 2012," Chief Financial Officer Greg Maxwell said.[211]

October 10, 2012: Phillips 66 to Announce Third-Quarter Financial Results on October 31

Phillips announced on October 10, 2012 that the company will release its third-quarter financial results on October 31, 2012 and host a conference call to discuss the company’s third-quarter performance and provide an update on strategic initiatives.[212]

2012 Q2: August 1, 2012: Phillips announces Profits up 14% in Second-Quarter Earnings Call

Reuters reported on August 2, 2012 that Phillips 66 posted a 14 percent jump in second-quarter profit with a net income of $1.18 billion, or $1.86 per share, up from $1.04 billion, or $1.64 per share, a year earlier. Chief Financial Officer Greg Maxwell told analysts the company's capital expenditures for 2012 would range between $1 billion and $1.5 billion. Phillips 66 said it would retain its 247,000 barrel-per-day Alliance plant in Belle Chasse, Louisiana, because it expects increased access to cut-price light sweet crude to run there. Garland said Phillips 66 "really likes" its Midwest and Gulf Coast refineries, which have easier access to cheaper Canadian and inland U.S. crudes. "The East and West Coast refineries are challenged refineries, and we think there are opportunities to improve them," Garland told Reuters in a post-call interview. Phillips 66 plans to buy 2,000 railcars to move cheap crude from North Dakota's Bakken shale play to the Bayway plant and its 100,000 bpd plant in Ferndale, Washington. Bayway already runs 10,000 to 20,000 bpd of Bakken crude. Garland said the Bayway Refinery and Ferndale Refinery were "absolutely" more likely to stay in the company's portfolio if Phillips 66 can increase the amount of Bakken crude they run, backing out other more expensive crudes. Bayway can run up to 100,000 bpd of light crude, while Ferndale can run 50,000 and Phillips plans to rail Bakken crude to both plants. Phillips is working to run more shale crude from the Mississippi Lime play in Oklahoma and Kansas at its 198,400 bpd refinery in Ponca City, Oklahoma by trucking crude from the company's existing gathering systems. Garland says that the company is not planning potential acquisitions -- refineries or other assets -- at this time. "There's nothing really interesting to us at this time," says Garland.[213]

Plan to Get Advantaged Crudes to Every Refinery

Garland said that Phillips wants to move the shale crudes from 120,000 to ultimately 450,000 to 460,000 barrels a day. "We are trying to get those crudes to every refinery we can. But clearly to Ferndale on the West Coast to Bayway on the East Coast, we think Ferndale can probably run 50,000 barrels a day of Bakken crude. Wood River, we can run up to 90,000 to 120,000 barrels a day of shale type crudes there. Ponca about 60,000 barrels a day. Bayway, 100,000 barrels a day of shale type crudes that we can advantage, that we can move into Bayway. Smaller Rodeo we can get at 30,000 barrels a day and Sweeny about 40,000 barrels a day. And then Alliance, we are running today Eagle Ford crude and some Bakken crude in Alliance, but ultimately 50,000 to 90,000 barrels a day. So we have a plan to get advantaged crude into most of our refineries."[214]

June 28, 2012: Phillips 66 to Hold First Earnings Call on August 1

Phillips 66 issued a press release on June 28, 2012 announcing that Phillips will issue its second-quarter earnings report on August 1 and Greg Garland and Executive Vice President and Chief Financial Officer Greg G. Maxwell will host a webcast to discuss the company’s second-quarter performance and provide an update on how the company is delivering on its strategy.[215]

Investor Conferences

September 4, 2014: Phillips Presents at Barclay CEO Energy-Power Conference

Greg Garland made a presentation to analysts at the Barclay CEO Energy-Power Conference on September 3, 2014. "So here is our strategy, growth, returns, distributions. We have an unyielding commitment to operational excellence, which for us is personal safety, process safety, environmental excellence reliability, cost management and a commitment to have a high performing organization. So right people, at the right place, at the right time to execute the plan, and having people that know how to win and are committed to differentiating shareholder value. So that's kind of the strategy."[216]

"As we look at our refining business, it's run well, it's optimized, it's minimized capital investments. We won't invest in advantaged crude at the front end, exports on the backend, yield capture, energy efficiency, but really very disciplined capital investment in our refining business. Midstream business, aggressive growth and we'll go through that today as we move into the presentation. Chemicals, aggressive growth; selective growth in our marketing and specialties businesses. We're executing well. We've identified lot of growth opportunities in the company, we'll talk about today. A lot of them around midstream and logistics, ultimately destined for our master limited partnership. We've raised the dividend 28% in May and June. The board approved additional $2 billion share repurchase, so we're at $7 billion total authorization on share repurchases."[217]

May 21, 2014: Phillips 66 presents at UBS Global Oil & Gas Conference

TBD

April 10, 2014: Phillips Presents at Phillips 66 Analyst Meeting

Phillips reported that Greg Garland, Clayton Reasor, Tim Taylor, and Greg Maxwell presented at an Analyst Meeting on April 10, 2014. "Part of our vision is to double the enterprise value of our Company based upon its historical implied value, said Garland. "We were thoughtful, we are very purposeful in how we structured Phillips 66 from the very beginning and the assets that went into the Company. We believe that our four main business segments are more valuable together than they would be separated, and we do test that continually. We think that we access lower cost of capital. We think that, looking across the value chain, that we can optimize. We can direct capital to its highest and most best use. And then finally, we can grow quicker."[218]

March 6, 2014: Phillips 66 presents at Bank of America Merrill Lynch 2014 Refining Conference

Phillips reported that Clayton Reasor and Greg Maxwell presented at Bank of America Merrill Lynch 2014 Refining Conference on March 6, 2014. "We’ve got two very good refineries on the West Coast – one in San Francisco, one in L.A. – about 230,000 barrels a day of total capacity, 110,000 barrels a day of coking capacity. They are positive cash flow, they are positive net income," said Reasor. "Capital requirements aren’t that significant. So those refineries are well positioned, but they’re generating single-digit returns and struggle as far as attracting capital. We’ve talked about how to improve performance in California, and for us, it’s around increasing the amount of advantaged crude, so how do we find ways of getting Canadian crude into California? We’re in the comment period right now at Santa Maria, a 30,000 or 35,000-barrel-a-day unit train rail unloading facility, and hopefully that will be permitted. We’re also looking at other things in California to improve the performances of those businesses. But for us, we believe California will struggle being competitive in the export market, given the costs there and the lack of advantaged crudes, and longer term, we look at California and wonder if it’s something that we need to continue to own in order to grow our chemicals industry business."[219]

February 12, 2014: Phillips presents at Credit Suisse Energy Summit

Phillips reported that Greg Garland Clayton Reasor presented at the Credit Suisse Energy Summit on February 12, 2014. Garland told security analysts that the Refining Business Segment is always is going to be a very volatile business for Phillips. "We don't see that changing in the future. I think small changes in operating rates in infrastructure are going to create dislocations. I think having a large system like we have, having a very sophisticated and large commercial organization like we have, we're going to be able to take advantage of those opportunities that come our way."[220]

August 29, 2013: Phillips presents at Barclays CEO Energy-Power Conference

Phillips reported that Greg Garland presented at Barclays CEO Energy-Power Conference on August 29, 2013. "It's going to be an energy century as you think about it; it's going to be a century of opportunity," said Garland. "We're very optimistic about the growth in U.S. manufacturing as people see $3.50 natural gas; they're looking at 8% unemployment. They see the investment that the industry is making in infrastructure and petrochemical facilities and etc. And we think at Phillips 66 we're extremely well-positioned to play our part in this changing American energy landscape and that we can be one of the premier companies in this space in terms of creating jobs, capturing value, providing energy and improving lives."[221]

May 21, 2013: Phillips Presents at UBS Global Oil & Gas Conference

Phillips reported that Greg Maxwell presented at the UBS Global Oil & Gas Conference on May 21, 2013. "We can run some lights in San Francisco. As far as working towards getting advantaged crudes into that, we're looking at options to take down via pipeline -- I mean via rail cars, and then also going over to the waterfront and barging down into those refineries," said Maxwell. "With regard to San Francisco and LA, land is expensive and short to come by. We have to do some permitting. And then also, bringing it in via tankers, we have to get some permitting as well. So all that's underway."[222]

May 15, 2013: Phillips Presents at the Citi Global Energy and Utilities Conference

Phillips reported that Tim Taylor and Greg Maxwell presented at the Citi Global Energy and Utilities Conference on May 15, 2013. "Rail for us is a relatively minor percentage of our total movement, and so we look at rail as a mobile pipeline," said Taylor at the conference. "And clearly today some of the northern plays are more oriented toward rail versus the access that you have by pipe in the southern part of the U.S. So I see rail as playing a role, but we still like pipelines. It’s more economical. But there is a lot of flexibility in rail, so I think rail continues to be a piece, but it’s not going to become the dominant mode or the primary focus."[223]

March 18, 2013: Phillips Presents at the Howard Weil 41st Annual Energy Conference

Phillips reported that they presented at the Howard Weil 41st Annual Energy Conference on March 18, 2013.[224]

February 28, 2013: Phillips to Present at Bank of America Merrill Lynch 2013 Refining Conference on March 7

The Fort Mills Times reports that Larry Ziemba, executive vice president, Refining, Project Development and Procurement of Phillips 66 will speak at the Bank of America Merrill Lynch 2013 Refining Conference in New York on Thursday, March 7 to discuss the company’s plans to enhance refining returns, as well as its overall strategy for growth and value creation.[225]

February 5, 2013: Taylor Tells Credit Suisse Energy Summit That Canadian Crude is Being Transported to California Refineries

Reuters reported on February 5, 201 that Tim Taylor, Phillips executive vice president for commercial, marketing, transportation and business development, told the Credit Suisse energy conference that Phillips has begun moving cut-price Canadian crude to its California refineries at Los Angeles and San Francisco via rail. "We're beginning to deliver Canadian crude to our California refineries by rail," said Taylor. Garland told Reuters on January 30, 2013 that Phillips was looking at coiled tube cars that are suited to bitumen in Canada's heavy oil deposits that must be heated in order to flow.[226]

January 22, 2013: Phillips 66 to Present at Credit Suisse Energy Summit on February 5, 2013

Daily Finance reported on January 22, 2013 that Tim Taylor, executive vice president, Commercial, Marketing, Transportation and Business Development of Phillips 66 will speak to investors and securities analysts at the Credit Suisse Energy Summit in Vail, Colo. on February 5, 2013 to discuss the company's strategy to enhance refining returns, grow midstream infrastructure and chemicals capacity, and increase distributions to shareholders.[227]

December 13, 2012: Phillips Announces 2013 Capital Program at Inaugural Analyst Meeting

Phillips reported on Decmeber 13, 2012 that they had hosted their inaugural Analyst Meeting in New York to discuss their capital program of $3.7 billion for 2013, a 6 percent increase over the $3.5 billion capital spend for 2012, and how it will to enhance returns, deliver profitable growth and increase distributions to shareholders.[228]

November 27, 2012: Greg Garland to Host Inaugural Analyst Meeting on December 13

Marketwatch reported on November 27, 2012 that Greg Garland and other executives at Phillip 66 will discuss the company's strategic objectives, including its plans to enhance returns, grow profitably and increase shareholder distributions at an Inaugural Analyst Meeting in New York on December 13, 2012.

November 13, 2012: Tim Taylor Presents at Bank of America Merrill Lynch 2012 Global Energy Conference

4-traders reported on November 5, 2013 that Tim G. Taylor, executive vice president, Commercial, Marketing, Transportation and Business Development of Phillips 66 spoke to investors and securities analysts at the Bank of America Merrill Lynch 2012 Global Energy Conference in Miami, Fla. on November 13, 2012 with an overview of the company and its strategic initiatives.[229]

September 5, 2012: Garland Speaks at Barclays CEO Energy-Power Conference

Phillips 66 reported that Phillips CEO Greg C. Garland spoke to investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 to discuss Phillips 66's business portfolio and provide an update on the company's strategic progress.[230]

August 22, 2012: Garland to Speak at Barclays CEO Energy-Power Conference on September 5

Marketwatch reported on August 22, 2012 that Phillips CEO Greg C. Garland will speak to investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 20120 to discuss Phillips 66's business portfolio and provide an update on the company's strategic progress.[231]

June 5, 2012: Garland Presents Phillips Strategy for Growth to the Citi Global Energy Conference

On June 5, 2012 Phillips CEO Greg Garland presented to the Citi Global Energy Conference and said Phillips has a clear strategy for growth and improving returns.[232]

Refining and Marketing Strategy

Garland said Phillips is kind of an average performer in terms of returns on Refining and Marketing with a 12% ROCE in this business, but the expectation is thatthis can be improved to a 15% ROCE business over the cycle. "The R&M business for us is a run well, optimized business. You won’t see us adding capacity. You will see us investing around the infrastructure to put more advantaged crude to the front end of the refineries and to be able to export."[233]

There is another way Phillips would like to improve returns in the refining business and that is by getting advantaged crude to the front end of the refineries. "Today we can process about 500,000 barrels a day of TI-related and about 100,000 barrels a day of shalerelated crudes. If you think about the mid-con, we think there’s about 2 million barrels a day of new light sweet crude coming on in the central part of the US. Then you’ve got another couple million barrels a day of the Canadian heavy that’s ultimately going to make its way down through the midcontinent and ultimately, we believe to the Gulf Coast. And so every dollar that we can capture across our system is worth about $500 million of net income to us." So Phillips is going to go around pipelines and is considering buying a couple thousand more rail cars to get Bakken crude either east and west. "We’re running about 100,000 barrels a day of these shales today and we think we can easily in the next year or two move another 120-150,000 barrels a day of incremental crude through rail. Plus as these pipeline solutions become more available and ready, we’ll capture those opportunities. But ultimately, we can process about 500,000 barrels a day of these shale-type crudes."[234]

Phillips also wants to increase yields in the refineries. "Every one percent clean product yield is worth somewhere between $100 to $150 million of net income. For every one percent diesel yield, we can increase, in today’s market is the capture of about $60 million in net income. In the first quarter we ran about 41% diesel, which is really the highest of the peer group if you look out there. And so we’re pretty comfortable that we can continue to tweak the operations in refineries and to eke out a couple more percentage points in clean product yields and continue to push our diesel yields up without significant investment at this point in time.[235]

When asked a question about rationalizing refining capacity by closing down plants Garland said it is difficult to shut refineries down. "Mostly because you think about the environmental liabilities that have accrued over the years. So it takes a lot of money to actually exit one of these facilities. And so that’s what you see people convert them to other uses, terminals, etcetera. So they tend to find another life in some shape or form to avoid the remediation that comes along with completely clearing, closing, shutting down and remediating the whole facility."[236]

Midstream Strategy

Garland said there are s large opportunities in terms of midstream investment in gas gathering and processing, NGL fractionation, and distribution and that Phillips has a a very aggressive investment profile in the midstream space. "We have about $7 billion of projects identified, underway in this space and so you think at the DCP JV level spending kind of $500 million a year, historical capex, we’re moving that up to about $2 billion a year," said Garland. "We also have our own embedded midstream business within Phillips 66. It’s primarily pipelines and ownership in fractionators at Conway, Borger, and Belvieu. Good business generates good returns for us in a growth area for us and we would consider growth in this area around fractionation, around LPG exports."[237]

Chemical Strategy

Garland says the NGLs that are coming on over the next 10 years are going to be feedstocks for the petrochemicals business and that the Joint Venture with Chevron is well positioned for that.[238]

June 5, 2012: Garland Presents to Investors at Citi Global Energy Conference

On May 29, 2012 Phillips 66 announced that CEO Greg Garland will speak to investors and securities analysts on June 5, 2012 at the 2012 Citi Global Energy Conference partipating n a roundtable discussion, providing a brief company overview and engaging in Q&A with investors.[239]

May 24, 2012: Clayton Reasor Presents to UBS Global Oil and Gas Conference

On May 17, 2012 Phillips 66 announced that Clayton Reasor, Phillips 66 senior vice president for Investor Relations, Strategy and Corporate Affairs, will speak to investors and securities analysts on May 24, 2012 at the UBS Global Oil and Gas Conference in Austin, Texas about Phillips 66's strategic priorities, including plans for growth and returns enhancement.[240]

Other Investor News

July 23, 2013: Phillips 66 Partners raises $377.8 million in IPO

Businessweek reported on July 23, 2013 that Phillips 66 Partners LP raised $377.8 million from its initial public offering of stock. 16.4 million shares sold at at $23 up from 15 million shares the partnership had expected to sell for $19 to $21 each. The banks managing the deal may buy another 2.5 million shares if there's demand for them and if they do, the public will own about 26 percent of Phillips 66 Partners. Phillips 66 will own the rest of it. The shares are expected to start trading on the New York Stock Exchange Tuesday under the "PSXP" ticker symbol.[241]

July 15, 2013: Phillips 66 Partners Plans $315 million IPO

Fox Business reported on July 15, 2013 that Phillips 66 Partners plans an initial public offering will likely total as much as $315 million that will include certain pipeline, terminal and storage systems—used for crude oil and refined petroleum product—in the Central and Gulf Coast regions. The IPO of approximately 15 million shares is expected to price in a range of $19 to $21 a share, according to a filing with the Securities and Exchange Commission.[242]

March 27, 2013: Phillips 66 Midstream Vehicle Registers for $300 million IPO

Reuters reported on March 27, 2013 that Phillips has registered for an initial public offering of units in a midstream partnership that would raise $300 million and will trade on the New York Stock Exchange under the "PSXP" ticker symbol. The IPO is expected to include the Clifton Ridge oil pipeline and storage system in Louisiana and refined product pipelines and storage in Texas and Illinois: Sweeny-Pasadena and Hartford Connector, respectively.[243]

July 3, 2012: Phillips Recommends Stockholders Reject TRC Mini-Tender Offer

CSP Net reported on July 3, 2012 that Phillips 66 Co. has recommended that shareholders not tender their shares in response to an unsolicited mini-tender offer that TRC Capital Corp. TRC is offering to purchase up to three million shares, or less than 0.48% of Phillips 66's outstanding common stock at an offer price of $31.30 per share represents a 4.78% discount to the Phillips 66 closing share price on June 25, 2012, the day prior to the commencement of TRC's mini-tender offer. "Phillips 66 strongly recommends investors obtain current market quotes for their shares of common stock and consult with their financial advisors with respect to TRC's offer," the company said. "The company does not endorse and is not associated with TRC's unsolicited mini-tender offer."[244]

June 7, 2012: Garland says Phillips Deserves a Higher P/E

On June 7, 2012 Barrons reported that Greg Garland said that Phillips is a lot more than just an oil refiner and deserves a higher price/earnings multiple than the paltry P/E ratio that refiners now garner. "We don't want the Street to just give us a refining multiple," Garland said in an interview in New York. Philips shares, at around 32, trade for less than seven times projected-2012 profits of $4.90 a share and yield 2.5% based on the company's targeted quarterly dividend of 20 cents that is set to begin in the third quarter. Garland says that Phillips has gotten about 60% of its profits on average over the past three years from higher-return businesses, principally chemicals and so-called midstream assets, including pipelines and processing facilities that handle natural-gas liquids. The chemical and midstream operations generate 20%-plus returns on capital and offer significant reinvestment opportunities.[245]

May 2, 2012: Phillips Rings Wall Street's Opening Bell

On May 2, 2012, executives and employees from Phillips 66 celebrated the company's first week of regular trading on the New York Stock Exchange by ringing the opening bell. Chairman and Chief Executive Officer Greg C. Garland led the delegation, which included employees from its Houston Headquarters and Bayway Refinery in Linden, N.J.[246]

April 23, 2012: Phillips to Join S&P 500

It was announced on April 23, 2010 that Phillips 66 will join the the S&P 500.[247]

April 17, 2012: Howard Thill says Phillips Will Have Increased Flexibility

On April 17, 2012 Howard Thill, Marathon Oil’s vice president of investor relations and public affairs, spoke about the ConocPhillips split at Oklahoma State University’s energy conference in Oklahoma City. “It’s about enhanced flexibility — the ability to focus on an individual asset or set of assets,” Thill said. “When you have a very large conglomerate, it’s very difficult to be able to generate enough information at a low enough level to give investors that transparency into the business,” Thill said. “Independent refiners and independent exploration and production companies disclose much more information about their companies than a major integrated because from a major integrated standpoint, the scale is so large that it just doesn’t make a difference in that respect.”[248]

April 4, 2012: ConocoPhillips Board of Directors Votes to Create Two New Companies

On April 4, 2012 ConocoPhillips' board of directors announced that two new companies will be separated through the distribution of shares of Phillips 66 to holders of ConocoPhillips common stock. This distribution is expected to occur after market close on April 30, 2012. ConocoPhillips shareholders will receive one share of Phillips 66 common stock for every two shares of ConocoPhillips common stock held at the close of business on the record date of April 16, 2012.[249]

Operational Excellence

OSHA recordable rates are standard industrial safety performance measures that represent health and safety incidents per 200,000 work hours, a unit of measure chosen by the agency because it approximates the annual work of 100 employees. Lost-time incidents are those injuries or occupational illnesses that result in time away from work.[250]

Greg Garland told financial analysts on April 9, 2012 that operational excellence would be a focus at Phillips 66 and part of his strategy to grow the company. "We'll always focus on operational excellence. We'll focus on building a great organization to execute our plans."[251][252][253]

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that Phillips 66 has a long legacy of being good operators and of operational excellence. "I have a real passion for this. It's the foundation that provides the opportunity to create sustainable value growth. I'm proud of our progress here. We have more work to do."[254]

In mid 2012, Phillips 66 rolled out its five-point strategy to its employees and Tim Taylor and other senior leaders of the company have hosted dozens of town-hall meetings to convey the strategy to workers across all levels of the organization. "Taylor approaches each town-hall gathering in three steps," wrote Morey Stettner in Investor's Business Daily on June 21, 2013. "If it's held at a refinery, he begins by huddling with the site managers to review operating metrics such as safety performance. He applies 'operational excellence' principles that encourage continuous improvement. Second, he visits control rooms to get an overview of the operation. Chatting with employees, he learns about different aspects of their job and the challenges they face. Finally, he hosts town halls. Between 100 and 200 employees usually attend. After Taylor's opening remarks, he engages in a lively Q&A." Taylor and other top executives at Phillips 66 use cross-functional teams to generate ideas. For example, an internal group of 10 to 15 crude oil buyers, logistics experts, refinery technicians, salespeople and others proposed that the company use railcars to transport oil. Thanks to the team's analysis, the company announced in June 2012 that it would buy up to 2,000 railroad tank cars to ship oil from inland shale fields to coastal refineries. One year later, the use of rail is already proving a winner in helping Phillips 66 boost results. "We were an early mover in rail and I'm proud (our team) came up with that," Taylor said. "Without them, we would not have made progress as rapidly as we have."[255]

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Operational Excellence is job one for Phillips. "We have to get this done right. We believe that we protect and enhance shareholder value when we do this well. When we send every employee home safely every day without getting hurt, when we operate the processes in control, when we operate them reliably, when we reduce our environmental footprint and we manage our costs well, we create value for the owners of our Company."[256]

Components of Operational Excellence

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that operational excellence is holistic in our view and includes personal safety, process safety, environmental excellence, reliability, and cost management. "It's all those elements wrapped together."[257]

Personal Safety, Process Safety, and Environment

Reliability

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that reliability has improved over the past couple of years. "We operate above industry average rates."[258]

Cost Management

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that part of Phillips' heritage is stringent, prudent, detailed cost management. "We have all grown up in commodity businesses. We understand the importance of cost, cost structure, and managing those costs every day."[259]

August 1, 2012: Plan to Reduce Controllable Cost by 5% with Optimize 66 Program

Phillips was asked by Paul Sankey of Deutsche Bank during their second-quarters earnings report on August 1, 2012 about the $4 billion of controllable costs and if Phillips had set a target for a 5% reduction in controllable costs for around $200 million of savings. "Yes. Controllable cost, we put a number out there $200 million. We think it is a good number," said Garland. "I frankly think we will do better than that. We tend to always exceed. We have got a program we call Optimize 66 that we are working across this budgeting process, which we are in the middle of now. And people are looking at all avenues to improve efficiency and reduce costs. And, frankly, [the boys] have come up with some great ideas from their early work that I have seen. So I think that the $200 million is a good number for a target."[260]

Safety and Environment

Employee Deaths and Injuries at Borger Refinery: Phillips had three employee injuries in the Hydrofluric Acid Unit in March 2014 at Borger Refinery, an employee fatality in May 2012, and 2 dead workers and 11 injured in October 1979 as a result of what OSHA called "willful and serious safety violations." Borger Refinery Photo by: Philip Klein All Rights Reserved. Photo used with permission of the photographer

Phillips Recent Safety and Environmental Issues

September 14, 2014: Are the Cities Near the Ferndale Refinery Prepared for an Oil Train Derailment?

Samantha Wohlfeil provided an in-depth report in the Bellingham Herland on September 14, 2014 on how prepared the cities near the Ferndale Refinery are for an oil train derailment. "If a train hauling more than 100 cars of highly volatile crude oil were to derail in Bellingham, would the city be prepared?" writes Wohlfeil. "What if it instead left the tracks near Ferndale, or rural Custer, or along Chuckanut Drive, where an accident only feet from the water might be nearly impossible for first responders to reach from land?" According to Kent Catlin, deputy director of the Whatcom County Sheriff’s Office Division of Emergency Management, the question is complex and may not have a simple answer. “Any event like this will overwhelm any jurisdiction and exhaust its resources,” said Catlin. “All of us operate at a bare bones of what we need because it doesn’t make sense to have more staff than needed.”[261]

When faced with an event like a derailment, first responders have to decide whether to fight or surround the problem, depending on available resources and the size and intensity of any fire or spill, said Roger Christensen, Bellingham’s interim emergency manager and recently retired fire chief. “If you’re faced with an event you can’t do anything about, you have to decide how to protect what’s around it,” Christensen said. With millions of gallons of potential combustible material on each train, if a fiery accident were to occur, even the most prepared communities might just have to sit back and watch it burn because most fire departments carry small amounts of firefighting foam that can be used to contain fuel and keep vapors from getting into the air. “Even with a lot of foam you may not be able to put that fire out,” says Patrick Brady, BNSF director of Hazardous Materials Special Operations. “Plus, it’s better to consume the oil in that fire rather than put it out and now it’ll get into the river, or in a populated area like Seattle it’ll get into the storm drains.”[262]

September 1, 2014: One Year After Cleanup, DCP Midstream Oil Spill Still Causes Concern

Phil Cross reported at Fox25 on September 1, 2014 that more than a year after an oil spill from an abandoned pipeline owned by DCP Midstream, the landowners say they are still fighting to get it cleaned up. Records indicate DCP hired a company to perform the clean-up of the creek and the OCC document says the state ordered work to be completed by July 15, 2013. The people who own the land just downstream from the spill say that cleanup effort failed. “It should be nice clean water to water the cattle and fertilize the hay and the blackberries in the area,” says Spencer city councilwoman Tonni Canaday who told Fox 25 the town was not notified oil was spilled in Spencer Creek. “I couldn't, in good conscious, put cattle on here right now.”[263]

The issue, the landowners say, is that any slight movement in the water stirs up a glossy sheen. They claim it is residual oil left from the initial spill. Records from the OCC indicated the pipeline spilled about a barrel of oil, but the company only recovered half a barrel of material. The landowners invited Fox 25 to visit the creek this summer, more than a year after the spill and eight months after the final cleanup was deemed complete. On our visit the landowner stirred the creek and a glossy sheen appeared on the water. A soil sample dug from the bottom of the creek revealed a strong odor of oil and was greasy to the touch. “There is absolutely a problem,” Canaday says, “And to each of those people that we've had come out and say it's not that big of a problem; we haven't seen anybody take a drink or take a bottle of water out of there themselves.” The corporation commission says DCP has been willing to do anything they've been asked and that company has voluntarily helped with the cleanup and containment of other pipeline spills they were not responsible for in the past.[264]

August 21, 2014: Four Injured in DCP Midstream Pipeline Fire

NewOK reported on August 21, 2014 that fourworkers were injured in Garvin County in a fire while a crew was performing maintenance on a natural gas pipeline operated by DCP Midstream, a 50 percent joint venture between Phillips and Spectra Energy. The natural gas line fire was quickly extinguished and the workers were taken to the hospital in Lindsay, where they were treated and released. DCP reported the incident to the proper regulatory authorities and will investigate further on its own to determine what happened.[265]

July 8, 2014: Investigation Begins into Fire at Port Arthur Chemical Plant that Injured Two Workers

Mary Meaux reported at The Port Arthur News on July 8, 2014 that an investigation into the cause of the fire at Chevron Phillips Chemical Company that injured two workers is underway less than 24 hours after the incident. “A team of experts from other Chevron Phillips Chemical facilities has been assembled and has begun the investigation to determine the root cause of the incident,” according to a press release from David Hastings, public affairs manager at Chevron Phillips. The localized fire occurred at the Port Arthur facility at about 8 pm on July 7. The chemical company’s fire response team handled the fire while Port Arthur Fire Department remained on standby with equipment and manpower should it be needed, said Port Arthur Police Maj. John Owens. “The fire chief (Larry Richard) and I went in and were part of their emergency operations center to assist them in decision making and operations should they need outside assistance and to ensure the public and community that we had someone inside the EOC to look at it from the community’s side,” Owens said.[266]

Independent air monitoring throughout the night to ensure the community was safe. “The continuous monitoring picked up zero readings,” said Owens. “We do this any time there is an incident. It is protocol for the fire department’s hazardous response team to perform independent monitoring.”[267]

July 8, 2014: Representative Hahn Sends Letter to State Fire Marshal about Phillips Violations After Wilmington Oil Spill

Zamná Ávila reported at Random Length News on July 8, 2014 that Representative Janice Hahn sent a letter to California Fire Marshal Tonya Hoover with regards to the Phillips 66 violations in a recent oil spill requesting an update on the office’s progress in citing Phillips 66 for federal law violations. “The 1,200 gallon oil spill in Wilmington placed the health of hundreds in danger due to a failure to follow federal law regarding pipeline safety,” Hahn wrote. “The families of Wilmington remain uncompensated for the destruction of their property, and the federal government is unable to act until your office cites the company for wrongdoing.” Hahn expressed her disappointment that Phillips 66 had not yet been cited.[268]

July 8, 2014: Phillips Applies for Permits for Six Injection Wells Near Brazoria, Texas

Friends of the River reported on July 5, 2014 that Phillips has applied to the Railroad Commission of Texas for a permit to dispose of produced salt water, brine or other oil and gas waste by well injection into a porous formation not productive of oil or gas on on the San Bernard River near Brazoria, Texas. A group of 31 people attended a meeting on July 8, concerning the proposed action of of six disposal wells being drilled during the upcoming year at the Phillips 66 Clemens Field on the San Bernard River. In answer to the question of what was going to be injected into the wells, only the salt water, brine, produced from “washing” an underground salt cavern will be injected in the disposal wells. Oil and gas waste will not be injected into the wells. The water used in this process is to come from a Phillips 66 pipeline of recycled effluent water and not pumped out of the San Bernard. In Texas, disposal wells are regulated by the Railroad Commission.[269][270]

July 7, 2014: Two Workers Injured in Fire at Port Arthur Chemical Plant

Plastics News reported on July 15, 2014 that two workers were injured in a fire in a ethylene/propylene unit at the at a Chevron Phillips Chemical Plant in Port Arthur. No cause for the fire was given in a July 9 statement from Chevron Phillips. The statement added that the injured workers remained hospitalized.[271] “We regret very deeply that this event has occurred. Our thoughts and prayers are with the injured and their families. We ask for your patience as we manage the response to the incident,” said Margie Conway, plant manager for Chevron Phillips Chemical. “We will communicate additional information when it can be confirmed.”[272]

The Port Arthur plant has almost 1.8 billion pounds of annual ethylene capacity and 1.1 billion pounds of annual propylene capacity. Chevron Phillips has declared force majeure production limits on that material after the fire. Phillips Chevron officials said that reviews are underway to determine when the unaffected areas of the plant can be restarted, and that no timetable has been set for restart of the area affected by the incident.[273]

June 12, 2014: Fire Crew Extinguishes Blaze in Crude Unit at Billings Refinery

The Billings Gazette reported on June 12, 2014 that a fire broke out at the large crude unit at the Billings Refinery at about 1:45 that was extinguished in about 15 minutes by on-site personnel. According to Phillips spokesman Travis Sloane, no one was injured in the fire and employees have been dispatched off-site while air quality is measured There does not appear to be any environmental harm as a result of the fire.[274]

June 11, 2014: Phillips Shuts CRU, VDU at Billings Refinery Due to Crude Unit Fire

A fire in the crude unit at Phillips 66’s refinery in Billings, Montana, on Wednesday forced the company to shut two major units for an indefinite period of time. The 38,000 b/d catalytic reforming unit (CRU) and 35,000 b/d vacuum distillation unit (VDU) were shut down on Wednesday afternoon, according to research company Genscape. Late Wednesday Phillips said it had a fire in the large crude unit, which had been extinguished onsite by emergency response personnel. It provided no estimate on the duration of the closure. [275]

June 6, 2014: Phillips Reports FCCU Emissions at Sweeny Refinery

Phillips reported an air blower turbine shutdown was causing emissions from its coker and fluid catalytic cracking unit (FCCU) at its Sweeny refinery in Texas on Friday, according to a filing with state pollution regulators. Energy intelligence firm Genscape had reported a brief flaring was observed at the refinery on Thursday. [276]

June 4, 2014: County Supervisors Order More Environmental Study for Rodeo Refinery Expansion

Jean Tepperman reported at the East Bay Express on June 4, 2014 that Contra Costa residents and environmentalists fighting pollution from oil refineries scored two wins at the board of supervisors as county supervisors voted to send a proposal by Phillips 66 for a new project at its Rodeo refinery back for another round of environmental review. The previous environmental impact report (EIR) of the Phillips 66 proposal — to construct new storage tanks for propane and butane — was “flawed,” explained Catherine Kutsuris, director of the Department of Conservation and Development. Many comments from community residents, as well as a letter from the Bay Area Air Quality Management District, pointed out that the original EIR failed to address the “cumulative impacts” of the Phillips 66 proposal together with other local oil industry projects.[277]

According to Tepperman, refinery workers packed the chamber and spoke in support of the Phillips 66 project, while members of local groups such as Crockett Rodeo United to Defend the Environment (CRUDE), along with representatives of environmental organizations, supported the recommendation to revise and re-circulate the EIR. At the invitation of Supervisor Federal Glover, Larry Silva, manager of health and safety at the Phillips 66 plant, described the environmental benefits of the project, including lowering sulfur dioxide emissions and the potential for flaring. He said other projects have not had to do a cumulative health impact and asked for fair treatment.[278]

June 3, 2014: Rodeo Refinery Propane Recovery Project Delayed Again Over Environmental Impact

Rick Jones reported on the Martinez News-Gazette on June 3, 2014 that Contra Costa County officials want to recirculate the environmental impact report (EIR) for the Phillips 66 Rodeo refinery propane and butane recovery project that calls for the installation of new equipment to recover and sell propane and butane instead of burning it as fuel at the refinery or flaring off excesses. The project would reduce emissions of several pollutants, including sulfur dioxide, the refinery has said. Appeals, by Communities for a Better Environment and the Rodeo Citizens Association, contend the report understates potential impacts of the project and warn that Phillips plans to process more and dirtier crude oil. Phillips has described those contentions as incorrect and speculative.[279]

May 26, 2014: Phillips Reports Ammonia Release at Wilmington Refinery

Phillips reported release of anhydrous ammonia at its Los Angeles-area refinery in Wilmington, California, on Monday, according to a filing with state pollution regulators. The filing did not specify whether the event had an impact on production.[280]

May 20, 2014: 38 Organizations Join Forces To Oppose Proposed Oil Pipeline to Bayway Refinery

The New Jersey Star-Ledger reported on May 20, 2014 that a coalition of 38 organizations from New York and New Jersey has called on Governors Chris Christie and Andrew Cuomo to oppose the proposed 150-mile oil pipeline between Albany, NY and Phillips' Bayway Refinery in Linden, NJ. “Putting the Pilgrim Pipeline through one of the most densely populated areas in the country is an accident waiting to happen, given how volatile Bakken shale oil is,” said Jeff Tittel, director of New Jersey’s Sierra Club chapter and the leader of the teleconference. “Even worse is having this pipeline pass through major water supply rivers” in northern New Jersey’s Highlands region, Tittel added. “This is playing Russian roulette with a fully loaded gun.”[281]

George Bochis, vice president of development for Pilgrim, said the company is “disappointed that these groups are opposing the project without meeting with us. We would be happy to meet to provide additional information. “We are surprised that these groups prefer the status quo when this project could provide a safer, more environmentally friendly and efficient means to transport these products."[282]

April 25, 2014: Phillips Promises Not to Bring Bakken Crude to Santa Maria Refinery

Cynthia Lambert reported in the San Luis Obispo Tribune that Phillips 66 officials said this week that they would not accept any light crude oil from the Bakken region as part of a proposed rail project at the Santa Maria refinery. In a past interview, company officials said rail shipments to the refinery might include a small amount of oil from the Bakken field in North Dakota or Canada — a plan that raised alarm, as there’s concern that Bakken oil might be more volatile than other crudes. “We told the county to put it right in the project description that we will not receive Bakken crude,” said Jim Anderson, project manager for the rail spur proposal.[283]

Some opponents said that their concerns remain despite any promises about the type of crude oil coming by rail into the county. “Regardless of the type of oil, the trains coming through here are a bad idea,” said Martin Akel. Members of the Mesa Refinery Watch group say Phillips 66’s proposal would dramatically transform its business model locally by creating a new, high-intensity operation with 250 more oil-hauling trains traveling through the county and significantly increasing the potential for accidents. “The bottom line — their claim of running out of crude to deliver by pipeline and the threat of lost jobs is a red herring,” the group wrote in a draft position paper. “The company simply wants to change the types of crude they refine in Nipomo, because they’re far more profitable.”[284]

April 18, 2014: Phillips Reports Small Gasoline Leak at Rodeo Refinery

Phillips reported a gasoline leak from a pipeline at its Rodeo, California, refinery, according to a filing with Contra Costa Health Services. About 2–3 barrels of gasoline were released within the refinery and the leak was contained, the filing said. [285]

April 16, 2014: Health and Safety Specialists at Santa Maria Refinery Claim They Were Punished for Unionizing

Colin Rigley reported at the New Times on April 16, 2014 that health and safety specialists at Phillips' Santa Maria Refinery allege Phillips officials warned them in January, 2012 that if they joined the United Steelworkers Union they would lose hours, be stripped of managerial powers, and as many as three of them could lose their jobs. “The insinuation here was that, ‘We may not need all of you,’” one of the specialists said in a written statement submitted to the labor board.[286]

When the newly unionized group went to the bargaining table in December, 2012, the specialists say in a complaint filed with the National Labor Relations Board that Phillips management carried out its threats. Phillips' proposed contract on December 10, 2012 allegedly included the threatened reductions of hours and responsibilities. The refinery’s health and safety specialists serve as organizers of the plant’s emergency response crew. Though none of the health and safety specialists was fired, three of them were transferred from their primary roles into regular plant operations, according to the complaint. The union is seeking to recover lost wages for the health and safety specialists, and to have their original job functions restored. Those lost wages totaled as much as $17,000 per year for some employees. In its complaint, the union further alleges that Phillips 66 bargained in bad faith when it imposed the 2012 contract.[287]

Phillips 66, in its responses to the union’s complaint, said the company reduced the five health and safety specialists to two as part of regular staffing changes, and the job functions were distributed across other personnel. “There is no value more important in our company than ensuring the safety of everyone who works at our sites as well as the safety of our neighboring communities,” Phillips spokesman Dennis Nuss said in a written statement to New Times. “In 2012, Phillips 66 redistributed certain safety-related functions and responsibilities among personnel at the Santa Maria Refinery, and there were no staff reductions. These changes have helped maintain and improve the refinery’s high standards for safety performance.”[288]

In addition to the reduced contract for health and safety specialists, the union alleges that the company violated federal labor laws when it implemented “news media guidelines” in October 2012. Those guidelines instructed employees not to speak to news media and, “It is against company policy for anyone but an authorized company spokespersons [sic] to speak to the news media.” The company defends its policy as a routine business practice that violated no labor laws.[289]

April 16, 2014: Candidates for County Supervisor Spar Over Plan to Move Crude Oil to Santa Maria Refinery by Rail

David Sneed reported in The Tribune on April 16, 2014 that the three candidates running for District 4 County Supervisor faced off in a forum at Nipomo High School, sparring – sometimes testily – over a variety of issues including the proposed rail spur at the Phillips 66 refinery to deliver crude oil from new sources. Real estate broker Mike Byrd took the firmest stance, saying he does not like the idea of oil being imported into the county in rail cars because it poses too many safety issues. “I have a problem with the idea that this is going to be allowed,” Byrd said, adding that a way should be found to pipe the oil into the refinery. Appointed incumbent Caren Ray said it is unethical of Byrd to take a hard-nosed position on the matter before it comes before the Board of Supervisors and said she is working to make sure that the environmental impacts and other issues associated with the project are dealt with. Lynn Compton said the project has its pros and cons but pointed out that the refinery is a source of good jobs in the district. “They are a good neighbor and a benefit to the community,” she said, adding that the county’s permitting of the project is unfolding as it should.[290]

April 4, 2014: Hearing on Rodeo Refinery Project Postponed until May 13

The Contra Costa Times reported on April 4, 2014 that a public hearing on a propane-and-butane recovery project at the Phillips 66 refinery in Rodeo was postponed by Contra Costa County Board of Supervisors to May 13. New equipment would enable the refinery to recover propane and butane instead of using it as fuel in its boilers or burning off excesses in a process called flaring, the company argued. It added it does not need to refine heavier crudes to make the project work. Opponents of the project argued the environmental report does not adequately study many of the project's potential impacts and it overstates the baseline amounts of propane and butane currently produced at the refinery. They also warned that Phillips plans to process more and dirtier oil. Phillips 66, characterizing many of the appellants' objections as speculative and based on incorrect assumptions, asserted the project would reduce emissions of the pollutant sulfur dioxide. Moreover, Phillips 66 said, there are no restrictions on the kinds of crude the refinery can process now or in the future.[291]

March 28, 2014: Santa Maria Rail Extension Project Reopened for Public Comment

The Contra Costa Times reported on March 28, 2014 that an environmental report for a rail expansion project at Phillips' Santa Maria Refinery that some East Bay residents fear could bring highly flammable, light crude from the Bakken oil fields in North Dakota and Canada through their communities will be reissued and subjected to a new round of public comment. This week, the Berkeley and Richmond city councils voted unanimously to oppose the transport of crude oil by rail through the East Bay, adding to a large body of commentary previously submitted during the draft report's initial public comment period. Murry Wilson, environmental resource specialist for the San Luis Obispo County Department of Planning and Building, said his agency decided to recirculate the draft report due to the large volume and nature of comments received. Phillips 66 spokesman Dean Acosta said this week the Santa Maria refinery is "configured to run the heavier California crudes," but he stopped short of saying the refinery would not receive Bakken crude.[292] .

March 26, 2014: Phillips Pays $500,000 Fine for Clean Air Violations at Five Refineries

CSP Daily News reported on March 26, 2014 that Phillips will pay a $500,000 penalty for violations of the Clean Air Act at the Sweeny Refinery in Old Ocean, Texas, the Alliance Refinery in Belle Chasse, La., the Wood River Refinery in Roxana, Ill., the Lake Charles Refinery in Westlake, La., the Borger Refinery in Borger, Texas, and several terminals across the country. Phillips also agreed to retire more than 21 billion sulfur credits that could have been used in the production of gasoline, which could potentially lead to significantly less pollution from vehicles. In a administrative settlement agreement, the EPA alleged that the company generated invalid sulfur credits between 2006 and 2012 and that Phillips failed to comply with recordkeeping, reporting, sampling and testing requirements at the five refineries. EPA discovered these violations during facility inspections and through a review of company records, which included the results of third-party company audits required by the Clean Air Act.[293]

March 24, 2014: Mesa Refinery Watch Group Says Explosive Risks Far Outweigh Benefits at Santa Maria Refinery

Linda Reynolds, the Chairperson for the Mesa Refinery Watch Group wrote an op-ed in the Cal Coast News on March 24, 2014 that says that Phillips "revamped corporate business model is to maximize profits by turning our nation’s rail lines into inherently unsafe “tank car pipelines” to take advantage of the new flood of lower-cost Canadian tar sands 1 and domestic fracked crude oils." According to Reynolds instead of bringing in crude by pipeline, Phillips proposes to bring half-billion gallons (488,000,000) of crude per year to the Santa Maria Refinery, via 20,800 rail tank cars and that the tank cars may very well contain Bakken crude — the explosive crude that has destroyed lives, property and the environment in towns across the U.S. and Canada. "We believe the vastly increased risks that this proposal brings to the citizens and businesses throughout SLO County and the Central Coast are unacceptable," concludes Reynolds. "The risks of massive explosions, fires, oil spills, and air, noise, odor and light pollution, enormously outweigh the benefits the plan bestows on an individual business entity — that is, Phillips 66. Any honest risk, benefit analysis would lead to that conclusion."[294]

March 18, 2014: Three Workers Injured in Hydrofluric Acid Unit at Borger Refinery

Channel 7 Amarillo reported on March 18, 2014 that two Phillips employees and a contractor were injured in an accident at Borger refinery that took place at about 5 pm on March 18, 2014. The injured were taken to Golden Plains Community Hospital to receive medical treatment and the condition of the individuals is not life threatening. One employee is at Golden Plains Community Hospital, the second has been transported to the Lubbock Burn Center, and the contract worker is under observation at Golden Plains Community Hospital. Scanner traffic indicated the injured had been exposed to hydrogen sulfide. Phillips is investigating the incident.[295]

According to the "Borger News-Herald" the incident occurred during turnaround at the unit that handles hydrofluric (HF) acid. The hydrofluric acid unit was shut down at the time the accident occurred. Phillips did not confirm the exact nature of the incident. Phillips is investigating the cause and implications of the incident and details are still being clarified as the influx of turnaround workers has increased traffic inside the plant. "We want to figure out exactly what happened," said Dennis Nuss, a Senior Advisor for Phillips 66 who works with Project Communications. "We want to make sure that something similar will not happen again." When asked if the incident was due to either a chemical exposure or a fire, Nuss said, "There was no fire." The Borger News-Herald is reaching out to contract companies and contractors for more information and will update the story as more information is released.[296]

March 18, 2014: Crack in Idle Phillips Pipeline Spews Crude Oil onto Wilmington Streets

The Wilmington Press-Telegrapm reported on March 18, 2014 that a crack in an idle Phillips oil pipeline, possibly caused by this week’s 4.4-magnitude earthquake, spewed thousands of gallons of crude oil onto a residential street in Wilmington. “After a thorough investigation of the source, we can confirm the leak is coming from an idle pipeline owned by Phillips 66,” said Phillips spokeswoman Monica Silva. “We are working to stop the leak and have recovered approximately 30 barrels of oil. Clean-up efforts continue.” Silva declined to elaborate on why the unused 10-inch pipeline was filled with crude oil. Normally, when a pipeline is not being used, oil companies will fill it with concrete slurry. However, if they think they may want to use the line again, they try to keep it viable. In this case, the oil may have been stored in the line to keep it from corroding or collapsing, fire officials said. Silva said oil company officials will not say more about the issue until Wednesday.[297]

Rep. Janice Hahn, D-San Pedro, visited the site on Tuesday out of “concern for the safety and well-being of the residents of Wilmington,” she said in a statement. “The harsh, crude oil smell is not only horrible, but can also be potentially harmful to the neighborhood residents and environment.” “As a member of the House Transportation and Infrastructure Subcommittee on Railroads, Pipelines and Hazardous Materials, I plan to make this oil spill incident a priority,” Hahn said. “I have already reached out to the subcommittee to find out what federal actions we can take to ensure that an incident like this will not happen again, and that there is proper oversight with our nation’s pipelines. County Hazardous Materials Specialist Don Miguel Ellis said that Phillips 66 officials were developing a plan Tuesday afternoon to remove the rest of the oil and clean and repair the area. “It’s a significant spill in a public area,” Ellis said. “But health risks are minimal.”[298]

Phillips, which earlier in the day said it was almost positive that it was not to blame for the leak, later took responsibility and put the blame on one of its out-of-service pipes. Janet Grothe, a spokeswoman for Phillips 66, said the company would investigate why oil remained in the pipe, which she said was taken out of service before Phillips 66 acquired it. Los Angeles Councilman Joe Buscaino, who was touring the area, said the pipe had been withdrawn from service in 1998. Don Ellis, a hazardous-materials specialist with the Los Angeles County Fire Department, said that when an underground oil pipeline is withdrawn from use, it is supposed to be capped and the material inside vacuumed out. Although Phillips initially thought the pipe didn't belong to the firm, the company was involved in the cleanup early on "as a good neighbor," Grothe said adding that Phillips' crews would steam clean the street and that repairs would be completed in a week.[299]

March 14, 2014: Phillips Santa Maria Rail Spur Meeting Draws 150 Critics

The Santa Maria Times reported on March 14, 2014 that 150 people attended an afternoon town hall meeting to discuss the Phillips' Santa Maria rail project that would allow tank cars to deliver crude oil to the Santa Maria Refinery. When an audience member asked how many in the audience opposed the project, virtually everyone raised a hand. When San Luis Obispo County 4th District Supervisor Caren Ray asked how many supported it, not one hand went up. Ray told the crowd that the County Planning Department “was simply overwhelmed” by 800 public comments about the draft Environmental Impact Report. The meeting started with a Powerpoint presentation by Art Herbon of the Mesa Watch steering committee outlining the project and why the group opposes it. Reasons cited by Herbon and, later, audience members included noise, air quality, dust, odors, visual and economic impacts plus the explosive danger of Bakken crude oil. “We support Phillips 66 in its efforts to increase profits and provide jobs, but not at any cost ...,” Herbon said following his presentation.[300]

The draft Environmental Impact Report says the primary source of crude oil in the shipments would be the Bakken oil formation in South Dakota, which opponents find alarming. Bakken crude was involved in the explosions and fires Dec. 30 when two trains collided in South Dakota, prompting the U.S. Department of Transportation to issue a warning that Bakken crude might be more flammable than other types. Bakken crude not only carries more hydrogen sulfide, which is toxic and flammable, but also more explosive butane and propane gases. Ray said Phillips 66 officials told her they would change the draft EIR so Bakken would not be the primary source but would not eliminate it entirely. That’s because Bakken crude could be delivered by “manifest trains” that would haul tank cars as well as other types of cargo, she said.[301]

March 10, 2014: Phillips Fined $239k for Air Quality Violations at Rodeo Refinery in 2008 and 2009

Denis Cuff reported in the Contra Costa Times that the Bay Area Air Quality Management District announced on March 10, 2014 that it had reached a civil settlement with Phillips for the payment of $230,900 in air pollution penalties for 19 air quality violations at their Rodeo Refinery in 2008 and 2009 that included late or missed flare gas samples, failure to install and inspect required emission controls on the wastewater system, and operating a storage tank while control valves were open.The refinery also exceeded hydrogen sulfide limits in fuel gas. "The air district has the responsibility to ensure that refineries operate their facilities in full compliance of air quality regulations to protect the health of local residents," said Jack Broadbent, the air district's executive officer. "Any violation of these regulations, no matter how minor, will not be tolerated."[302] Officials at Phillips said the company had disclosed most of the violations to the air district and fixed the problems quickly. "We continue to make improvements in our procedures, training and monitoring to minimize if not eliminate the likelihood of recurrence," said Janet Grothe, a spokeswoman for Phillips.[303]

March 5, 2014: Bakken Crude in Exploding Oil Trains May Contain Too Much Propane

Marcus Stern and Sebastian Jones report on Bloomberg that as federal regulators continue investigating why tank cars on three trains carrying North Dakota crude oil have exploded in the past eight months, energy experts say part of the problem might be that some producers are deliberately leaving too much propane in their product, making the oil riskier to transport by rail]. Sweet light crude from the Bakken Shale formation has long been known to be especially rich in volatile natural gas liquids like propane and while there's no way to completely eliminate natural gas liquids from crude, well operators are supposed to use separators at the wellhead to strip out gases before shipping the oil. The worry is that some producers are adjusting the pressure settings to leave in substantial amounts of natural gas liquids and purposefully selling their crude "fluffed up" with propane to maximize their profits. "There is a strong suspicion that a number of producers are cheating. They generally want to simply fill up the barrel and sell it—and there are some who are not overly worried about quality," says Alan J. Troner. "I suspect that some are cheating and this is a suspicion that at least some refiners share." As an oil train shakes, rattles and rolls toward the refinery, the propane begins to separate from the liquid and turning into gas. If one of those cars ruptures, the propane gas inside will likely make contact with outside air. If the gas is ignited—perhaps by a spark thrown off when the car rips open or maybe a spark thrown up from steel wheels scraping over steel tracks—the car can explode. Then the burning car can act like a blowtorch on the tanker next to it and at that point, railcars can explode in domino fashion.[304][305]

The Pipeline and Hazardous Materials Safety Administration (PHMSA) recently issued a safety alert that recent derailments and resulting fires indicate that the type of crude oil being transported from the Bakken region may be more flammable than traditional heavy crude oil. "It's typical of this type of oil. So it's not surprising. There's no mystery to it… especially if it were in a tanker not meant to carry that type of fluid," says Ramanan Krishnamoorti referring to the much-criticized DOT-111, a black, torpedo-shaped railcar designed in the 1960s that has become the workhorse of the crude-rail industry. Washington doesn’t appear to be in a rush to address the problem. On January 23, investigators at the US National Transportation Safety Board made broad recommendations that would have big consequences: They said crude oil should meet the same restrictions as toxic chemicals, which must be routed on tracks away from population centers. “The large-scale shipment of crude oil by rail simply didn’t exist 10 years ago, and our safety regulations need to catch up,” says NTSB Chairman Deborah Hersman. “While this energy boom is good for business, the people and the environment along rail corridors must be protected from harm.”[306][307]

March 3, 2014: Phillips Reports Emissions from Valve Release at Wood River Refinery

Phillips reported emissions from a valve release at its refinery in Wood River, Illinois, according to a filing with state pollution regulators on Monday. [308]

February 28, 2014: Phillips Faces Compliance Hearing for Pollution Monitoring System at Rodeo Refinery

The Contra Costa Times reported on February 28, 2014 that the Contra Costa County Zoning Administrator will hold a compliance meeting on March 3, 2014 on the land use permit of the Phillips 66 Rodeo Refinery to determine if the fence line pollution monitoring system, deemed deficient in October, has been fixed. The system is supposed to function 95 percent of the time, according to an agreement between the refinery and an environmental working group that is a condition of a Clean Fuels Expansion Project. According to the staff report, a contractor found the monitoring system exceeded the 95 percent standard during four months of a 10-month period, and failed to meet the standard during six of those months.[309]

February 20, 2014: Likelihood Of A Train Accident Releasing Oil In South County is Once In Every 226 Years

The Times Press recorder reports that a proposed rail spur extension and expansion at the Phillips 66 Santa Maria Refinery will be discussed at the South County Advisory Council meeting on February 24, 2014. Jim Anderson, superintendent of maintenance at the refinery, will present an overview of the project to construct additional rail spurs on the refinery property. Under the proposal, up to five trains would be unloaded each week, with the maximum expected to be 250 trains per year. That works out to an annual total ranging from 470 million to 547.5 million gallons, depending upon car sizes. According to the Draft Environmental Impact Report the likelihood of a train accident releasing oil in the county at once in every 226 years.[310]

February 19, 2014: Phillips 66 Reports Unspecified Material Combustion at Wilmington Refinery

Phillips 66 reported an unspecified material combustion due to unknown reasons at its Los Angeles-area refinery in Wilmington, California, on Wednesday, according to a filing with state pollution regulators. The filing did not specify whether the malfunction caused any production impact.[311]

February 14, 2014: Garland Says Phillips has Invested $1.5 Billion in Pollution Control in Last Decade

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips has invested over $1.5 billion in the last decade in pollution control equipment, in pollution reduction equipment. "So you combine that along with paying attention to the big things and the small things and running our businesses really well, you can see we significantly reduced emissions."[312]

February 10, 2014: Phillips 66 Reports Emissions at Ferndale Refinery

Phillips 66 reported emissions at its refinery in Ferndale, Washington, on February 10, according to a filing with the Northwest Clean Air Agency made public on Thursday. [313]

February 7, 2014: Opponents of Rail Terminal to Santa Maria Refinery Take Their Concerns to County Traffic Committee

The Times Press Recorder reported on February 7, 2014 that opponents of the proposed rail facility expansion at the Santa Maria refinery plan to take their concerns to South County Advisory Council’s Traffic and Circulation Committee Meeting on February 13, 2014 that is scheduled to discuss the transportation section of the project’s draft environmental impact report. "We will be there in force,” said group member Laurance Shinderman. Members of Mesa Refinery Watch have collected 400 signatures on a petition opposing the expansion and another 100 people individually wrote letters opposing the project said Shinderman. The group worries about a catastrophic explosion along the Union Pacific rail line like the one on December 30, 2013 when two trains collided in South Dakota and last July that killed 47 people after a derailment in Quebec. “It’s not an issue of the refinery increasing capacity,” Shinderman said. “It’s an issue of trains coming through.” Shinderman said the EIR’s assertion the project will have no significant impacts “is just insane,” noting there will be impacts to noise, aesthetics, traffic and air quality. “I think our position is not fewer trains but no trains."[314]

January 29, 2014: Phillips 66 Agrees To Pay $6,000 In State Fines for Water Pollution Violations from Rodeo Refinery

The Contra Costa Times reported on January 29, 2014 that Phillips has agreed to pay $6,000 in fines to the state for exceeding discharge limits for selenium on two different occasions at its Rodeo refinery along San Pablo Bay that occurred on July 2, 2012 and September 5, 2012. Phillips agreed to waive its right to a hearing and to settle the matter under the board's Expedited Payment Program. The settlement is pending acceptance by the board's executive officer following a public comment period that runs until 5 p.m. on February 28, 2014.[315]

January 22, 2014: Phillips Reports Equipment Malfunction, Start-up Procedures After Fire at Wood River Refinery

Phillips reported an equipment malfunction at its Wood River refinery in Roxana, Illinois, which led to sulfur dioxide and nitrogen dioxide emissions, a filing with the Illinois Emergency Management Agency pollution regulator showed. On January 22, 2014 the company had begun standard start-up procedures to bring a unit affected by a fire on January 21, 2014 back into service. The company had earlier said a small process unit fire that began after a leak at the refinery had been extinguished. [316]

January 14, 2014: Phillips Settle Claims of Defrauding Utah State Fund of $25 Million for Cleanups of Leaking Underground Tanks

The Insurance Journal reported on January 14, 2014 that Phillips has paid $2 million to settle allegations it helped itself to Utah’s Petroleum Storage Tank Fund for cleaning up damage from leaking fuel storage tanks even though it had insurance to cover the cleanups. Phillips was said to have relied on the fund for cleanups at 82 service stations. Consistently, these guys were saying, ‘No, we don’t have any insurance,” said Therron Blatter, a branch manager for underground storage tanks at the Utah Division of Environmental Response and Remediation. “Clearly, they did have the insurance.”[317]

According to the Salt Lake City Tribune Phillips was accused of defrauding the Utah’s Petroleum Storage Tank Fund to the tune of $25 million for cleanups associated with leaking underground tanks. In its lawsuit filed in 2012, the division alleged ConocoPhillips collected $25 million in payouts to cover cleanups at 82 service stations by falsely reporting that these sites were not covered by independent insurance. The suit sought to recover this money, plus punitive damages and fines totalling $10,000 for every day ConocoPhillips violated the law. But as lawyers gathered evidence it became apparent some of the claims were not that strong, said Brent Everett, director of the state Division of Environmental Response and Remediation. Officials said they are satisfied with the $2 million settlement, which amounts to less than 10 percent of what they originally claimed was misappropriated.[318][319]

December 31, 2013: Eleven Workers Treated After Hazardous Materials Leak at Wilmington Refinery

The Daily Breeze reported on December 31, 2013 that eleven workers were briefly treated for possible respiratory problems on December 31, 2013 following a sulfur dioxide leak at the Phillips 66 Refinery in Wilmington. A firefighter at the refinery said the 11 people were workers who had been exposed to sulfur dioxide gas. They were taken to hospitals for emergency treatment in fair condition said Katherine Main of the Los Angeles Fire Department. Other workers were told to shelter in place inside buildings on the refinery. By 11 a.m., the LAFD reported that the situation was “static’’ and there was “no active leak (and) no danger to the community." “All other refinery employees and contract workers have been accounted for and are safe. The area has been secured and the refinery is running under normal operations,’’ said Phillips 66 spokesman Rich Johnson.[320]

December 23, 2013: Safety Critics of Rail Terminal through San Luis Obispo County Speak Out at Workshop

The Santa Maria Sun reported on December 23, 2013 that 60 citizens and stakeholders gathered for a two-hour public workshop on December 12, 2013 regarding the draft environmental impact report (DEIR) for the Phillips 66 project to ship oil by train through San Luis Obispo County to Phillips Santa Maria Refinery in Nipomo. “I want people to wake up,” said Julie Tacker, a Los Osos resident and local activist. “I’d like people all along the railroad line—which runs right through the heart of SLO County—to pay attention. All it takes is one car on the oil train to blow, and then they’ll all blow.” Concerns raised about the rail spur project included the significant danger of an oil train accident similar to the Québec disaster of July 2013, adverse traffic and noise impacts, the higher volatility of Bakken crude (a potential source for the oil trains), and what detractors called the suspicious timing of the project in relation to a 10 percent refinery through-put increase approved just two months before the rail spur project was proposed. Local environmental activist Eric Greening was concerned about the safety of the train cars that will be used to transport oil. Greening claimed “the majority of train cars on the rails in America right now are substandard,” and requested that Phillips 66 use safer cars.[321]

Phillips 66 staffers, SLO County Planning and Building Department representatives, and the DEIR report consultants were in attendance to receive public comments and to answer questions. The county has tentatively scheduled a Planning Commission hearing for the project on April 24.[322]

November 27, 2013: Phillips to Pay $300K Settlement for Migratory Bird Deaths near Borger Refinery

Jim McBride reported in the Amarillo Globe-News on November 27, 2013 that Phillips and federal authorities have reached a nearly $300,000 settlement over migratory bird killed near their Borger Refinery after the the U.S. Fish & Wildlife Service learned in August 2012 about 260 waterfowl, mostly teal, had been killed at the Johnson Tank Farm Pond, a 3 million-barrel brine water pond spanning 22 acres in Hutchinson County. In exchange for the company’s mitigation efforts, authorities will not prosecute Phillips under the Migratory Bird Treaty Act or other federal laws if the company continues to comply with terms of the agreement, which was reached November 22, 2013. “At Phillips 66 we conduct our business with care for the environment. ... We have added additional deterrents and continue to work closely with the U.S. Fish & Wildlife Service to minimize bird activity near our operations,” said Phillips spokeswoman Janet Grothe. Phillips has established an emergency treatment center for injured birds at the Borger facility, installed bird deterrent devices and contracted with another firm to keep birds away from the pond with a boat and air horns, federal authorities said.[323]

October 30, 2013: Two Workers Injured in Steam Leak at Humber Refinery

The Grimsby Telegraph reported on November 28, 2013 that two workmen from Phillips, who received serious injuries after a steam leak at the Killingholme refinery on October 30, 2013, are still being treated at Pinderfields Hospital in Wakefield with one worker in a critical condition while the second is said to be making satisfactory progress.[324] The Health and Safety Executive (HSE) has visited the site and an official investigation into the accident is underway.[325][326]

October 3, 2013: Phillips Reports Small Fire in Process Unit at Rodeo Refinery

Phillips 66 reported a small fire in the insulation of a process unit at its Rodeo refinery in northern California, according to a filing with the Contra Costa Health Services. [327]

August 23, 2013: Expansion of Rodeo Refinery Worries East Bay Residents

KGO-TV reported on August 23, 2013 that a plan to build a propane storage facility at Phillips' Rodeo Refinery has some residents fearing for their safety, especially after the big explosion at a propane plant in Central Florida last month. "You can run from a fire, you cannot run from an explosion," says Tegan Clive of Rodeo. "It's too close to people." Phillips says they're just trying to catch up to their competitors in the Bay Area, that all the others already have propane plants on site. "Right now, we currently utilize propane and butane and burn it in our furnaces here. So, it's a fuel source. We're going to replace that with natural gas, something that's cleaner burning than propane and butane," says Phillips spokesman Mark Hughest. Phillips 66 says their plan has been reviewed by safety experts and the risks are low. The Contra Costa Planning Commission has approved a draft environmental impact report. If the full board of supervisors approves a final plan, Phillips hopes to begin construction early next year.[328]

August 20, 2013: Phillips Isolates Transmission Line in Oklahoma After Gas Spill

Reuters reported on August 20, 2013 that Phillips has isolated a transmission line in Pawnee County, Oklahoma following a leak of an unknown amount of gasoline according to a filing with the US National Response Center.[329]

August 6, 2013: Phillips Conducts Evacuation Drills at Lake Charles Refinery

KPLC TV reported on Augusut 6, 2013 that Phillips planned drill exercises over multiple days to cover all shifts and that residents should not be alarmed by horns. "Neighbors and passersby may hear a series of horn blasts and see employees gathering in the parking lot, however, they should not be alarmed as this is part of the exercise. The horns will sound to signal the start of the evacuation and then again when the all clear is issued," the release states. The Occupational Safety and Health Administration (OSHA) requires all VPP Star sites to conduct an annual evacuation drill.[330]

July 18, 2013: Phillips Pays Fine for Billings Refinery Pollution Violations

The Daily Journal reported on July 18, 2013 that Phillips has paid $17,075 to resolve pollution violations involving wastewater from the company's Billings refinery when the Montana Department of Environmental Quality said Phillips' refinery exceeded chlorine limits in its wastewater in 2010, and limits on oil and grease in 2012. Phillips used chlorinated water which is toxic to fish to test a large storage tank for leaks, but did not remove the chlorine prior to draining the tank.[331]

July 17, 2013: Phillips Oklahoma City Pipeline Terminal Receives Safety Recognition

Adam Wilmoth reported in the Daily Oklahoman on July 17, 2013 that the Oklahoma City Phillips 66 terminal received OSHA's Voluntary Protection Program Star qualification, awarded based on the company's safety policies and on how well employees understand and follow those policies. “Phillips 66 is very proud of Oklahoma joining the VPP Star sites. It's hard work, but it's well worth the effort to become part of this family,” said Bob Herman, senior vice president of health, safety and environment for Phillips 66. “We're committed to this program. We're in it for the long haul. The program cost us money, but it is the right way to run our business.” Phillips is the 46th company in Oklahoma to achieve the VPP Star recognition. The Oklahoma City terminal is the 23rd Phillips 66 site to receive the award.[332]

July 14, 2013: 400 Migratory Birds Encrusted with Salt at Borger Refinery

Jennifer Hiller reported in the San Antonio Express-News on July 14, 2013 that Texas is a major migration flyway for birds and with the severe drought birds desperate for water are landing in open pits and tanks that hold water for drilling and hydraulic fracturing operations. Last fall, for example, 400 migrating birds dove into briny water at Borger Refinery. “Their water source was dry and so they went to a huge brine pit that was within a refinery, and 400 or more birds were encrusted with salt,” said Longtime bird rehabilitator Bebe McCasland.[333]

July 12, 2013: Phillips Blames Shifting Land for 25,000 Gallon Crow Reservation Oil Spill

KULR News reported on July 12, 2013 that Phillips 66 says shifting land appears to have damaged an underground pipeline that spilled up to 25,000 gallons of gasoline on the Crow Reservation west of Lodge Grass. Phillips says that it has completed repairs on its 8-inch underground Seminoe line and a cleanup plan is pending. The line is expected to be put back into operation by July 14, 2013 and spokesman Dennis Nuss says by the time of the restart the company will have fulfilled safety actions requested by federal regulators to prevent further problems.[334]

July 9, 2013: Phillips 66 Plans New Oil Pipeline across Yellowstone River to Prevent Line From Breaking

KTVQ reported on July 9, 2013 that Phillips plans to build a new petroleum pipeline across the Yellowstone River in Montana after a survey conducted in 2011 found that the existing Phillips pipeline was only covered by two to six feet of river bed. The project comes two years after Exxon's pipeline broke in the Yellowstone River, spewing 63,000 gallons of crude oil into the water. Phillips wants to construct a new line that would run 40 feet underneath the water to prevent the line from breaking. The Montana Department of Natural Resources & Conservation recommends that Phillips 66 remove the old pipeline as part of the project but Phillips disagrees with this recommendation. The Montana Land Board will vote on whether or not to grant the construction permit on July 15, 2013.[335]

July 5, 2013: Phillips Gas pipeline Spills 25,000 Gallons on Crow Reservation in Montana

UPI reported on July 5, 2013 that a Phillips 66 pipeline spilled 25,000 gallons of gasoline on the Crow Reservation in southeastern Montana. The same pipeline broke twice in one week in 1997, spilling an estimated 2,300 barrels of gasoline near Lodge Grass and Banner, NBC News said. A U.S. Department of Transportation spokesman said the leak, which occurred about 15 miles from Lodge Grass, Mont., was under investigation but posed no safety threat to the public and did not immediately affect any waterways.[336] Phillips 66 says the pipeline transports finished petroleum products such as gasoline and diesel from its Billings refinery to Wyoming, Utah, and Colorado. Spokesman Dennis Nuss says Phillips immediately shut down the pipeline and that there are no anticipated health concerns. Crow Tribal Chair Darrin Old Coyote confirmed this and also said the leak is not near any homes or streams. "Phillips 66 was the one who reported it," Old Coyote said. "The pipeline is shut down and they are mobilizing their equipment to actually do the cleanup. No evacuations have taken place, but they are doing traffic control because the area is close to the road that goes from Hardin to Fort Smith."[337] In 2004, the Conoco Pipe Line Co. agreed to pay $465,000 for environmental violations after the line broke twice in a week in 1997, spilling more than 2,300 barrels of gasoline near Lodge Grass and Banner, Wyo.[338]

June 12, 2013: Employee is Exposed to Hydrogen Sulfide at Bayway Refinery

Phillips 66 said operations were not affected at its Bayway refinery in Linden, NJ after an employee was hospitalized following an exposure to hydrogen sulfide on June 12. The employee was released from the hospital later the same day, a spokesman said.[339]

April 27, 2013: Fire at Chevron Phillips Port Arthur Chemical Plant Sends Eight to Hospital

The Port Arthur News reported on April 27, 2013 that an early morning fire at Chevron Phillips Chemical Company in Port Arthur sent eight contract workers to two hospitals on April 27, 2013. Company officials confirmed that a localized fire occurred at its Port Arthur facility at approximately 4 a.m. during a turnaround period, which resulted in several contractor employees being transported to the local hospital. The fire was quickly extinguished, and there was no impact to the community, according to a press release from Melanie Samuelson with Chevron Phillips corporate communication. “The safety of our employees is our highest priority,” Margie Conway, plant manager at the Port Arthur facility, said in a press release. “We regret very much that this incident has occurred, and are thankful that most of the contractor employees were treated and released from the hospital.”[340]

April 26, 2013: Safety Called into Question at Bayway Refinery

Jim Hoffer wrote at WABC on April 26, 2013 that Bayway refinery worker and Union President Gary Doherty says that Phillips is cutting back on fire safety putting workers and the community in danger. Doherty says that Bayway's Fire Department has been reduced from 10 full-time firefighters in 2008 to seven today. "Managers made it clear to us that this is to save money, and we ask, at what cost?" Doherty said. Phillips 66 says it maintains robust emergency response capabilities and that only one full-time firefighter position has been cut.[341]

Eyewitness News learned that the volunteer rescue squad had its firefighting training eliminated causing nearly half of the refinery workers on the 48-man volunteer fire brigade to quit the squad. "They turned in their gear and they no longer volunteer to come in and fight fires in the refinery," Doherty said. "They fear for their safety." Phillips 66 says it has reversed its decision to cut firefighting training for Bayway's rescue squad resulting in a return of several volunteers who had quit the fire brigade but Eyewitness News has been told that earlier this week, a training class had to be cancelled because of a lack of volunteers.[342]

April 26, 2013: Amy Goldsmith and Fletcher Harper write that Phillips 66 has Reduced Staffing in Safety Areas at Bayway Refinery, Creating Concern for Workers and Neighbors

Amy Goldsmith and Fletcher Harper wrote in an op-ed in the New Jersey Star-Ledger on April 26, 2013 that the threat of an industrial fire and explosion that recently hospitalized hundreds in West, Texas has potentially increased for New Jersey residents as a result of a recent change in ownership at the Bayway oil refinery. "Last year, the refinery became part of Phillips 66," write Goldsmith and Harper. "After the ownership change, Phillips 66 eliminated one of just two positions dedicated entirely to firefighting and response to chemical leaks on the night shift and also reduced staffing for a process unit that can generate deadly hydrogen sulfide gas. They also cut back on long-established procedures for testing fire protection."[343]

According to Goldsmith, director of the New Jersey Environmental Federation, the state chapter of Clean Water Action, and Harper, executive director of GreenFaith, Phillips produces millions of pounds of highly toxic and flammable substances at Bayway Refinery and Phillips May 2012 Risk Management Plan submitted to EPA acknowledges that a flammable mixture could cause serious harm in the surrounding area in which 18,000 people live. "The people who work at the Bayway refinery have been objecting to Phillips 66’s cuts through their union, Teamsters Local 877. Unfortunately, Phillips 66 has responded by ordering a two-week suspension from work for the local union officer who has helped lead the workers’ health and safety efforts for many years," write Goldsmith and Harper. "Between Earth Day (Monday) and Workers’ Memorial Day (this Sunday), this week has focused Americans’ attention on the need to put public safety and environmental protection ahead of extra profits and bonuses for corporate CEOs. This would be a good time for corporate executives such as those at Phillips 66 to start listening."[344]

April 5, 2013: Explosion at DCP Midstream Gas Compressor Station in Langston, Oklahoma

Channel 2 News reported on April 5, 2013 that authorities say a worker inside a natural gas compressor station owned by DCP Midstream was able to escape without injury after an explosion near Langston, Oklahoma, about 45 miles north of Oklahoma City. The Guthrie Fire Department, along with Meridian and Coyle fire departments, all responded to the explosion but firefighters let the natural gas in the line burn off before they could safely fight the blaze and the fire was extinguished several hours after the blast. DCP Midstream doesn't know what started the explosion in rural Logan County, but is investigating along with the Department of the Environmental Quality and the Oklahoma Corporation Commission. "It was a tremendous fire ball in the sky and was able to be seen for quite a few miles," said Guthrie Fire Chief Eric Harlow adding that he believes weather may have been a factor in the fire. "We didn't have much wind last night, which would allow the gas to kind of stay in place, instead of dissipating, at that point any spark, whether it be static electricity or even the spark of vehicle ignition could likely set it off." Three homes had to be evacuated and DCP Midstream offered to pay for one other family's hotel if they wanted to evacuate. "We've never had any problems at the compressor station before," said William Savory, who has lived in Wellston for 20 years and decided not to take DCP up on its offer. "And I told my wife, all it's just going to do is burn off, it's going to burn off because it's so wet."[345][346]

April 2, 2013: Small Fire Breaks Out in Coking Unit at Los Angeles Refinery

Phillips 66 reported a small fire broke out on April 2 in a coking unit and was later extinguished. There were no injuries or impact to operations.[347]

January 23, 2013: Phillips 66 pays $50K over Hazardous Waste Allegations at Trainer Refinery

The Philadelphia Inquirer reported on January 23, 2013 that Phillips 66 Co. has agreed to pay a $50,000 penalty to settle alleged violations of hazardous waste regulations at its former refinery in Trainer. The U.S. Environmental Protection Agency cited Phillips 66 for violations involving the storage of hazardous materials including refinery hydrocarbon waste, chromium waste, heavy metal waste from batteries and mercury waste from fluorescent bulbs.[348]

January 23, 2013: Phillips Joins Global Environmental Management Initiative

IB Times reported on January 23, 2013 that Phillips has joined the Global Environmental Management Initiative, an organization of leading companies dedicated to foster global environmental, health and safety (EHS) and sustainability excellence through the sharing of tools and information to help business achieve environmental sustainability excellence. "We are pleased to welcome Phillips 66 to GEMI," said GEMI's Chair, Neville Dias, Director, HESS Management System, Carnival Corporation & plc. "Their knowledge and experience will be valuable additions to GEMI, and we look forward to combining their expertise with that of our other GEMI members."[349][350]

January 16, 2013: Phillips Returns CDU to Service at Wood River Refinery After Electrical Fire

Phillips 66 said it has returned a crude distillation unit (CDU) to service at its Wood River refinery after repairs over the weekend. The unit was temporarily shut following a brief electrical fire on on January 12, 2013.[351]

January 12, 2013: Brief Electrical Fire Shuts CDU at Wood River Refinery

Phillips 66 reported a crude distillation unit (CDU) at its Wood River refinery was temporarily shut following a fire on January 12, 2013, according to a spokesman. At approximately 5:00 p.m. local time, an electrical fire occurred in a piece of equipment that supports one of the refinery’s crude units, the spokesman said. He did not identify the unit where the fire broke out, but the refinery filed a notice January 12 with the Illinois Emergency Management Agency about a fire on an above-ground crude oil storage tank. The spokesman said that repairs were underway and that the crude unit was expected to return to production in “a couple of days.” The CDU is one of three at the Wood River refinery.[352]

January 2, 2013: California Sues Phillips for Environmental Violations at Gas Stations

Bloomberg reported on January 2, 2013 that California Attorney General Kamala Harris and and seven county district attorneys filed a complaint on January 2, 2013 in state court seeking an order to force ConocoPhillips and Phillips 66 to comply with California’s laws for underground gasoline storage tanks as well as unspecified civil penalties for violating the state’s health and safety code. “The state’s hazardous waste laws help protect our residents from contaminated groundwater,” Harris said in a statement. “This lawsuit safeguards public health by ensuring proper maintenance of the tanks that store fuel beneath many California communities.” The People v. Phillips 66, RG13661894, Superior Court of California, Alameda County (Oakland) accuses the two companies of improperly monitoring, inspecting and maintaining underground storage tanks.[353]

December 19, 2012: Phillips 66 Responds to Ponca City Residents' Concerns Over Groundwater Contamination

Beverly Bryant reported in the Ponca City News on December 19, 2012 that Phillips 66 has responded to health concerns of Ponca City residents of about what they believe to be contamination of the water which comes into their homes, as well as groundwater on their properties. “Phillips 66 conducts its operations and environmental programs in a manner that protects the community, human health and the environment," said a statement by Bob Gingerich, head of Human Resources at the Phillips 66 Refinery. "Since the early 1990s, Phillips 66 (previously Conoco and then ConocoPhillips) has been working cooperatively with state regulators, to continue remediation and monitoring of groundwater and springs beneath and surrounding the refinery. Phillips 66 conducts monitoring of this groundwater and springs multiple times throughout the year in accordance with a plan approved by state regulators. Test results show the impacted area continues to shrink. These results are available to the public through the Oklahoma Department of Environmental Quality and at the Ponca City Public Library. Since 2003, Phillips 66 has purchased and continues to purchase selective property near the refinery to increase the buffer zone between the community and the refinery. Phillips 66 has a long history of working with our neighbors and responding to community questions and concerns. Community members are welcome to call our 24-hour InfoLine (580) 767-7130.” Gingerich declined to answer any questions about the monitoring results, but said “We are happy to talk to any individual homeowners about any concerns and come out to help them understand what’s going on."[354]

December 18, 2012: Ponca City Residents Meet Over Concerns about Possible Groundwater Contamination

Beverly Bryant reported in the Ponca City News on December 18, 2012 that residents of a southeast Ponca City neighborhood adjacent to the Phillips 66 Refinery met at the Poncan Theatre with Attorneys Dave Askman, Jason Aamodt, Kalyn Free and Dallas Strimple to discuss possible groundwater contamination with benzene, a volatile organic compound which can cause cancer. The attorneys, who included the co-counsels that represented the Ponca Tribe in their 2005 lawsuit against Continental Carbon Company, gave a presentation called “Orange Water: Ponca City, Oklahoma.” Water samples were taken from seven sites, said Askman adding that although not all seven sites showed the same results, benzene was found in a concentration of 20 parts per million at one site, along with diesel-range organics. “In those orange springs, we know there is benzene and diesel coming up in the water,” said Askman. “Phillips has information that materials have gotten into the neighborhood.” The Ponca City News reported that efforts to contact spokesmen for Phillips 66 and the Oklahoma Department of Environmental Quality had so far been usuccessful but would continue.[355]

December 13, 2012: Safety Changes At Santa Maria Refinery Pit Workers Against Management

Matt Fountain reported in the New Times on December 13, 2012 that before December 10 2012, Phillips 66 employed five health and safety shift specialists at the Santa Maria refinery, who worked onsite in 12-hour shifts but that after the specialists became members of USW Local 534, relations between management and the team have grown shakier. Last month, word came down: The five were being split up. Two would work the regular daylight shift as “safety coordinators” and the other three would be reassigned to the operations emergency response team, essentially the lowest position in terms of safety. According to Fountain, along with the reassignments came severe pay cuts—some to the tune of $12 an hour less, according to knowledgeable sources. The changes were finalized December 10, 2012. In their place, management delegated their responsibilities to plant employees, though at a far lower degree than what the health and safety shift specialists did, according to USW staff representative Ron Espinoza. Instead of having an all-encompassing EMT and search and rescue-certified expert on site, now the only EMT on site will be the front gate security guard, according to union reps and plant employees. The problem with the guard assuming response duties, they said, is that guards aren’t equipped or authorized to access many of the higher-risk areas of the facility. “We do believe it’s retaliation,” USW staff representative Espinoza told New Times. “They’re coming after them, and doing a fairly good job at it.”[356]

In January 2012, members of the USW Local 534 took to the picket lines outside the plant’s gates to protest the management’s hard-line on their then-ongoing labor negotiations. One of the issues of contention: a “fatigue policy” for work schedules. And another: safety equipment improvements.[357]

In response to a long list of questions regarding the specialist team and safety conditions at the plant, Phillips 66 Spokesman Rich Johnson provided the following statement in an e-mail to New Times: “There is no value more important in our company than ensuring the safety of everyone who works at our sites as well as the safety of our neighboring communities. Over the past year, we have redistributed certain safety-related functions and responsibilities among personnel at the Santa Maria refinery, and there have been no staff reductions. We expect these changes will help maintain and improve the refinery’s high standards for safety and performance.”[358]

According to Fountain, plant operators seem to be upset over the reorganizing of the safety department, as well, as they’ll now be seeing additional job duties and training requirements on top of an already-full workload. “I love this company, I obviously have no problem with Big Oil, [Phillips is] good to the environment—it’s just the way their mentality is,” one employee told New Times. “These [HSS specialists] make [the company] look better if an emergency happens, but there’s a calculated risk, and if they can get away with something, they will. “It’s going to take somebody high in the chain to say stop. That’s the way these people think,” he added.[359]

October 26, 2012: Contaminated Houses near Phillips' Wood River Refinery to Be Torn Down

The Telegraph reported on October 26, 2012 that three houses in a polluted area of Roxana near the west fence line of what is now the Wood River Refinery, operated by Phillips 66, are scheduled for demolition November 5 to allow the expansion of a pollution remediation project after tests showed benzene contamination in the area. Phillips 66 acquired the facility from Shell Oil Company after a series of other owners operated it and Phillips has defended the way it has operated the plant. The three houses near Chaffer and Fourth streets now are vacant after they were acquired by Shell, and neighbors are speculating that more homes may be purchased. The Illinois Environmental Protection Agency has been testing homes in the area for several months and found benzene in occupied rooms in the basements in the homes. One family was put up in a motel for several months before Shell bought their property, said Dale Carroll of the 100 block of Fourth Street near the three homes that are slated for demolition.[360]

June 26, 2012: Santa Maria Refinery Wins a National Safety Award

The Santa Maria Times reported on June 26, 2012 that the Phillips 66 Santa Maria refinery won a national safety award from the American Fuel and Petrochemicals Manufacturers and a delegation of five refinery employees traveled to San Antonio, Texas, to accept the 2011 Distinguished Safety Award presented May 17 at AFPM’s national safety conference. To qualify, a facility must have an exceptional safety record that includes no lost-time injuries for three prior years. The Santa Maria Refinery has about 150 employees and processes about 45,000 barrels per day of crude oil that is shipped via pipeline for further processing at the company’s refinery in Rodeo.[361]

June 24, 2012: Bayway Refinery Earns EPA’s ENERGY STAR® Certification

New Jersey Today reported on June 24, 2012 that Phillips Bayway Refinery has earned the US. Environmental Protection Agency’s ENERGY STAR certification, which signifies that the industrial facility performs in the top 25 percent of similar facilities nationwide for energy efficiency and meets strict energy efficiency performance levels set by the EPA. Bayway Refinery improved its energy efficiency by 11 percent since 2002 by strategically managing energy consumption and making cost-effective improvements to the plant. To earn the ENERGY STAR, Phillips 66 Bayway Refinery replaced a large crude oil unit furnace to newer, more efficient technology in 2010, replaced its sulfur recovery plant in 2007, upgraded various plant energy recovery systems. ENERGY STAR was introduced by EPA in 1992 as a voluntary, market-based partnership to reduce greenhouse gas emissions through energy efficiency.[362]

May 1, 2012: Employee Fatality at Borger Refinery

KVII-TV in Amarillo, Texas, reported on May 1, 2012 an employee at the Phillips 66 refinery in Borger, Texas fell from a height of 100 feet at about 3pm and was taken to the Golden Plains Community Hospital in Borger where he died. "ConocoPhillips deeply regrets the loss of our employee and wishes to extend sympathy to the employee's family, friends and co-workers," said spokesman Rich Johnson. "ConocoPhillips is investigating the cause of the accident." Officials with Phillips 66 say the incident remains under investigation. It is reported that this is the first fatality at the refinery in 25 years.[363][364]

April 9, 2012: Garland Says the Safest Facilities Tend to Have the Best Cost Structures

Phillips CEO Greg Garland told analysts on April 9, 2012 that that the safest facilities tend to have the best cost structures. "We expect employees can work one day, one week, one month, even an entire career, without getting hurt. Over 30 years, I've observed that our safest facilities tend to have the best cost structures. They tend to be the most reliable facilities that we have. There's solid business reasons for focusing on operating excellence. It's clearly a foundation for sustainable value. We've got more work to do here. Zero's the target. That's where we're heading."[365][366][367]

Refineries and Marketing Business Segment

The return on capital for the Refinery and Marketing Business Segment at Phillips 66 has increased dramatically in recent years. However Christopher Helman writes in Forbes magazine that Phillips 66′s most profitable refineries of the past couple years are in Mid-Continent because of the the glut of crude oil pouring into the region from newly tapped shale oil plays like North Dakota’s Bakken. "Because there was a lot of new oil and not enough pipeline capacity to get it down to the Gulf Coast mega-refineries, the crude got bottled up in the storage tanks at Cushing, Oklahoma", writes Helman adding that over the next three to five years those wide differentials will collapse to the transportation differential. “So more like $3 to $5 a barrel. It’s not going to be $20 forever.”[368]Derivative Photo: Hugh Pickens
Phillips 66′s most profitable refineries of the past couple years are in what’s called the Mid-Continent — from Texas north to Montana including the Borger refinery, Ponca City, Wood River and Billings. The reason for their high profitability has been the glut of crude oil pouring into the region from newly tapped shale oil plays like North Dakota’s Bakken. "Because there was a lot of new oil and not enough pipeline capacity to get it down to the Gulf Coast mega-refineries, the crude got bottled up in the storage tanks at Cushing," writes Helman. "The bottleneck that kept oil from getting out of Cushing also kept its price at a record-wide discount relative to its rival European benchmark Brent crude. At one point last year you could buy a barrel of WTI for $27 less than a barrel of Brent. Historically WTI has been slightly more expensive." Photo: National Energy Board of Canada Click graphic to enlarge.
James Hamilton reports on Econobrowwer that on July 19, 2013 West Texas Intermediate sold for the same price as Brent for the first time in almost three years.[369] Graph: James Hamilton

Garland said during his analyst call on April 9, 2012 that the refining and marketing segment has one of the broadest geographic bases of our peers. Phillips 66 has 15 refineries and 2.2 million barrels a day of capacity and is the sixth largest non-governmental controlled refiner in the world, the second largest US refiner. Phillips 66 is the only independent downstream to have significant ownership and interest in gas gathering and processing in the global petrochemicals business.[370][371][372]

Geographic Diversity of Refineries

September 5, 2012: Philips Geographic Footprint is a Very Competitive Advantage

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that Phillips has the broadest geographic segment within our peer group. "We think this geographic footprint gives us a very competitive advantage. It's a great platform for capturing advantaged feedstock and optimizing the product placement that comes out of the refineries. You can see 15 refineries, 11 in the US. We have substantial infrastructure that supports the refineries in terms of 15,000 miles of pipe, 50 some odd terminals, barges, railcars, etc."[373]

Cyclical Nature of Refining

February 14, 2014: Garland Says Refining is Always Going to be a Volatile Business for Phillips

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that the Refining Business Segment is always is going to be a very volatile business for Phillips. "We don't see that changing in the future. I think small changes in operating rates in infrastructure are going to create dislocations. I think having a large system like we have, having a very sophisticated and large commercial organization like we have, we're going to be able to take advantage of those opportunities that come our way."[374]

Refining and Marketing Earnings

Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that he expects a 15% ROCE in the R&M Business Segment going forward. "My view is that, refining historically has been kind of a 10% to 12% business," said Garland. "We think we have plans in place to advantage crude capture, yields, cost reduction, that we can move it 400 basis points. So it’s a 15% business going forward for us versus a 30% return business in Chemicals. And probably Midstream business 15% to 17% returns is kind of what we’re looking in fact."[375]Derivative Photo: Hugh Pickens

January 30, 2013: Garland Says Phillips Expects 15% ROCE in R&M Business Segment Going Forward

In answer to a question from Blake Fernandez of Howard Weil Incorporated, Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that he expects a 15% ROCE in the R&M Business Segment going forward. "My view is that, refining historically has been kind of a 10% to 12% business," said Garland. "We think we have plans in place to advantage crude capture, yields, cost reduction, that we can move it 400 basis points. So it’s a 15% business going forward for us versus a 30% return business in Chemicals. And probably Midstream business 15% to 17% returns is kind of what we’re looking in fact. So, to the extent that we have 30% and 40% return projects in refining, we’re going to do those. I think, I mean we do get challenged by people all the time or we under investing in refining. At this point, we don’t think so. I don’t think there’s any opportunities out there, we feel that we’ve missed in terms of an investment opportunity in the refining space. Our focus is going to be very disciplined. We’re going to restrict capital in this space. We’re going to improve returns in this space. And so we don’t see a change required in our strategy at this point in time."[376]

January 30, 2013: Garland Announces 22% ROCE in R&M Business Segment for 2012

Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that Phillips return on capital employed for the R&M segment, which includes over $3 billion in goodwill improved to 22% for 2012, up from a 12% return for 2011. "The earnings of all four of our refining regions increased primarily due to improved refining margins," said Garland. "The improvements in refining margins, reflects not only higher market crack spreads, but also an improved feedstock advantage especially in the Gulf Coast, in the Central Corridor regions. The improvements in feedstock advantage increased earnings in the Gulf Coast by over $200 million and by over $100 million in the Central Corridor. Finally, other refining was up this quarter compared to last year, primarily due to movements of Canadian crude supply to several of our refineries."[377]

August 1, 2012: Phillips announces Annualized R&M Adjusted Net Profit of 17% for Second-Quarter, 2012

Reuters reported on August 2, 2012 that Phillips 66 posted an annualized 17 percent adjusted profit for the R&M Business Segment for the 2nd quarter of 2012. "The adjusted net profit for 2011 was 12%. Refining and Marketing generated $1.2 billion in adjusted earnings," said Phillips Chief Financial Officer Greg Maxwell. "The $437 million improvement was primarily driven by much stronger refining margins particularly in the US Midcontinent and Europe."[378][379]

May 24, 2012: Phillips 66 Expects Global Refining Margins to Drop in 2012 and 2013

NASDAQ reported on May 24, 2012 that Clayton Reasor, Phillips 66's senior vice president of strategy and corporate affairs, said that Phillips 66 expects global refining margins to drop in 2012 and 2013 and that US gasoline demand growth in the U.S. and Europe is expected to continue to fall, while demand for distillate fuels, such as heating oil and diesel, is expected to jump, driven by growth in developing countries. "What we need to do as a refining company is ship out our yield away from gasoline to distillate to the extent we can," said Reasor. "As gasoline demand continues to fall in the U.S. we need to find markets for our products." Part of Phillips 66's strategy to become more profitable is boosting its fuels exports to more than 200,000 barrels per day by the middle of the decade, up from 100,000 barrels a day last year.[380]

April 23, 2012: ConocoPhillips Reports 2012 Q1 Earnings

ConocoPhillips announced on April 23, 2012 that for Q1 2012, R&M’s worldwide crude oil capacity utilization rate was 91 percent, reflecting minimal unplanned downtime. The U.S. refining capacity utilization rate was 89 percent and the international rate was 97 percent. In addition, the worldwide clean product yield remained at 84 percent. R&M earnings were $452 million, compared with $482 million a year ago. The slight decrease was primarily due to lower refining margins, partially offset by higher marketing margins. Refining margins decreased as the impact of less favorable crude differentials more than offset improved market crack spreads. Pre-tax turnaround expenses for the quarter were $176 million, in line with expectations.[381]

Labor Relations and Human Resources

Labor Relations and Issues with Employees

April 16, 2014: Health and Safety Specialists at Santa Maria Refinery Claim They Were Punished for Unionizing

Colin Rigley reported at the New Times on April 16, 2014 that health and safety specialists at Phillips' Santa Maria Refinery allege Phillips officials warned them in January, 2012 that if they joined the United Steelworkers Union they would lose hours, be stripped of managerial powers, and as many as three of them could lose their jobs. “The insinuation here was that, ‘We may not need all of you,’” one of the specialists said in a written statement submitted to the labor board.[382]

When the newly unionized group went to the bargaining table in December, 2012, the specialists say in a complaint filed with the National Labor Relations Board that Phillips management carried out its threats. Phillips' proposed contract on December 10, 2012 allegedly included the threatened reductions of hours and responsibilities. The refinery’s health and safety specialists serve as organizers of the plant’s emergency response crew. Though none of the health and safety specialists was fired, three of them were transferred from their primary roles into regular plant operations, according to the complaint. The union is seeking to recover lost wages for the health and safety specialists, and to have their original job functions restored. Those lost wages totaled as much as $17,000 per year for some employees. In its complaint, the union further alleges that Phillips 66 bargained in bad faith when it imposed the 2012 contract.[383]

Phillips 66, in its responses to the union’s complaint, said the company reduced the five health and safety specialists to two as part of regular staffing changes, and the job functions were distributed across other personnel. “There is no value more important in our company than ensuring the safety of everyone who works at our sites as well as the safety of our neighboring communities,” Phillips spokesman Dennis Nuss said in a written statement to New Times. “In 2012, Phillips 66 redistributed certain safety-related functions and responsibilities among personnel at the Santa Maria Refinery, and there were no staff reductions. These changes have helped maintain and improve the refinery’s high standards for safety performance.”[384]

In addition to the reduced contract for health and safety specialists, the union alleges that the company violated federal labor laws when it implemented “news media guidelines” in October 2012. Those guidelines instructed employees not to speak to news media and, “It is against company policy for anyone but an authorized company spokespersons [sic] to speak to the news media.” The company defends its policy as a routine business practice that violated no labor laws.[385]

September 30, 2013: Contractors at Humber Refinery Protest Against Cuts to Breaks

The Grimsby Telegraph reported on September 30, 2013 that more than 100 contractors at the Humber Refinery in Killingholme held on early morning protest on their own time outside the gates of the refinery to protest Phillips' plan to cut the 20 minute mid-morning refreshment break that goes into force January 1. "Everyone knows the importance of a break, especially in this kind of workplace." said one contractor who declined to be identified. "We need the tea break to refresh, to cool off and rehydrate."[386] The Grimsby Telegraph reported on October 1, 2013 that over 100 contractors met with union representatives and held a indicative vote through a show of hands to bring about the process of a legal vote for strike action over Phillips' plan to remove their 20 minute morning break starting January 2014. "When we are up there working in the freezing cold we need that tea break to warm up, when we are out there in the blistering heat we need that tea break to cool down," said an unidentified contrator. "They tell us safety first and tell us to follow guidelines but taking this break away means we are not following safety guidelines. When they are sat in ivory towers they can have their tea breaks still."[387]

December 13, 2012: Safety Changes At Santa Maria Refinery Pit Workers Against Management

Matt Fountain reported in the New Times on December 13, 2012 that before December 10, 2012, Phillips 66 employed five health and safety shift specialists at the Santa Maria refinery, who worked onsite in 12-hour shifts but that after the specialists became members of USW Local 534, relations between management and the team have grown shakier. Last month, word came down: The five were being split up. Two would work the regular daylight shift as “safety coordinators” and the other three would be reassigned to the operations emergency response team, essentially the lowest position in terms of safety. According to Fountain, along with the reassignments came severe pay cuts—some to the tune of $12 an hour less, according to knowledgeable sources. The changes were finalized December 10, 2012. In their place, management delegated their responsibilities to plant employees, though at a far lower degree than what the health and safety shift specialists did, according to USW staff representative Ron Espinoza. Instead of having an all-encompassing EMT and search and rescue-certified expert on site, now the only EMT on site will be the front gate security guard, according to union reps and plant employees. The problem with the guard assuming response duties, they said, is that guards aren’t equipped or authorized to access many of the higher-risk areas of the facility. “We do believe it’s retaliation,” USW staff representative Espinoza told New Times. “They’re coming after them, and doing a fairly good job at it.”[388]

In January 2012, members of the USW Local 534 took to the picket lines outside the plant’s gates to protest the management’s hard-line on their then-ongoing labor negotiations. One of the issues of contention: a “fatigue policy” for work schedules. And another: safety equipment improvements.[389]

In response to a long list of questions regarding the specialist team and safety conditions at the plant, Phillips 66 Spokesman Rich Johnson provided the following statement in an e-mail to New Times: “There is no value more important in our company than ensuring the safety of everyone who works at our sites as well as the safety of our neighboring communities. Over the past year, we have redistributed certain safety-related functions and responsibilities among personnel at the Santa Maria refinery, and there have been no staff reductions. We expect these changes will help maintain and improve the refinery’s high standards for safety and performance.”[390]

According to Fountain, plant operators seem to be upset over the reorganizing of the safety department, as well, as they’ll now be seeing additional job duties and training requirements on top of an already-full workload. “I love this company, I obviously have no problem with Big Oil, [Phillips is] good to the environment—it’s just the way their mentality is,” one employee told New Times. “These [HSS specialists] make [the company] look better if an emergency happens, but there’s a calculated risk, and if they can get away with something, they will. “It’s going to take somebody high in the chain to say stop. That’s the way these people think,” he added.[391]

September 10, 2012: Union Contract Ratified with 52 percent of Bayway Refinery Workers Voting in Favor

Reuters reported on September 10, 2012 that union members at Phillips 66 Bayway refinery ratified a three-year contract with 52 percent of the 288 members of the Teamsters union at the refinery voting in favor of the contract which takes effect on October 1, 2012. Union leadership recommended the contract be accepted but several members of the union expressed displeasure with some of the work rights and quality of life changes in the new contract.[392]

September 7, 2012: Bayway Refinery Workers Vote on New Union Contract

Reuters reported on September 7, 2012 that members of the Teamsters Union at Bayway refinery vote on September 7, 2012 on whether to ratify their latest labor contract. The existing union contract ends on October 1, 2012 but if the contract is voted down there will not be an immediate strike but rather a return to negotiations. Contract negotiations began in June which provided a longer window for the talks. Although The contract was recommended by the union's executive board, according to a source familiar with the situation, some union members plan to vote against the contract which includes issues concerning work rules, overtime pay, and scheduling changes. Rich Johnson, a spokesman for Phillips 66, said the company would prefer to wait until after the ratification vote before offering any comment.[393]

August 30, 2012: Refinery Operators Expected to Decline by 14% by 2020

Fox News reported on August 30, 2012 that over the next decade, the number of Petroleum Pump System Operators, Refinery Operators and Gaugers is expected to decline by 14% from 44,200 in 2010 to 38,000 by 2020.[394]

May 30, 2012: Phillips Fires 21 Union Workers, 3 Supervisors at Billing Refinery for Stealing Hours

The Billings Gazette reported on May 30, 2012 that according to Wade Johnson, president of the United Steelworkers International union in Billing that twenty-one pipefitters, welders and insulators and three supervisors were fired from the Phillips 66 refinery on May 30, 2012. “They were certainly not given an option of keeping their jobs,” said Johnson. “So, I would call that being fired.” Rich Johnson, a Phillips 66 spokesman based in Houston, said the company took some individual personnel actions. “I can tell you we took personnel actions against employees today,” said Johnson said. “But it is our company policy not to comment on personnel matters.” According to KTVQ TX the workers were fired for for knowingly violating policy in regard to hours worked at the refinery. "There are no mass layoffs taking place at the refinery," said Johnson.[395][396]

KTVQ reported on May 31, 2012 that the United Steelworkers International union says it plans to fight the dismissal of 21 union employees at the Billings Phillips 66 refinery. Union president, Wade Johnson, with the United Steelworkers International in Billings, says the union believes the employees were wrongfully discharged.[397] According to a comment to the story by Kathy Reinhardt the fired workers were called in to work extra hours so that turnaround could be completed at the refinery. According to a comment by Jonathon Sapp the supervisor who called the men in to work should have been held responsible.[398]

Employee Benefits

August 20, 2014: Phillips Has One of the Top Rated 401k Plans in Houston

Olivia Pulsinelli reported at the Houston Business Journal on August 20, 2014 that Phillips 66 has one of the 25 top-ranked 401(k) plans in Houston, according to a new list from BrightScope Inc., an independent financial information and investment research company. Phillips plan has 87% employee participation and is rated No 7 in Houston.[399]

April 1, 2014: Phillips Headquarters Employees Have On-Site Dentist

The Houston Business Journal reported on April 1, 2014 that Phillips has added an in-house dentist at its campus converting a 660-square-foot conference room on the company’s first floor at its interim headquarters at Pinnacle Westchase. The on-site dentists will also be included at Philips 66's new building in the Westchase District. “It opened in mid-February and they have already seen 211 patient at the Phillips 66 Dental Office,” said Charles Lusk, CEO of Onsite Solutions. “It’s the wave of the future. Some groups offer mobile clinics that set up in the parking lot, but who would want to use that?" Having a dental office on site for employees and their families to use is convenient for staff and lucrative for employers. “The reality of the matter is an employee can spend four hours of his or her day for one dental appointment, when you factor in drive-time. It’s not conducive to a good work day,” said Lusk. “By having an office on site, you’re increasing productivity as well as the likelihood that someone will even go to the dentist, which makes for a healthier person.” “Some corporations are just more innovative than others. They are doing it because they know their competitors are going to do it,” Lusk said. “Phillips 66 is very forward-thinking and wanted to get up in front of the trend.”[400]

Philanthropic and Community Benefits

September 9, 2014: Phillips Donates $500,000 to Oklahoma State University

The Stillwater News Press reported on September 9, 2014 that Phillips has donated $500,000 to open the Phillips 66 Student Plaza as part of the college’s new Student Excellence Center. The center will provide a nexus of social, career and academic opportunities for the college’s more than 4,300 engineering, architecture and engineering technology students and allow students to enjoy the outdoors while studying in groups, working on laptops or enjoying lunch with friends. Engineering, architecture and engineering technology students will help design large natural-gas barbeques, a tailgate kitchen, and other features enhancing the plaza. “We are so grateful for Phillips 66’s generosity and vision,” says Paul Tikalsky, dean of the College of Engineering, Architecture and Technology. “Through the Phillips 66 Student Plaza, students across the various college disciplines will have a central location to collaborate and develop our community of scholars. Their interactions, and the programs and exhibitions this beautiful outdoor area hosts, will excite students about the future and the grand challenges they will help solve.”[401]

This contribution is in addition to Phillips 66’s annual support for the Phillips 66 SHIELD (Students Heightening Involvement in Education, Learning and Development) Scholars Program as well as support for the Multicultural Engineering Program, scholarships, equipment, and student retention programs in CEAT and other colleges at OSU. “Phillips 66 continues to provide wonderful careers for many of our graduates and make generous contributions across the university,” Tikalsky says. “But their true gift is creating the next generation of intellectual capital for our nation.”[402]

September 3, 2014: Ponca City Refinery Donates Two Used Firetrucks to Volunteers

The Ponca City News reported on September 3, 2014 that Phillips 66 Ponca City has donated a 1990 Ford Fire Engine to the Fairfax Volunteer Fire Department and a 1989 Ford Fire Engine to the Osage Cove Volunteer Fire Department. “We are happy that others can use this equipment. Other options were to sell or scrap them, but we think gifting to area volunteer fire departments is a good use for the communities they serve," said Dave Klanica, the Ponca City Refinery Safety Manager.[403]

September 2, 2014: Phillips Gives $750,000 to Louisiana State University to Fund Interactive Classroom

The New Orleans Times-Picayune reported on September 2, 2014 that Phillips 66 is giving LSU $750,000 to fund an interactive education classroom in the newly renovated College of Engineering. "This new learning community will accelerate our efforts to prepare graduates to meet the environmental, social, economic, scientific, creative and educational challenges that confront the nation and world in the 21st century," Rsaid ick Koubek, dean and Bert S. Turner Chair in the College of Engineering.[404]

August 15, 2014: Phillips and Chevron Pledge $1,6000,000 to Fund Petrochemical Academy in Sweeny

Hydrocarbon Proecssing reported on August 15, 2014 that Phillips 66 and Chevron Phillips Chemical are making an initial combined contribution of $1.6 million to help fund the creation of a petrochemical academy with the Sweeny Independent School District as part of their continued commitment to education and workforce development initiatives in the communities where they operate. The $1.6 million combined contribution by Phillips 66 and Chevron Phillips Chemical will support the purchase of equipment, building renovations, and scholarships for juniors and seniors enrolled in Sweeny ISD and surrounding school systems. Subsequent contributions will be made in coming years to help cover ongoing maintenance and operation costs and additional equipment. We have significant growth plans for our operations in this region, so it’s exciting to know that students who enroll in classes at the academy will gain college-level skills before they even graduate high school,” said Willie Tempton, Refinery Manager at Phillips Sweeny Refinery. “That means a well-trained workforce for industry in our area and good paying jobs for young Texans looking for a career right here at home.”[405]

August 13, 2014: Phillips Pledges $1,700,000 to Support STEM Education in Bartlesville

The Tulsa World reported on August 13, 2014 that Phillips will be giving $1.7 million to Bartlesville Public Schools to create new innovative laboratories on three school campuses to support science, technology, engineering and math classes and research projects. “We want to create a place where our students will come and be excited, be challenged and hopefully be encouraged to follow a career at a place like Phillips 66,” he said. “We want to put the right kind of tools in the hands of students in Bartlesville so they can be more successful.”[406]

The funds came through a Phillips 66 Signature Community Initiative grant application submitted to the company under an effort spearheaded by Scott Bilger, a Bartlesville school board member and Phillips 66 employee, and Granger Meador, a physics teacher who heads up Bartlesville High’s science department. The new laboratories and major new course offerings will be at the high school, along with Madison and Central Middle Schools. “We are just really, really excited about the opportunity this is going to provide our students,” Superintendent Gary Quinn said. “It cannot be overstated what this is going to mean to our students.” Phillips 66 has about 2,000 workers in Bartlesville.[407]

July 9, 2014: Phillips Pledges $750,000 to Support STEM Education in Billings

The Billings Gazette reported on July 9, 2014 that has pledged to donate $750,000 over three years to support enhanced science, technology, engineering and math (STEM) education in Billings School District 2 elementary and middle schools. Ray Rigdon, the refinery's manager, said that the donation comes from Phillips 66's Signature Community Initiative, in which it partners with local groups and nonprofits to address targeted, defined issues within the community. "It makes a meaningful investment ... to solve specific community problems with meaningful results," said Rigdon. The money will also fund a technology training center for teachers, students and community members that is expected to open in the fall at Orchard.[408]

June 27, 2014: Phillips Awards Nine Scholarships to Students Whose Parents Work at Wood River Refinery

The Edwardsville Intelligencer reported on June 27, 2014 that Phillips has awarded nine college scholarships of $16,000 to local high school seniors whose parents work for Phillips at the Wood River Refinery. The awards are based on academic excellence, community service and financial need. “This scholarship program reflects Phillips 66’s commitment to the communities where we live and operate and builds on our corporate vision of improving lives,” said Melissa Erker. “We congratulate these students on their achievements inside and outside the classroom and wish them every success in college." The Phillips 66 Dependent Scholarship Program will annually award as many as 66 four-year scholarships of $16,000 each for higher education at any accredited institution. Scholarship Management Services, a neutral, third-party administrator of educational assistance programs, selects the recipients and manages the program for Phillips 66.[409]

June 10, 2014: Phillips Honored with Philanthropy Award at Bayway Refinery

New Jersey reported on June 10, 2014 that Trinitas Health Foundation honored Phillips with a Philanthropy Award at the Trinitas Health Foundation’s “Passion for Our Patients” Gala. Gary Horan, FACHE, President and Chief Executive Officer noted, "Phillips 66 Bayway Refinery exemplifies how philanthropy connects a community. Throughout our partnership, they have helped financially including generous assistance to acquire a digital endoscopy scanner, breast health imaging equipment, C.O.R.E. (Center of Regional Education) Building Project, Outpatient Electronic Medical Records Project, Emergency Department Patient Cardiac Monitors Upgrade Project, and with in-kind donations of office furniture for the Women's Clinic. They've also answered patients' direct needs with donations of clothing and toys. We are thrilled to honor Phillips 66 at the Gala."[410][411]

"Our relationship with Trinitas began more than two decades ago, and we are pleased to be honored tonight," said Mary Phillips, Community Relations Coordinator. "Many of our employees and neighbors call Trinitas their community hospital, and assisting our neighbors in the communities where we operate our business is consistent with our values of safety, honor, and commitment. We are looking forward to being honored and receiving the Trinitas Celebrating Philanthropy Award." [412][413]

April 22, 104: Phillips Donates $500,000 to University of Texas

Adam Hamze reported at the Daily Texas on April 22, 2014 that Phillips donated $500,000 to the University of Texas to support programs within the Cockrell School of Engineering, McCombs School of Business and College of Natural Sciences. A large portion of the gift, which will be split between the three schools, will help fund the Phillips 66 SHIELD Scholar program, which provides a number of resources, including scholarships, professional development and community service opportunities, for students pursuing careers in the energy industry. “It’s very symbiotic — these relationships with these companies are definitely two-way streets,” said Donnell Roy, corporate and foundation relations director at McCombs. “They also support programs such as information management that is strategic to building a talented pipeline of students that can be potentially recruited into Phillips 66.”[414]

Rex Bennett, Phillips 66 president of specialties and business development, said the company is constantly looking for new, young employees. “Phillips 66 is always looking for new voices with unique thoughts and different perspectives to help our company succeed,” Bennett said. “We’ve built a strong pipeline at the University of Texas that will enable us to recruit those who will help us all prosper — both now and in the future.”[415]

November 15, 2013: Phillips Honored for Outstanding Philanthropy at Ferndale Refinery by Association of Fundraising Professionals – Washington Chapter

Mauri Ingram reported at the Whatcom Community Foundation on November 15, 2013 that the Association of Fundraising Professionals – Washington Chapter honored Phillips 66 Ferndale Refinery for Outstanding Philanthropic Corporation. For nearly 60 years the Ferndale Refinery has provided millions of dollars and thousands of volunteer hours to support communities throughout Whatcom County. With a focus on education, the environment and health and safety, Phillips 66 supports a variety of nonprofit organizations with direct donations and generous employee volunteer and matching gift programs.[416]

Among the organizations benefiting from the company’s contributions are the United Way of Whatcom County, Whatcom Land Trust, Northwest Straits Marine Conservation Initiative, Bellingham Technical College, the Ferndale School District, Ferndale Chamber of Commerce, and Ferndale Boys & Girls Club. Phillips 66 also supports nonprofits in other Washington cities where it does business, such as Tacoma and Spokane. “Phillips 66 is an outstanding philanthropic leader that takes great pride in being a good neighbor and in helping make this a wonderful place to live and work,” wrote Mauri Ingram, president and Chief Executive of the Whatcom Community Foundation in nominating Phillips 66 for this honor.[417]

Increasing Profitability in the Refining and Marketing Business Segment

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that there are five things Phillips is doing to in refining and marketing in to enhance returns and capital efficiency. "We think we have 400 basis points of improvement in ROCE in this business and there's five things that we're doing to drive that." Photo courtesy of Phillips 66
Steps Phillips will take to improve returns by 400 basis points. Graphic from Phillips 3rd Quarter Presentation to Analysts on December 12, 2013.
Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips will get more advantaged crude in front of refineries. "We're well on our way. Last year, we're 74%, up 10%. As you move to into the fourth quarter, we pushed that up to 90%. So our real opportunities are the East Coast and the West Coast today. I think we've got good advantaged crude in the midcon and in the Gulf Coast, where 51% of our or 55% of our capacity resides today."[418] Graphic from Phillips Presentation to USB Global Oil and Gas Conference May 21, 2013.

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that there are five things Phillips is doing to in refining and marketing in to enhance returns and capital efficiency."We think we have 400 basis points of improvement in ROCE in this business and there's five things that we're doing to drive that."[419]

Garland told analysts at Barclays CEO Energy-Power Conference on September 3, 2014 that the refining business is run well, optimized business. "Operating excellence is key. Putting advantaged crude to the front of refineries, working our yields, improving our yields at our refineries and working on our cost structure is the key of what we're trying to accomplish here. $13 billion of capital employed in this business, it's a huge base. And when you think about 400 basis points of improvement in a business of this scale, that's huge. It's about $600 million of net income improvement. $400 million of that comes from advantaged crude capture, $200 million is around yields and cost reduction. So significant improvement in our base refining business. We view this as moving from a 10% to a 14% return on capital employed business."[420]

Increase Profitability by Getting More Advantaged Crude in Front of Refineries

September 3, 2014: Phillips to Add Another Jones Act Vessel to its Fleet

Greg Garland told analysts at the Barclays CEO Energy-Power Conference on September 3, 2014 that Phillips is adding another Jones Act Vessel to its fleet. "And logistics around the Gulf Coast are going to be important and an opportunity to create a lot of value. We currently have two Jones Act vessels that we use. Starting in January, we're adding a third Jones Act to the fleet. So we've added capability there coming up this January." Garland added that Phillips can use their Jones Act Vessels to move crude oil from the Texas Gulf Coast to Bayway.[421]

September 3, 2014: Phillips to Build North Dakota Origination Rail Terminal for Bakken Crude

Argus reported on September 3, 2014 that Greg Garland told analysts at the Barclays CEO Energy-Power Conference that Phillips will build a rail-loading facility permitted to handle up to 200,000 b/d of Bakken crude, the first time a US refiner has directly owned a North Dakota origination terminal.[422] "The thing I would say is in terms of North Dakota, we acquired 700 acres of land. We have permits in hand and engineering to construct a new rail loading facility. This is permitted up to 200,000 barrels a day. We'll probably do about a 160,000 barrels a day, about 300,000 barrels of storage there."[423]

September 3, 2014: Phillips to Buy 500 More Railcars To Move Crude to Coastal Refineries

Reuters reported on September 3, 2014 that Greg Garland told analysts at the Barclays CEO Energy-Power Conference that Phillips has ordered another 500 railcars to increase its fleet to 3,700 railcars. which will allow it to eventually move up to 185,000 barrels per day (bpd) of North Dakota Bakken crude oil to its refineries on the East and West coasts.[424]

September 5, 2014: Garland Disappointed with Lengthy Permit Process for Rail Offloading at Santa Maria Refinery

Reuters reported on September 3, 2014 that Greg Garland told analysts at the Barclays CEO Energy-Power Conference that Phillips was "disappointed" in the lengthy permitting process for a rail offloading project at its refinery in Santa Maria, California, but remained optimistic it would be built. The rail project would bring in about 40,000 bpd of heavy oil, like that produced in Canada rather than light Bakken crude, according to the company. A local planning commission meeting to consider approving the project has been pushed to January from April to allow an environmental impact report produced in late 2013 to be recirculated for more public comment.[425]

September 3, 2014: Phillips Receives First Crude-Only Train at Bayway Refinery

Reuters reported on September 3, 2014 that Greg Garland told analysts at the Barclays CEO Energy-Power Conference that Bayway Refinery in Linden, New Jersey, received its first crude-only train at the plant's newly expanded offloading system. The system can take up to 70,000 bpd, in addition to up to 75,000 bpd from a joint venture with Global Partners.[426] "So let me start on the East Coast at Bayway. We've built the 70,000 barrel a day rail rack. It's operational. We unloaded our first unit train in August, August 5. We can do one unit train a day there at Bayway. That was a global deal. We can do 50,000 to 75,000 a day in the global deal. And then we have our Jones Act vessels also to move crude around from the Texas Gulf Coast to Bayway."[427]

September 3, 2014: Rail Off-loading System On Track for 4th Quarter Start at Ferndale Refinery

Reuters reported on September 3, 2014 that Greg Garland told analysts at the Barclays CEO Energy-Power Conference that Phillips 66's 30,000-bpd offloading system at Ferndale Refinery is on track to start up in the fourth quarter. [428] "Thinking about California, work in process, I would say, in terms of putting advantaged crude into California. Ferndale, we have a rail rack under construction, 30,000 barrels a day. It will be ready by the fourth quarter of this year. We're disappointed in the progress to permit our Santa Maria rail rack 40,000 a day, but we have – we're optimistic that we'll get that done. It just takes time in California to get these things permitted."[429]

July 30, 2014: Narrowing Crude Differentials Negatively Impacted Phillips Realized Margins in 2014 Second Quarter

Greg Maxwell told analysts during the 2nd quarter earnings conference on July 30, 2014 that narrowing crude differentials negatively impacted Phillips realized margins. "Realized Refining margins decreased in all of our regions exception for the Western Pacific region. The decrease was driven by weaker distillate market cracks reduced seasonal blending activity, gasoline activity and also lower secondary product realizations," said Maxwell. "In addition, narrowing crude differentials negatively impacted our realized margins. In the Gulf Coast, the LLS Maya differential narrowed by $5.32 per barrel, impacting our Sweeny and our Lake Charles refineries. And on the East Coast the Bakken Brent differential narrowed by $1.43 per barrel impacting our Bayway refinery."[430]

March 12, 2014: Brent-WTI Spread Narrows While Heavy and Sour Canadian Crude Oil Maintain High Margins

Isac Simon writes at "The Motley Fool" that with the Cushing Marketlink pipeline coming online in late January, inventories at the Cushing storage hub of the West Texas Intermediate have eased causing the Brent-WTI spread to shrink to less than $7 a barrel. "Since the two most widely traded crude oil benchmarks diverged in late 2010, a narrowing spread between Brent and WTI has never been a good sign for refiners," writes Simon. "Throughout 2012 and during the fourth quarter of 2013, U.S. refiners enjoyed a solid run -- thanks to the availability of the deeply discounted West Texas Intermediate crude oil when compared against the internationally traded Brent. As a result, refiners such as HollyFrontier, Marathon Petroleum, Valero Energy Corporation, and Phillips 66 could buy cheaper feedstock, while maintaining global prices for refined products."[431]

However sour and heavy variants of crude oil are much cheaper than their light and sweet counterparts and higher volumes of heavy crude -- or bituminous crude -- from Canada's tar sands are slowly making way by rail to the Gulf Coast where most refineries are located according to Simon. "Phillips 66 is expecting 2,000 railcars to be delivered in 2013-2014. These high-capacity railcars will be used primarily to deliver Bakken crude oil to its Bayway and Ferndale refineries. Out of its 11 refineries in the United States, eight are capable of refining heavy sour crude," writes Simon. "Both Canadian crude and the price-advantaged Bakken sweet crude are trading at a discount to the West Texas Intermediate. So while the Brent-WTI spread may be narrowing, there's a different market force at work -- that of directly transporting cheap crude by rail. The better prepared refiner is well on its way to take advantage."[432]

February 12, 2014: Garland Says Phillips Will Get More Advantaged Crude in Front of Refineries

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips will get more advantaged crude in front of refineries. "We're well on our way. Last year, we're 74%, up 10%. As you move to into the fourth quarter, we pushed that up to 90%. So our real opportunities are the East Coast and the West Coast today. I think we've got good advantaged crude in the midcon and in the Gulf Coast, where 51% of our or 55% of our capacity resides today. We're working on our clean product yields. There's $60 million to $100 million of value creation there by pushing our yields. We're working on decreasing operating costs and then we're working on portfolio management in terms of rightsizing the portfolio."[433]

""We have an extensive system of railcars, pipelines, barges, access to ocean-going ships. We're using that in the value capture for advantaged crude to the front end of our refineries," said Garland. "You'll see us expand this system over time. You'll see us add more railcars, more unloading capability and we're working the East and West Coast right now. Bayway we have the rail rack at Bayway. 75,000 barrels a day will come on later this year. On the West Coast, we have the rail rack at Ferndale that'll come on later this year, 35,000 a day. We're in the middle of a comment period on permitting for our Santa Maria rail rack. We're actively working other third-party rail unloading facilities in southern California.[434]

January 30, 2014: in the Fourth Quarter, 94% of Phillips Crude Slate Was Advantaged

Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that 94% of Phillips' US crude slate was advantaged. "Our realized margin was $10.75 per barrel, with a market capture rate of 112%. The global crude utilization rate was 92%, and our clean product yield was 84%. During the quarter, 94% of the Company's US crude slate was advantaged, and this compares with 66% last quarter. The increase was largely driven by additional domestic crude's consistently trading at a discount to Brent. We will cover this in more detail on slide 13. The 2013 adjusted return on capital employed for refining was 13%, and the average capital employed for this segment was $14.3 billion," said Garland. "On an annual basis, our advantaged crude slate has increased from 62% in 2012, to 74% in 2013. And this is due to processing an additional 118,000 barrels per day of tight oil, additional domestic crude's that consistently trade at a discount to Brent, as well as higher volumes of heavy Canadian crudes."[435]

October 30, 2013: Phillips May Buy More Railcars to Move Advantaged Crude to US Refineries

Reuters reported on October 30, 2013 that Garland told analysts during the third quarter earnings conference call that Phillips may buy more railcars to move advantaged crude from North Dakota and Canada to its refineries. This would be on top of the 2,000 railcars already expected for delivery this year of which the company has to date received 1,270.[436]

Phillips Bayway refinery had been running about 100,000 barrels per day of U.S. crudes in place of imports - from Texas via tanker and North Dakota's Bakken via rail and barge but the company cut rail shipments to 30,000 bpd day when the discount of U.S. crude benchmark West Texas Intermediate to London's Brent all but dried up during the quarter. The discount of North Dakota Bakken crude to WTI also narrowed. However, Phillips 66 is ramping rail shipments back up and running less imported crude now that the spread has widened to more than $10 a barrel. "The spreads now incent us to run Bakken at Bayway today," said Tim Taylor, executive vice president for commercial, marketing, transportation and business development, in a post-call interview.[437]

Phillips 66 is building a new rail offloading facility at Bayway to further increase shipments by 75,000 bpd by the second half of 2014. The company also received all necessary permits to build a similar facility at its 100,000 bpd refinery in Ferndale, Washington, to handle 30,000 bpd also by the second half of next year.[438]

July 31, 2013: Narrowing of WTI-Brent Gap Contributes to Disappointing Earnings for Phillips' 2nd Quarter

FuelFix reported on July 131, 2013 that Phillips underperformed in the second quarter as its earnings dropped 19 percent because of higher costs for oil and outages that shut down key facilities. “We should have run better and our earnings results reflect this,” said Garland. Phillips 66′s adjusted earnings per share of about $1.50 was well below analyst expectations of about $1. 81 for that figure.[439]

Higher domestic oil prices pushed down profits as the gap between the price of West Texas Intermediate, a benchmark for domestic crude, and Brent, a measure of international oil prices, narrowed substantially during the second quarter. That trend is expected to continue through the remainder of the year, with Brent currently around $107 and WTI at about $105. U.S. refiners had previously enjoyed a huge advantage over their foreign competitors because WTI prices were as much as $20 lower than Brent prices , with some U.S. crudes priced far lower because there was limited access to foreign markets.[440]

July 31, 2013: Phillips Has Taken Delivery of 650 Rail Cars Out of 2,000

FuelFix reported on July 31, 2013 that Phillips has already taken delivery of 650 rail cars of the 2,000 that they ordered in 2012. “These cars will be used to transport advantaged crude to Phillips 66 refineries on the east and west coasts," said Garland. “Phillips 66 has been an early mover on adding logistical infrastructure to improve its flexibility of taking lower cost domestic crudes to refineries across its portfolio and this flexibility we believe will lower their feedstock costs over the long run,” said Jeff Dietert, and analyst for Simmons & Co. International.[441]

July 21, 2013: Brent-WTI Spread Disappears For Now

James Hamilton reports on Econobrowwer that on July 19, 2013 West Texas Intermediate sold for the same price as Brent for the first time in almost three years. "Since 2010, infrastructure for transport and delivery of crude to U.S. refiners by rail and barge has grown tremendously," writes Hamilton. "This has narrowed the Brent-WTI spread, but is not enough to eliminate it, since pipelines are an economically more efficient (and environmentally more friendly) way to transport oil." However Hamilton adds that other projects will also likely soon be bringing even more oil from Canada and the U.S. into Cushing including the 600,000 b/d from the South Flanagan project and another 800,000 b/d that could be delivered through the proposed Canada-to- Nebraska leg of the Keystone project. "All of this means that the elimination of the Brent-WTI spread may prove to be a short-lived phenomenon."[442]

May 21, 2013: Phillips Plans to Increase Advantaged Crude Processing to 100% Within the Next Few Years

Greg Maxwell, Executive Vice-President for Finance and Phillips CFO, told analysts at the UBS Global Oil and Gas Conference on May 21, 2013 that the first and largest lever in improving earnings is increasing advantaged crude processing. "We are well-positioned to utilize the emerging advantaged crudes in our domestic refineries. For example, from a sensitivity perspective, $1 per barrel change in our crude cost, if we can capture $1 a barrel change, that improves our net income by $440 million per year. And already, we're running shale crudes at eight of our domestic refineries. We increased our advantaged crude runs from 52% in 2011 to 62% in 2012, and 68% in the first quarter of this year. These crudes are being delivered via truck, and being delivered by rail, barge, ocean-going vessel, and also by pipelines. And our plan is to be able to run 100% advantaged crudes within the next few years."[443]

May 1, 2013: Phillips Increases Share of Advantaged Crude to 68%

Fox News reported on May 1, 2013 that Phillips has been working to increase its use of relatively cheap crude by building rail capacity at its plants and buying rail cars to help bring crude from shale formations not yet reached by pipelines and the company has been inching toward the goal of processing only discounted crudes extracted in North America, a target they expect the company to hit within the next few years. "Certainly its an aspiration, but it is concrete and achievable," said Tim Taylor, executive vice president for commercial, transportation, business development and marketing. Phillips 66 said it boosted the share of discounted crude produced in the U.S. and Canada that its refineries process to 68% of its feedstock, up from 60% last year and during the quarter, it processed 221,000 barrels per day of crude from the Eagle Ford, Bakken and Mississippi Lime formations, up 120,000 barrels per day over last year's first quarter.[444]

March 20, 2013: Phillips Signs Deals to Boost Deliveries of Cheap Crude by Pipeline and Rail

Eliot Caroom reported on Bloomberg on March 20, 2013 that Phillips will increase deliveries of cheaper crudes to its refineries nationwide by as much as 130,000 barrels a day under three transportation deals and a new investment.[445]

First is a three-year deal with Enbridge Energy Partners LP for loading rail cars with up to 35,000 to 45,000 barrels a day of Bakkan crude from Enbridge’s terminal in Berthold, North Dakota. The crude will be delivered to Bayway Refinery on the east coast and Ferndale Refinery on the West Coast. Some crude could also be sent to Gulf Coast refineries at Lake Charles, Alliance, and Sweeney.[446]

Second is a pact with Targa Resources Partners LP (NGLS) for five years to provide rail-unloading and barge-loading services in Tacoma, Washington for about 30,000 barrels a day of U.S. and Canadian crudes that will go to the Ferndale Refinery. Phillips’s Rodeo refinery near San Francisco could also receive crude deliveries, displacing imports from outside North America.[447]

Finally Phillips has signed a pipeline deal with Magellan Midstream Partners LP (MMP) to move 20,000 barrels a day of crude to near the Marland Refinery in Ponca City, replacing West Texas Intermediate from Cushing with oil from the Mississippian Lime play. Magellan service will begin in late 2013, reaching full volume by January 2014. Phillips will also invest in its own Oklahoma assets to transport an additional 40,000 barrels a day of Mississippian Lime to Ponca City. Mississippian Lime crude comes from the Anadarko Basin, which spans Oklahoma and neighboring states. Two new pipelines carrying the grade are planned to start service this year, according to a February EIA report. “We are aggressively pursuing increased access to advantaged crudes in North America by partnering with leading third-party transportation providers and better leveraging our own system capabilities,” Greg Garland, Phillips 66 chairman and chief executive officer, said in the statement. “Increasing our utilization of those advantaged crudes should allow us to capture significant value in our refining and marketing businesses.”[448]

January 30, 2013: Garland Says Phillips is Running More Advantaged Crude

Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that Phillips is running more advantaged crudes with 67% of Phillips U.S. crude in advantaged crude compared to 57% in the fourth quarter of last year.[449]

January 30, 2013: Garland Says Feedstock Advantage Increased Earnings for $300 Million for 2012

Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that improvements in feedstock advantage increased earnings in the Gulf Coast by over $200 million and by over $100 million in the Central Corridor. "The positive $3.69 per barrel adjustment per feedstocks stems from running certain crudes and other feedstocks that are priced lower than our benchmark crudes," said Garland. "For example, our feedstock advantage this quarter was primarily related to running for an heavy-sour crudes at our Gulf Coast refineries and Canadian crudes in our refineries in the Central Corridor. In addition, our crude slate is increased to include more shale crudes, primarily Bakken and Eagle. Finally, the other category primarily reflects the impacts of volume gain and product differentials."[450]

January 8, 2013: Global Partners to Deliver 50,000 bpd of Bakken Crude to Bayway Refinery

The Boston Globe reported on January 8, 2013 that Global Partners LP has signed a five-year contract with Phillips 66 to deliver crude oil from North Dakota to Bayway Refinery using its rail transloading, logistics, and transportation system to deliver about 91 million barrels of crude oil to the Phillips refinery over the life of the contract. That equates to approximately 50,000 barrels per day.[451] “Global has established a ‘virtual pipeline’ for the reliable transportation of Bakken crude,” said Tim Taylor, Executive Vice President, Commercial, Marketing, Transportation & Business Development of Phillips 66. “Our five-year agreement with Global assures us long-term access to advantaged crude for our Bayway refinery through what we believe is a cost competitive origin-to-destination supply system to the East Coast.” The Bakken crude oil is expected to be transloaded at Basin Transload LLC’s North Dakota rail facilities.[452]

December 13, 2012: Phillips Announces Marine Charter Agreements to Supply Alliance and Bayway Refineries

Phillips 66 reported at their inaugural Analyst Meeting on December 13, 2013 that they had recently signed time charter agreements for two medium-range Jones Act marine vessels that will supply the Alliance and Bayway refineries, and potentially the company’s other Gulf Coast refineries, with Eagle Ford crude beginning in early 2013.[453]

September 19, 2012: Greg Garland Says Structural Change in Crude Prices Provide an Opportunity for US Refiners

Fuelfix reported on September 19, 2012 that with new shale crudes coming on there has been a structural change in crude prices that presents a real opportunity for the U.S. refining businesses. "You still have 2 to 3 million barrels a day of new light sweet crude coming on out of these new shale plays," said Garland. "And I think ultimately there’s 2 to 3 million barrels a day of Canadian heavy that comes south. I think the U.S. is going to find itself, particularly the mid-continent areas and the Gulf Coast areas — where 51 percent of our capacity is — with an advantaged crude price versus the rest of the world. That’s a structural change."[454]

September 5, 2012: All Three Business Segments Are Well Positioned to Take Advantage of the Prolific Shale Plays and the Canadian Heavy

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that all three business segments, the R&M business, the Midstream business, and the Chemicals business, are well positioned to take advantage of the prolific shale plays and the Canadian heavy. "A big source of competitive advantage we think we can have in our business is the access to advantaged crudes. It's 75% of our cost structure, a lot of work going across the Company in accessing these advantaged crudes."[455]

August 15, 2012: Crack Spread is $29.05 a barrel for Texas and Midwest Refiners

Paragon reported on August 15, 2012 that new crude production from Texas and the Midwest has resulted in profits reaching their highest levels since 2007 with the difference between the cost of crude and the price companies could sell fuel 9crack spread) in the April-June quarter at $29.05 a barrel according to data collected from Bloomberg. "The prospects for U.S. refiners have turned around dramatically," said John Auers, senior vice president of Turner Mason & Co., a petroleum and refinery consulting company. "Cheap crude has given an advantage to the U.S. refining system, already the most advanced, most complex and most efficient in the world." U.S. refiners have outperformed all other energy sectors in the S&P 500 Index with an average gain of 42 percent. In comparison the S&P 500 Integrated Oil & Gas Index has gained just 2.85 percent year-to-date.[456]

August 1, 2012: The Spread between Brent and Bakken Crude is still around $19/barrel

Michael Fitzsimmons wrote on Seeking Alpha on August 1, 2012 that in February2, 102 Fitzsimmons wrote that the price differential between WTI and Brent (then $19/barrel) would tighten up once the Seaway pipeline was reversed. "I was wrong in my prediction. What I missed was the huge increase in oil production coming out of the Bakken (now over 600,000 bpd) and Eagle Ford shales," writes Fitzsimmons. "While I was expecting production to increase, I had no idea it would increase at such a rate as to pretty much fill up Seaway and still be left with the same problem as before it was reversed."[457]

August 1, 2012: Phillips to Buy 2,000 Rail Cars to Move Bakken Crude to Bayway and Ferndale Refineries

Reuters reported on Phillips second-quarters earnings report on August 2, 2012 that Phillips 66 plans to buy 2,000 railcars to move cheap crude from North Dakota's Bakken shale play to the Bayway plant and its 100,000 bpd plant in Ferndale, Washington. Bayway already runs 10,000 to 20,000 bpd of Bakken crude.[458]

June 5, 2012: Phillips May Add Several Thousand Railroad Cars in an Effort to Expand Capacity

Streetinsider reported on Jun 5, 2012 that Phillips may purchase a "couple thousand" additional rail cars to provide transportation from US shale formations to refineries.[459] The railroad cars would cost $200 million and enable Phillips to carry 120,000 barrels of oil a day from mid-continent, where oil is cheaper, to Phillips coastal refineries.[460] "We're going to add rail capacity," said Garland. "We're considering buying a couple thousand more railcars so we can get Bakken crude either east and west." The initial goal is to increase delivery of shale crudes to Phillips refineries by 100,000 to 150,000 bpd within two years using railroad unit trains. "That's a pipeline on wheels. So, that could go to the Bakken. It could go to the Niobrara. It can shift as the opportunity shifts around the country." Many analysts say rail will be a bigger part of the oil delivery picture for years because shale wells - often scattered, small and of uncertain lifespan - won't justify pipeline construction.[461]

June 5, 2012: Garland Wants to Get More Advantaged Crude to the Front End of Refineries

On June 5, 2012 Phillips CEO Greg Garland presented to the Citi Global Energy Conference and said Phillips has a clear strategy for growth and improving returns.[462]

Garland said Phillips is kind of an average performer in terms of returns on Refining and Marketing with a 12% ROCE in this business, but the expectation is thatthis can be improved to a 15% ROCE business over the cycle. "The R&M business for us is a run well, optimized business. You won’t see us adding capacity. You will see us investing around the infrastructure to put more advantaged crude to the front end of the refineries and to be able to export."[463]

There is another way Phillips would like to improve returns in the refining business and that is by getting advantaged crude to the front end of the refineries. "Today we can process about 500,000 barrels a day of TI-related and about 100,000 barrels a day of shalerelated crudes. If you think about the mid-con, we think there’s about 2 million barrels a day of new light sweet crude coming on in the central part of the US. Then you’ve got another couple million barrels a day of the Canadian heavy that’s ultimately going to make its way down through the midcontinent and ultimately, we believe to the Gulf Coast. And so every dollar that we can capture across our system is worth about $500 million of net income to us." So Phillips is going to go around pipelines and is considering buying a couple thousand more rail cars to get Bakken crude either east and west. "We’re running about 100,000 barrels a day of these shales today and we think we can easily in the next year or two move another 120-150,000 barrels a day of incremental crude through rail. Plus as these pipeline solutions become more available and ready, we’ll capture those opportunities. But ultimately, we can process about 500,000 barrels a day of these shale-type crudes."[464]

June 5, 2012: Greg Garland Wants a Pipeline on Wheels to Get the Barrels in Front of the Facilities

Streetinsider reported on Jun 5, 2012 that Phillips may purchase a "couple thousand" additional rail cars to provide transportation from US shale formations to refineries.[465] The railroad cars would cost $200 million and enable Phillips to carry 120,000 barrels of oil a day from mid-continent, where oil is cheaper, to Phillips coastal refineries.[466] "We're going to add rail capacity," said Garland. "We're considering buying a couple thousand more railcars so we can get Bakken crude either east and west." The initial goal is to increase delivery of shale crudes to Phillips refineries by 100,000 to 150,000 bpd within two years using railroad unit trains. "That's a pipeline on wheels. So, that could go to the Bakken. It could go to the Niobrara. It can shift as the opportunity shifts around the country." Many analysts say rail will be a bigger part of the oil delivery picture for years because shale wells - often scattered, small and of uncertain lifespan - won't justify pipeline construction.[467]

Simone Sebastian reported in the Houston Chronicle on July 2, 2012 that the nation's energy transportation network is undergoing a multibillion-dollar overhaul, as oil and natural gas production surges in new regions of the country and energy producers charge into new areas with technology that can reach oil and natural gas trapped in shale and other tight rock formations leaving pools of crude and gas stranded far from the Gulf Coast refineries and petrochemical plants that need them. "Where it used to be isn't where it is now. Where it needs to go isn't where it used to go," says Terrance McGill, president of fuel carrier Enbridge Energy. "You're seeing this fundamental shift of crude oil across the country." Phillips 66 CEO Greg Garland says his company is considering buying 2,000 more rail cars that could carry an additional 150,000 barrels a day from shale regions (PDF) to its refineries across the country because the glut of crude oil pouring out of the newly tapped shale oil plays like North Dakota’s Bakken has kept the price of Mid-Continent crude at a record-wide discount of up to $27 per barrel relative to its rival European benchmark Brent crude because there is not enough pipeline capacity to get Bakken crude to Gulf coast refineries. "That's a pipeline on wheels," says Garland. "You'll see us stepping out and doing some more things around infrastructure. Like everyone else, we're doing everything we can to get more barrels in front of those facilities."[468][469]

May 24, 2012: Clayton Reasor Says Price Spread between West Texas Intermediate Crude and Brent Crude futures Likely to Narrow Sharply in 2013

NASDAQ reported on May 24, 2012 that according to Clayton Reasor, Phillips 66's senior vice president of strategy and corporate affairs, the price spread between West Texas Intermediate crude and Brent crude futures is likely to narrow sharply in 2013 as increased domestic pipeline capacity relieves the glut created by new shale-oil supplies. "The WTI-Brent differential will narrow as the onshore pipeline capacity is built up and removes some of the bottlenecks that exist between Cushing and the Gulf Coast," said Reasor.[470]

May 22, 2012: New Pipelines to Bring Bakken Crude to Ponca City Refinery and Cushing

Janet McGurty wrote in the Calgary Herald on May 22, 2012 that Kinder Morgan’s Pony Express Pipeline and Belle Fourche Pipeline are looking for shippers to use their newly planned pipeline to send their light, sweet crude from outside Baker, Montana, just over the state line from North Dakota’s booming Bakken oil shale play, about 1,000 miles southeast to Ponca City, home of Phillips 66 refinery before continuing on to the oil storage hub of Cushing, Oklahoma. Once the Pony Express reaches Cushing it will be near the Seaway pipeline, now able to carry 150,000 bpd of oil to the Gulf Coast with expansion plans to over 400,000 in the works. Although plans are on the book to move Bakken crude north and east, production in the region topped 510,000 bpd in March and is expected to continue to expand.[471]

May 15, 2012: Gregory J. Millman Says Mid-Continent Refineries Have Access to Cheap, High Quality Crudes

Gregory J. Millman wrote in the Wall Street Journal on May 15, 2012 that mid-continent refineries have access to high quality crudes that are cheap because there are no pipelines to carry them to world markets, and therefore they are in superabundant supply. Since the product price is a world market price, and refineries have access to export markets, those that can use cheaper crudes enjoy fatter margins and are more profitable than those who cannot.[472]

May 10, 2012: Simon Moore Says New Pipelines Will Bring Bakken Oil to Mid-Continent Refineries

Simon Moore writes on Seeking Alpha on May 10, 2012 that with all the new piplines getting ready to come online to move Bakken Oil to Cushing, starting material for refineries in the Mid-Continent Segment will soon become relatively cheaper which will benefit Phillips 66 with three Gulf coast refineries with a total capacity of 733 MMbpd for the next several years. Moore notes that the Seaqay Pipline reversal will go online on May 17, 2012 brining 150,000 barrels/day of light sweet crude from Cushing, Oklahoma to the Gulf Coast and there are currently plans to expand the pipeline to approximately 400,000 barrels/day and then to 850,000 barrels/day. In addition the new Flanagan South Pipeline will move another 585,000 barrels/day from Illinois to Cushing. Finally the Bakken Express Pipeline from Oneok (OKE) will move 200,000 barrels/day from the Bakken to Cushing. "PSX stands to benefit from the extra crude that will be piped from Cushing to the Gulf Coast increasingly over time."[473]

May 1, 2012: Phillips 66 Plans to Run More Shale Oil

Phillips may purchase 2,000 additional rail cars to provide transportation from US shale formations to refineries.[474] The railroad cars would cost $200 million and enable Phillips to carry 150,000 barrels of oil a day from mid-continent, where oil is cheaper, to Phillips coastal refineries.[475] "We're going to add rail capacity," said Garland. "We're considering buying a couple thousand more railcars so we can get Bakken crude either east and west." The initial goal is to increase delivery of shale crudes to Phillips refineries by 100,000 to 150,000 bpd within two years using railroad unit trains. "That's a pipeline on wheels. So, that could go to the Bakken. It could go to the Niobrara. It can shift as the opportunity shifts around the country." Many analysts say rail will be a bigger part of the oil delivery picture for years because shale wells - often scattered, small and of uncertain lifespan - won't justify pipeline construction.[476] Photo: Railroad Tank Cars by San Diego Model Railroad Museum Flickr Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

Kristen Hays wrote on Reuters on May 1, 2012 that Greg Garland says the Phillips 66 aims to process more shale oil "everywhere we can get it." Garland added that several refineries are already well positioned to receive shale oil, such as its 247,000 barrels-per-day (bpd) refinery in Sweeny, Texas, in proximity to the state's prolific Eagle Ford shale play, or Midwest plants. The company last fall also ran unit trains from the Bakken shale oil play in North Dakota to its 238,000 bpd Bayway refinery in Linden, New Jersey, and has taken trains to West Coast refineries. "You'll see us stepping out and doing some more things around infrastructure," he said. "Like everyone else, we're doing everything we can to get more barrels in front of those facilities."[477]

May 1, 2012: Investments in refining will enhance its export abilities and connections to lower-cost crude

Garland told the Houston Chronicle on May 1, 2012 that investments in refining will enhance its export abilities and connections to lower-cost crude. "But you won't see us investing to increase refining capacity," Garland says. Garland says that Phillips 66 will execute a number of strategies to revitalize the refining business. Phillips 66 will target lower-cost oil and focus more of its refining capacity on producing diesel and other high-yield fuels. The company also will ramp up exports to foreign markets that offer higher prices for their fuel.[478]

April 30, 2012: Phillips 66′s most profitable refineries of the past couple years are in what’s called the Mid-Continent

According to Christopher Helman writing in Forbes magazine, Phillips 66′s most profitable refineries of the past couple years are in what’s called the Mid-Continent — from Texas north to Montana including the Sweeny refinery [sic], Ponca City, Wood River and Billings. The reason for their high profitability has been the glut of crude oil pouring into the region from newly tapped shale oil plays like North Dakota’s Bakken. "Because there was a lot of new oil and not enough pipeline capacity to get it down to the Gulf Coast mega-refineries, the crude got bottled up in the storage tanks at Cushing," writes Helman. "The bottleneck that kept oil from getting out of Cushing also kept its price at a record-wide discount relative to its rival European benchmark Brent crude. At one point last year you could buy a barrel of WTI for $27 less than a barrel of Brent. Historically WTI has been slightly more expensive." In an April conference call with analysts, Garland said the company had been generating $90 million in annual net income for every dollar of WTI-Brent price differential that it could capture for its refineries. However, this opportunity is not going to last long term because there will soon be plenty of new options for getting crude out of Cushing and Garland agrees that the price differential will collapse. “Over three to five years those wide differentials that we’re seeing in the Midcon will collapse to the transportation differential,” he told me. “So more like $3 to $5 a barrel. It’s not going to be $20 forever.”[479]

Increase Profitability by Increasing Exports

Greg Garland disclosed during the 4th quarter earnings conference call on January 29, 2014 that Phillips exported nearly 200,000 barrels a day. "Our total export capacity is just over 400,000 barrels per day, up from 285,000 barrels at the end of 2012." Garland added that the increase in export capacity is primarily Gulf Coast. "I think we will continue to push the limits. We are looking for cheap ways that we can just get more barrels across there. Certainly, we have stated our ultimate target is about 500 a day, but almost all that increase is going to be on the Gulf Coast. Minor debottlenecks on the West Coast, and then we have underutilized capacity today on the East Coast."[480] Graphic from Phillips Presentation to USB Global Oil and Gas Conference May 21, 2013.

August 13, 2014: Phillips Evaluates Export of Super-Light Crude Oil

Kristen Hays reported at Reuters on August 13, 2014 that Phillips is evaluating the export of super-light crude oil known as condensate, after two industry peers received U.S. government approval to ship it overseas after minimal processing but declined to say if it has sought formal permission to export condensate from the U.S. Department of Commerce, which is tasked with interpreting exceptions to a decades-old ban on crude exports. "We're evaluating the process and seeking a better understanding," said Chris Chandler, Phillips 66's head of natural gas liquids (NGLs). "That process is still a little unclear to us." Asked if the export facility could potentially export condensate that has been minimally processed, Chandler said: "This Freeport facility has a lot of expansion possibilities. It's close to the Gulf of Mexico, three miles from open water. We have the capability of doing a lot more here than we do currently."[481]

May 7, 2014: Garland Softens Position - Doesn't Oppose Crude Oil Exports

Fuelfix reported on May 7, 2014 that Garland said Phillips doesn’t oppose exporting U.S. oil, putting the company at odds with other independent refiners who have lobbied aggressively against lifting the nation’s crude exports ban. In the past, Garland has expressed outright support for lifting the ban, garnering him attention for reportedly being the first major refining head to take that position. According to Fuelfix, Garland is now taking a slightly softer position. “We’ve never said we’re for — we’ve said we don’t oppose,” Garland said. “In our view, it’s time to have an honest, open dialogue about energy policy in the U.S., and we need to be holistic in that,” Garland continued. Garland said he isn’t very confident U.S. policy on crude exports will change any time soon. “In an election year, I think it’s going to be difficult for Congress to move on this issue simply because they have too many other things on their plate,” Garland said. “Politically, it’s a very difficult thing right now.”[482]

April 11, 2014: Phillips Exports Oil to Canada

Reuters reported on April 11, 2014 that after securing an export license in 2013, Phillips is now exporting oil to Canada. A Phillipsspokesman declined to say where in Canada its exports are headed and in what volume and did not disclose if the oil will reach its destination via rail or barges. "As a matter of practice, Phillips 66 does not comment on commercial activity," said spokesman Dennis Nuss. The United States does not allow exports of its own oil, but makes exceptions such as barrels going to Canada and re-exports of foreign oil.[483]

April 11, 2014: Phillips to Build Splitter at Sweeny Refinery to Process Condensates into Fuel Components that Can Be Exported

Reuters reported on April 11, 2014 that Phillips plans to build a condensate splitter at Sweeny refinery which will allow it to process condensates into fuel components that can be exported.[484]

March 5, 2014: BP Skirts US Crude Export Ban with Mini-Refineries: Phillips May Follow Suit

Bloomberg reports that the oil industry is pressuring President Barack Obama to end the 41-year-old ban on most crude exports but British Petroleum (BP) isn’t waiting for a decision. The British oil giant has signed on to take at least 80 percent of the capacity of a new $360 million mini-refinery in Houston that will process crude just enough to escape restrictions on sales outside the country. “It’s a relatively inexpensive way around the export prohibition,” says Judith Dwarkin “You can lightly ruffle the hydrocarbons and they are considered processed and then they aren’t subject to the ban.” Amid a flood of new US oil], the demand for simple, one-step plants capable of transforming raw crude into exportable products such as propane is feeding a construction boom along the Gulf Coast. The first such mini-refinery, built for 1/10 the cost of a complex, full-scale refinery, is scheduled to open the first phase of its 100,000 barrel-a-day crude processing plant in July, The mini-refineries take advantage of the law that allows products refined from oil to be sold overseas, though not the raw crude itself. "The international buyers of these products will likely need to refine them further, so this is basically a veiled form of condensate exports,” says Leo Mariani.[485][486][487]

According to Bloomberg, three additional plants have been proposed by other pipeline or trading companies, and refiners including Valero and Phillips said they may follow suit.[488]

February 19, 2014: Christopher Helman Says the US Oil Boom is Not So Bad for Refinery Owners

Christopher Helman wrote at Forbes Magazine on February 19, 2014 that increasingly, the oil giants seem to have realized that there’s better returns to be made, with fewer headaches, by turning their focus back to the USA and that it’s the smaller operators that have been able to capitalize best on the unconventional oil and gas revolution. "Thanks to the U.S. oil boom, refineries in this country are chronically oversupplied with cheap oil (as witnessed by the discount of WTI to Brent) and will continue to be as long as oil exports remain prohibited. This frustrates the small independent drillers who would like to sidestep the refiners and export their crude to the world market (if it weren’t prohibited). But it’s not so bad if you happen to own a refinery; then you can capture much of that differential by exporting finished gasoline and diesel to the world market," writes Helman. "That’s why Exxon, Chevron and Shell are unlikely to jettison any U.S. refineries as long as this dynamic remains. On the contrary, notes Deutsche Bank’s oil analyst Paul Sankey, we may soon see the day when a big independent oil producer buys a small refining company — “relative multiples would make this a highly accretive move,” Sankey wrote."

February 14, 2014: Garland Says Phillips is Well Placed to Compete in the Export Market to South America

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips is well placed to compete in the export market. "We have 7 coastal refineries, so roughly 75% of our domestic capacity is on the coast. These are going to be the best position refineries to participate in the export opportunities that we see," said Garland. "We believe that you're going to have to access the export markets to be able to continue to run high utilization rates and hence our focus on growing our export capability to 500,000 barrels a day." Garland said that in December we sold 250,000 barrels a day to Latin America and South America. "We do believe that the U.S. refining business is really well positioned to compete in those export markets. You have an energy price advantage over European and Asian refiners. You have -- you're in the right zip code so you have a transportation cost advantage. Then you factor in an advantaged crude position. So these refineries and when you look at the complexity, size and the scale of the U.S. refining business, well positioned to compete in the export markets. That's true of Phillips 66 also."[489]

January 29, 2014: Garland Reiterates Support of Crude Exports

In response to a question from Doug Leggate of Merrill Lynch, Greg Garland reiterated his support for crudge exports during the 4th quarter earnings conference call on January 29, 2014. "I think I came out in May of 2012, and said we wouldn't be opposed to lifting the ban on crude exports. We do encourage a thoughtful and broad conversation around energy policy in our country, and I think you have got to look at that holistically. It is not just crude exports, but it is also infrastructure. And that could be pipelines, that could be marine, and I think you just can't take one of them and pull it out separately. So we don't oppose lifting the crude ban. But I think you have got to look at RFS. You have got to look at infrastructure pipeline. Can we approve a pipeline or not in this country? All the way to marine infrastructure limitations that we have in this country. So and generally we are free-traders, but we would like to see a free market also."[490]

January 29, 2014: Phillips Hits New Record Exporting 200,000 BPD, Ultimate Target is 500,000 BPD

Greg Garland disclosed during the 4th quarter earnings conference call on January 29, 2014 that Phillips exported nearly 200,000 barrels a day. "Our total export capacity is just over 400,000 barrels per day, up from 285,000 barrels at the end of 2012." Garland added that the increase in export capacity is primarily Gulf Coast. "I think we will continue to push the limits. We are looking for cheap ways that we can just get more barrels across there. Certainly, we have stated our ultimate target is about 500 a day, but almost all that increase is going to be on the Gulf Coast. Minor debottlenecks on the West Coast, and then we have underutilized capacity today on the East Coast."[491]

May 21, 2013: Phillips is Increasing Export Capabilities

Greg Maxwell, Executive Vice-President for Finance and Phillips CFO, told analysts at the UBS Global Oil and Gas Conference on May 21, 2013 that Phillips is increasing export capabilities. "We have projects in progress to increase export capability from our Gulf Coast and our West Coast refineries by 115,000 barrels per day over the next few years. And during the first quarter, we moved 150,000 barrels per day into the export market. And these projects position us with the capability to export up to 30% of our total clean product production from our coastal refineries."[492]

January 10, 2013: Michael Fitzsimmons Writes that Garland's Support of Crude Exports is Grounded in Confidence in the Future and in Relations with ConocoPhillips

Michael Fitzsimmons wrote in Seeking Alpha on January 10, 2013 that Fitzsimmons has a theory as to why Phillips CEO Garland has unpredictably come public in December in support of is supporting crude oil exports: Could it be that Phillips 66's position on the crude oil export question goes back to its relationship to - ConocoPhillips? After all, Fitzsimmons says, since the spin-off many COP executives and employees likely hold stock in PSX, and vice-versa. Fitzsimmons says that COP produces over 130,000 boe/day of high quality light-sweet crude in the Eagle Ford - very close to PSX's Texas refineries. "Even though the companies are now separate publicly traded entities, you know that COP and PSX management talk turkey quite often. So I wonder what PSX might get from COP in return for publicly supporting crude exports? First dibs on Eagle Ford production at a favorable rate? Discounts on natural gas feedstock for its refinery and chemical operations? Discounts on WCS from COP's top-tier position in the Canadian oil sands? The point is this - by working in tandem, there is certainly room for COP and PSX to optimize the overall returns for both companies."[493]

"While an easing of the crude oil export ban will likely reduce the Brent/WTI spread and thus crimp profits in the company's refining sector, I take it as a very bullish and almost cocky indicator of the confidence PSX management has in its future - exports or no exports. I also believe COP and PSX will work closely together to maximize the benefits to both companies should the ban on crude oil exports be lifted or substantially eased - something I see as very likely."[494]

December 13, 2012: Garland Supports Exports of Crude Oil

Reuters reported on December 13, 2013 that Phillips 66 CEO Greg Garland told reporters at a lunch in New York that Phillips would support exports of crude oil from the United States, arguing the boost they would give the country's economy would trump the higher costs for the company and for American consumers. "When you think about what is good for U.S. economy, what drives job growth... all of these are reasons why we support crude oil exports," said Garland. "If we're allowed to export refined products I think others should be allowed to export the crude they produce." Garland is the first head of a major refiner to speak openly in favor of exporting crude.[495]

The United States in the past three years has become a major exporter of gasoline, jet fuel, and diesel as domestic demand has fallen in reaction to higher prices and a slow economic recovery. Some say the decades old ban on crude oil exports is outdated should North America become energy independent in the coming years, though it is likely to be a fiercely fought political issue. Garland said that U.S. sea-borne crude oil imports could be as low as 2 million barrels per day (bpd) within five years. The drop in sea-borne imports, from a peak above 8 million bpd in the middle of the last decade, has led many to speculate the U.S. could eventually become a net exporter of crude.[496]

Garland praised the cheap energy-led "renaissance" in American manufacturing. "We consider ourselves a manufacturing company... Last year the biggest export from the United States was not planes or automobiles but refined products - and that's the first time since the 1940s."[497]

September 19, 2012: Phillips Plans to Increase Exports to 220,000 bbl by End of 2013

FuelFix reported on September 19, 2012 that Phillips 66 exported about 100,000 barrels a day and plans to increase daily exports to 220,000 by the end of 2013. "If we can export to make more money, we’ll do that. If we can sell in the U.S. and optimize earnings, we’ll do that too. But to date, exporting has actually gotten us a higher price than selling in the U.S." Garland added that it doesn't take a huge investment to increase exports. "These aren’t huge investments. It’s access to tanks and pipes and dock space. It’s less than $100 million of investment for us to do this." Garland says that demand is down in the United States, so increasing exports is beneficial for the country. "Last year, the U.S. industry’s No. 1 export oil products, gasoline and diesel essentially. When we think about exports, we think it’s great for the country. It makes jobs for us. Ultimately, I think it results in better prices for American consumers. We are running our refineries harder, we are spreading those fixed costs over more barrels. So what you are seeing is relatively high utilization rates in the U.S. refining industry today even though demand has been down."[498]

Increase Profitability by Increasing Clean Product Yields

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that there's $60 million to $100 million of value creation by pushing our clean yields.[499] Graphic from Phillips Presentation to USB Global Oil and Gas Conferecne May 21, 2013.

February 12, 2014: Garland Says Phillips is Pushing Our Clean Yields

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that there's $60 million to $100 million of value creation by pushing our clean yields.[500]

January 29, 2014: Phillips Benefited from Clean Product Differentials

Greg Garland told analysts at the fourth quarter earnings conference on January 29, 2014 that Phillips benefited from clean product differentials. "During the quarter, we realized better prices on average for clean products, compared with the benchmark prices. In addition, as RIN prices moderated, the benefit of resulting lower expenses is reflected in this bar."[501]

May 21, 2013: Phillips Plans to Increase Product Yields

Greg Maxwell, Executive Vice-President for Finance and Phillips CFO, told analysts at the UBS Global Oil and Gas Conference on May 21, 2013 that Phillips plans to increase product yields. "Over the last few years, we've increased our total clean product yields by 2% percent with an emphasis on maximizing our diesel yield. As you know, global demand for diesel is strong and growing. Our distillate yield is 3% higher than the United States industry average. And we believe we have a peer leading distillate yield. This is worth approximately $150 million in net income per year based on today's market prices. And 11 of our refineries have small projects to increase both clean product and diesel yields."[502]

April 9, 2012: Garland Wants to Increase Clean Product Yields

"As we look at our refining business, we pulled capital down over the past couple years. Our sustaining level of capital in the R&M segment is about $1 billion a year. We will focus some incremental spend in R&M on margin improvement projects. We think that there's opportunities to capture more feed stock advantaged crudes. We can drive our clean product yields, increase our export capability. 1% improvement in clean product yield gives us about $100 million to $150 million of net income improvement. If we can capture $1 a barrel of WTI/Brent differential, it's worth about $90 million of net income. There is powerful economic incentives to capture these margin improvements."[503][504][505]

June 5, 2012: Garland Wants to Increase Clean Product Yields

On June 5, 2012 Phillips CEO Greg Garland presented to the Citi Global Energy Conference and said Phillips has a clear strategy for growth and improving returns. Garland said Phillips is kind of an average performer in terms of returns on Refining and Marketing with a 12% ROCE in this business, but the expectation is thatthis can be improved to a 15% ROCE business over the cycle. "The R&M business for us is a run well, optimized business. You won’t see us adding capacity." Phillips wants to increase yields in the refineries. "Every one percent clean product yield is worth somewhere between $100 to $150 million of net income. For every one percent diesel yield, we can increase, in today’s market is the capture of about $60 million in net income. In the first quarter we ran about 41% diesel, which is really the highest of the peer group if you look out there. And so we’re pretty comfortable that we can continue to tweak the operations in refineries and to eke out a couple more percentage points in clean product yields and continue to push our diesel yields up without significant investment at this point in time.[506]

Increase Profitability by Decreasing Costs

See * Operational Excellence

Increase Profitability by Optimizing Portfolio

See * Phillips' Divestiture of Non-Core Assets Through Sale, Exchange, or Closure

Phillips' Divestiture of Non-Core Assets Through Sale, Exchange, or Closure

Phillips announced in June, 2013 that they want to sell the Whitegate Refinery in Cork, Ireland.[507] Courtesy of ConocoPhillips
At the Phillips Third Quarter Earnings Conference on October 31, 2012 Tim Taylor said that when Phillips looks at its California refineries, it's been one of the more challenged markets from a recovery standpoint post-recession. Asked if California would still remain part of Phillips' core portfolio Taylor replied that right now California is in the lower performing part of Phillips portfolio. "So I think that if our assessment would become that it's going to be challenged for some period of time, we've either got to find a way to improve that operation or find some other way to deal with that."[508] Photo of Wilmington Refinery by unzarjones Flicker Creative Commons Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0)
Phillips announced on May 1, 2012 that the Alliance Refinery in Belle Chasse, Louisiana was for sale. Phillips announced in August, 2012 that they had changed their mind and that the Alliance Refinery was no longer for sale. Photo: Lower Mississippi Riverkeeper Flickr Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)
Phillips sold Trainer Refinery in Trainer, Pennsylvania to Delta Airlines in June, 2012.[509] Photo by Phillips 66

September 4, 2014: Chevron Phillips to Sell Performance Polymers Business for $220 Million

Bloomberg reported on September 4, 2014 that Chevron Phillips has agreed to sell Ryton polyphenylene sulphide plants, a performance polymers business, to Belgian chemical maker Solvay for $220 million to expand its offering of lightweight plastics for replacing heavier metal parts in cars. “Ryton PPS fits neatly with our unique specialty polymers portfolio and reinforces our unrivalled capabilities to provide solutions to our customers in dynamic innovative end-markets,” said Augusto Di Donfrancesco, president of Solvay Specialty Polymers. Solvay will gain Ryton PPS sites in Texas and Oklahoma, and a plant in Belgium. Solvay plans to invest in a PPS production technology developed by Chevron Phillips that hasn’t “achieved its full potential,” the company said. Completion of the deal is expected in the fourth quarter.[510]

August 28, 2014: Phillips Sells Whiddy Oil Terminal

The Irish Examiner reported on Augusut 28, 2014 that Phillips has reached an agreement to sell the Whiddy Island oil terminal in Bantry, which holds a third of Ireland’s strategic oil reserves, to the US startup, Zenith Energy. “We understand from Phillips 66 that Zenith intend to continue operating the terminal on a commercial basis. The Bantry terminal will therefore remain an important element of Irish oil infrastructure, regardless of its ownership,” said the Department of Energy Communications, Energy and Natural Resources. Phillips 66 employs 30 people directly at the site and the operation indirectly supports 100 contractor jobs. The Whiddy facility, which has a storage capacity of 7.5 million tonnes, is considered one of the best fuel storage facilities in Europe following significant investment over the past 15 years.[511]

April 3, 2014: Phillips Gives Up Trying to Sell Whitegate Refinery

Alison Sider reported in the WSJ on April 3, 2014 that after nearly a year of trying to sell its Whitegate refinery in Ireland, Phillips is calling off the search for a buyer and will just keep running it. “Based on the level of interest from potential buyers, we will take the next step in the sales process for the Bantry Bay storage terminal only,” company spokesman Rich Johnson said. According to Sider European refineries are struggling because fuel demand in the region is down amid a sluggish economy, plus there’s increasing competition from plants in the Middle East, Asia and even the U.S.[512]

February 14, 2014: Garland Says Phillips Has Gotten Good at Selling the Good Things

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips has gotten very good at selling the good things but now Phillips is going to have to get very good at selling the not-so-good things. "I think we've demonstrated that we're willing to create value for shareholders by deal. So we sold ICHP, the power plant, nice ten multiple for that facility in 2013 or was it 2012, 2013 we closed. Then the flow improver deal was just a deal that had to be done. Nice multiple for the, effective ten multiple tax-free transaction. It made a lot of sense for a big shareholder of our Company, but also made a lot of sense for Phillips 66. It was done like-kind exchange, share exchange for the business. So that deal needed to be done. We're starting to run out of those deals in the portfolio. We've gotten very good at selling the good things. I told Clayton we're going to have to get very good at selling the not-so-good things."[513]

February 14, 2014: Garland Says Phillips Expects to Sell Melaka and Whitegate in 2014

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips expects to sell Melaka and Whitegate Refineries in 2014. "We've gotten very good at selling the good things. I told Clayton we're going to have to get very good at selling the not-so-good things. Certainly [we] have a process underway with Whitegate. We have a process underway with Melaka. What I would say in that you should expect that we will draw those processes to a conclusion in 2014.[514]

February 14, 2014: Phillips to Sell Gold Product Pipeline System to Phillips 66 Partners for $700 million

The Oil and Gas Journal reported on February 14, 2014 that Phillips will sell the Gold Product Pipeline System, also known as the “Gold Line System,” and the Medford Spheres, two newly constructed refinery-grade propylene storage spheres, for a total consideration of $700 million.

The Gold Line system shuttles approximately 132,000 barrels per day of refined products from a Phillips 66 refinery in Borger, Texas, north to Cahokia, Ill. It also includes two lateral lines, and four terminals with 4.3 million barrels of aggregate storage capacity.

The two propylene storage systems are located in Medford, Okla., with a combined capacity of 70,000 barrels. The units will serve as a temporary stopover for refinery-grade propylene coming from the Phillips 66 refinery in Ponca City, Okla., en route to the major natural gas liquids hub in Mont Belvieu, Texas. It also includes two lateral lines, and four terminals with 4.3 million barrels of aggregate storage capacity.

Phillips 66 and the partnership will enter into transportation, storage, and terminaling agreements that include minimum throughput volume commitments, with terms ranging from 5 to 10 years. The minimum volume commitments account for more than 80% of expected throughput volumes. The partnership expects these assets to contribute EBITDA of approximately $65 million to $70 million in their first full year of operation. Annual maintenance capital expenditures are initially expected to be between $3 million to $4 million.[515][516]

January 30, 2014: Garland Says the West Coast is a Challenged Environment

Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that the West Coast is a very challenged environment for refineries. "It is a high cost area to operate. Our assets are good assets. We are on a path to fix it, I would say. As you think about, a net income positive, single-digit return business, and how do we get crude advantaged to the West Coast? So I think, you can ask me in April, we will probably tell you more about what we are doing to get advantaged crudes into California. But it is a combination of investments and third-party as we work that. And then, I think we said openly that all options for California I think are on the table, in terms of those assets, whether it could be a spin, an IPO, variable MLP, a joint venture. As you look at the West Coast, we think those are valuable assets ultimately, because there is -- we have 110,000-barrels a day of coking capacity there. And so, those assets in the future will probably be worth more than what people think they are worth today, is my view. And I mean, the California market is a big market as everyone knows, and so, we have a continuing interest there. But as we think through the assets, our path today is to make it better and more profitable, run those assets well. We don't see any big capital investments in front of us on the West Coast, and so, the hold option really cost us nothing."[517]

December 30, 2013: Phillips Sells Specialty Products Unit to Warren Buffett's Berkshire Hathaway for $1.4 Billion

Phillips reported on December 30, 2013 that Berkshire Hathaway Inc. is acquiring Phillips Specialty Products Inc., a flow improver business, from Phillips 66 in exchange for shares of Phillips 66 common stock currently held by Berkshire Hathaway. PSPI leads the science of drag reduction and specializes in developing polymers to maximize the flow potential of pipelines. “Berkshire Hathaway made a strong offer for our high-performing flow improver business,” said Greg Garland. “This transaction optimizes our portfolio and focuses growth on our Midstream and Chemicals businesses.”[518]

Wells Fargo analyst Roger D. Read said Phillips 66's entire specialty division generates about $250 million in annual earnings before interest, taxes, depreciation and amortization (EBITDA), with PSPI generating just a portion of those earnings. Read estimates that the specialty unit will generate just 4% of Phillips 66's 2014 EBITDA and that PSPI was sold a premium price relative to the firm's valuation. Buffett and Berkshire appear able to afford a premium priced PSPI acquisition using Phillips 66 shares. Berkshire Hathaway marked the cost of its Phillips 66 shares at $660 million in its 2012 shareholder letter. Meanwhile, the stock-for-PSPI swap will come with tax advantages for Berkshire Hathaway. "The cash-rich split "is a way for a holder of appreciated stock to dispose of it in a very tax efficient way," says Robert Willens, an independent tax expert. "The distribution of PSPI to BRK is intended, no doubt, to qualify under Sec. 355 of the Internal Revenue Code. If its does, neither PSX nor BRK will recognize gain on the exchange of the stock of PSPI for BRK's PSX stock."[519]

Antoine Gara wrote at The Street that "one wonders whether Phillips 66's sale of its PSPI unit to a large shareholder raises conflicts of interest." "That's especially the case since Berkshire will be paring its stake in Phillips 66 significantly through the PSPI acquisition. A press release announcing the deal and an 8-k filing with the Securities and Exchange Commission also don't list any advisors on the stock transaction."[520]

October 30, 2013: Garland Says East Coast and West Coasts Refineries are in Challenged Markets

Garland told analysts at the third quarter earnings conference that Bayway is a great asset and a challenged market. "But when we look at our assets around the Midcontinent and Gulf Coast, we think those are pretty good assets, and long-term those assets will probably be in our portfolio, because if we think about West Coast and East Coast and U.S, it is not necessarily true, Atlantic Basin is a very challenging place if you well know," said Garland. "If you look at that, 30,000 feet the market that we are in North America and Europe aren't going to be growing market, in fact they're probably declining markets. And so the opportunity to employ capital and make a good return on that is just more difficult. I’d rather move into the higher valued businesses in midstream in chemical and we have been pretty consistent about that. But we are always going to look at our portfolio and optimize the portfolio."[521]

October 30, 2013: Garland Says Phillips Still Looking to Sell Whitegate Refinery and Its Interest in Melaka Refinery

Garland told analysts at the third quarter earnings conference on October 30, 2013 that Phillips is still looking at "selling possibly our Whitegate refinery in Ireland and our interest in the Melaka refinery in Malaysia, and so those efforts continue. We’re in the process of evaluating specifically the opportunities around Whitegate. So I think those have been the pieces of portfolio for us that long-term are really where the strategic interest is."[522]

September 12, 2013: Phillips 66 says It Has Buyers Interested in Whitegate Refinery

Greg Garland told analysts at the Barclays Energy-Power Conference in New York that Phillips has potential buyers interested in its Whitegate Refinery. Garland declined to elaborate, but analysts had speculated that buyers would be tough to find.[523]

July 15, 2013: Phillips Creates Phillips 66 Partners LP, a Master Limited Partnership with Pipline Assets

Phillips announced on July 15, 2013 that they were creating Phillips 66 Partners LP, a limited partnership and subsidiary of Phillips 66, with an initial public offering of 15,000,000 common units, representing limited partner interests. The common units are expected to trade on the New York Stock Exchange under the ticker symbol “PSXP.” The partnership’s assets include the Clifton Ridge crude oil pipeline, terminal and storage system in Louisiana; the Sweeny to Pasadena refined petroleum product pipeline, terminal and storage system in Texas; and the Hartford Connector refined petroleum product pipeline, terminal and storage system in Illinois.[524]

June 10, 2013: Phillips Wants to Sell Whitegate Refinery

Reuters reported on June 11, 2013 that Phillips wants to sell the Whitegate Refinery in Cork, Ireland. However Seth Kleinman, head of energy research at Citigroup says the odds of finding a buyer look slim and that the refinery would probably have to be shut down as it will be hard to find a buyer for it. In the meantime Phillips will continue to operate the refinery. "Phillips 66 intends to continue operating the assets as usual during the marketing process, which is expected to last for several months," said company spokesman Rich Johnson in a statement.[525]

Europe's refining sector has been struggling because of over capacity and Coryton refinery in the UK, owned by the bankrupt Petroplus group, closed last year after administrators failed to find a buyer for it. Micheal Martin, the leader of Ireland's main opposition party Fianna Fail, said the sale of the refinery had potentially serious consequences for its economy as it is the only refinery in Ireland supplying about one third of Ireland's oil products. "Whitegate is a key strategic asset. It provides one third of all our transportation fuel and is a long-term principal supplier to the National Oil Reserves Agency. The threat to its future has serious implications for Ireland's energy supply and consequently for our economy," Martin said in a statement. "It has been a major employer in the area for decades, supporting hundreds of jobs directly and indirectly. Its loss would be a serious blow to local economy."[526]

"The move is part of a fire sale of Irish assets by Phillips," writes James Detar on Investor's Business Daily. "which is also selling an oil and refined products storage terminal in Bantry Bay in County Cork, and its Ireland wholesale marketing business."[527]

May 11, 2013: Phillips Sells Power Plant at Humber Refinery

The Grimsby Telegraph reported on May 11, 2013 that the 1,220 MWe power plant employing 56 people and providing steam and electricity to Phillips 66's Humber Refinery, steam to the neighboring Lindsey refinery, and electricity to the National Grid is being sold to the Vitol Group, based in Switzerland, for an undisclosed sum. Expanded at a cost of £210 million in 2010, the power plant has at least twice been subject of a review by ConocoPhillips and by Phillips 66. "While a high-quality business and asset, ICHP was determined not be a core asset for Phillips 66's business strategy," said Brian Coffman, general manager of Phillips 66 Humber Refinery, and lead executive in the UK. "ICHP is a good solid business with strong potential in the UK electricity market."[528]

March 7, 2013: Phillips May Sell Refineries in Europe and Asia if the Price is Right

Alison Sider reported at Hyrdocarbon Processing on March 7, 2013 that Larry Ziemba, executive vice president for refining, project development and procurement, told analysts that, for the right price, the company would consider selling its 71,000 barrel-per-day refinery in Cork, Ireland, its 47 percent interest in the 170,000 barrels per day (bpd) Melaka, Malaysia Refinery and its 18.75 percent stake in the 300,000 bpd Mineraloelrafnerie Oberrhein GmbH refinery in Southwest Germany. "They're really not strategic," said Ziemba. The company's stake in Malaysia's Maleka refinery is a holdover from Phillips 66's days as the refining arm of ConocoPhillips, which had upstream operations in Malaysia. Now, "it might be worth more to Petronas or someone else than it is to us," said Ziemba.[529][530]

Ziemba added that most of Phillips refining capacity is located in the US, where the company is looking to take full advantage of booming production of relatively inexpensive "advantaged" crude-oil and that the share of "advantaged" oil has grown from 52% of the crude Phillips 66 ran in 2011, to 70% by the end of 2012. "Ultimately, our objective is to push all the Brent crudes out of our system," said Ziemba.[531][532]

January 30, 2013: Garland Does Not Rule Out a Sale of Los Angeles Refinery and San Francisco Refinery

Reuters reports that Greg Garland told investors on January 30, 2013 at the 4th quarter earnings conference that Phillips did not rule out a sale of Phillips two California refineries, one at Los Angeles and one at San Francisco, given challenges with state regulatory requirements and high costs. "We're studying any and all options for California in terms of where do we go long-term in the business," said Garland. "We are doing everything we can to improve it. I don't feel it's a distressed asset. We want to take our time and be thoughtful."[533]

Garland told analysts that Phillips 66 was looking at getting railcars capable of hauling even cheaper Canadian heavy crude to the company's refineries in California. However, he said resistance to such a move was likely. A 2006 California law requiring sharp cuts in emissions has a component that would require refineries to run crudes produced in environmentally friendly ways. Canadian crude production comes with high emissions. Plus, California has the huge Monterey shale, estimated by the U.S. government to have more reserves than the prolific Eagle Ford in Texas or Bakken in North Dakota. But output has been spotty with geology that differs from those other plays. Given those uncertainties, Garland told Reuters in an interview that for the time being, Phillips 66 will focus on improving the California refineries' single-digit returns while studying a possible sale, joint venture or spinoff. "The option value to hold California is zero. It really costs us nothing."[534]

December 13, 2012: Phillips Likely to Sell Whitegate Refinery in Ireland and its stake in Melaka Refinery in Malaysia

Reuters reported on December 13, 2012 that Greg Garland told reporters on December 13, 2012 that Phillips will likely look to sell its Whitegate refinery in Cork, Ireland, and its stake in the 2 Melaka refinery in Malaysia. Phillips plans to retain stakes in the refineries it owns in the United Kingdom and Germany. "We don't envision growing in the Asian refining space," said Garland.[535]

December 13, 2012: Phillips to Transfer Transportation Assets to a Master Limited Partnership

Marketwatch reported on Decmeber 13, 2012 that Phillips will transfer transportation assets to a master limited partnership that will debut in the stock market in 2013. The assets could include crude and product pipelines and terminals, natural gas liquids assets, or rail cars and infrastructure, but it was unclear what portion of Phillips 66's business would go to the MPL, analysts at Simmons said in a note.[536] “We expect to use the master limited partnership as an efficient vehicle to fund growth investments in the transportation and midstream sectors,” said Phillips 66 Chairman and CEO Greg Garland. “We believe the proposed MLP will enable us to enhance value for our shareholders and increase the transparency of our business.”[537]

December 3, 2012: Standard and Poor Says Some Phillips Facilities Are Candidates for Divestiture or Closure

Standard and Poor reported on December 3, 2012 that the overall quality of Phillips operations is mixed, with some facilities being candidates for divestiture or closure over the next few years. "Notwithstanding the relatively favorable market conditions at times over the past year, we view long-range industry fundamentals as difficult given persisting excess production capacity globally and a secular decline in demand for some key transportation fuel products in developed markets," the report says. "While we believe that Phillips 66 Co. will be able to further improve the operating performance of its refining assets, we expect opportunities for doing so will be mostly incremental in nature."[538]

October 31, 2012: California Refineries are in Lower Performing Part of Refinery Portfolio and Must Improve

Tim Taylor was asked at the Phillips Third Quarter Earnings Conference on October 31, 2012 if Phillips' position with its two major refineries in California was sufficiently advantaged to warrant continued participation and replied that when Phillips looks at the West Coast, it's been one of the more challenged markets from a recovery standpoint post-recession. "In California, specifically, it's a tough regulatory environment, as well, so costs are higher. And there is a lot of potential additional costs as new regulations come into effect. That said, it's still a very significant market and we think it's really important to look at how can we get some of these crudes out of the middle part of the country into the West Coast, particularly California. So we're working hard on that to try and change that. The comment I'd make in Washington is that that's got a natural access to the Bakken in North Dakota and Canadian crudes. We separate the Washington piece from the California piece that way. But everyone's working hard to look at some crude solutions for the West Coast to improve its competitive position."[539]

"I think we look at the market and say demand continues to struggle out there, as well, post-recession," added Taylor. "And then I think you look more fundamentally at the operating environment and the costs associated with particularly the environmental regulations. And we think that's going to continue to keep pressure on operations and operating costs out there. So, yes, I would say that from a California perspective it is one of the more challenged parts of our portfolio in terms of the basic value equation. So that's why we're still looking at the crude side of it. And continuing to stay abreast and on top of what it's going to take to comply with things like AB32 to really maintain your operations out there."[540]

Asked if California would still remain part of Phillips' core portfolio Taylor replied that right now California is in the lower performing part of Phillips portfolio. "So I think that if our assessment would become that it's going to be challenged for some period of time, we've either got to find a way to improve that operation or find some other way to deal with that."[541]

October 17, 2012: Phillips Decides Not to Build Research and Training Campus in Louisville, Colorado

Timescall reported on October 17, 2012 that Phillips has decided not to build a a global training center and research and development campus, a facility heralded for its potential to bring thousands of jobs and an economic boom, in Louisville, Colorado and plans to sell the 432-acre property off U.S. 36. "The uses that ConocoPhillips originally envisioned for this site don't really fit into Phillips 66's long-term plans at this time," said Louisville Mayor Bob Muckle. After the split from ConocoPhillips, Phillips 66 acquired the research facility in Bartlesville, Okla., and moved forward on plans to establish an international training center at its new corporate headquarters in Houston. "After careful consideration of the needs of the new company and its employees, Phillips 66 has decided to sell its 432-acre property in Louisville, Colo.," said Phillips 66 officials in the statement. "Phillips 66's predecessor company, ConocoPhillips, purchased the Louisville property in 2008. As a result of the repositioning of ConocoPhillips into two independent energy companies, the Louisville site became an asset of Phillips 66." The campus was to be constructed in three phases: the opening of 1.6 million square feet of office, research, training and hotel space by 2013, another 150,000 square feet by 2018 and the final 750,000 square feet by 2032.[542]

October 9. 2012: Phillips Sells Riverhead, NY Marine Petroleum Terminal

The Sacramento Bee reported on October 9, 2012 that Phillips announced the sale of the Riverhead, N.Y., marine petroleum terminal and associated assets to United Refining Co. for an undisclosed sum. The terminal is located on the north shore of Long Island in New York and is used as a storage and shipment hub for crude, heavy fuel, diesel and gasoline. It has the only deep-water loading and unloading platform on the East Coast.[543]

September 19, 2012: Greg Garland Says There's No Need to Expand Refining Capacity

Fuelfix reported on September 19, 2012 that no need to expand the refining capacity at Phillips 66. "This market is well supplied," said Garland. "I think we have the opportunity to improve margins and improve returns because of these structural changes in crude and the opportunity to uplift export. But even for us, while looking at exports, the refineries tend to have very localized markets. So you think globally, but act locally in this business for the most part."[544]

September 19, 2012: Greg Garland Says Underperforming Refineries Could be Sold

Garland added that in the future there could be more sales of refineries. "We have $50 billion in assets and in the last six years we’ve sold $10 billion. You would expect that some assets are really good and some aren’t quite as good. Over time you want to move the under-performing assets and take that money and invest it in higher performing assets. That’s business.," said Garland. "I don’t have any refineries today that have a huge capital requirement. It’s not that we’re in dire straights and we have to do something with any asset we have. It becomes a question of what assets do we think long-term will provide the highest returns in the portfolio. And the ones that don’t meet that criteria, what can we do to fix them? I would prefer to fix them first. And we’re going to give people time to do that. But ultimately, if we can’t get a way to fix them, we’ll see if someone will pay something for them, more than they’re worth."[545]

September 5, 2012: Garland says Phillips Will Always Work the Tail of its Portfolio

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that over the last six years Phillips has sold $10 billion of $50 billion worth of assets and that investors should expect that over time that Phillips will always work the tail in its portfolio. "We're not going to be real specific about which assets that we might sell. But you should expect that we'll always manage that core. We did have Alliance on the market. The offers came -- we had 20 people go through the data room. We probably had four offers, none really serious. We think that with LLS and where it's going, we see more opportunity for Alliance in the future than we saw a year ago when we put it on the market. But yes, you should always expect that we're going to have some rationalization of the portfolio."[546]

August 1, 2012: Phillips Does Not Have Plans to Acquire Additional Refineries

Reuters reported on Phillips second-quarters earnings report on August 2, 2012 that Phillips 66 is not planning potential acquisitions -- refineries or other assets -- at this time. "We have looked at what is out there on the market right now in acquisitions and there is nothing really interesting to us at this time," said Phillips CEO Greg Garland. "So we have got our plate full in terms of executing the plan around improving our base R&M business, improving margins, [and] returns."[547][548]

August 1, 2012: Phillips Won't Sell Alliance Refinery

Reuters reported on Phillips second-quarters earnings report on August 2, 2012 that Phillips 66 has decided to retain its 247,000 barrel-per-day Alliance plant in Belle Chasse, Louisiana, because it expects increased access to cut-price light sweet crude to run there.[549]

June 13, 2012: Delta Airlines Set to Close its Landmark Deal on June 22 to buy Phillips Trainer Refinery

June 7, 2012: Greg Garland says Phillips has no plans to Buy or Expand its Portfolio of 11 Domestic Refineries

In an interview with Barrons published June 7, 2012 Phillips CEO Greg Garland said that Phillips has no plans to buy or expand its portfolio of 11 domestic refineries. Philips has an advantage because about 60% of its crude comes at advantageous prices relative to the world market thanks in part to the company's midcontinent presence where crude-production growth has depressed prices.[550]

June 5, 2012: Garland Says It Takes a Lot of Money to Close Down a Refinery

When asked a question about rationalizing refining capacity by closing down plants Garland said at the Investor Conference on June 5, 2012 that it is difficult to shut refineries down. "Mostly because you think about the environmental liabilities that have accrued over the years. So it takes a lot of money to actually exit one of these facilities. And so that’s what you see people convert them to other uses, terminals, etcetera. So they tend to find another life in some shape or form to avoid the remediation that comes along with completely clearing, closing, shutting down and remediating the whole facility."[551]

June 5, 2012: Phillips 66 Reconsiders Sale of Alliance Refinery

Nasdaq reported on June 5, 2012 that Phillips 66 CEO Greg Garland told financial analysts during an investors conference that although Phillips 66 has been considering the sale of its Alliance refinery in Belle Chasse, Louisiana since December 2011, the company is now rethinking the prospect amid falling prices for Light Louisiana Sweet (LLS) crude oil and may not put the refinery up for sale after all. "Our view of that refinery has increased," said Garland. "We think LLS will become an advantaged crude." hillips 66 and other refiners have been rearranging their geographic footprint to take advantage of a boom in US oil and natural gas production that has scrambled the refining map. Refineries with access to new, discounted oil in the U.S. midcontinent have prospered, while coastal refineries have seen profit margins decline.[552] LLS sold for about $95 a barrel Tuesday, down nearly 17% since December. The premium of about $12 LLS commands over inland-crude-oil benchmark West Texas Intermediate should fall as more WTI crude comes to the Gulf Coast via pipelines and rail cars.[553]

According to an article in the Wall Street Journal on June 7, 2012, it may be difficult for Phillips to find a buyer for the Alliance Refinery because long term US gasoline consumption is falling. "Other refineries all have assets on the chopping block, but in a world where domestic fuel sales are in long-term decline, potential buyers are in short supply," write Ben Lefebre. However lower crude prices are making the economics of refining attractive again. "There may be a gleam of hope for Gulf Coast refiner profitability," writes Lefebre. "Exports are growing and Gulf Coast crude economics are getting better. The surge in domestic crude production could bring down the cost of regional oil benchmark Light Louisiana Sweet, giving refines in the region a distinct advantage, refiners and analysts have said."[554]

June 5, 2012: Fox News reports Sunoco and BP Have Refineries on the Selling Block

Other refineries are on the selling block include Sunoco's 35,000-barrel-a-day refinery in Philadelphia. Sunuco closed its refinery in Marcus Hook in December, 2011. BP PLC (BP, BP.LN) is also trying to sell its 265,000-barrel-a-day Carson refinery in California.[555]

May 23, 2012: Morningstar Analyst Recommends Sale of Underperforming Refining Assets

According to Allen Good writing in Morningstar on May 23, 2012 Phillips 66 needs to start selling underperforming assets in their Refining and Marketing Business Segment and Phillips 66's refinery assets are definitely a mixed bag. Phillips' four Mid-Continent refineries in Billings, Ponca City, Wood River, and Borger "are some of the company's best positioned, given their access to discount domestic and Canadian crudes." The three Gulf Coast refineries in Alliance, Lake Charles and Sweeny facilities are some of the most attractive in Phillips portfolio, given their size and complexity says Good. Phillips has already let it be known that the Alliance Refinery is up for sale at the right price but "we won't let it go cheap." The two refineries in California at Los Angeles and San Fransisco face higher costs and environmental regulation which weighs on their value. "Efforts to boost cost-advantaged feedstock should help, but a weak economy in the short term and regulatory capital spending in the long term will be headwinds." Finally the sale or closure of the one remaining East Coast refinery at Bayway in Linden, NJ would "further high-grade the portfolio" although Greg Garland has already said that Bayway will be the "last refinery standing" in PADD I.[556]

May 1, 2012: Phillips Sells Trainer Refinery to Delta Airlines

May 1, 2012: Phillips 66 is Trying to Sell Alliance Refinery

Reuters reported on May 1, 2012 that Greg Garland says that Phillips 66 aims to double refined product exports to 200,000 bpd in the next two years, but its 247,000 bpd Alliance refinery in Belle Chasse, Louisiana -- which runs light-sweet crude -- is on the block. Increasing U.S. light-sweet inland shale oil output along with more infrastructure to move it to the refinery-heavy Gulf Coast means more advantaged crude prices could show up in the region in the coming years, increasing Alliance's value, Garland said. If the price isn't right for what he called "a good export platform for us," Phillips 66 will keep it, Garland said. "We wouldn't let the refinery go cheap."[557]

July 14, 2011: Greg Garland says “There’s enough refineries in the world today"

In recent years ConocoPhillips has sold a European refinery and backed out of a big project with Saudi Aramco to build a brand-new refinery in Saudi Arabia. Phillips 66 is looking to sell its Alliance refinery in Louisiana and its Trainer plant in Pennsylvania “We’ve been selling and shutting down unprofitable assets,” says Garland. “There’s enough refineries in the world today." “No one knows these assets better than the guys at ConocoPhillips; if they think it’s a good idea to jettison this baggage, shouldn’t you too?” says Ed Hirs, a professor of energy economics at the University of Houston. “No one is going to want to buy into Phillips 66. They have no growth, no upside and huge environmental liabilities."[558] Jim Mulva reiterated in his conference call to financial analysts on July 14, 2011 in answering a question by Ed Westlake of Credit Suisse that "if we have an alternative to sell one of the less sophisticated refineries in a way, we are not going to delay until this is done accomplishing and doing that."[559][560]

Phillips Expansion, Construction, Acquisitions and Purchases

September 3, 2014: Truck Loading Facility at Ponca City Refinery to Have 100,000 b/d Capability by mid-2015

Greg Garland told analysts at Barclays CEO Energy-Power Conference on September 3, 2014 that Phillips has invested in a truck loading facility at the Ponca City Refinery for indigenous Oklahoma crudes with a capability of 70,000 barrels a day, that by mid-2015 the facility will have a capability of 100,000 barrels a day, and that the Magellan pipe will bring another 20,000 barrels a day to Ponca City. "So, we're buying indigenous Oklahoma crudes at the wellhead, very consistent product, we know what we're getting and that's translating into better yields at the refinery, good throughputs," said Garland. "And so, as we go to wellhead and buy, we know the crude, the quality of the crude that's coming in, and another opportunity to leverage our expertise in our commercial business into our refining business."[561]

September 3, 2014: Phillips Acquires 100% of Cogen Facility at Sweeny to Prevent a Recurrence of 2013 Outages

Greg Garland told analysts at Barclays CEO energy-Power Conference on September 3, 2014 that Phillips wants to prevent a reccurence of the electrical problems that plagued Sweeny in the first and second quarters of 2013. "We took out our other equity owner, 50% owner of the 440 megawatt Cogen facility at Sweeny. when you think about the existing investment we have, the new investment going in at Sweeny, both from PSX and also CPChem, we want to make sure we harden that electrical infrastructure. You remember in the first quarter and second quarter of last year, we had some issues, mostly related to our third-party providers. We want to ensure that we've got that well in hand and we don't have that ever happen to us again and so that was part of the reason for that.[562]

FuelFix reported on July 31, 2013 that Phillips 66 underperformed in the second quarter as its earnings dropped 19 percent because of higher costs for oil and outages that shut down key facilities. The refinery at Sweeny had two power outages that were a major problem. “We had a second power outage in the second quarter and in my view that’s unacceptable,” Garland said. The refinery is powered both by an on-site generation facility and by a power company. The power company was the cause of the two outages. “To me, personally, the biggest disappointment in the quarter was having a second power outage at Sweeny,” Garland added.[563]

September 3, 2014: Phillips to Build North Dakota Origination Rail Terminal for Bakken Crude

Argus reported on September 3, 2014 that Greg Garland told analysts at the Barclays CEO Energy-Power Conference that Phillips will build a rail-loading facility permitted to handle up to 200,000 b/d of Bakken crude, the first time a US refiner has directly owned a North Dakota origination terminal. We have permits in hand in engineering to construct a new rail-loading facility. This is permitted up to 200,000 b/d. We'll probably do about 160,000 b/d" and build about 300,000 bl in storage said Garland.[564]

August 13, 2014: Phillips Breaks Ground on LPG Export Terminal at Freeport

Jordan Blum reported in the Houston Business Journal on August 13, 2014 that Phillips broke ground on its $1 billion liquefied petroleum gas export terminal — its first ever — in Freeport to sell propane, butane and more to international markets. The project, which is expected to be completed in mid-2016, will export 4.4 million barrels of fuel a month to countries in Europe and Asia. The terminal will get the fuel from its Sweeny complex in Old Ocean and its Gulf Coast Fractionators facility in Mont Belvieu. "We are investing, we are building and we are growing," Phillips 66 Chairman and CEO Greg Garland said at the groundbreaking. "The projects we're breaking ground on … total more than $3 billion of investment for our company, … and it's happening right here in our own backyard in the communities of Sweeny and Freeport." Freeport has advantages over operating out of the Houston Ship Channel because Freeport is 3 miles from deep water, compared to 50 miles for the channel says Jim Webster, Phillips 66’s general manager of midstream.[565]

August 7, 2014: Phillips Not Interested in Purchasing Citgo Refineries

CSPNet reported on August 7, 2014 that Venezuela, strapped for cash at home and staring down costly litigation overseas, is considering a deal for CITGO Petroleum which has three U.S. refineries with combined capacity of approximately 750,000 barrels per day but the offer does not appear to be drawing much interest from other refiners. "I think we've consistently said we have better opportunities to invest in our midstream and chemicals business," says Garland.[566]

June 23, 2014: Phillips to Acquire Lubricant Manufacturer Spectrum Corp

Olivia Pulsinelli reported in the Houston Business Journal on June 23, 2014 that Phillips is acquiring Memphis-based Spectrum Corp. a specialty lubricants company from Dominus Capital LP as it plans to grow its lubricants business. There are approximately 225 employees working at Spectrum today who will become Phillips 66 employees upon closing of the transaction,” a Phillips 66 spokesman told the Houston Business Journal. “The acquisition of Spectrum complements our strong-performing lubricants business by increasing our access to specialized global lubricants markets and is in line with our strategy to selectively grow our marketing and specialties segment,” Tim Taylor, president of Phillips 66, said in a statement. “It also creates new opportunities to expand our worldwide lubricants customer base.”[567]

June 5, 2014: Phillips Buys Big Oil Storage Terminal On Gulf Coast

Fuelfix reported on June 5, 2014 that Phillips plans to purchase the Beaumont Terminal, capable of carrying 7.1 million barrels of oil equivalent, from Chevron subsidiary UNOCAL. “This acquisition supports our midstream growth strategy,” said Tim Taylor. “Given our expectations for increasing volumes of North American crude oil movements into the Gulf Coast region and growth in refined product exports, the Beaumont Terminal is well positioned to serve this growing market while providing significant expansion potential.”[568]

September 29, 2013: Coker Reactors Moved into Place at Ponca City Refinery

The Ponca City News reported on September 30, 2013 that two $70 million, 232 ton coker reactors manufactured in Japan were moved into place into two slots on the working platform at the Ponca City Refinery on September 29, 2013 and carefully lowered into position by the Mammoet PTC-140 heavy lift crane.[569]

Marketing and Special Products

Phillips 66 treats marketing and special products as part of the R&M Business Segment but a significant portion of the earnings of R&M are not related directly to refining. Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that marketing and special products is a very stable business that brings in $500 million to $700 million of annnual net income. "When we talk about marketing in the US, we do not own any stations. We market through branded wholesale stations in the US. There's about 8,000 branded stations that are marketed under either the Phillips 66, the Conoco, or the 76 brand. About half of our marketing margin is actually moved through unbranded wholesale. In Europe, we do sell direct. We have about 900 stations in Germany and Austria, another 250 stations in Switzerland in a joint venture with Coop. In Germany and Austria, we -- Switzerland and UK we market under the JET brand. Extremely high market efficiency out of these stations. Strong ROCEs in excess of 30%. We like the European retail presence. We look at the European market. It's a lot like North America. It's really a flat to declining market. So we will grow, but we'll grow marginally in the European business. We're also a large top three supplier of lubricants in the US, the other business we like and we'll continue to grow that business."[570]

Marketing

December 6, 2013: Phillips to Invest $140 Million in 2014 in Marketing and Specialties

Phillips reported on December 6, 2013 that they plan to invest $140 Million in 2014 in Marketing and Specialties growth and sustaining capital. The growth investment reflects Phillips 66’s intent to expand its international fuel marketing business. The company plans to add approximately 200 new retail sites in Europe over the next five years.[571]

September 26, 2013: Former Phillips 66 Marketer Shuns Big Oil for E15

Domestic Fuel reported on September 26, 2013 that Scott Zaremba, a Kansas retailer who sold fuel under the Phillips 66 brand for 28 years, has decided to drop Phillips 66 so he can offer consumers the choice of E15 ethanol. “They changed the rules mid-stream for what they would allow me to do once E15 came out,” said Zaremba. “And so I re-branded my locations to Zarco USA and created a brand of American Fuels.” Zaremba says it was necessary to offer something else, becoming the first retailer in the nation to offer E15 and hopes others will follow his lead and break with Big Oil and choose the cleaner, more economical and stable renewable fuel, ethanol. “We see the great opportunity now of being able to give the consumer a choice, reduce our dependency on foreign oil, and move forward being able to have something for the consumer that will give them higher octane in a cleaner burning product, and give stability to our economy.”[572]

June 10, 2013: Phillips Forces Gas Station Owners to Either Label or Stop Selling Gasoline Blended with 15 percent Ethanol

Cezary Podkul reported on Fox Business on June 10, 2013 that according to new Phillips 66 guidelines any gasoline with more than 10 percent ethanol has to be served from a separate, yellow hose with the aim of distinguishing E15 from other Phillips 66-branded gasolines with 10 percent or less ethanol. On April 1, Zaremba received a notice from Phillips 66, the nation's third-largest refiner, that he could no longer sell the E15 fuel from his regular black fuel hoses, as he had been selling it since last July. "He has other options, but they aren't cheap - or very feasible," writes Podkul. "For example, it would cost $100,000 to $250,000 to install new stand-alone gas pumps for E15, Zaremba said. Or he can always pay a $412,000 fee to Phillips 66 to break his marketing contract - expensive options that have so far kept him in compliance with the Phillips 66 guidelines, the only way he said he could." Phillips 66 Spokesman Dennis Nuss said in a statement that they were simply part of an occasional update to its brand standards meant "to ensure a positive and consistent customer experience at the pump." Oil producers say they are just doing the responsible thing - holding firm to a 10 percent maximum blend of ethanol in gasoline, or E10 - because anything more than that can cause engine damage in many vehicles on the road today.[573]

May 14, 2013: Phillips to Celebrate New Company During Marketing Conference

CSP Daily News reported on May 14, 2013 that Phillips will have booths manned by informed company representatives from the fuels, lubricants and aviation divisions to promote Phillips 66 Lubricants, Phillips 66 Motor Fuels Marketing and Phillips 66 Aviation at the 2013 Marketing Conference & Trade Show from May 21 to May 24 2013 at the Aria Resort in Las Vegas. Phillips chose the theme "New Energy, New Possibilities" to celebrate the establishment and spirit of the new corporation. "The theme expands on our excitement and passion for providing you new opportunities, ideas and ways to help grow your business," the company said. "Expect informative and beneficial breakout sessions, engaging speakers, a comprehensive trade show, exciting entertainment and much more."[574]

January 2, 2013: California Sues Phillips for Environmental Violations at Gas Stations

Bloomberg reported on January 2, 2013 that California Attorney General Kamala Harris and and seven county district attorneys filed a complaint on January 2, 2013 in state court seeking an order to force ConocoPhillips and Phillips 66 to comply with California’s laws for underground gasoline storage tanks as well as unspecified civil penalties for violating the state’s health and safety code. “The state’s hazardous waste laws help protect our residents from contaminated groundwater,” Harris said in a statement. “This lawsuit safeguards public health by ensuring proper maintenance of the tanks that store fuel beneath many California communities.” The People v. Phillips 66, RG13661894, Superior Court of California, Alameda County (Oakland) accuses the two companies of improperly monitoring, inspecting and maintaining underground storage tanks.[575]

Specialty Coke

September 5, 2012: Garland Says Speciality Coke Provides Stable Earnings

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that the specialty coke business provides stable earnings and really slightly stronger earnings in the base refining business. "As we think about specialty coke, really two types, anode coke and the needle coke. Anode coke is critical to the production of aluminum. We think the aluminum market grows about 5% to 7% a year. We have about a 7% market share of global demand in this business. So this business provides stable earnings and really slightly stronger earnings in the base refining business. We also make a needle grade coke at two of our refineries. It's the only type of coke that's used to make graphite anodes in the steel recycling industry. This industry is growing about 2% to 4% a year, very high profit for us. This is based upon proprietary PSX technology. So you'll see us grow this business over time.[576]

Specialty Lubricants

June 23, 2014: Phillips to Acquire Lubricant Manufacturer Spectrum Corp

Olivia Pulsinelli reported in the Houston Business Journal on June 23, 2014 that Phillips is acquiring Memphis-based Spectrum Corp. a specialty lubricants company from Dominus Capital LP as it plans to grow its lubricants business. There are approximately 225 employees working at Spectrum today who will become Phillips 66 employees upon closing of the transaction,” a Phillips 66 spokesman told the Houston Business Journal. “The acquisition of Spectrum complements our strong-performing lubricants business by increasing our access to specialized global lubricants markets and is in line with our strategy to selectively grow our marketing and specialties segment,” Tim Taylor, president of Phillips 66, said in a statement. “It also creates new opportunities to expand our worldwide lubricants customer base.”[577]

Technology Development

Proprietary Technology

CPChem's Proprietary Technology

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that CPChem's success is partly based upon their proprietary technology. "We think this ensures low cost. It ensures competitive position via the other peers out there."[578]

Research Center

October 27, 2012: Bartlesville Research Center Dodges a Bullet

Rod Walton reported in the Tulsa World on October 27, 2012 that with Phillips decision not to build a long-planned major research and training center in Colorado, Bartlesville employees are breathing a sigh of relief because many feared that their piece of the company might be headed to the Rocky Mountains. "Any time a major employer in the community makes a sizable investment in another location, it generates concerns," said David Wood, president of Bartlesville Development Corp. "The formal announcement that Phillips 66 will be selling the Louisville property puts this issue to rest." The Bartlesville research center has a long history. Phillips Petroleum Co. had its headquarters in the city from the early 20th century until the merger with Conoco Inc. in 2002. Now it looks like the research center is safe and sound for some years to come. "Without being complacent, indications are that the research center will continue to be a large, high-wage employer in Bartlesville for the foreseeable future," Wood said. "We couldn't be more pleased with that outcome."[579]

October 17, 2012: Phillips Decides Not to Build Research and Training Campus in Louisville, Colorado

Timescall reported on October 17, 2012 that Phillips has decided not to build a a global training center and research and development campus, a facility heralded for its potential to bring thousands of jobs and an economic boom, in Louisville, Colorado and plans to sell the 432-acre property off U.S. 36. "The uses that ConocoPhillips originally envisioned for this site don't really fit into Phillips 66's long-term plans at this time," said Louisville Mayor Bob Muckle. After the split from ConocoPhillips, Phillips 66 acquired the research facility in Bartlesville, Okla., and moved forward on plans to establish an international training center at its new corporate headquarters in Houston. "After careful consideration of the needs of the new company and its employees, Phillips 66 has decided to sell its 432-acre property in Louisville, Colo.," said Phillips 66 officials in the statement. "Phillips 66's predecessor company, ConocoPhillips, purchased the Louisville property in 2008. As a result of the repositioning of ConocoPhillips into two independent energy companies, the Louisville site became an asset of Phillips 66." The campus was to be constructed in three phases: the opening of 1.6 million square feet of office, research, training and hotel space by 2013, another 150,000 square feet by 2018 and the final 750,000 square feet by 2032.[580]

New Technology

December 11, 2013: Phillips to Develop Algae Crude Oil with Sapphire Energy

UPI reported on December 11, 2013 that Phillips is teaming with green crude oil producer Sapphire Energy expand Sapphire's test program in New Mexico to show algae can be converted to crude oil using traditional refining methods. "We believe this joint development project with Sapphire Energy could produce a refinery-ready, sustainable product for Phillips 66, creating yet another exciting opportunity in this rapidly changing energy landscape," Merl Lindstrom, a vice president in charge of technological develops for Phillips. Sapphire said it expects to have a commercial demonstration project up and running by 2015 and be able to produce as much as 23 million barrels of green crude oil per year by 2025.[581]

August 21, 2012: Team Sets New world Record in Power Conversion Efficiency for Polymer-based Organic Photovoltaic (OPV) Cells

Marketwatch reported on August 21, 2012 that Phillips 66, the South China University of Technology (SCUT), and Solarmer Energy, Inc. successfully set a new world record in power conversion efficiency for polymer-based organic photovoltaic (OPV) cells with a 9.31 percent efficiency certified by the Newport Technology & Application Center's Photovoltaic Lab in Long Beach, CA. "The breakthrough in efficiency offers a good opportunity for the commercialization of the organic photovoltaic technology," said Dr. Byron Johnson, manager of Sustainability Technologies at Phillips 66. "This marks an important milestone for the industry and has the potential to deliver truly low cost energy for the world." OPV is lightweight, has a better performance in low light and is easier to manufacture -- making it a potentially cost-effective renewable energy technology on par with current conventional energy technologies.[582]

Technology Transfer

March 21, 2013: Phillips 66 to License E-Gas™ Technology to CB&I

Hydrocarbon Processing reported on March 21, 2013 that Phillips has entered into an agreement with CB&I to provide Phillips E-Gas solids gasification technology, a process that converts coal or petcoke into syngas, which can be used for power generation or further converted to substitute natural gas, hydrogen and downstream methanol-related chemicals production. Financial details were not disclosed. “We look forward to adding the E-Gas Technology to our portfolio, which will mark our entry into the syngas value chain," said Daniel McCarthy, group president of CB&I’s technology operating group. "It also will bring added synergy to our delayed coking technology offering for integrated power generation, and other options to the refining and power industries."[583]

May 21, 2012: Phillips 66 to License E-Gas™ Technology to India's Planned Gasification Plants at Jamnagar

Phillips 66 announced on May 21, 2012 that it will will license its E-Gas™ Technology to Reliance and provide process engineering design and technical support relating to Reliance's Jamnagar site, the largest refining complex in the world, with an aggregate refining capacity of 1.3 million barrels of oil per day. The planned gasification plants at Jamnagar will be among the largest in the world and will process petroleum coke and coal into synthesis gas that will be used as feedstock for a new chemical complex and will fuel the refinery's existing gas turbine power generation units. “We look forward to this opportunity to work with Reliance on the largest gasification project in the world,” said Rex Bennett, President, Specialties and Business Development at Phillips 66. “Our E-Gas™ Technology will be used to turn petcoke and coal into clean, reliable energy for Reliance’s refinery and petrochemical plant operations.”[584]

Index of Sections

Major Sections of this report include:


Corporate


Strategic and Financial


Stock Market


Safety, Environment, Legal, Labor


Refineries and Marketing Business Segments


Detailed Look at Ponca City Refinery


Other Business Segments


Other Locations


Reference


How Much Money Does the Marland Refinery in Ponca City Earn for Phillips 66?

On September 2, 2013 the Ponca City News reported on Phillips CEO Greg Garland's speech to the Bartlesville Chamber of Commerce with the front page headline Phillips 66 CEO Praises Bartlesville Contributions.
Portrait of E. W. Marland, founder of the Marland Oil Company and builder of the Marland Refinery in Ponca City. Portrait hangs in the original board room adjacent to Marland's office in the Marland Refinery. On February 1, 2013 Phillips honored E. W. Marland by hosting members of the Ponca City Chamber of Commerce in the Marland boardroom. Photo: Hugh Pickens All Rights Reserved
Phillips 66's Marland Refinery in Ponca City is the most profitable refinery of Phillips 66's fourteen worldwide refineries, contributing a net profit of over $500 million in 2011 to Phillips bottom line. For 2012, profits are on target for the Marland Refinery in Ponca City to contribute of over $600 million of net profit to Phillips bottom line. Based on Phillips' third quarter earnings report for 2012 with a realized crack spread of $31.83 for mid-continent refineries and a capacity utilization of 102%, the Marland Refinery in Ponca City will contribute at an annualized rate of over $1 billion ($1.032 B) of net profits in 2012 to Phillips bottom line. Derivative Photo: Hugh Pickens
There are three leading operating segments in the new company: Chemicals, Midstream, and Refining and Marketing. The refinery in Ponca City falls in the Refining and Marketing Business Segment (R&M) which has a much lower ROCE (Return on Capital Employed) than the other two Phillips 66 business segments. ROCE is a ratio used in finance, valuation, and accounting that compares earnings with capital invested in the company is used to prove the value the business gains from its assets and liabilities. ROCE returns are from Phillips 66 profit figures for 2011. Derivative Photo: Hugh Pickens
Phillips may purchase 2,000 additional rail cars to provide transportation from US shale formations to refineries.[585] The railroad cars would cost $200 million and enable Phillips to carry 150,000 barrels of oil a day from mid-continent, where oil is cheaper, to Phillips coastal refineries.[586] "We're going to add rail capacity," said Garland. "We're considering buying a couple thousand more railcars so we can get Bakken crude either east and west." The initial goal is to increase delivery of shale crudes to Phillips refineries by 100,000 to 150,000 bpd within two years using railroad unit trains. "That's a pipeline on wheels. So, that could go to the Bakken. It could go to the Niobrara. It can shift as the opportunity shifts around the country." Many analysts say rail will be a bigger part of the oil delivery picture for years because shale wells - often scattered, small and of uncertain lifespan - won't justify pipeline construction.[587] Photo: Railroad Tank Cars by San Diego Model Railroad Museum Flickr Creative Commons Attribution-NonCommercial-NoDerivs 2.0 Generic (CC BY-NC-ND 2.0)

The Phillips 66 Refinery located in Ponca City, Oklahoma, has a published crude oil processing capacity of 187,000 barrels per day[588] making it by far the largest refinery in Oklahoma.[589] The refinery processes a mixture of light, medium and heavy crude oil. Most of the crude oil processed is received by pipeline from the Gulf of Mexico, Oklahoma, Texas and Canada. Additional foreign crude is purchased into the Gulf Coast and delivered by pipeline. The Ponca City Refinery is a high-conversion facility that produces a full range of products, including gasoline, diesel fuel, jet fuel, LPG and anode-grade petroleum coke. Its facilities include fluid catalytic cracking, delayed coking and hydrodesulfurization units. Finished petroleum products are shipped by truck, railcar, and company-owned and common-carrier pipelines to markets throughout the Mid-Continent Region.[590]

The Phillips 66 Refinery in Ponca City contributed a net profit of over $500 million in 2011 to Phillips bottom line, making it the most profitable of Phillips 66's fifteen worldwide refineries.

Based on Phillips' second quarter earnings report for 2012 and the realized crack spread of $26.34 for mid-continent refineries (Borger Refinery, Billings Refinery, Marland Refinery in Ponca City, and Wood River in Ravena, Illinois), profits are on target for the Marland Refinery in Ponca City to contribute over $600 million of net profits in 2012 to Phillips bottom line.

Based on Phillips' third quarter earnings report for 2012 with a realized crack spread of $31.83 for mid-continent refineries and a capacity utilization of 102%, the Marland Refinery in Ponca City will contribute at an annualized rate of over $1 billion ($1.032 B) of net profits in 2012 to Phillips bottom line.

Background

How Oil Prices are Set

When an oil producer sells to a refiner, they generally agree to a price set on an exchange such as the New York Mercantile Exchange. After the oil is refined into gasoline, it is sold by the refiner to a distributor, again pegged to the price of wholesale gasoline on an exchange. Finally, gas station owners set their own prices based on how much they paid for their last shipment, how much they will have to pay for their next shipment, and, perhaps most importantly, how much their competitor is charging. Oil companies and refiners have to accept whatever price the market settles on -- it has no relation to their cost of doing business. When oil prices are high, oil companies make a lot of money, but they can't force the price of oil up.[591]

Large refiners like Phillips have the capital resources and ability to use their infrastructure to maximize the difference between the spot prices and final product. For decades the mid-continental oil benchmark, West Texas Intermediate (WTI) was priced at a premium above other benchmarks such as North Sea Brent. At the start of 2010 this began to change radically. Brent became more expensive and the last few months Brent has sold around $15-$25 higher than WTI. Even more, interior continental oil plays like Niobrara (Colorado) and the Bakken (North Dakota) have sold for as low as $40 under Brent. Phillips is able to take advantage of the cheap mid-continent oil available to their refineries in Billings, Borger, Ponca City, and Ravena to buy crude oil cheap and sell the refined products high with record realized crack spreads for the mid-continent refineries of $26.34 per barrel reported by Phillips for the 2nd quarter of 2012.[592]

Benchmarks

There are two benchmarks for oil prices that are very important to determining the profitability of the refinery at Ponca City: Brent and West Texas Intermediate (WTI). Brent Crude is a major trading classification of sweet light crude oil comprising Brent Blend, Forties Blend, Oseberg and Ekofisk crudes (also known as the BFOE Quotation). Brent Crude is sourced from the North Sea. The Brent Crude oil marker is also known as Brent Blend, London Brent and Brent petroleum.[593] West Texas Intermediate (WTI), also known as Texas light sweet, is a grade of crude oil used as a benchmark in oil pricing. This grade is described as light because of its relatively low density, and sweet because of its low sulfur content. It is the underlying commodity of Chicago Mercantile Exchange's oil futures contracts. The price of WTI is often referenced in news reports on oil prices, alongside the price of Brent crude from the North Sea.[594]

Prior to September 2010, there existed a typical price difference per barrel of between +/-3 USD/bbl compared to WTI and OPEC Basket.[595] Since the autumn of 2010 there has been a significant divergence in price compared to WT with a $10-$15 spread between the two developing that has remained ever since.[596]. Many reasons have been given for this widening divergence ranging from a speculative change away from WTI trading (although not supported by trading volumes), Dollar currency movements, regional demand variations, and even politics. The depletion of the North Sea oil fields is one explanation for the divergence in forward prices.[597] According to James Hamilton writing at Econbrowser, the gap is essentially a geographic difference between the price paid for oil in the central United States and that paid on the U.S. coasts and anywhere else in the world.[598] In February 2011 the divergence reached $16 during a supply glut, record stockpiles, at Cushing, Oklahoma and is currently (August 2011) above $23. Historically the different price spreads are based on physical variations in supply and demand (short term).[599]

Barclays Plc (BARC) cut its 2012 forecast for West Texas Intermediate oil on July 5. WTI will average $96 a barrel this year and Brent will average $113, according to a report published today by analysts Paul Horsnell and Amrita Sen in London. That’s down from $105 for WTI and $120 for Brent that the bank had projected in a report on June 25. So right now the differential is $17 per barrel.[600]

Advantaged Oil

Companies that have pipelines in the Mid-Continent region - which is to say, the Texas Panhandle, Oklahoma, Kansas - are inherently in a position to source cheap crude. And companies that have refining assets on the coasts - the West Coast, the East Coast and the Gulf Coast - are in a much tougher position when it comes to sourcing cheap crude because, generally speaking, they have to buy crude that's imported. And import crudes are at a premium to WTI.[601]

The CEO of Phillips 66 says to process more shale oil "everywhere we can get it." "We want to increase our exposure in both the West Coast and East Coast for some of those advantaged barrels."[602] That includes more rail unloading, rail cars and storage to facilitate, in the medium term, movement of cheaper inland crude to coastal markets until more pipelines are built to alleviate bottlenecks, he said. Phillips 66 is the only refiner that has plants in all U.S.markets.[603] Garland noted several refineries are already well positioned to receive shale oil, such as its 247,000 barrels-per-day (bpd)refinery in Sweeny, Texas, in proximity to the state's prolific Eagle Ford shale play, or Midwest plants.[604]

Last fall Phillips 66 also ran unit trains from the Bakken shale oil play in North Dakota to its 238,000 bpd Bayway refinery in Linden, New Jersey, and has taken trains to West Coast refineries.[605] "You'll see us stepping out and doing some more things around infrastructure," he said. "Like everyone else, we're doing everything we can to get more barrels in front of those facilities."[606] Today we can process about 500,000 barrels a day of TI-related and about 100,000 barrels a day of shale related crudes.[607]

Mid-Continent Oil

Phillips 66 has 15 refineries globally and 2.2 million barrels a day of capacity. "When we think about our refining business we like to think about it in four segments. One is the Mid-Continent, about 21% of our capacity is there. Margins have been very strong in this area, as you know," says Phillips 66 CEO Greg Garland.[608] "Our largest region is the Gulf Coast, about 33% of our capacity is there.We have large economy of scale here. We have very complex refineries on the Gulf Coast. The Western US and Pacific region is about 20%, includes our interests in the Melaka refinery.The West Coast has typically had high margins historically, but the last couple years has been challenged in part due to the economic slowdown in California."[609]

Phillips 66′s most profitable refineries of the past couple years are in what’s called the Mid-Continent — from Texas north to Montana including the Borger refinery, Ponca City, Wood River and Billings. [610] The reason for their high profitability has been the glut of crude oil pouring into the region from newly tapped shale oil plays like North Dakota’s Bakken. "Because there was a lot of new oil and not enough pipeline capacity to get it down to the Gulf Coast mega-refineries, the crude got bottled up in the storage tanks at Cushing," writes Helman. "The bottleneck that kept oil from getting out of Cushing also kept its price at a record-wide discount relative to its rival European benchmark Brent crude.[611] At one point last year you could buy a barrel of WTI for $27 less than a barrel of Brent.[612] In an April conference call with analysts, Garland said the company had been generating $90 million in annual net income for every dollar of WTI-Brent price differential that it could capture for its refineries.[613]

Phillips to Run More Mississippi Lime Shale Crude through the Ponca City Refinery

Mississippi Lime Oil Producing Formations around Ponca City are shown in brown. Mississippi Lime - porous limestone formations in northern Oklahoma and southern Kansas has been yielding reservoirs to horizontal operators such as SandRidge, Chesapeake, Devon and Tulsa-based Eagle Energy LLC during the past two years. The "new" reserves actually lie slightly below formations that were big producers 100 years ago. One advantage of the Mississippi Lime is that limestone's porosity and natural fractures can mean less expense on the drilling and hydraulic fracturing parts of the project. Expenses can total half and even a fourth of typical unconventional well efforts. Another advantage is that there is already plenty of seismic data available for the area from past exploration and drilling. Map created by Hugh Pickens and is a derivative creation from a similar map in the Tulsa World by David Housh.

Reuters reported on Phillips second-quarters earnings report on August 2, 2012 that Phillips is working to run more shale crude from the Mississippi Lime play in Oklahoma and Kansas at its 198,400 bpd refinery in Ponca City, Oklahoma by trucking crude from the company's existing gathering systems.[614] Rod Walton reported in the Tulsa World on September 24, 2011 that Mississippi Lime - porous limestone formations in northern Oklahoma and southern Kansas has been yielding reservoirs to horizontal operators such as SandRidge, Chesapeake, Devon and Tulsa-based Eagle Energy LLC during the past two years. The "new" reserves actually lie slightly below formations that were big producers 100 years ago. Phillips Petroleum Co., for instance, made its name in the nearby Burbank Field, on the eastern edge of the play that includes Osage, Pawnee, Kay, Garfield, Woods, Alfalfa and other northern Oklahoma counties. "It's sort of amazing that all of this has been sitting there and waiting for horizontal drilling," says Eagle CEO Steve Antry. "The vertical wells hardly drained any of that." The move now is toward the deposits containing mostly oil and natural gas liquids. [615]

The Mississippi Lime's ratio is often 52 to 55 percent oil, according to reports. "We're into the second tier of this renaissance," says Chip Minty, a spokesman for Oklahoma City-based Devon Energy Corp. "Now what we're doing is taking the same technology beyond the shales to the carbonates, such as limestone." One advantage of the Mississippi Lime is that limestone's porosity and natural fractures can mean less expense on the drilling and hydraulic fracturing parts of the project. Expenses can total half and even a fourth of typical unconventional well efforts. Another advantage is that there is already plenty of seismic data available for the area from past exploration and drilling. "It's a reasonably low-cost play where hydrocarbons have been found before, with a lot of wells drilled in the past," says RAM spokesman Robert Phaneuf. And that gives you good data points."[616]

Methodology for Determining the Profitability of the Ponca City Refinery

The adjusted earnings (profit) from the Refining and MarketingBusiness Segment of Phillips 66 for the years 2009, 2010, and 2011. From a presentation by Clayton Reasor, Senior Vice President for Strategy and Corporate Affairs to industry analysts on May 24, 2012. Click on the figure to enlarge.
Phillips 66 has 15 refineries globally and 2.2 million barrels a day of capacity. "When we think about our refining business we like to think about it in four segments. One is the Mid-Continent, about 21% of our capacity is there. Margins have been very strong in this area, as you know. Our largest region is the Gulf Coast, about 33% of our capacity is there.We have large economy of scale here. We have very complex refineries on the Gulf Coast. The Western US and Pacific region is about 20%, includes our interests in the Melaka refinery.The West Coast has typically had high margins historically, but the last couple years has been challenged in part due to the economic slowdown in California." Derivative Photo: Hugh Pickens

The methodology for determining the profitability of the refinery at Ponca City is to begin with a very crude estimate of profitability using figures from Phillips 66 presentations to financial analysts, and then to drill down into these figures and add in additional factors, refining the figures through more detailed scenarios to come up with a better estimate.

Phillips 66 does not break out their profitability by refinery. However they do provide the profitability of the Refining and Marketing Business Segment and they break out the profitability of their domestic refineries and their international refineries. Further Phillips 66 CEO Greg Garalnd has provided guidance as to the what portion of the R&M Business Segment is due to advantaged oil that is TI related and refined in Phillips Mid-Continent refineries at Borger, Ponca City, Wood River, and Billings.

In addition, on August 1, 2012 Philips 66 publicly reported the realized crack spreads during their 2nd quarter 2012 presentation to financial analysts for Mid-Continent, Gulf Coast, Atlantic Basin, and Western Pacific refineries.

Our methodology will look at the following scenarios:

  • Scenario 1: Look at the Total R&M Segment Profitability and divide it equally into Phillips 66's fifteen worldwide refineries
  • Scenario 2: Look at the Total R&M Segment Profitability for domestic refineries only and divide it into Phillips 66's eleven domestic refineries by throughput capacity
  • Scenario 3: Determine what the profit contribution has been for advantaged West Texas Intermediate-related crude (WTI) and allocate the portion attributable to the Ponca City Refinery based on the refinery's throughput capacity
  • Scenario 4: Determine the portion of the R&M Profitability which is not attributable to advantaged TI-related oil and allocate it to each refinery based on throughput capacity. Include a correction factor for the portion of the R&M profitability that is attributable to Marketing.
  • Scenario 5: Determine the sum of TI-related net income (Scenario 3) and non-TI-related net income (Scenario 4) for each refinery.
  • Scenario 6: Determine the projected profitability of each refinery for 2012 based on Phillips 2nd Quarter Earnings and the Realized Crack Spread for the Mid-Continent refineries
  • Scenario 7: Determine the projected profitability of each refinery for 2012 based on Phillips 3rd Quarter Earnings and the Realized Crack Spread for the Mid-Continent refineries

Profitability of the Ponca City Refinery

Scenario 1: Total R&M Earnings Divided by Worldwide Refineries

The very simplest formulation for determining the profitability of of the Ponca City Refinery is to simply look at the overall R&M profits for 2011 ($2,664 Million) and divide it by the fourteen Phillips 66 worldwide refineries giving a profit contribution of $178 million for each refinery.

Scenario 2: Total Domestic R&M Earnings Divided by Domestic Refineries

Phillips 66 breaks out the profitability of the Refining and Marketing Business Segment by international refineries and by domestic refineries, so we will look at only the domestic refineries in the second scenario. Dividing the R&M profits for domestic refineries for 2011 ($2,365 Million) by the eleven Phillips 66 domestic refineries gives a profit contribution of $215 million for each domestic refinery.

Scenario 3: Portion of the Net Earnings Attributable to TI-Related Crude

According to Phillips 66 CEO Greg Garland, each dollar of WTI-Brent differential translates to $90 million in additional net income to Phillips 66. West Texas Intermediate is used in Phillips' mid-Continent refineries.[617]

In 2011 the average differential for WTI crude was $15 which contributed $1,350 million in net income to Phillips. Breaking out the TI-related advantaged oil that is refined in Phillips 66 mid-continent refineries.

Location Total Capacity (KBD) Normalized Capacity (KBD)  % of Total Mid-Continent Net Income from TI-related Crude ( $ millions)
Ponca City, OK 187 187 35.2% 475
Roxana, IL 306 153 28.2% 389
Billings, MT 118 118 22.2% 300
Borger, TX 146 73 13.7% 186
Total Mid-Continent 531 100.0% 1,350
  • Note that the Wood River refinery is owned by WRB Refining, Phillips 50-50 joint venture with Cenovus Energy Inc. The Borger refinery is operated by Phillips in a 50-50 joint venture with Cenovus Energy Inc. Therefor only half of the throughput of each of these two refineries is will be attributed to Phillips 66 for purposes of calculating the use of TI-related advantaged crude.

The total throughput of the four mid-continent refineries is 531,000 barrels per day. The Ponca City Refinery, with a throughput of 187,000 bpd, accounts for 35.2% of the TI-related advantaged crude.

Incidental Use of Non-TI Related Crude

As a footnote, the Ponca City refinery does not refine WTI crude exclusively. One of the reasons that ConocoPhillips resisted reversing its Seaway Pipeline from Cushing to the Gulf for so long was that ConocoPhillips had said it was in the company's best interests to maintain the status quo to help supply its 198,400 bpd refinery in Ponca City to produce "premium coke" at the Ponca City Refinery. However, this has a negligible effect on the Marland Refinery's overall profitability because the proportion of non-TI related crude supplied to Ponca is a small percentage of the total, the profit margin on specialty products is also high, and other Phillips mid-continent refineries are in a similar situation of refining a small proportion of non-advantaged crudes.[618][619][620][621]

Scenario 4: Portion of the Net Earnings Not Attributable to TI-Related Crude

Slide 9 from Phillips' April 9, 2012 presentation to investors shows that Phillips 66 expects to Brent-WTI differential to be a significant factor in their profitability for years to come. According to Phillips 66 CEO Greg Garland, each dollar of WTI-Brent differential translates to $90 million in additional net income to Phillips 66. West Texas Intermediate is used in Phillips' mid-Continent refineries.[622] In 2011 the average differential for WTI crude was $15 which equals $1,250 million in net income to Phillips. The Ponca City Refinery, with a throughput of 187,000 bpd, accounts for 35.2% of the TI-related advantaged crude producing $475 million in net profit for Phillips 66 in 2011. Businessweek reports that according to the Barclay's crude price forecasts for 2012, WTI will average $96 a barrel in 2012 and Brent will average $113, according to a report published by analysts Paul Horsnell and Amrita Sen in London - a differential of $17.[623] Under Scenario 6 for 2012, with a contribution to Phillips 66's net profit of over $600 million the Ponca City refinery will contribute one-third off all the net income for Phillips 66's net profits for all refineries and more than the seven least profitable refineries combined.
Phillips 66 does not break out the marketing earnings separately for the Refining and Marketing Business Segment in their reports. However slide 16 from the April 9, 2012 presentation to investors shows that for the years 2009 to 2011 marketing contributed 24% to Phillips 66 total earnings while Refining contributed 40% to Phillips 66 total cumulative earnings earnings for those years. The total adjusted earnings for the Refining and Marketing Business Segment for 2009, 2010, and 2011 was $ 4,057 million. Marketings contribution to the R&M bottom line would be 37.5% which translates to $1,521 million and on the assumption the marketing profitability was relatively stable across the three year period would be $507 million for each of the three years..

Subtracting out for earnings attributable to TI-related advantaged crude gives $1,015 million in net income attributable to normal earnings for refining during this part of the business cycle and attributed to each domestic refinery on the basis of throughput capacity.

Phillips 66 does not break out the marketing earnings separately for the Refining and Marketing Business Segment in their reports. However slide 16 from the April 9, 2012 presentation to investors shows that for the years 2009 to 2011 marketing contributed 24% to Phillips 66 total earnings while Refining contributed 40% to Phillips 66 total cumulative earnings earnings for those years. The total adjusted earnings for the Refining and Marketing Business Segment for 2009, 2010, and 2011 was $ 4,057 million. Marketings contribution to the R&M bottom line would be 37.5% which translates to $1,521 million and on the assumption the marketing profitability was relatively stable across the three year period would be $507 million for each of the three years.

This leaves $543 million in normal non TI-related profitability for 2011 to be divided among the 15 domestic and international refineries, so based on throughput the net income for normal refinery operations attributable to the Ponca City Refinery is 10% of Phillips 1,866,000 bpd in domestic production which translates to an additional $ 54 million in net income attributable to the Ponca City Refinery after the adjustment for marketing has been made.

Scenario 5: Total Net Income for Domestic Refineries

The total net income for each Phillips domestic refinery is the sum of the TI-related net income and the non-TI related net income as shown in the following table:

Location Capacity (KBD) Normalized Capacity (KBD) TI-Related Net Income ($ M)) non TI-Related Net Income ($ M) Total Net Net Income ($ M)
Ponca City, OK 187 187 475 54 529
Roxana, IL 306 153 389 44 433
Billings, MT 118 118 300 34 334
Borger, TX 146 73 186 21 207
Belle Chasse, LA 247 247 71 71
Old Ocean, TX 247 247 71 71
Linden, NJ 238 238 69 69
Westlake, LA 239 239 69 69
Carson, CA/Wilmington, CA 139 139 40 40
Rodeo, CA 120 120 34 34
Ferndale, WA 105 105 30 30
Total 1,866 1,350 543 1,893


With a a contribution to Phillips 66's net profit of over $500 million, the Phillips 66 Refinery in Ponca City contributes more than one-quarter of the net income to Phillips Refining bottom line and contributes more than the the total of the seven least profitable Phillips refineries combined.

Scenario 6: Estimates for 2012 based on Phillips 2nd Quarter Earnings and Realized Crack Spreads

On August 1, 2012 Phillips reported their adjusted earnings for refining operations were $851 million in their 2nd Quarter Earnings Report for 2012. Phillips has taken out R&M earnings attributable to marketing and specialty products($334 million). Phillips also reported the crack spreads for the Mid-Continent, Gulf Coast, Atlantic Basin, and Western Pacific of $26.34, $9.36, $7.76, and $7.91 respectively. The total profit for each refinery is calculated by determining the crack spread times the normalized throughput capacity for each refinery to allocate the total refinery profit to each refinery.


Location Capacity (KBD) [A] Normalized Capacity (KBD) [B] Crack Spread ($) [C] Capacity Utilization (%) [A]*[B]*[C] Per Cent Contribution to Total Refining Profits Annualized Yearly Profit ($ Million)
Ponca City, OK 187 187 26.34 95 4,995 18 600
Roxana, IL 306 153 26.34 95 3,829 14 491
Billings, MT 118 118 26.34 95 2,953 11 379
Borger, TX 146 73 26.34 95 1,827 7 234
Belle Chasse, LA 247 247 9.36 91 2,104 8 270
Old Ocean, TX 247 247 9.36 91 2,104 8 270
Westlake, LA 239 239 9.36 91 2,036 8 261
Linden, NJ 238 238 7.76 95 1,755 6 225
Whitegate, England 71 71 7.76 95 523 2 67
Humber, Germany 221 221 7.76 95 1,629 6 209
Carson/Wilmington, CA 139 139 7.91 89 979 4 126
Rodeo, CA 120 120 7.91 89 845 3 108
Melaka, Malaysia 76 76 7.91 89 535 2 69
Ferndale, WA 105 105 7.91 89 739 3 95
Total 2,245 28,730 100 3,404


Using this method for 2012, the Marland Refinery in Ponca City will make a contribution to Phillips 66's net profit of $600 million, by far the largest of any of Phillips' refineries.

Scenario 7: Estimates for 2012 based on Phillips 3rd Quarter Earnings and Realized Crack Spreads

On October 31, 2012 Phillips reported their adjusted earnings for refining operations were $1,580 million in their 3rd Quarter Earnings Report for 2012. Phillips also reported the crack spreads for the Mid-Continent, Gulf Coast, Atlantic Basin, and Western Pacific of $31.83, $11.42, $13.02, and $13.30 respectively. The total profit for each refinery is calculated by determining the crack spread times the normalized throughput capacity for each refinery to allocate the total refinery profit to each refinery.


Location Capacity (KBD) [A] Normalized Capacity (KBD) [B] Crack Spread ($) [C] Capacity Utilization (%) [A]*[B]*[C] Per Cent Contribution to Total Refining Profits Extrapolated Yearly Profit ($ Millions)
Ponca City, OK 187 187 31.83 102 6,071 16 1,032
Roxana, IL 306 153 31.83 102 4,967 13 844
Billings, MT 118 118 31.83 102 3,831 10 651
Borger, TX 146 73 31.83 102 2,370 6 403
Belle Chasse, LA 247 247 11.42 88 2,482 7 422
Old Ocean, TX 247 247 11.42 88 2,482 7 422
Westlake, LA 239 239 11.42 88 2,402 6 408
Linden, NJ 238 238 13.02 100 3,099 8 527
Whitegate, England 71 71 13.02 100 924 2 157
Humber, Germany 221 221 13.02 100 2,877 8 489
Carson/Wilmington, CA 139 139 13.30 97 1,793 5 305
Rodeo, CA 120 120 13.30 97 1,548 4 263
Melaka, Malaysia 76 76 13.30 97 980 3 167
Ferndale, WA 105 105 13.30 97 1,355 4 230
Total 2,245 28,730 100 6,320


Using this method for 2012, the Marland Refinery in Ponca City will make a contribution to Phillips 66's net profit of $1,032 million, by far the largest of any of Phillips' refineries.

Variations in the Realized Crack Spread Among Phillips' Four Mid-Continent Refineries

One of the factors not accounted for in the methodology used to calculate the earnings attributable to the Marland Refinery in Ponca City is that Phillips 66 does not break out the crack spreads by refinery but only provides the composite realized crack spread for the mid-continent refineries which include the Billings Refinery, Borger Refinery, Marland Refinery in Ponca City, and Wood River Refinery in Roxana, Illinois.

On September 7, 2012 Brent was selling at $112.85 and WTI at $91.40 for a Brent-WTI differential of $21.45. North Dakota Sweet was selling at $74.50 for a Brent-North Dakota Sweet differential of $38.40. The Borger Refinery primarily runs WTI while the Billings and Wood River Refineries run Canadian and Bakken crude respectively. Except for some specialty products, the Marland Refinery in Ponca City runs primarily WTI but has been increasing the amount of Mississipi Lime Shale crude that it has been buying from oil producers in Northern Oklahoma and Southern Kansas like Red Fork Energy who recently signed a contract with Phillips to provide Mississippi crude to Ponca City. Phillips 66 hasnot disclosed the amount of Mississipi Shale crude provided to the Marland Refinery in Ponca City nor the price that Phillips has negotiated for the shale crude. The contribution to the realized crack spread from the Brent differential will be somewhere between the Brent-WTI differential of $21.45 and the Brent-North Dakota Sweet differential of $38.40 depending on the quantity of Mississipian run through the Marland Refinery in Ponca City and the price that has been negotiated for the Mississippi Lime Shale crude.[624]

Phillips to Run 60,000 bbl of Shale Crude Through Ponca City

Phillips reported during their second-quarters earnings report on August 1, 2012 that Phillips wants to move the shale crudes from 120,000 to ultimately 450,000 to 460,000 barrels a day and has a plan to get advantaged crude into most of Phillips' refineries. "We are trying to get those crudes to every refinery we can," said Phillips CEO Greg Garland. "Ponca about 60,000 barrels a day."[625]

The Oil and Gas Journal reported on August 8, 2012 that the Pony Express Pipeline company has received sufficient binding shipper commitments to move forward with its Pony Express Oil Project that will deliver crude oil from receipt points near Guernsey, Wyo., to the Phillips 66 Ponca City Refinery as well as to Cushing, Okla. The 220,000 b/d pipeline will enter service third-quarter 2014. Once the Pony Express Pipeline is in operation, this will make interior continental oil plays like Niobrara in Colorado available to the refinery in Ponca City which have sold for as low as $40 under Brent.[626][627]

Phillips did not disclose how much shale oil is presently being refined at the Marland Refinery in Ponca City at the 2nd Quarter Earnings Report on August 1, 2012 nor what the realized crack spread is for the refinery in Ponca City. But every barrel of shale crude that runs through the Marland Refinery in Ponca City replaces a barrel of TI-related crude and adds an additional $17 of Brent differential so once Phillips gets up to their full 60,000 bbl target this will add another $372 million in profit for Phillips. Until Phillips breaks out the realized crack spread for each refinery, the additional profit will be reflected in an increased crack spread for the mid-continent refineries.

How Much Does Phillips 66 Contribute to Ponca City?

The Ponca City News reported on October 21, 2012 that Phillips 66 provides financial and in-kind support to community organizations through corporate and employee based programs. "Our philanthropic contributions in Ponca City and the surrounding area are significant. In 2011, direct contributions to non-profit agencies, matching United Way contributions, and contributions based on employee and retiree hours or monetary contributions were in excess of $1.1 million dollars." The Ponca City Refinery earned profits in excess of $500 million in 2011 for Phillips 66 and based on Phillips' third quarter earnings report for 2012 with a realized crack spread of $31.83 for mid-continent refineries and a capacity utilization of 102%, the Marland Refinery in Ponca City will contribute at an annualized rate of over $1 billion ($1.032 B) of net profits in 2012 to Phillips bottom line. Graphic: Hugh Pickens. Note: The area of each bag of money is proportional to the amount of money. Click on the graphic to enlarge.

Phillips 66's Marland Refinery in Ponca City provides benefits to the local community in wages to local employees, property taxes paid to the community, and direct philanthropic contributions to the community. We will evaluate three categories:

  • Wages Paid to Local Employees
  • Property Taxes Paid the Community
  • Direct Philanthropic Contributions to the Community

Wages Paid to Ponca City Residents

The Ponca City News reported on October 14, 2012 that Refinery Manager Pete Stynes spoke to the Ponca City Lions Club on October 10, 2012 about Phillips 66's Refinery in Ponca City and said that 800 employees work at the refinery with the direct employment of 625 Phillips employees.[628]

FuelFix reported on January 12, 2012 that according to the United Steelworkers International representing 30,000 refinery and chemical workers at 168 production, refining, marketing, transportation, pipeline and petrochemical facilities nationwide the average wage of US refinery and chemical workers is $33.85 an hour.[629] We estimate that of the 800 workers at the Marland Refinery, 100 of them are in engineering or managerial positions earning an average yearly salary of $110,000. We estimate that the cost of additional employee benefits including social security payments, unemployment benefits, pension benefits, vacation days, sick days, holidays, and medical benefits adds an additional 60% to direct wages paid. This cost is known as the burden rate.[630]

Marland Refinery in Ponca City Hourly Employees Salaried Employees
Hourly Wage $ 33.85
Yearly Salary $ 70,408.00 $110,000.00
Number of Employees 700 100
Wages $49,285,600.00 $11,000,000.00
Payroll Taxes (10%) $4,928,560.00 $1,100,000.00
Wages and Payroll Taxes $54,214,160.00 $12,100,000.00
Total Wages and Payroll Taxes for Hourly and Salaried Employees $66,314,160.00

Under these assumptions the total wages and payroll taxes paid to the 800 employees at the Marland Refinery in Ponca City including both hourly employees and salaried employees is $66,314,160.00 (54,214,160.00 + 12,100,000.00).

Comparison with Borger Refinery

By way of comparison with the Phillips Refinery in Borger, Texas, the Borger News Herald reported on July 11, 2012 that refinery manager Chris Coon spoke to the Borger Rotary Club on July 10, 2012 about employment and payroll at the Borger Refinery. Coon told members that Phillips pays with an annual payroll of $65 million to 920 full time employees (including 200 routine contractor) at the Borger refinery. Phillips also pays $6 million in payroll taxes and about $12 million in property taxes.[631] The Borger Refinery is comparable in capacity with the Marland Refinery in Ponca City having a throughput capacity of 146,000 barrels per day compared with Marland's throughput capacity of 187,000 bpd.

Borger Refinery All Employees
Hourly Wage $ 34.00
Average Yearly Salary $ 70,652.00
Number of Employees and Routine Subcontractors 920
Wages $65,000,000.00
Payroll Taxes (10%) $6,000,000.00
Wages and Payroll Taxes $71,000,000.00

The figures provided by the refinery manager at Borger are consistent with the calculations made for employees at the Marland Refinery in Ponca City. Using the same average yearly salary of employees at Borger Refinery, the annual wages plus payroll taxes for the Marland Refinery at Ponca City is $61,739,000.00.

Phillips 66 Property Tax Paid to Kay County

According to property tax records of the Kay County Assesor's Office Phillips 66 has two different types of property that pay tax in Kay County: the refinery itself and real estate around Ponca City including office buildings, warehouses, and residential properties.

Tax Assessment of the Refinery

The Phillips Refinery is assessed under According to Tax Record 30,446.

Amount
Total Market Value $ 542,889,080
Total Assessed Value (14%) $ 76,004,471
Total Exemption $ 4,255,329
Net Assessed $ 71,749,142
Tax Paid $ 6,771,684

The total annual tax paid by Phillips 66 for the refinery is $ 6,771,684.

Tax Assessment for Real Estate

On May 21, 2012, ConocoPhillips transferred real estate in Kay County to Phillips 66 for a value of $69,223,000.00. Real property in the Ponca City School District is taxed at a rate of .00948 for an annual tax of $656,234 on this real estate.

Phillips 66 Charitable Contributions to Ponca City

The Ponca City News reported on October 21, 2012 that Phillips 66 provides financial and in-kind support to community organizations through corporate and employee based programs. "Our philanthropic contributions in Ponca City and the surrounding area are significant. In 2011, direct contributions to non-profit agencies, matching United Way contributions, and contributions based on employee and retiree hours or monetary contributions were in excess of $1.1 million dollars. When employee and retiree contributions are added to the company contributions, the total is over $1.7 million dollars."[632]

News, Issues, and Status at Other Refineries

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Chemical Business Segment within Phillips 66

CPChem. 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. 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."[633] Graphic from Phillips Presentation to USB Global Oil and Gas Conference May 21, 2013.
The return on capital for the Chemicals Business Segment at Phillips 66 has been high in recent years. Garland said during his analyst call on April 9, 2012 that the Chemicals segment is primarily conducted through the 50/50 JV with Chevron. CPChem is one of the largest producers of olefins and poly olefins and has spent the last 10 years building one of the best positions in the Middle East, and CPChem has significant assets in the US which are advantaged given the NGLs from the North American shale plays. Garland plans to increase capital invesment in the Chemicals Business Segment. Derivative Photo: Hugh Pickens
Chevron Phillips Chemical Plant in Pasadena, Texas. Photo: Photo: Glass Door Only original, non-copyrighted images.
Chevron Phillips Chemical Plant in Cedar Bayou, Texas. Photo: Photo: Glass Door Only original, non-copyrighted images.
Chevron Phillips Chemical Plant in Sweeny, Texas. Photo: Photo: Glass Door Only original, non-copyrighted images.
Chevron Phillips Chemical Plant in Port Arthur, Texas. Photo: Photo: Glass Door Only original, non-copyrighted images.

There are two other operating segments in the new company: Chemicals and Midstream. “You never really heard us talk about chemicals; you never heard us talk about midstream, and both of those businesses trade at higher multiples than the refining business," says Garland. Phillips 66 will own half of the ChevronPhillips Chemical Company, a JV with Chevron. “Midstream and chemicals is what differentiates us."[634]

Garland said during his analyst call on April 9, 2012 that the Chemicals segment is primarily conducted through our 50/50 JV with Chevron. CPChem is one of the largest producers of olefins and poly olefins and has spent the last 10 years building one of the best positions in the Middle East, and CPChem has significant assets in the US which are advantaged given the NGLs from the North American shale plays.[635][636][637]

"As we've said, our Chemicals operations are conducted through our CPChem joint venture with Chevron. Our Chemicals businesses delivered superior returns. We think it's an exceptional growth platform. CPChem produces petrochemicals in over 70,000 different commercial and industrial products, holds global market positions in several key products, such as olefins, poly olefins, aromatics and other specialties. It has a large global footprint and we're rapidly expanding outside of the US. We think part of CPChem's success and its foundation is based upon -- is proprietary technology.We believe this ensures lower cost for us, it enhances our competitiveness.These are markets, these are technologies that we understand thoroughly. As you know, advantage feed stocks is critical to profitability and sustained returns in this business. CPChem has a substantial footprint in the Middle East. CPChem also has a large asset base in the US. It's primarily based upon ethane. It's allowing CPChem to recover attractive margins today.We believe after the Middle East, the US-based ethane based ethylene margins are going to be significantly advantaged versus margins in Asia and Europe, which are primarily based on naphtha. CPChem's done a good job over the last few years in terms of their portfolio management. They've been very disciplined on their costs.They have been shifting investments into higher returning opportunities, and the have moved from really last in their peer group to number one in their peer group on economic return."[638][639][640]

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that Phillips is the only downstream independent company to have a significant ownership in a petrochemicals business. "We conduct our chemicals operation primarily through Chevron Phillips Chemical Company, 50/50 JV with Chevron. This joint venture is 12 years old. It stood the test of time. We have a great relationship with Chevron. We like the management team. We think they're a very talented group of individuals. We think there's good value between Phillips and Chevron as we manage the joint venture. We're completely aligned in terms of the growth profile, significant organic investment opportunity and growth in CPChem over the last ten years and certainly in the next ten years that we see."[641]

Chevron Phillips Chemical

Chevron Phillips Chemical, a joint venture with Chevron that will be part of Phillips 66, is benefiting from low prices for the natural gas it uses as feedstock to make products such as ethylene and polyethylene plastic. The company has made it clear that Chevron Phillips Chemical is a top priority. It has announced plans to invest in a new $5 billion ethylene cracker at Cedar Bayou.[642]

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. 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."[643]

Latest News and Views on the Chemical Business Segment

September 4, 2014: Chevron Phillips to Sell Performance Polymers Business for $220 Million

Bloomberg reported on September 4, 2014 that Chevron Phillips has agreed to sell Ryton polyphenylene sulphide plants, a performance polymers business, to Belgian chemical maker Solvay for $220 million to expand its offering of lightweight plastics for replacing heavier metal parts in cars. “Ryton PPS fits neatly with our unique specialty polymers portfolio and reinforces our unrivalled capabilities to provide solutions to our customers in dynamic innovative end-markets,” said Augusto Di Donfrancesco, president of Solvay Specialty Polymers. Solvay will gain Ryton PPS sites in Texas and Oklahoma, and a plant in Belgium. Solvay plans to invest in a PPS production technology developed by Chevron Phillips that hasn’t “achieved its full potential,” the company said. Completion of the deal is expected in the fourth quarter.[644]

August 7, 2014: Chevron Phillips to Raise Prices in September

Platts reported on August 7, 2014 that Chevron Phillips Chemical joined the growing list of US polyethylene producers planning to raise resin prices in September raising prices for all grades of polyethylene by 3 cents/lb effective September 1. Sources have described the US polyethylene market as tight, pointing in part to a number of feedstock and production-related issues. Feedstock prices have also moved higher, with ethylene contract prices for July fully settled at a 1.75 cents/lb increase, sources said this week.[645]

July 30, 2014: Chevron Phillips Chemical Plant in Port Arthur Remains Closed After Fire

The Houston Chronicle reported on July 30, 2014 that during the second quarter conference call, company officials at Phillips said that the Chevron Phillips Chemical plant in Port Arthur remains closed after a fire injured several workers on July 7 and that it's too early to know when it might reopen.[646]

July 15, 2014: Chevron Phillips Declares Force Majeure Production Limits After Fire at Port Arthur

Plastics News reported on July 15, 2014 that Chevron Phillips has declared force majeure production limits on that material after the fire at the Chemical Plant at Port arthur. Phillips Chevron officials said that reviews are underway to determine when the unaffected areas of the plant can be restarted, and that no timetable has been set for restart of the area affected by the incident. The Port Arthur plant has almost 1.8 billion pounds of annual ethylene capacity and 1.1 billion pounds of annual propylene capacity. [647]

July 7, 2014: Two Workers Injured in Fire at Port Arthur Chemical Plant

Plastics News reported on July 15, 2014 that two workers were injured in a fire in a ethylene/propylene unit at the at a Chevron Phillips Chemical Plant in Port Arthur. No cause for the fire was given in a July 9 statement from Chevron Phillips. The statement added that the injured workers remained hospitalized.[648]

Mary Meaux reported at The Port Arthur News on July 8, 2014 that an investigation into the cause of the fire at Chevron Phillips Chemical Company that injured two workers is underway less than 24 hours after the incident. “A team of experts from other Chevron Phillips Chemical facilities has been assembled and has begun the investigation to determine the root cause of the incident,” according to a press release from David Hastings, public affairs manager at Chevron Phillips. The localized fire occurred at the Port Arthur facility at about 8 pm on July 7. The chemical company’s fire response team handled the fire while Port Arthur Fire Department remained on standby with equipment and manpower should it be needed, said Port Arthur Police Maj. John Owens. “The fire chief (Larry Richard) and I went in and were part of their emergency operations center to assist them in decision making and operations should they need outside assistance and to ensure the public and community that we had someone inside the EOC to look at it from the community’s side,” Owens said.[649]

Independent air monitoring throughout the night to ensure the community was safe. “The continuous monitoring picked up zero readings,” said Owens. “We do this any time there is an incident. It is protocol for the fire department’s hazardous response team to perform independent monitoring.”[650]

April 2, 2014: Chevron Phillips Chemical Breaks Ground On Ethane Cracker at Baytown Facility

Ryan Holeywell reported in FuelFix on April 2, 2014 that Chevron Phillips Chemical broke ground on a a massive new ethane cracker, the first component of a $6 billion expansion and the first new major facility of its type built in the U.S. in a decade. The ethane cracker is a massive piece of equipment with a footprint the size of nearly 50 football fields used to transform ethane, a component of natural gas, into ethylene, a component used to make plastics. "This is a big deal for us — $6 billion is a big project for a company with $10 billion in assets,” said CEO Peter Cella. The investment, which officials say will contribute to the creation of about 400 jobs. Cella said Chevron Phillips is still “a few years away” from developing contracts with customers for the ethylene it will produce, and polyethylene contracts tend to be developed on a year-to-year basis. He expected most of the ethylene produced by the cracker to be used domestically, including by the company itself.[651] “It’s a huge investment for a company like this,” Cella said, all of which is “catalyzed” by the shale boom that is producing lots of ethane that serve as the “competitive feedstock” for the chemical plants. “We see the supply of ethane being pretty substantial going forward,” Cella said in an interview before the Baytown groundbreaking. “It’s important to point out there’s a surge of investments being contemplated or already in progress like ours in the chemical industry."[652]

The other component of the endeavor, in nearby Old Ocean, consists of two polyethylene units, which convert ethylene into polyethylene pellets that can be sold, melted and formed into a variety of industrial and household plastics. The entire project is slated to come online in 2017. The two polyethylene units will develop two different products: a biomodal resin he described as durable but soft, and a metallocene resin that is clear and can receive printing and is commonly used for packaging in retail stores.[653]

December 6, 2013: Phillips to Invest $1.046 Billion in 2014 in Chemical Business Segment

Phillips reported on December 6, 2013 that they plan to invest $1.046 Billion in their 50/50 joint venture with Chevron, representing a substantial increase over 2013. The increase primarily reflects advancement of CPChem’s 3.3 billion-pound-per-year ethane cracker and two 1.1 billion-pound-per-year polyethylene facilities. The facilities are expected to start up in 2017. Additionally, CPChem plans to complete and start up its 550 million-pound-per-year 1-hexene plant in Baytown, Texas, in the first half of next year.[654]

October 30, 2013: Garland Says CPChem has Necessary Approvals to begin Construction of Ethane Cracker and Two Polyethylene Facilities

Garland told analysts at the third quarter earnings conference on October 30, 2013 that CPChem announced its world-scale Gulf Coast ethane cracker and two new polyethylene facilities earlier this month. "CPChem now has the necessary approvals to begin construction," said Garland. "In addition to the petrochemicals projects CPChem is also completing one hexane unit which is expected to be operational in the first half of 2014 as well at the Sweeny ethylene expansion in 2014. All in CPChem at a 100% basis is expected to spend between $6 million and $8 billion on self-funded capital between now and 2017. They expect to add about $1.5 billion of EBITDA in 2017 once all these growth projects are online."[655]

July 31, 2013: Outages at Sweeny Facility Caused Lost Production of 540 million pounds

Greg Garland told analysts at Phillips 2nd Quarters earnings conference on July 31, 2013 that outages at the Sweeny facility during both the first quarter and the second quarter of 2013 resulted in loss production of approximately 540 million pounds. "The decrease in earnings was primarily in olefins and polyolefins driven by unplanned power outages at CPChem’s Sweeny Complex as well as an extended 91 day turnaround at its Port Arthur facility. In May of this year, CPChem was required to declare force majeure on ethylene and certain derivatives, following these outages," said Garland. "These outages as well as the downtime at Port Arthur resulted in higher manufacturing costs and decreased production sales volumes for ethylene, polyethylene, and normal alpha olefins in the second quarter of 2013. While industry ethylene margins remained strong, CPChem realized lower margins because of these unplanned events."[656]

July 31, 2013: Phillips Completes NGL Fractionator Expansion Project at Sweeny Facility

Greg Garland told analysts at Phillips 2nd Quarters earnings conference on July 31, 2013 that Phillips chemicals joint venture CPChem completed the NGL fractionator expansion project at the Sweeny facility during the second quarter. The project increased capacity by nearly 20%.[657]

July 02, 2013: Phillips to Reduce Polypropylene Deliveries Because of Insufficient Feedstock Supply

Platts reported on July 20, 2013 that Phillips has written a letter to customers announcing that it will be reducing deliveries of polymer-grade propylene because of issues with feedstock supply. "While we are currently producing at full rates with our integrated monomer, this disruption of feedstock supply has forced us to restrict present deliveries," said Phillips 66 the letter to customers. Phillips 66 said it was exploring other sources of feedstock, but that given the circumstances it was "compelled to reduce deliveries of product at this time and apportion the material we have available to our customers in a fair and reasonable manner so that we can build inventory to carry us through the turnaround."[658]

Phillips had planned to use feedstock PGP from Williams Partners, but was left scrambling after Williams suffered an explosion and fire at its Geismar, Louisiana, olefins plant that resulted in two deaths and the disruption of production for an indefinite time frame. Last week, Garyville, Louisiana-based Pinnacle Polymers issued a force majeure declaration on polypropylene, citing feedstock supply issues that market sources said also resulted from the Williams disruption. "It's getting tough to find material," said a source with a distributor.[659]

June 3, 2013: Phillips to Add Furnace at Sweeny Petrochemical Complex

The Oil and Gas Journal reported on June 3, 2013 that Chevron Phillips Chemical Co. LP will add a furnace at its Sweeny petrochemical complex that will expand ethylene production by 200 million lb/year. Construction of the furnace will begin within three months and the start-up is expected in 2014. The new furnace will not add to nameplate capacity of the facility, the company said, explaining, “the increased operating factor should result in net increase of 200 million lb of ethylene availability to provide additional operation flexibility and reliability.”[660]

April 27, 2013: Fire at Chevron Phillips Port Arthur Chemical Plant Sends Eight to Hospital

The Port Arthur News reported on April 27, 2013 that an early morning fire at Chevron Phillips Chemical Company in Port Arthur sent eight contract workers to two hospitals on April 27, 2013. Company officials confirmed that a localized fire occurred at its Port Arthur facility at approximately 4 a.m. during a turnaround period, which resulted in several contractor employees being transported to the local hospital. The fire was quickly extinguished, and there was no impact to the community, according to a press release from Melanie Samuelson with Chevron Phillips corporate communication. “The safety of our employees is our highest priority,” Margie Conway, plant manager at the Port Arthur facility, said in a press release. “We regret very much that this incident has occurred, and are thankful that most of the contractor employees were treated and released from the hospital.”[661]

January 30, 2013: Garland Says Phillips ROCE on Chemical Business Segment Was 31% for 2012

Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that 2012 return on capital employed from Phillips Chemicals segment increased to 31%, up form 28% last year and Phillips ended the quarter with $3.6 billion in capital employed. "Overall, CPChem achieved a 90% capacity utilization rate and its O&P segment in the fourth quarter," said Garland. "This was down somewhat from the third quarter due to unplanned downtime at the Saudi Polymers petrochemical facility. If we exclude this downtime in SPCo, CPChem’s utilization rate was near capacity for the quarter."[662]

December 13, 2012: Phillips to Invest $1.149 Billion in 2013 in Chemical Business Segment

Phillips 66 reported at their inaugural Analyst Meeting on December 13, 2013 that CPChem plans $1.1 billion of investment including several growth projects planned or under construction, such as its U.S. Gulf Coast petrochemicals complex and 1-hexene plant.[663]

November 11, 2012: Chevron Phillips Chemical Says the Company is Expanding

Fuel Fix reported on November 11, 2012 that Chevron Phllips Chemical, with about 4,700 employees worldwide, is adding new facilities and employees and expects the number of employees to continue growing over time through projects in North America.. “I am confident we can stack up with just about anybody by delivering new products, our marketing capabilities, and our strategy,” said Dan Coombs, the company’s senior vice president of specialties, aromatics and styrenics.[664]

September 5, 2012: The Chemicals Business is Pursuing Advantaged Feedstock

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that the chemicals business is pursuing advantaged feedstock. "We think the shale plays in the US present a new opportunity for advantaged feedstocks here in the US. Most of our US capacity is ethane based. That's a big advantage that we see going forward."[665]

September 5, 2012: Chemicals is Increasing Capacity

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that Phillips is increasing its chemicals capacity. "So, one of the things that we're doing, we're increasing fractionation capacity at CPChem's facility at Sweeny, about a 20% increase in frac. We're also investing in a 1-hexene plant, 200,000 ton a day facility. Think of that as a specialty chemical, very nice returns in that business. Then we've announced a $5 billion new grassroots facility at -- well actually split. The cracker will be at our Cedar Bayou facility. The derivatives, which primarily are polyethylene, will be at our Sweeny facility in Old Ocean, Texas. We expect that the cracker will be up in 2017. We think we'll be one of the first of the new grassroot crackers to be up in 2017."[666]

September 2, 2012: Low Natural Gas Prices Are a Plus for Phillips' Chemical Business Segment

Emily Pickrell wrote in Fuel Fix on September 2, 2012 that Phillips 66's Midstream Business Segment took a hit in the second quarter along with many companies in the natural gas sector as natural gas prices are at decade lows, reducing the company's second-quarter net profit from $55 million in 2011 to $35 million in 2012 but Phillips 66 uses some of DCP’s natural gas liquids as feedstock for its chemical plants. “For Phillips 66, the low prices are a plus, not a negative. It almost mitigates the negative impacts of NGL prices,” says Fadel Gheit, an analyst with Oppenheimer & Co. “They are one of the largest chemical producers in the country.”[667]

August 10, 2012: Chevron Phillips CEO Pete Cella Says Company Gets More Attention from Phillips 66

The Houston Business Journal reported on August 10, 2012 in a profile of Chevron Phillips CEO Pete Cella that with the ConocoPhillips split of its upstream and downstream business in May, Chevron Phillips makes up a more prominent part of the Phillips 66 business, which is good because the company gets more attention, said Cella. Cella also said that Chevron Phillips is more than a chemical company, it is a manufacturing company. “There is a newfound optimism in manufacturing that goes beyond chemicals,” said Cella, adding that with the recent chemical industry resurgence, there are more opportunities for U.S. companies to manufacture plastic products and chemical-related products that can boost the overall economy.[668]

June 14, 2012: New 1-hexene Plant Under Construction at Chevron Phillips Chemical's Cedar Bayou complex Will be the World's Largest

Emily Pickrell wrote in San Antonio Express on June 13, 2012 that Phillips 66 executives gathered for a ceremonial groundbreaking on June 12, 2012 at Chevron Phillips Chemical's Cedar Bayou complex that will use ethylene to create 1-hexene, an essential ingredient for a range of plastic products. “The facility that we are groundbreaking is an outcome of this new natural gas resource base,” said Pete Cella, CEO of Chevron Phillips Chemical. “Five years ago, the expectation was that the U.S. would become a net importer of ethylene. Now we are expecting that we will not only meet U.S. demand domestically, but will become a major exporter.” The company plans to hire 1,000 workers to build the plant, which is expected to be online in early 2014.[669]

Chevron Phillips Chemical also plans to build a new ethane cracker at Cedar Bayou; two new polyethylene units at a site near its Sweeny plant in Old Ocean; and an expansion of its fractionator that separates the individual components out of natural gas liquids at the Sweeny facility.[670]

June 12, 2012: In Three Years, Phillips 66 may invest in a Second New Chemical Plant in the U.S. Gulf Region

Fox Business reported on June 12, 2012 that reg Garland told the Financial Times that Phillips 66 may invest in a second new chemical plant in the U.S. Gulf region to take advantage of the cheap feedstock in North America that was released by the shale revolution, a decision that could be made in three years' time. "After the Middle East, the U.S. is the next best place to make petrochemicals, because of the advanced feedstock, and we see that continuing for some time," said Garland.[671] Garland said US chemicals manufacturers could buy ethane at about $5 per million British thermal units of energy content, compared to about $18 per mBTU for crude oil and that the US petrochemicals industry, stands at the dawn of a long-term upturn, and Phillips 66 stands to benefit through Chevron Phillips Chemical, its 50/50 joint venture with Chevron. The cheap feedstock persuaded CP Chem to announce last year that it would build a new “cracker” in Baytown, Texas, to convert ethane into ethylene. The Baytown cracker, expected to come into operation in 2017, will employ 10,000 people while under construction, and about 400 when it is running. [672]

June 4, 2012: Chevron Phillips Chemical Looking into Developing Iraq Plant

Olivia Pulsinelli reported in the Houston Business Journal on June 4, 2012 that Chevron Phillips signed a letter of intent with Iraq to examine the feasibility of building a new plant and upgrading an existing petrochemicals facility owned by Iraq. "Data from BP Plc (NYSE: BP) shows Iraq has the fifth-largest crude reserves in the world and the fifth-largest natural gas deposits in the Middle East, Bloomberg reports. While the Iraq wants to diversify into chemicals productions and other industries, the country currently lacks infrastructure to use natural gas as a fuel for electricity plants or feedstock for petrochemicals."[673]

May 17, 2012: Phillips 66 Exec says Glut of Natural Gas will last 4 to 5 Years

Peter Cella, Chief Executive of Chevron Phillips Chemical, a joint venture between Phillips 66 and Chevron, said on May 17, 2012 that the oversupply of natural gas liquids (NGLs)that feed its US plants is likely to last for another four or five years. "The supply source has gotten ahead of the demand need. I think we're doing our share to elevate the capacity to consume," Cella told the Reuters Global Energy & Environment Summit in Houston. "You can drill a well in a month or two, and it takes us five years to build a new cracker, so you've got this mismatch in timelines." Chevron Phillips Chemical, which was formed in 2000 and employs about 4,700 people, is the world's fourth-largest producer of high density polyethylene, used to make everything from food containers to plastic furniture. Cella expects that three or four new crackers will be needed over the next ten years to meet US plastic demand, especially packaging but also a variety of products like lipstick and trash bags, since demand grows with the economy. Chevron Phillips Chemical is spending $5 billion on new ethylene facilities in Texas.[674]

May 10, 2012: Simon Moore says Chemical is doing well Because it has Access to Cheap US Natural Gas

Simon Moore wrote at Seeking Alpha on May 10, 2012 that the Chemical Business Segment is doing well because it has access to extremely cheap US natural gas, which it uses in the manufacturing process and because the margins on certain chemicals, such as ethylene, are much higher when they are manufactured from NGLs versus naphtha (oil derived). "Ethane derived ethylene has a cash margin of more than $600/ton currently. Naptha derived (oil derived) ethylene has a cash margin of only $100-$200 per ton," writes Moore. "PSX has a great supply of cheap NGLs (ethane among them) in the US."[675]

Andrew Bary wrote in the WSJ on May 12, 2012 that the Chemical Business Segment is so profitable, earning $1.4 billion in 2011, because 80% of its capacity is in the US, where low gas prices hold down input costs. "Phillips' petrochemical business will benefit in a disproportionate way from the growth in the production of natural-gas and natural-gas liquids," says ISI Group analyst Doug Terreson.[676]

May 2, 2012: Phillips to Build two new polyethylene plants Near Sweeny Petrochemical Complex

The Oil and Gas Journal reported on May 2, 2013 that Chevron Phillips Chemical Co. LP has selected a site near its Sweeny petrochemical complex for two new polyethylene plants with capacities of 1.1 billion lb/year each. Jacobs Engineering Group will design the polyethylene plants which are part of a major Gulf Coast Expansion.[677]

April 9, 2012: According to ConocoPhillips CPChem has a strong history of Successfully Executing Growth Projects

According to the ConocoPhillips Investors Presentation on April 9, 2012 "CPChem has a strong history of successfully executing growth projects. They've executed five mega projects in the Middle East over the past 10 years.They continue to work new opportunities in the Middle East region. They're currently building the world's largest 1-hexene plant at Cedar Bayou.They're actively pursuing a new Gulf Coast cracker.We think it will start up in 2017.This will be the first new cracker to start up on the Gulf Coast."[678][679][680]

Midstream Business Segment within Phillips 66

Midstream Business Segment. 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.[681] Graphic from Phillips Presentation to USB Global Oil and Gas Conference May 21, 2013.
The return on capital for the Midstream Business Segment at Phillips 66 has been high in recent years. Garland said during his analyst call on April 9, 2012 that Phillips 66's Midstream businesses are primarily conducted through our 50/50 JV with Spectra and DCP is one of the largest gatherers and processors of natural gas and NGLs. "When you look at DCP's assets, they overlay some of the best shale opportunities in the world today, places like the Eagle Ford, the Permian, the Anadarko, the Niobrara and others. DCP is just superbly positioned to capture and create value in this area and there remains considerable, additional opportunity in this space." Garland plans to increase capital invesment in the Midstream Business Segment. Derivative Photo: Hugh Pickens

Garland said during his analyst call on April 9, 2012 that Phillips 66's Midstream businesses are primarily conducted through our 50/50 JV with Spectra and DCP is one of the largest gatherers and processors of natural gas and NGLs.[682][683][684]

"DCP is one of the largest gatherers and processors of natural gas and natural gas liquids. We do hold assets outside of DCP. We have interest in three fractionators with a net capacity of 112,000 barrels a day.We also have a 25% interest in the Rex pipeline. When you look at our Midstream operations and particularly the DCP, they overlay some of the best shale plays in North America and so just superbly positioned to capture significant growth opportunities. DCP, like CPChem, leads its peers in terms of economic return on assets."[685][686][687]

DCP Midstream

DCP Midstream, is a 50-50 joint venture with Spectra that helped counteract poor refining performance last quarter for ConocoPhillips. "The fundamentals of the business could not look better," said Spectra CEO Greg Ebel. "DCP operates in liquids-rich areas. In those areas, we are seeing dramatic volume growth, which is helping overcome low natural gas prices for our consumers."[688]

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.[689]

Growth Strategy in Midstream Segment

"We're investing significantly in both NGL pipelines and gathering, processing capability.When we look at the increased shale production, we believe there's about $70 billion to $80 billion worth of industry investment needed in infrastructure. Of that, about $21 billion has already been announced. And roughly $6 billion of the $21 billion is DCP's announced investments. When you look at DCP's assets, they overlay some of the best shale opportunities in the world today, places like the Eagle Ford, the Permian, the Anadarko, the Niobrara and others. DCP is just superbly positioned to capture and create value in this area and there remains considerable, additional opportunity in this space."[690][691][692]

Latest News and Views of the Midstream Business Segment

September 1, 2014: One Year After Cleanup, DCP Midstream Oil Spill Still Causes Concern

Phil Cross reported at Fox25 on September 1, 2014 that more than a year after an oil spill from an abandoned pipeline owned by DCP Midstream, the landowners say they are still fighting to get it cleaned up. Records indicate DCP hired a company to perform the clean-up of the creek and the OCC document says the state ordered work to be completed by July 15, 2013. The people who own the land just downstream from the spill say that cleanup effort failed. “It should be nice clean water to water the cattle and fertilize the hay and the blackberries in the area,” says Spencer city councilwoman Tonni Canaday who told Fox 25 the town was not notified oil was spilled in Spencer Creek. “I couldn't, in good conscious, put cattle on here right now.”[693]

The issue, the landowners say, is that any slight movement in the water stirs up a glossy sheen. They claim it is residual oil left from the initial spill. Records from the OCC indicated the pipeline spilled about a barrel of oil, but the company only recovered half a barrel of material. The landowners invited Fox 25 to visit the creek this summer, more than a year after the spill and eight months after the final cleanup was deemed complete. On our visit the landowner stirred the creek and a glossy sheen appeared on the water. A soil sample dug from the bottom of the creek revealed a strong odor of oil and was greasy to the touch. “There is absolutely a problem,” Canaday says, “And to each of those people that we've had come out and say it's not that big of a problem; we haven't seen anybody take a drink or take a bottle of water out of there themselves.” The corporation commission says DCP has been willing to do anything they've been asked and that company has voluntarily helped with the cleanup and containment of other pipeline spills they were not responsible for in the past.[694]

August 21, 2014: Four Injured in DCP Midstream Pipeline Fire

NewOK reported on August 21, 2014 that fourworkers were injured in Garvin County in a fire while a crew was performing maintenance on a natural gas pipeline operated by DCP Midstream. The natural gas line fire was quickly extinguished and the workers were taken to the hospital in Lindsay, where they were treated and released. DCP reported the incident to the proper regulatory authorities and will investigate further on its own to determine what happened.[695]

August 13, 2014: Phillips Breaks Ground on LPG Export Terminal at Freeport

Jordan Blum reported in the Houston Business Journal on August 13, 2014 that Phillips broke ground on its $1 billion liquefied petroleum gas export terminal — its first ever — in Freeport to sell propane, butane and more to international markets. The project, which is expected to be completed in mid-2016, will export 4.4 million barrels of fuel a month to countries in Europe and Asia. The terminal will get the fuel from its Sweeny complex in Old Ocean and its Gulf Coast Fractionators facility in Mont Belvieu. "We are investing, we are building and we are growing," Phillips 66 Chairman and CEO Greg Garland said at the groundbreaking. "The projects we're breaking ground on … total more than $3 billion of investment for our company, … and it's happening right here in our own backyard in the communities of Sweeny and Freeport." Freeport has advantages over operating out of the Houston Ship Channel because Freeport is 3 miles from deep water, compared to 50 miles for the channel says Jim Webster, Phillips 66’s general manager of midstream.[696]

July 26, 2014: Front Range Pipeline Transports NGL Through Colorado

The Tribune reported on July 26, 2014 that the 435-mile long Front Range Pipeline, which began operating in February 2014, is expected to become increasingly important as the state’s production of natural gas liquids continues to grow. that runs through eastern El Paso County has positioned Colorado to take advantage of the burgeoning market for natural gas liquids. The pipeline, owned by Texas-based Enterprise Product Partners and Anadarko Petroleum and Denver-based DCP Midstream, transports about 80,000 barrels of NGLs from Weld County, which sits atop the Denver-Julesburg basin, to Skellytown, Texas. There, it connects to the Texas Express pipeline, which carries the liquids to Mont Belvieu, Texas, the largest NGL hub in the country. The liquids are then stored, processed and distributed. The joint venture offers Colorado NGL producers a direct route to Mont Belvieu. Before construction of the Front Range Pipeline, Colorado NGL producers transported their products using the Overland Pass and Mid-America pipelines, both of which pass through the state’s oil and gas basins.[697]

June 5, 2014: Phillips Buys Big Oil Storage Terminal On Gulf Coast

Fuelfix reported on June 5, 2014 that Phillips plans to purchase the Beaumont Terminal, capable of carrying 7.1 million barrels of oil equivalent, from Chevron subsidiary UNOCAL. “This acquisition supports our midstream growth strategy,” said Tim Taylor. “Given our expectations for increasing volumes of North American crude oil movements into the Gulf Coast region and growth in refined product exports, the Beaumont Terminal is well positioned to serve this growing market while providing significant expansion potential.”[698]

March 14, 2014: Phillips Enters Long-Term Deal to Sell LPG to China

Reuters reported on March 14, 2014 that China's largest state refiner, Sinopec Corp, said it had entered a long-term deal to buy liquefied petroleum gas (LPG) from Phillips 66, showing the U.S. shale drilling boom is having an impact on Asian markets. Sinopec, which plans to use the LPG as a petrochemical feedstock, didn't give any details of the contract, the amounts or when the supply starts. Phillips said last October it would develop a $1 billion LPG export terminal at Freeport, Texas, with a capacity of 4.4 million barrels per month, with start-up planned for the middle of 2016. Analysts say the U.S. LPG export boom will be aided by the expansion of the Panama Canal, allowing the passage of so-called very large gas carriers (VLGC) from 2015 and reducing the cost of freight by cutting the sailing time from the United States to Asia by more than two weeks.[699]

February 14, 2014: Garland Says There Will Be Additional Fracks at Sweeney and on Gulf Coast

Greg Garland told security analysts at the Credit Suisse Global Energy Summit on February 12, 2014 that Phillips has named the frack at Sweeny Frack 1 for a reason. "Because there will be Frack 2, Frack 3. We're looking at other fracks not just in Sweeny as we look at the footprint and where we think the capacity is going to be needed for additional frack capacity on the, let's say the U.S. Gulf Coast," said Garland. "We have $4 to $6 billion worth of investments that we see over the next couple years at DCP. You should expect that we will fund the majority of those investments by dropping assets from DCP into DPM. That we'll use DPM as really the vehicle to play out these investments."[700]

February 7, 2014: Phillips Board Okays $3 Billion for Sweeny Fractionator One and Freeport Liquefied Petroleum Gas (LPG) Export Terminal

RTT News reported on February 7, 2014 that Phillips Board of Directors gave approval to go ahead on the Sweeny Fractionator One and Freeport Liquefied Petroleum Gas (LPG) Export Terminal representing an investment of more than $3 billion in the company's Midstream Business Segment.[701]

The Sweeny Fractionator One will be located in Old Ocean, Texas, close to the company's Sweeny Refinery, and will supply purity natural gas liquids (NGL) products to the petrochemical industry and heating markets. The 100,000 barrel-per-day NGL fractionator is expected to start up in the third quarter of 2015.[702]

The Freeport LPG Export Terminal will be located at the site of the company's existing marine terminal in Freeport, Texas, and will have an initial export capacity of 4.4 million barrels per month, the equivalent of eight very large gas carriers, with a ship loading rate of 36,000 barrels per hour. Startup of the export terminal is expected in mid-2016. "Given the anticipated growth in natural gas liquids production, we see substantial advantages in having fractionation and export facilities on the Gulf Coast outside of Mont Belvieu. These projects allow us to maximize our existing infrastructure and will position us for further growth," said Tim Taylor, executive vice president, Phillips 66 Commercial, Marketing, Transportation and Business Development.[703]

Molly Ryan reported in the Houston Business Journal on February 11, 2014 that Phillips' decision to move forward with more than $3 billion worth of projects reflects the company’s strategic decision to chase higher-margin markets. "Midstream spending is expected to pick up in 2014 since energy companies are increasingly realizing the profits that can be found in moving the massive amount of oil and gas coming from U.S. shale plays," writes Ryan. "Phillips 66 specifically hopes to cash in on this through its new liquefied petroleum gas terminal, which will store and transport fluids, and its new fractionator facility, which will supply and transport natural gas liquid products to petrochemical companies."[704]

January 4, 2014: Phillips to Proceed with Houston Ship Channel Cross-Channel Connector

The Oil and Gas Journal reported on January 4, 2014 that Phillips 66 Pipeline LLC, a wholly owned subsidiary of Phillips 66, will build its 180,000-b/d Cross-Channel Connector refined product pipeline project, expanding transportation capacity across the Houston Ship Channel. The Cross-Channel Connector will combine a 20-in. OD reactivated pipeline under the HSC and expansion of a second active 20-in. line in Pasadena. Phillips 66 plans to connect to Magellan Midstream Partners’ refined product pipeline for transportation from HSC’s south side to Magellan and Kinder Morgan Energy Partners systems on the north side of the channel at Galena Park and East Houston.[705] "Transportation at Phillips 66 is part of our growing Midstream business," said Debbie Adams, president, Phillips 66 Transportation. "The Cross-Channel Connector project is a key investment to help us leverage our infrastructure and the opportunities of the North American energy renaissance." The company anticipates the project could be complete as early as the fourth quarter of 2014, subject to the receipt of necessary permits and regulatory approvals. The Cross-Channel Connector is expected to have an initial system capacity of up to 180,000 barrels per day. The Phase 2 expansion could add an additional 50,000 barrels per day of capacity.[706]

December 6, 2013: Phillips to Invest $2.167 Billion in 2014 in Midstream Business Segment

Phillips reported on December 6, 2013 that they plan to invest $2.167 Billion in 2014 in their Midstream Business Segment including $1.417 in direct investment and $0.750 Billion in investment with affiliate groups. Phillips expects to begin construction of a 100,000 barrel-per-day NGL fractionator and a 4.4 million-barrel-per-month liquefied petroleum gas export terminal on the U.S. Gulf Coast. In addition, several rail offloading facilities and other crude handling projects will increase the company’s access to advantaged refining feedstocks. Phillips 66 Transportation is also developing pipeline expansion and connection projects that will grow capacity and allow for greater refined product exports.[707]

Phillips expects to invest $750 Million in DCP, a 50/50 joint venture with Spectra Energy. DCP anticipates leveraging its existing NGL infrastructure to initiate new gathering and processing growth projects, mainly in the North and Permian regions. DCP also expects to increase natural gas processing capacity in the Denver-Julesburg Basin and complete other gathering system expansions during 2014.[708]

October 30, 2013: Garland Says Phillips May Build 100,000 barrel-per-day NGL Fractionator at Phillips Sweeny Complex

Garland told analysts at the third quarter earnings conference on October 30, 2013 that Phillips may build a 100,000 barrel-per-day NGL fractionator at Phillips Sweeny complex along with the associated infrastructure. "We expect that first we’ll incubate the project at Phillips 66 and eventually drop them in to Phillips 66 Partners. Potential candidates for this approach would include the 100,000 barrel-per-day NGL fractionator at our Sweeny complex along with the associated infrastructure," said Garland. "Startup of the frac is expected in 2015 with the export facility following closely to 2016. We’ve seen increasing number of opportunities to participate in the NGL market and we will use our midstream business to supply petrochemical, heating and transportation markets globally. The combination of refining free cash flow and our MLP provides us with a unique position and options to accelerate our growth in the midstream space."[709]

October 30, 2013: Garland Says Phillips is Developing an LPG Export Terminal at Freeport, Texas

Garland told analysts at the third quarter earnings conference on October 30, 2013 that Phillips is "developing an LPG export terminal project at Freeport, Texas. The LPG export facility is expected to enable us to take advantage of the Company's existing midstream transportation and towards infrastructure." Garland added that combining NGL fractionator project and the LPG export terminal project represented two discrete $1 billion investment over the next 2 to 3 years. "Ultimately once we're up and running at full capacity we expect these projects to generate on the order of $400 million to $500 million of EBITDA annually."[710]

October 28, 2013: Activist Sandell Urges Strategic Action on DCP Midstream

4-traders reported on October 28, 2013 that Activist investor Sandell Asset Management is urging Spectra Energy Corp to swap its interest in DCP Midstream Partners LLC for equity in Phillips 66's master limited partnership in a deal meant to improve the valuation of the companies, according to a letter seen by Reuters. Sandell, which owns less than 1 percent of pipeline company Spectra and 1 percent of refining company Phillips 66, said in a letter dated October 2 it believes DCP's assets are a better fit with Phillips. DCP is jointly owned by Spectra and Phillips 66. The letter marks the second time since June that Sandell has pressed Spectra for changes. Sandell said in the earlier letter that it believes Spectra is undervalued and should trade around $48 per share, 33 percent above its Friday closing price of $35.95.[711]

April 19, 2013: DCP Plans Gas Plant Near Carlsbad, New Mexico

Gary Gerew reported in the Albuquerque Business Journal on April 19, 2013 that DPC Midstream plans to build a gas plant on 164 acres in Lea County and a 50-mile pipeline that will run through Eddy County for the collection of natural gas from operators in Eddy and Lea counties. “Right now, we are following regulatory requirements, evaluating the feasibility of the project and understanding our customer’s needs,” said DCP spokewoman Lisa Newkirk. Robert Gomez, BLM realty specialist, said DCP Midstream has requested access to public lands to construct the gas plant and pipeline.[712]

April 19, 2013: DCP Pipeline Awaits Approval in Colorado

Steve Block reported in the Trinidad Times on April 19, 2013 that a proposed 13.75-mile pipeline section planned to go through northeast Las Animas County, Colorado is awaiting approval from the county planning commission and then the county board. As designed, the pipeline has a capacity of 150,000 barrels per day, which could be readily expanded to approximately 230,000 barrels per day and could begin service in the fourth quarter of 2013. Permit land agent Mike Rutherford said the company thought it only needed a special-use permit from the county for the project, which it had in hand before the state gave its final approval. It later turned out that it also needed a 1041 permit under county regulations. “We thought it was just going to be an SUP only and we already had that,” Rutherford said. “I guess if we’d known it was going to be a full-blown 1041, we could have gotten that four or five months ago, and been through this temporary approval process months ago.” The permitting process requires public notice of the application, followed by a 30-day period for comment from interested parties to the county board. Meanwhile, the application must work its way through the planning department approval process. Fourteen days after that, the planning commission and county board can approve the application at the same time, thus speeding up the process. Dixie Newnam, county attorney, said the entire process could take 45 – 60 days from the time the application was submitted.[713]

April 5, 2013: Explosion at DCP Midstream Gas Compressor Station in Langston, Oklahoma

Channel 2 News reported on April 5, 2013 that authorities say a worker inside a natural gas compressor station owned by DCP Midstream was able to escape without injury after an explosion near Langston, Oklahoma, about 45 miles north of Oklahoma City. The Guthrie Fire Department, along with Meridian and Coyle fire departments, all responded to the explosion but firefighters let the natural gas in the line burn off before they could safely fight the blaze and the fire was extinguished several hours after the blast. DCP Midstream doesn't know what started the explosion in rural Logan County, but is investigating along with the Department of the Environmental Quality and the Oklahoma Corporation Commission. "It was a tremendous fire ball in the sky and was able to be seen for quite a few miles," said Guthrie Fire Chief Eric Harlow adding that he believes weather may have been a factor in the fire. "We didn't have much wind last night, which would allow the gas to kind of stay in place, instead of dissipating, at that point any spark, whether it be static electricity or even the spark of vehicle ignition could likely set it off." Three homes had to be evacuated and DCP Midstream offered to pay for one other family's hotel if they wanted to evacuate. "We've never had any problems at the compressor station before," said William Savory, who has lived in Wellston for 20 years and decided not to take DCP up on its offer. "And I told my wife, all it's just going to do is burn off, it's going to burn off because it's so wet."[714][715]

April 2, 2013: DCP Midstream Withdraws Plan to Build Megatank in Searsport

Abigal Curtis reported in the Bangor Daily News on April 2, 2013 that DCP Midstream is withdrawing thire application to build a controversial liquid propane gas terminal and storage tank project at Mack Point in Searsport. “We really, really wanted to do business in Maine,” said Roz Elliott, spokesperson for Denver-based DCP Midstream, citing the Searsport Planning Board’s initial meetings last week to review the $40 million project before issuing a final decision later this spring. “It’s unfortunate, but with these local circumstances, we don’t forsee doing future capital development in Maine.” The board members found that certain elements of the project did not meet the town’s ordinances. “Very extensive time, resources, passion — we really believed in this,” Elliott said, adding that the company decided to withdraw the application “as a courtesy” to the Searsport Planning Board.[716]

April 2, 2013: DCP Midstream Increases Ownership in Eagle Ford Venture to 80%

Mike Thomas reported in the San Antonio Business Journal that DCP Midstream Partners LP has completed its acquisition of an additional 47 percent interest in an Eagle Ford joint venture for $626 million bringing its stake inthe partnership up to 80 percent. The partnership also increased its ownership in a cryogenic processing plant at Goliad with a capacity of 200 million cubic feet per day that is under construction. The new plant is expected to be complete by the first quarter of 2014 and would be one of the largest gathering and processing plants in the Eagle Ford Shale play.[717]

April 2, 2013: Phillips to Build 100,000 bpd Fractionator in Old Ocean, Texas to Process Natural Gas

4-traders reported on April 2, 2013 that Phillips is pursuing development of a 100,000 barrel-per-day natural gas liquids (NGL) fractionator to be located in Old Ocean, Texas, close to the company's Sweeny Refinery. NGL feedstock for the Old Ocean fractionator project would be supplied by several nearby pipelines avoiding the Mont Belvieu congestion, and purified products produced by the fractionator would be marketed primarily to petrochemical customers in the region with access to Mont Belvieu. "This project would enable us to take advantage of strong existing midstream transportation and storage infrastructure along with demonstrated operations excellence," said Phillips 66 Chairman and CEO Greg Garland. "We see excellent market-facing opportunities to grow the natural gas liquids business, and the chance to supply purity NGLs and liquefied petroleum gas to the petrochemical industry and heating markets." The project is currently in the engineering design phase, and the company is in the process of filing for all applicable permits.[718]

March 27, 2013: Phillips 66 Midstream Vehicle Registers for $300 million IPO

Reuters reported on March 27, 2013 that Phillips has registered for an initial public offering of units in a midstream partnership that would raise $300 million and will trade on the New York Stock Exchange under the "PSXP" ticker symbol. The IPO is expected to include the Clifton Ridge oil pipeline and storage system in Louisiana and refined product pipelines and storage in Texas and Illinois: Sweeny-Pasadena and Hartford Connector, respectively.[719]

March 13, 2013: DCP Midstream Pipeline to Serve Permian Basin

Mella McEwen reported in the Midland Reporter-Telegram on March 13, 2013 that DCP Midstream LLC is spending $1 billion on projects, including the new Sand Hills Pipeline, a natural gas liquids pipeline that will carry natural gas liquids from the Permian Basin and Eagle Ford Shale to the Gulf Coast, including the fractionation complex at Mont Belvieu. The Eagle Ford leg of the pipeline came online late last year and the Permian Basin portion will begin coming online this summer, reports Greg Smith, newly named president of the midcontinent and Permian business units. DCP's new Rawhide Plant, a 75 million cubic feet per day natural gas processing plant is also under construction in Glasscock County. DCP currently operates 17 gas processing plants in the Permian Basin with processing capacity of 1.3 billion cubic feet per day, recently adding 150 million cubic feet per day of processing capacity through the expansion and restart of existing facilities.[720]

January 30, 2013: Garland Says Phillips ROCE for Midstream Business Segment was 22% for 2012

Greg Garland told analysts at the 4th quarter earnings conference on January 30, 2013 that although NGL prices were down 36% compared to 2011, return on capital employed for the year was still strong at 22%. Midstream's adjusted earnings for 2012 were $62 million, includes $38 million in earnings associated with Phillipsinterest in DCP Midstream and $24 million for other Midstream businesses. "We ended the quarter with $1.3 billion in capital employed in our Midstream segment," said Garland. "And as I said earlier, during the fourth quarter we closed our investments in the Sand Hills and the Southern Hills pipelines that are being constructed by DCP Midstream, and these pipes are scheduled for startup this year."[721]

January 5, 2013: Two Hundred Turn Out in Searsport to Protest DCP Midstream's LPG Storage Tank

The Republican Journal reported on January 8, 2013 that about 200 people turned up at Mosman Park on January 5, 2013 and formed a circle to show the footprint of a 137-foot-tall liquefied petroleum gas storage tank proposed for Mack Point.[722]

December 13, 2012: Phillips to Invest $1.461 Billion in 2013 in Midstream Business Segment

Phillips 66 reported at their inaugural Analyst Meeting on December 13, 2013 that DCP Midstream plans to invest $2.2 billion primarily for new logistics infrastructure and NGL production during 2013.[723]

December 5, 2012: No Injuries After Gas Line Explosion And Fire Near DCP Midstream Plant at Goldsmith

Permian Basin reported on December 5, 2012 that two gas lines exploded outside of the DCP Midstream plant near Goldsmith around 6 PM and a large fire also broke out in the area of the explosion. The owner of the ruptured lines -- West Texas Gas -- shut off 4 miles of the line and let the fire burn out while DCP Midstream evacuated all employees from their plant safely after the explosion happened.[724]

November 15, 2012: Spectra Acquires one-third Interest in Sand Hills and Southern Hills Pipelines Owned by DCP Midstream

The Sacramento Bee reported on November 15, 2012 that Spectra Energy Corp announced it has closed its previously announced acquisition of a one-third interest in the Sand Hills and Southern Hills pipelines, both of which currently are under construction by DCP Midstream, a 50/50 joint venture between Spectra Energy and Phillips 66. Spectra Energy, Phillips 66, and DCP Midstream each own a one-third interest in the two pipelines – and will equally fund the remaining capital expenditures through completion. The aggregate investment by Spectra Energy in the two pipeline projects is expected to be approximately $700-800 million.[725]

November 12, 2012: Proposed Consent Decree Reached over Contamination at Cahokia Site

The Madison Record reported on November 12, 2012 that the federal government last week sued and reached a proposed settlement with thePhillips 66 Pipeline LLC in St. Clair County seeking to recover some of the money it spent on cleaning up the Rogers Cartage Site in Cahokia after the Environmental Protection Agency (EPA) issued an enforcement action memorandum in 2011 noting the presence of polychlorinated biphenyls (PCBs) at the site and directing Phillips 66 to excavate and remove about 16,575 tons of soil. Rogers Cartage Co. and its corporate parent, Tankstar Inc., were listed as potentially responsible parties to the contamination in a 2009 EPA liability notice. Phillips 66 received the notice as the current owner of the site. In 2011, Phillips 66 sued Rogers Cartage for cost recovery and injunctive relief. Phillips 66 will amend its complaint to pursue a claim for contribution if the proposed decree is approved.[726]

October 24, 2012: DCP Midstream Announces Opening of First Segment Sand Hills Pipeline

DCP Midstream issued a press release on October 24, 2012 announcing that Sand Hills Pipeline has initiated service on the first segment in South Texas online to provide service from the Eagle Ford Shale to Eagle Ford NGLs. Sand Hills will consist of approximately 720 miles of 20-inch pipeline with an initial capacity of more than 200,000 barrels per day, which can grow to 350,000 bbl/d with the installation of additional pump stations. "When finished, Sand Hills Pipeline will be a major link between the liquids-rich Eagle Ford and Permian producing regions and growing Gulf Coast markets," said Tom O'Connor, chairman and chief executive officer of DCP Midstream.[727]

September 7, 2012: Maine Fuel Board Approves Permit for DCP Midstream's Searsport Megatank

The Free Press reported on September 7, 2012 that the Maine Fuel Board has issued a permit to DCP Midstream to build a 22.7 million gallon propane storage tank in Searsport, the final permitting hurdle at the state and federal levels. The next step is for the company to submit the complete site application, including all state and federal permits, to the Searsport planning board for review.[728]

September 2, 2012: Low Natural Gas Prices for DCP Midstream Are a Plus for Phillips' Chemical Business Segment

Emily Pickrell wrote in Fuel Fix on September 2, 2012 that DCP Midstream took a hit in the second quarter along with many companies in the natural gas sector as natural gas prices are at decade lows, reducing the company's second-quarter net profit fell from $55 million in 2011 to $35 million in 2012 but Phillips 66 uses some of DCP’s natural gas liquids as feedstock for its chemical plants. “For Phillips 66, the low prices are a plus, not a negative. It almost mitigates the negative impacts of NGL prices,” says Fadel Gheit, an analyst with Oppenheimer & Co. “They are one of the largest chemical producers in the country.” Analysts predict that Phillips will continue to benefit as new chemical and processing plants come online in the next two to five years. “I think it’s a great place to be,” says John Stekla, an analyst with IHS. “The petrochemical industry is betting tremendous sums of money that NGLs will stay advantaged as a feedstock for the rest of the world. I have no doubt there will be huge growth in NGLs.” DCP has also set about building infrastructure to pick up gas at the wellhead and transport natural gas liquids to market centers on the Gulf Coast converting two pipelines to transport natural gas liquids to Mont Belvieu, a gas storage and processing center east of Houston. “We decided we probably should be looking harder at owning more natural gas liquids infrastructure and more natural gas liquids pipelines,” says Tom O’Connor, CEO of DCP Midstream, the entity that owns the general partner of DCP Midstream Partners, describing DCP’s strategy to position itself as the premier one-stop services company to get natural gas liquids from the well to customers. “We are on the front end of this energy revolution."[729]

August 24, 2012: DCP Midstream GP appoints Bill Waldheim as New President

Equities.com reported on August 24, 2012 that Bill Waldheim has been appointed to the position of president of DCP Midstream General Partner effective September 1, 2012. Bill Waldheim is currently the president of the natural gas liquids, gas, and crude oil logistics business unit for DCP Midstream, LLC, a position he has held since 2011. Prior to that time, Waldheim was president of DCP Midstream, LLC's northern business unit since 2009 and was responsible for executive management of commercial and operations of assets in the Midcontinent, Rocky Mountain, Michigan and Gulf Coast regions as well as being responsible for downstream marketing of gas, NGLs and condensate. "The Board believes that Bill Waldheim has the demonstrated leadership skills and capabilities to ensure the long term growth and stability of DCP Midstream Partners, LP, or the 'Partnership' as we continue to execute on our multi-faceted growth strategy with increased emphasis on co-investment with DCP Midstream, LLC," said Tom O'Connor, the chairman of the board of the General Partner. "Through Bill's leadership DCP has been able to advance numerous high value projects including Sand Hills and Southern Hills pipelines."[730]

August 21, 2012: CEO Mark Borer of DCP Midstream General Partner Resigns

FuelFix reported on August 21, 2012 that DCP Midstream Partner’s Chief Executive Officer Mark Borer will resign at the end of the 2012. “I have been with the DCP enterprise since 1999 and am honored to have been a key executive during its growth into the largest NGL producer in the United States,” said Borer in a written statement. “With an effectively planned succession and transition, now is the time for me to retire from the Partnership and experience other avenues of personal and professional growth.”[731]

August 8, 2012: DCP Midstream Year-to-Year Adjusted Net Income Down in 2nd Quarter

Nasdaq reported on August 8, 2012 that DCP Midstream reported adjusted net income attributable to the company for the quarter was $13.9 million or $0.08 per limited partner unit, compared to the net income of $20.5 million or 0.33 per limited partner unit a year ago.[732][733]

August 6, 2012: DCP Midstream set to Double Processing Capacity in Colorado

The Denver Post reported on August 6, 2012 that DCP Midstream plans to double its capacity in the Denver-Julesberg Basin increasing processing capacity to 800 million cubic feet per day for natural gas and 70,000 barrels a day for liquids by 2014. "The Denver-Julesberg Basin continues to reinvent itself, and the introduction of horizontal drilling is uncovering associated natural gas discoveries in the Niobrara Shale and Codell formations," says Wouter van Kempen, president of the company's gathering and processing business unit. DCP Midstream recently broke ground on a plant, west of LaSalle in Weld County, with a capacity of 110 million cubic feet per day, due to be completed in the second half of 2013 and is also constructing two compressor stations near the LaSalle Plant, and an associated gathering system due to be in service by the second half of 2013.[734]

July 26, 2012: DCP Midstream Increases Quarterly Distribution to Partners

Marketwatch reported on July 26, 2012 that the board of directors of DCP Midstream declared a quarterly cash distribution of $0.67 per unit for the quarter ended June 30, 2012, an increase of 1.5 percent over the last quarterly distribution of $0.66 per unit paid May 15, 2012.[735]

July 25, 2012: DCP Midstream Fined $631,000 For 11 Air Quality Violations

Permian Basin 360 reported on July 25, 2012 that the Texas Commission on Environmental Quality fined DCP Midstream $631,628 for 11 different air quality violations found during an inspection at a DCP Midstream, LP site in Panola County on August 9, 2011.[736]

July 13, 2012: DCP Midstream Breaks Ground on $270 Million Facility in Colorado

Denver Business Journal reported on July 13 that DCP Midstream LLC of Colorado broke ground in June on its $270 million processing plant in Weld County. DCP also recently grew its Mewbourn Plant just south of Greeley, to keep up with demand from clients working in theDenver-Julesburg Basin in northeastern Colorado.[737]

July 5, 2012: DCP Midstream Completes Acquisition of Crossroads Processing Plant

DCP Partners Midstream issued a press release on July 5, 2012 that the company had completed the acquisition of the Crossroads Processing Plant for $63 million.[738]

June 18, 2012: DCP Midstream Partners to Acquire Crossroads Processing Plant

DCP Midstream Partners, a joint venture between Spectra Energy and Phillips 66, issued a press release on June 18, 2012 announcing that has entered into an agreement with Penn Virginia Resource Partners, L.P. ("PVR") to acquire the Crossroads processing plant and associated gathering system, for approximately $63 million. The Crossroads system, located in the southeastern portion of Harrison county in East Texas, includes approximately 8 miles of gas gathering pipe, an 80 million cubic feet per day cryogenic processing plant, approximately 20 miles of NGL pipeline and a 50% ownership in an approximately 11-mile residue gas pipeline. This system will allow the Partnership to increase critical midstream services to producers that are expanding their liquids rich Haynesville shale and Cotton Valley drilling programs in East Texas. "This immediately accretive acquisition provides us with an opportunity to increase our market position in East Texas and demonstrates our commitment to provide integrated midstream services to our customers," said Mark Borer, president and CEO of the Partnership. "The addition of the Crossroads system is a synergistic bolt-on acquisition to our existing East Texas system and will expand our processing capabilities to support our customers' growth."[739]

June 6, 2012: DCP Midstream's Plans Move Forward on Building Large Propane Tank in Maine as Opposition Grows

The Free Press reported on June 6, 2012 that Searsport officials met with representatives of DCP Midstream on June 4, 2012 to review the company's application to build a 23-million-gallon propane storage facility at Mack Point and found the application was missing a gas storage tank permit from the Maine Fuel Board and was also missing some minor but important documentation, including the square footage of each individual building and structure proposed for the development and written documents to town officials and abutting property owners informing them of the development. When the application is deemed complete, the planning board begins reviewing the contents of the application and must schedule a public hearing within 30 days.[740]

June 1, 2012: Plan for DCP Midstream's Giant Propane Gas Tank in Maine Generates Opposition

The Maine Public Broadcasting Company reported on June 1, 2012 that DCP Midstream's plan to build a 137-foot high, 23-million gallon liquid propane gas tank next to the Mack Point industrial area has generated heated opposition in communities along the midcoast as selectmen on the island community of Islesboro added their names to the list of people raising concerns about the tank. "Concerns about the project on the mainland have fallen into several categories," writes Jay Field. "There are those who say the tank is simply an eyesore that dwarfs all other industrial facilities in the area and threatens the sense of place on the midcoast. Others dread the large increase in truck traffic on Route 1 that will come if the project moves forward. Still others worry about the safety hazards of storing so much highly-flammable, liquid petroleum gas in one place." Even if it's approved, the project is all but certain to be challenged in court by opponents for years to come.[741]

May 26, 2012: Oklahoma Property Owners Fight DCP's Gas Pipeline

The Daily Oklahoman reported on June 18, 2012 that DCP Midstream has filed lawsuits in district court that seek eminent domain judgments against 14 property owners in Oklahoma County as landowners have rejected DCP offers to pay for a portion of their land and say they will fight to keep the company off their land. “It’s not a matter of money for most of us, it’s a matter of principle,” says Joe Freund, a retired physician who lives on 40 acres of forestland about a mile east of Arcadia who is concerned that clearing a 75-foot wide strip of forest that runs the length of his property would tarnish the aesthetics that attracted him to this plot in the first place. “They claim that it’s for the public good and perhaps it is, but they won’t even move their pipeline one inch to avoid taking down trees a hundred years old.” DCP Midstream says the pipeline would tie gathering and processing systems across central and western Oklahoma to their existing line and is part of $2 billion in capital investments currently under development by DCP. “It’s about de-bottlenecking for the producers and finally giving them an opportunity to get their product to market," says Roz Elliott, vice president at DCP Midstream, adding that DCP hopes to run 250 million cubic feet of liquid natural gas to coastal markets every day by the middle of 2013.[742]

Conclusions

The same earnings contribution from the Refining and Marketing Business Segment is proportionally 4.3 times as important to Phillips 66 as it was to ConocoPhillips. R&M's contribution was 13.7% of ConocoPhillips' total earnings while the same contribution will be 59.2% of Phillips 66 total earnings. Chart by Hugh Pickens

Note: This section of the report contains our conclusions based on the documented facts that are presented in the rest of the report. All responsibility for the conclusions are ours. If you have any additional information or insights that you would like to see added to this report please contact Hugh Pickens by email at hughpickens AT gmail DOT com.

Our analysis of the information publicly available on Phillips 66 leads us to the following conclusions:

Positives

  • The Refining and Marketing Business Segment will be more important to Phillips 66 than it was to ConocoPhillips.
  • The Refinery in Ponca City will be more important to Phillips 66 than it was to ConocoPhillips.

Negatives

  • The Refining and Marketing Business Segment is the least profitable Business Segment and will be de-emphasized with unprofitable refineries closed or sold off.
  • There will be a reduction in Capital Allocation to the Refining and Marketing Business Segment.
  • The Refinery in Ponca City is unlikely to be closed or sold In the medium term as margins have been strong in the Mid-Continent Segment and are expected to remain high for the next three to five years.

Refinery and Marketing Segment will be More Important to Phillips 66 than it was to ConocoPhillips

Based on the earnings contribution of the Refining and Marketing business segment, it is possible to estimate the relative importance of the segment to the overall business of both ConocoPhillips and Phillips 66. For Q1 2012 Exploration and Production (E&P) had $2,548M in earnings, Midstream was $93M, Chemicals was $218M, and finally Refining and Marketing was $452M. The total earnings for ConocoPhillips is $3,310M of which R&M's contribution was 13.7%. Considering only the three business segments that will be moving over to Phillips 66, the total earnings were $763M of which the same R&M's contribution was 59.2%. In other words, relatively speaking the R&M business segment is moving over from a small fish in a big pond (ConocoPhillips) to a big fish in a small pond (Phillips 66). The same earnings contribution from the Refining and Marketing Business Segment is 4.3 times as important to Phillips 66 as it was to ConocoPhillips.[743]

The Refinery in Ponca City will be More Important to Phillips 66 than it was to ConocoPhillips

ConocoPhillips does not break out earnings numbers to each refinery. However it is possible to make an estimate of the contribution of Ponca City's refinery to the overall Refinery and Marketing segment by looking at the production of the refineries. According to Garland's presention to financial analysts on April 9, 2012, although ConocoPhillips has reduced throughput refining capacity about 450,000 barrels a day over the past three years, in 2011 it stood at about 2.2 Million barrels per day. According to ConocoPhillips figures, the Ponca City refinery has a crude oil processing capacity of 187,000 barrels per day.[744] In terms of throughput capacity, Ponca City provides 8.5 per cent of Phillips 66 production. From a business standpoint, what is important is the earnings contribution. The Ponca City refinery is part of the Mid-Continent segment with about 21% of Phillips 66 capacity and margins have been very strong in this area so the contribution to earnings would exceed the contribution to throughput. We estimate that the Ponca City refinery contributes about 10% of the earnings to the Refining portion of the Refining and Marketing business segment.

A detailed financial analysis found that the Ponca City Refinery earned a net profit of over $500 million in 2011 and is on track to earn in exess of $600 million in 2012, contributing more than one-quarter of the net income to Phillips Refining bottom line and contributing more than the the total of the seven least profitable Phillips refineries combined.[745]

R&M Segment is the Least Profitable Business Segment and Will be De-Emphasized

The three operating segments of Phillips 66 have very different ROCE's. In 2011 the ROCE of the Refining and Marketing segment was 12%, the ROCE of the Midstream segment was 30%, and the ROCE of the Chemical segment was 28%. Because the ROCE of the Chemical segments and the Midstream segments is so much higher than the ROCE in the R&M segment, Garland plans to plans to aggressively grow the Chemicals and Midstream segments of Phillips 66 and de-emphasize the Refining and Marketing segments of the company.

According to information available on April 17, 2012, Phillips 66 plans to aggressively grow the Chemicals and Midstream segments of the new company and de-emphasize the Refining and Marketing segment of the company. The Refinery and Marketing segment of the company is the lowest profit margin segment of the company and Phillips 66 plans on selling and shutting down unprofitable assets in this segment.

There will be a Reduction in Capital Allocation to R&M Segment

Phillips 66 plans a major change in this allocation. "Long-term we have a vision that about 50% of our capital employed will be directed towards the R&M segment (down from 84% in 2011). And the other 50% will be directed towards Midstream and Chemicals." This is a 40% reduction in capital allocation from from 84% of capital allocated to the R&M segment in 2011. The conclusion we draw is that there will be less capital investment and improvements in the existing Phillips 66 refineries in general and in the refinery in Ponca City in particular.

Refinery in Ponca City Unlikely to be Closed or Sold in the Near Term as Margins Have Been Strong in the Mid-Continent Segment

The Ponca City refinery is part of the Mid-Continent segment with about 21% of Phillips 66 capacity and margins have been very strong in this area. The conclusion we draw is that although Phillips 66 plans to sell or close down some of their less profitable refineries, it is unlikely that any of those in the mid-continent region would be closed.

Phillips 66′s most profitable refineries of the past couple years are in the Mid-Continent including the Sweeny refinery, Ponca City, Wood River and Billings. The reason for their high profitability has been the glut of crude oil pouring into the region from newly tapped shale oil plays like North Dakota’s Bakken. In an April conference call with analysts, Garland said the company had been generating $90 million in annual net income for every dollar of WTI-Brent price differential that it could capture for its refineries. However, this opportunity is not going to last long term because there will soon be plenty of new options for getting crude out of Cushing and Garland agrees that the price differential will collapse. “Over three to five years those wide differentials that we’re seeing in the Midcon will collapse to the transportation differential,” he told me. “So more like $3 to $5 a barrel. It’s not going to be $20 forever.”[746]

What Does the Creation of Phillips 66 Mean to Ponca City?

Parade down Grand Avenue in Ponca City. The refinery in Ponca City can expect more attention at the corporate level. The refinery can expect more visits from Phillips 66 upper management. The refinery can expect that technical and community concerns will be listened to with more attention. However the refinery in Ponca City can expect that there will be relatively little interest at the corporate level at expanding the refinery or making new investments in the refinery. It is unlikely that Phillips 66 will move quickly to sell the refinery in Ponca City because of its complexity and the high profitability of the mid-continent segment which is expected to last another three to five years. Photo: Hugh Pickens

The refinery in Ponca City will be more important to Phillips 66 than it was to ConocoPhillips - 4.3 times as important - because the Refining and Marketing business segment will be a larger part of Phillips 66, a smaller company, focused on downstream operations, than it ever was to ConocoPhillips, where the Refining and Marketing business segment was only a small part of the company, dwarfed by the exploration side of the house. Since the refinery in Ponca City is part of the more profitable mid-continent segment (ConocoPhillips does not break out earnings by refinery.) the refinery is more important to the profitability of Phillips 66 than than it was to ConocoPhillips. Because of these two factors the refinery in Ponca City can expect more attention at the corporate level. The refinery can expect more visits from Phillips 66 upper management. The refinery can expect that technical and community concerns will be listened to with more attention.

Although Phillips 66 is already moving to sell two of its least profitable refineries, it is unlikely that Phillips 66 will move quickly to sell the refinery in Ponca City because of its complexity and the high profitability of the mid-continent segment which is expected to last another three to five years. On the downside, although the Refining and Marketing Business segment of Philips 66 makes the largest overall contribution to the company's earnings, in terms of percentage profitability it is the least profitable business segment with only a 10% COBE so Phillips 66 has made a decision to de-emphasize Refining and Marketing and increase the investment in the Chemical and Midstream business segments with higher COBE's which is also where the new CEO, Greg Garland has his background. Because of this factor, the refinery in Ponca City can expect that there will be relatively little interest at the corporate level at expanding the refinery or making new investments in the refinery.

Master Index for Phillips 66 Articles

Major Sections of this report include:


Corporate


Strategic and Financial


Stock Market


Safety, Environment, Legal, Labor


Refineries and Marketing Business Segments


Detailed Look at Ponca City Refinery


Other Business Segments


Other Locations


Reference


External Links

If you have additional information, insights, or corrections for this report please contact the author at hughpickens AT gmail DOT com.

Corporate Links and Presentations

Third Party Links and Presentations

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  394. Fox News. "America’s 10 Disappearing Jobs" August 30, 2012.
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  396. KTVQ TX. "Local refinery fires two dozen employees, for stealing time" May 30, 2012.
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  400. Houston Business Journal. "Fighting decay to retain employees" by Jenny Aldridge. April 1, 2014.
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  403. Ponca City News. "Phillips 66 Donates Fire Trucks To Two Volunteer Departments" September 3, 2014.
  404. New Orleans Times-Picayune. "Phillips 66 gives $750k for LSU College of Engineering interactive classroom" by Quincy Hodges. September 2, 2014.
  405. Hydrocarbon Processing. "Phillips 66, Chevron Phillips to fund new Texas petrochemical academy" Augusut 15, 2014.
  406. Tulsa World. "Phillips 66 CEO announces $1.7 million STEM grant for Bartlesville schools" by Laura Summers. August 13, 2014.
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  408. Billings Gazette. "Phillips 66 gives $750K to SD2's science, technology program" by Zach Benoit. July 9, 2014.
  409. Edwardsville Intelligencer. "Phillips 66 awards 9 scholarships" June 27, 2014.
  410. New Jersey. "Trinitas Health Foundation honors Phillips 66 with Philanthropy Award" June 10, 2017.
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