Phillips 66: Red Oak, Liberty, ACE Pipelines Deferred by Cost Cuts

HOUSTON (P&GJ) — Responding to market conditions with cost-cutting across its business lines, Phillips 66 has announced that the Red Oak Pipeline, Liberty Pipeline and Sweeny Hub fractionation expansion have all been postponed.

The diversified Houston company said that midstream-focused Phillips 66 Partners also has deferred a final investment decision on the ACE Pipeline project. Phillips 66 Partners is a master limited partnership formed by Phillips 66 in 2013.

"We are taking action to maintain our financial strength to ensure security of our dividend, execute capital growth projects that are near completion, and maintain our strong investment grade credit rating,” said Greg Garland, chairman and CEO of Phillips 66.

“We will continue to closely monitor market conditions and evaluate the impact on our portfolio. We are prepared to take additional action as needed,” Garland said.

The company said it is reducing its 2020 consolidated capital spending by $700 million to $3.1 billion, reducing operating and administrative costs by $500 million and temporarily suspending share repurchases.  It also secured a new $1 billion, 364-day term loan facility. Phillips 66 already had a $5 billion revolving credit facility in place, while Phillips 66 Partners has a $750 million revolving credit facility.

Red Oak Pipeline, a 50/50 joint venture of Phillips 66 and Plains All American Pipeline, would be a system comprised of multiple pipeline projects to transport crude oil from Cushing, Oklahoma, and the Permian Basin in West Texas to the Texas Gulf Coast. 

Liberty Pipeline, a joint venture of Phillips 66 Partners and Bridger Pipeline, would be a $1.6 billion, 700-mile pipeline of up to 24" diameter transporting light crude oil from Guernsey, Wyoming to Cushing, Oklahoma.

ACE Pipeline would transport crude oil from the market hub in St. James Parish, Louisiana, to downstream refining destinations in Belle Chasse, Meraux, and Chalmette, Louisiana. The project is a joint venture of Phillips 66 Partners, Harvest Midstream and PBF Logistics.

Phillips 66 Partners said last week that it postponed the date of its conference call to discuss first-quarter earnings to May 1.

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