Phillips 66 (PSX), a diversified energy manufacturing and logistics company, revealed its capital program of $1.9 billion for 2022. This plan includes sustaining capital worth $992 million and growth capital worth $916 million, of which about 45% support lower-carbon opportunities.
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Furthermore, Phillips 66’s self-funded proportionate share of capital spending by joint ventures Chevron Phillips Chemical Company, WRB Refining LP, and DCP Midstream is likely to total $1.1 billion.
Therefore, the company’s total capital program is estimated to be $3 billion for 2022.
Plan in Detail
As part of the broader plan, $703 million is allocated to the Midstream capital plan, including $426 million for growth projects and $277 million for sustaining projects. Capital will also be allocated to enhance the company’s lower-carbon efforts. (See Phillips 66 stock charts on TipRanks)
Total capital to be invested in Refining stands at $896 million, including $488 million for reliability, safety, and environmental projects. Notably, growth capital worth $408 million will be allocated towards the refurbishment of the San Francisco Refinery in Rodeo, California, which is expected to be completed in early 2024.
Markedly, post-completion, the facility is expected to have around 50,000 barrels per day, or 800 million gallons per year, of renewable fuel production capacity. The conversion is likely to reduce emissions from the facility and produce lower-carbon transportation fuels.
The remaining capital is planned to be used for the continued development and enhancement of the company’s retail network, including energy transition opportunities, along with funding of digital transformation projects.
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CEO Comments
The CEO of Phillips 66, Greg Garland, said, “The 2022 capital program demonstrates our commitment to disciplined capital allocation. Our plan for sustaining capital reflects our ongoing focus on operating excellence to ensure the safety and reliability of our operations.”
“We are also investing in returns-focused growth opportunities, including projects that will help us advance a lower-carbon future. In addition to a disciplined capital program, we will continue to prioritize debt reduction and returns to shareholders,” Garland added.
Wall Street’s Take
Recently, J.P. Morgan analyst Phil Gresh upgraded Phillips 66 to a Buy from a Hold and increased the price target to $93 from $83.
According to Gresh, the stock has historically been a premium multiple story in Refining on the back of strong execution, a well-diversified portfolio, and balanced capital allocation.
Following a challenging 2020-2021, the analyst believes that now the company’s relative margin performance should close the gap.
The rest of the Street is cautiously optimistic about the stock, with a Moderate Buy consensus rating based on 8 Buys and 3 Holds. The average Phillips 66 price target of $93 implies 28.24% upside potential. Shares have gained 7.9% over the past year.
Bloggers Weigh In
TipRanks data shows that financial blogger opinions are 91% Bullish on PSX, compared to a sector average of 68%.
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