Plummeting crude prices worldwide doubled Phillips 66′s profits in the third quarter, providing the company with a cheaper feedstock to run its refineries.
Crude oil is, by far, the largest operating expense for the Houston-based refining, pipeline and chemicals company. Phillips 66 purchases about 2 million barrels of oil per day, spending more than $80 billion per year on crude, depending on the price.
Falling prices can dramatically cut the company’s costs — a savings of $1 per barrel is worth about $450 million in net income, the company has reported.
The company on Wednesday reported earnings of $1.2 billion, or $2.09 per share, during the three-month period ending Sept. 30. That’s up from $535 million, or 87 cents per share, during the same period last year. Phillips 66 posted higher earning despite a fire in July at its Port Arthur plant that affected the facility’s ethylene production.
The refining sector saw the biggest boost, with earnings climbing to $558 million in the third quarter from a loss of $30 million during the same time last year. Phillips 66 capitalized on the improved margins between crude prices, which have tumbled more than 20 percent since July, and the value of the gasoline, diesel and other products produced by the company’s 15 refineries.
Phillips 66′s investments in rail cars and other midstream assets have helped the company carry cheap domestic crude from far away shale plays like the Bakken in South Dakota to refineries along the coasts. During the third quarter, Phillips 66 grew its rail car fleet by 500 additional cars and continued work on a rail-loading facility which is under construction on land recently purchased in North Dakota. The facility could expand the capacity to access Bakken crude by 200,000 barrels per day, the company announced Wednesday.
As the U.S. oil production continues to swell, Phillips 66 has invested heavily in growing the pipeline infrastructure to capture domestic crude.
“We’re delivering on our commitment to growing our midstream business,” CEO Greg Garland said in call with investors.
On Tuesday, Phillips 66 announced plans to participate in two joint ventures to develop two major pipelines at a cost of $1.2 billion. The Dakota Access Pipeline is expected to carry 450,000 barrels per day of crude oil from the Bakken Shale to the Midwest while the Energy Transfer Crude Oil Pipeline will transport oil from the Midwest to the Gulf Coast, including Phillips 66 terminal in Beaumont.
Both projects are expected to begin operating at the end of 2016.
Share this: