Divestiture of Non-Core Assets at Phillips 66

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Conoco and Phillips 66 announced on November 18, 2001 that their boards of directors had unanimously approved a definitive agreement for a "merger of equals". The merged company, ConocoPhillips, became the third-largest integrated U.S. energy company based on market capitalization and oil and gas reserves and production. On November 11, 2011 ConocoPhillips announced that Phillips 66 would be the name of a new independent oil and gasoline refining and marketing firm, created as ConocoPhillips split into two companies. ConocoPhillips kept the current name of the company and concentrated on oil exploration and production side while Phillips 66 included refining, marketing, midstream, and chemical portions of the company. Photo: Hugh Pickens all rights reserved.

by Hugh Pickens, Ponca City Oklahoma

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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.

Major Sections of this report on Phillips 66 include:

Safety, Environment, Legal <html>
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Corporate

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Strategic and Financial

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Business Segments

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Stock Market

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Reference

Refining Business Segment

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Increasing Profitability in Refining Business Segment

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Detailed Look at Ponca City Refinery

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Other Phillips Refineries

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Other Locations


Contents

Master Index of Articles about Phillips 66

File:Refinery crane.jpg
The 587 foot tall Mammoet PTC 140 crane, seen here from North First Street, towers over the Refinery Complex in Ponca City. The supercrane was used to move two new 232 ton coker reactor units within the refinery on September 29, 2013. Phillips was willing to invest $70 million in the two new coker reactor units because the Ponca City Refinery is one of the best run, safest, and most profitable of Phillips' fifteen worldwide refineries and Garland wants the refinery in Ponca City to continue to run smoothly and profitably. This photograph of the supercrane in Ponca City was taken from almost two miles away from the crane. Photo: Hugh Pickens All Rights Reserved.
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Hugh Pickens, an analyst who closely follows Phillips 66, speaks with Phillips CEO Greg Garland (right) about the disposition of the North Tower, South Tower, and Research West at Phillips' Ponca City Refinery after Garland's speech to the Bartlesville Chamber of Commerce on August 13, 2014.

by Hugh Pickens, Ponca City Oklahoma

<html>
</html>

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.

Major Sections of this report on Phillips 66 include:

Safety, Environment, Legal <html>
</html>

Corporate

<html>
</html>

Strategic and Financial

<html>
</html>

Business Segments

<html>
</html>

Stock Market

<html>
</html>

Reference

Refining Business Segment

<html>
</html>

Increasing Profitability in Refining Business Segment

<html>
</html>

Detailed Look at Ponca City Refinery

<html>
</html>

Other Phillips Refineries

<html>
</html>

Other Locations


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

April 4, 2017: Phillips 66 Proposes to Close Warwick Office in UK Eliminating 59 Positions

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Phillips 66 Proposes to Close Warwick Office in UK Eliminating 59 Positions. Phillips 66 confirmed that there are proposals to shut down its 120-employee office in Warwick in the UK. It is currently unknown what will happen to the 120 jobs people hold at the office. Phillips 66's logo was displayed on Warwick Castle during the Carols at the Castle event in December, where A warm-up of Christmas songs were also provided by the Phillips 66 choir, as part of the company's community involvement. Photo: Warwick Courier

The Warwick Courier reported on April 4, 2017 that Phillips 66 confirmed that there are proposals to shut down its 120-employee office in Warwick in the UK. It is currently unknown what will happen to the 120 jobs people hold at the office but it is believed the organisation will try and relocate some of the jobs to its other two sites in London or at its Humber Refinery in Lincolnshire.

“Phillips 66 is committed to its future in the UK, as demonstrated by continued investment," said a spokesman for Phillips 66. "The UK businesses recently initiated a review to ensure it was well-positioned for a sustainable future in a challenging and ever-evolving market. The review has resulted in a proposed repositioning of our business. The proposal streamlines our support functions and consolidates the business into two core locations: the Humber Refinery, the heart of our UK business, and London, the commercial and trading centre of the UK. As a result it is proposed that our Warwick office will be closing first quarter 2018. The proposed repositioning is subject to the completion of the necessary Information and Consultation processes. It is proposed that the majority of our Warwick-based Marketing roles, with some exceptions, will re-locate to our Aldersgate office in London. In total 116 Warwick-based employees are impacted by this proposed repositioning. Whilst we hope to be able to relocate a significant number of employees from Warwick and have them continue their roles from our London or Humber office, we do recognise the challenge of this proposed change. We expect that a number of employees will elect not to relocate, and we anticipate 59 roles (of which 12 of these are currently vacant) will be eliminated across the three locations as a result of the proposed repositioning."[1]

September 9, 2016: Phillips 66 Finalizes Sale of Whitegate Refinery to Irving Oil

PR Newswire reported on Septmber 9, 2016 that Irving Oil has assumed full ownership of Whitegate Refinery and will continue full operation of the facility, including maintaining its existing workforce. "Whitegate is a great facility, and is a good fit for our company," says Arthur Irving, Chairman of Irving Oil. "We are happy to welcome the Whitegate team to Irving Oil and we are looking forward to working together."[2]

August 3, 2016: Phillips 66 Finds Buyer for Whitegate Refinery

The Irish Independent reported on August 3, 2016 that after trying to sell their Ireland-based Whitegate Refinery for the past several years, Philips 66 has reached an agreement to sell the refinery to Irving Oil for an undisclosed sum. Irving Oil, which operates the largest oil refinery in Canada, said it views Whitegate as a key element in expanding their business in Europe. The processing facility is capable of handling 75,000 barrels of crude oil per day. “We are pleased to have signed an agreement to purchase the Whitegate refinery,” said Irving Oil chairman, Arthur Irving. “It’s a good day for our company and we’re looking forward to welcoming the Whitegate team to Irving Oil.” Irving Oil said it had been deeply impressed by Whitegate and its Irish workforce. The Canadian company said that the Irish plant had an operational track record that made it a perfect fit for their future development plans. Sale conditions are now being concluded and the deal is set to be formally closed by the year’s third quarter. Irving said it intends to continue full operation of the Whitegate plant and the maintenance of its existing workforce.[3]

July 29, 2016: Phillips is Still in the Process of Selling the Whitegate Refinery

Greg Garland told analysts during the 2016 second quarter earnings conference call on July 29, 2016 that "we're still in the process on Whitegate, I would tell you we're pleased with the progress to this point. And hopefully, as I said, I think on last quarter, our intention is we get this closed this year."[4]

July 29, 2016: After the Whitegate Sale, Phillips Doesn't Plan to Sell Any Other Refineries

Greg Garland told analysts during the 2016 second quarter earnings conference call on July 29, 2016 that "as we come to the end of the Whitegate process, I don't think there is a lot more in portfolio that we have on deck, certainly for 2016 or thinking about it into 2017."[5]

May 21, 2016: Phillips 66 Moves Closer to Sale of Whitegate Refinery in Ireland

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Phillips 66 Moves Closer to Sale of Whitegate Refinery in Ireland. Phillips 66 could announce the sale of Whitegate oil refinery as early as next week with negotiations believed to be at an advanced stage. Ireland's only refinery has been on the market since November 2015 when its current owners Phillips 66 (P66) took the decision to again seek a buyer after earlier attempts to offload it in 2014 failed.[6] Courtesy of ConocoPhillips

The Irish Examiner reported on May 21, 2016 that Phillips 66 could announce the sale of Whitegate oil refinery as early as next week with negotiations believed to be at an advanced stage. Ireland's only refinery has been on the market since November 2015 when its current owners Phillips 66 (P66) took the decision to again seek a buyer after earlier attempts to offload it in 2014 failed. According to sources, a preferred bidder has been identified from a shortlist of interested companies which included private equity firm ArcLight Capital, Irving Oil, UK-based PTFPlusOne and Valero Energy. Canadian family-owned Irving Oil are understood to be the frontrunners in the sales process. Irving is a gas and oil processing, transporting and marketing company headquartered in Saint John with additional operations in the US state of New Hampshire. The Canadian firm was one of the companies touted as a potential buyer for Whitegate in 2007.

Whitegate reported losses in 2014 of more than $280m representing a fivefold increase on the $58m loss it made the previous year. Phillips 66 reduced the value of the plant and equipment resulting in an impairment cost of $127.6m in addition to its $146m operating loss.[7]

April 29, 2016: Phillips Is Not Actively Seeking to Divest Santa Maria, Wilmington, and Rodeo Refineries in California

In answer to a question from Neil Mehta, Kevin Mitchell told analysts during the 2016 first quarter earnings conference call on April 29, 2016 that although Phillips has talked about divestitureof its California refineries in the past at this point Phillips will just hold on to them at this point in time. "California we talked about a lot the hold cost or the option value is really not much there is not a lot of capital in front of us in California last few year margins have been very good in California so it's a net cash contributor," said Mitchell. "And you think about could you sell asset probably but could we did good value for it, probably not and so I think we just hold it at this point in time they're good assets, they're probably mid back in terms of where they set their cost structure, but given the option value to keep, I think it'll just hang on."[8]

April 29, 2016: Phillips Expects to Conclude the Divestiture Process with Whitegate Refinery This Year

In answer to a question from Neil Mehta, Kevin Mitchell told analysts during the 2016 first quarter earnings conference call on April 29, 2016 that Phillips has a process underway for divestiture at Whitegate and we expect that will conclude this year.[9]

April 21, 2016: Irish Fuel Supply 'Vulnerable' if Future of Whitegate Refinery is Not Secured

The Irish Examiner reported on April 21, 2016 that Ireland’s fuel supply could be “extremely vulnerable” and the country left depending on the goodwill of the UK if British voters choose to leave the European Union and the future of Whitegate oil refinery isn’t secured. Should the UK vote to leave the EU in the June 23 referendum it would no longer be bound by EU energy regulations which require member countries to share resources in certain circumstances. “In Ireland, 80% of the petrol we use is imported. Of these imports, 70% come from the UK meaning that the UK supplies us with well over half of the petrol we consume. The figures are similar if we take the heavier gas/diesel oil, of which 50% of our final consumption is imported from the UK," said Fine Gael MEP Seán Kelly. “In the event of a crisis and [the UK wasn’t] in the European Union, we would be in a very bad position because we’d be dependent on their goodwill more than any obligations on them. So it’s fraught with uncertainty at the moment,” Kelly said. The refinery’s future remains up in the air after its US owner Phillips 66 put it back on the market in November 2015. Phillips 66’s contractual obligation with the state to operate the refinery comes to an end days after voters go to the polls in Britain. Kelly said the refinery must be a priority for the next government, adding that it is “without doubt of key strategic importance to the security and reliability of the Ireland’s fuel supply”.[10]

February 2, 2016: Port Chairman Says Whitegate Refinery of ‘Strategic Energy Importance’ to Ireland

The Irish Examiner reported on February 2, 2016 that Port of Cork chairman John Mullins said the Port of Cork is partially “insulated” from future developments at Whitegate oil refinery but has a clear preference for it to remain operational. “The worst case scenario if it closes is that it will be converted into strategic storage and actually a place where refined product will be shipped from,” said Mullins. “Our view as a port board and company is we believe [Whitegate] is of strategic energy importance; not just to the south of Ireland but actually to the totality of Ireland and our thoughts are with the workers at the moment and hopefully this will get clarified very soon." The port’s chairman also criticised the extent of the support Whitegate had received to date. Mullins called on the Government to offer additional support, adding: “So far all you’ve heard is that it is of strategic importance; that’s not saying it’s of strategic necessity.”[11]

December 19, 2015: Deputy David Stanton Raises Issue of Whitegate Refinery in Ireland's Dáil

The Independent of Ireland reported on December 19, 2015 that Cork East Fine Gael Deputy David Stanton raised the issue of the future of Whitegate Refinery in the Dáil (Ireland's lower house of the legislature). tanton said the refinery supplies 40% of Ireland's transport needs and sells on a wholesale, rather than retail, basis. "I have been told it turns around about 200 lorries per day, a figure which has risen to well over 300 at times of peak demand. If it were to close, it would be a major shock to the State, and that is why it is of strategic importance," said Deputy Stanton. "The fuel, as the Minister knows, is used for transport, industry, agriculture, shipping, food production, heating, hospitals, haulage, public transport and so on. The refinery also produces liquid petroleum gas for a local company, Calor Gas." All other fuel is imported, mainly from the UK, he said. The refinery acts as a competitor to the importation of fuel. "No other country in Europe has allowed all of its refining capacity to be closed, and that should not happen in Ireland," he said. "I ask the Minister and the current and future Governments to support the continuation of refining in Whitegate and to continue the positive engagement that has occurred to date with the owners, any future owners, the workforce and local management."

Stanton said over 300 workers are employed locally in the refinery, including 157 staff and 130 contractors. "I have been told that 600 ancillary jobs are dependent on the refinery, which again shows its important. It accounts for about half of the shipping tonnage in Cork Harbour," Stanton added.

In response Energy Minister Alex White said Ireland has a single refinery, at Whitegate. "Refining in Europe has been struggling since the onset of the recession in 2008," he said. "The local management of Phillips 66 informed the Department on 12 October last of the company's intention to put the refinery and marketing business up for sale. Any sale of the refinery would be a commercial matter between Phillips 66 and a potential purchaser. While this process is under way, Whitegate will continue to operate on a business-as-usual basis. Whitegate's management has repeatedly indicated that it is committed to honouring the 15-year agreement under the 2001 sale and purchase agreement. This commitment is not, and would not be, affected by the planned sale."[12][13]

November 25, 2015: Irish Government Says Continued Operation of Whitegate Refinery is Central to Country's Energy Security

The Irish Examiner reported on November 25, 2015 that the Irish government considers the continued operation of the Whitegate Refinery as central to the country’s energy security and economic prospects. “The Government views the continued operation of the Whitegate Refinery on a commercial basis as highly desirable from an energy security and economic perspective,” said a spokesperson for the Department of Communications, Energy, and Natural Resources. “Security of supply remains a fundamental tenet of our energy policy. The minister [Alex White] is in contact with his ministerial colleagues to discuss the importance of continued operations at the facility.” Government and opposition TDs have expressed their desire for the State to do all it can to ensure the refinery remains operational in order to safeguard the country’s economic interests as well as the jobs supported by the refinery.

However, the State does not have the skills required to operate the refinery should a private bidder fail to materialise, according to Fianna Fáil TD for Cork South-Central, Michael McGrath. “The preference has to be for a company that has the international expertise in the area to come in and carve out a viable future for the refinery," said McGrath. "The State doesn’t have any expertise or track record in recent years in running such a refinery so, at most, the State’s involvement would be a strategic partner in a joint venture arrangement with a private company. I think either of those options for ownership, by a private company, or joint venture involving the State and a private company from the energy field, would need to be pursued in the interests of energy security.”[14]

November 24, 2015: Whitegate Refinery Back on the Market

The Irish Examiner reported on November 24, 2015 that Phillips 66 has decided to seek a buyer for its 71,000 barrel-per-day Whitegate Refinery and associated wholesale marketing business in Ireland after pulling the plug on its sales process in early 2014 having failed to find a buyer. “Phillips 66 intends to continue the business as usual, in compliance with the terms of agreements between Phillips 66 and the Irish Government, during the marketing process which is expected to last for several months,” a Phillips 66 spokesperson said. The company is contracted to operate the refinery until July 2016. The confirmation that the refinery is back on the market comes as latest accounts filed with the Companies Registration Office show that losses at the Whitegate facility soared $282.18m in 2014 with an impairment cost contributing significantly to the refinery’s overall losses.. Phillips 66 reduced the value of the plant and equipment resulting in an impairment cost of $127.6m.

Fine Gael TD Jerry Buttimer said it was a concern that there may not be a suitable bidder for the facility given the scale of the losses and Phillip 66’s previous failure to offload the refinery and said he will raise the issue with Environment Minister Alex White to ensure the Government’s involvement in the process while everything needs to be done to safeguard the 300 or so jobs at the refinery. Fianna Fáil finance spokesperson Michael McGrath called on the Government to engage directly with Phillips 66 to determine the possibility of “carving out” a joint venture with a private company.[15]

October 28, 2015: County Councillor Calls for Irish Government to Purchase or Subsidize Phillips 66's Whitegate Refinery

The Evening Echo reported on October 28, 2015 that calls are now being made for the Government to step in and purchase Whitegate Refinery – or at least heavily subsidise it – in order to safeguard hundreds of jobs and an asset worth €100m to the local economy. Sinn Fein county councillor and candidate for Cork East in the forthcoming General Election, Pat Buckley, said the news that the refinery could close was “extremely concerning and a potential disaster for Whitegate, East Cork, and the country as a whole”, adding that it of the highest national importance that it now be purchased by the Government. “The refinery contributes €100 million directly into the local economy which is a huge benefit to the whole Cork Harbour area. It also contributes at least 600 spin-off jobs and accounts for half the shipping tonnage in Cork Harbour. If this refinery is not sold and as a possible result ceases to operate after July 2016, Ireland will lose another vital asset. There will be massive implications. We need fuel that is secure, sustainable and affordable for Ireland.”[16]

September 10, 2015: PDVSA Appeals Phillips 66's Right To Buy Stake In Sweeny Refinery Unit

Law360 reported on September 10, 2015 that Venezuelan state-owned oil company Petroleos de Venezuela SA (PDVSA ) plans to appeal after a New York federal judge upheld ConocoPhillips' acquisition of its 50 percent stake in a coking unit at a Texas refinery, setting the stage for the latest round in the long-running dispute.[17]

September 8, 2015: Judge Upholds Phillips 66 As Sole Owner of Sweeny Refinery

Retuers reported on September 8, 2015 that a federal court in New York has upheld a ruling granting U.S. oil and gas company ConocoPhillips sole ownership of a unit at the Sweeny, Texas refinery, ending a long-running dispute over the asset with Venezuela's PDVSA. U.S. District Judge Alison Nathan, in a decision signed last week, wrote that PDVSA's appeal was baseless and confirmed Conoco was the sole owner of the unit, which processes heavy crude oil. A spokesman for Conoco said litigation regarding refining assets was most likely transferred to Phillips 66, which was spun off from Conoco.

Conoco and PDVSA formed a joint venture in the late 1990s to run the refining unit. But they went to arbitration before the ICC in 2010 after crude supply interruptions that triggered a contract provision dissolving the pact. Under the terms of the contract, Conoco paid nothing for PDVSA's stake. The breakup clause in the contract said Conoco would gain the stake free of charge if PDVSA's dividends exceeded its capital contributions. Its dividends were $1.1 billion, while its capital contribution was about $270 million, the decision says. Conoco was also obligated to assume PDVSA's debt, which was about $195 million.[18]

July 16, 2015: Irish Government ‘Powerless’ to Secure Whitegate Future

Peter O'Dwyer reported in the Irish Examiner on July 16, 2015 that the future of Whitegate Refinery will be decided solely on a commercial basis by Phillips 66 and the decision is beyond its control of the Irish government since the State offloaded the facility in 2001. “Under the sale and purchase agreement made at that time, commercial decisions beyond July 2016 are a matter for the company who operate in a fully liberalised market,” said a spokesperson for the Department of Communications, Energy and Natural Resources. There have been five meetings between sitting energy ministers and Phillips 66 over the past two years. The most recent of these meetings took place in April 2015, according to the department which added that its officials remain in ongoing contact with Phillips 66’s management team. A spokesperson for the Department of Communications, Energy and Natural Resources said the Government’s preference is for refining to continue after July 2016 when Phillips 66’s obligation expires.[19]

July 15, 2015: Whitegate Refinery Lost $53 million in 2013, “Asset will be Challenged”

Peter O'Dwyer reported in the Irish Examiner on July 15, 2015 that accounts filed for the refinery with the Companies Registration Office (CRO) show Phillips Whitegate Refinery had a pre-tax loss of $53.37m (€48.47m) in 2013. The directors of the company attributed the loss to a difficult economic climate and competitive environment in the European refining industry which they predicted was likely to persist.

The news that Phillips 66 is still considering selling the refinery spurred local political reaction with Independent councillor Noel Collins calling for a taskforce to be set up to ensure its future. Port of Cork chairman John Mullins sought to downplay concerns of the potential impact of any change of ownership. “I think it’s been on and off the market for many years,” said Mr Mullins. “Our view on it from a port point of view... is that Whitegate supplies 30% of oil products right around the region and that’s not going to change overnight, no matter what happens to the ownership of Phillips 66.” The former Bord Gáis chief executive added that “whatever happens” it is important that the refinery stays open and continues to function given its importance to the oil value chain in the south of the country.

The Irish Petroleum Industry Association (IPIA) says it is broadly in favor of the Government’s preference to maintain refinery capacity in the country but added that their support was not without condition. “About 60% of Ireland’s energy requirement is from oil,” said a spokesperson for the IPIA. “The Irish Petroleum Industry Association works with the State to protect security of supply of oil. We are therefore broadly supportive of the Government’s preference in favour of maintaining refinery capacity in Ireland as it would give Ireland extra protection in some circumstances. It does of course depend on how we do this and what the cost is.”[20]

July 14, 2015: Whitegate Refinery's Future is Uncertain Past July 2016 But Phillips is Still Trying to Sell the Refinery

Peter O'Dwyer reported in the Irish Examiner on July 15, 2015 that the potential sale of Ireland's only oil refinery in Whitegate is back on the table despite Phillips 66 appearing to pull the plug on the sales process last year. US multinational energy company Phillips 66 has confirmed to the Irish Examiner that it is considering selling the refinery, which employs 300 people locally, adding that, longer-term, it expects that the “asset will be challenged”. There is a contractual obligation between the Government and Phillips 66 to operate the refinery until July, 2016 but Phillips has declined to outline any future plans for the refinery post the expiry of the obligation other than to reiterate that it is evaluating its options which include possibly offloading the refinery or transforming it into an import terminal. Phillips 66 discontinued the marketing of the refinery last year having attracted “limited to negative interest” from potential suitors, its chief executive, Greg Garland said at the time.

"Whitegate’s future has been shrouded in uncertainty for some time and little progress has been made in terms of securing its longer-term future," writes O'Dwyer. Fianna Fáil leader Micheál Martin accused the Government on July 13, 2015 of failing to afford the refinery the appropriate level of urgency required to safeguard its future and called on Energy Minister Alex White to engage with the company again to create a blueprint that would give certainty to the situation. “I would encourage the Government to take a hands-on approach in relation to the refinery,” said Mr Martin. “It is of strategic importance to the region and to the country, and every effort should be made to retain it as an oil refinery.” His comments were echoed by party colleague Michael McGrath, who said he is “extremely fearful for the future of the refinery” once the obligation concludes, adding that its closure would have a devastating impact on employment.[21]

April 13, 2015: Oppenheimer Says Phillips May Divest Refining Assets in the Future

Anthony Sanfilippo wrote at Benzinga on April 13, 2015 that Oppenheimer issued a company update on Phillips 66 after analysts met with company management and that Oppenheimer believes that Phillips 66 may divest refining assets in the future while increasing their leverage to fund future growth. Oppenheimer Analysts Fadel Gheit and Luis Amadeo wrote, “PSX has a more favorable view on midstream, which is relatively stable compared to refining and generates returns on capital in the 10-12 percent range vs. 8-10 percent for refining. In the long term, PSX believes that refining margins will be flat and challenged. In the near term, DCP is facing several headwinds from the decline in commodity prices, the downgrade of its credit rating, and a capital-constrained partner. PSX would like to inject capital into DCP but doesn't want to have to consolidate the debt.”[22]

February 16, 2015: Phillips 66 Sells Interests in Three Pipeline Systems to Phillips 66 Partners

Reuters reported on February 16, 2015 that Phillips 66 is sellings interests in three pipeline systems to Phillips 66 Partners, a master limited partnership formed by Phillips 66, for a total of $1.01 billion. The deal includes two natural gas pipeline systems based in Texas, as well as a 19.46 percent interest in the Explorer Pipeline Company, which operates a pipeline carrying refined products between the Gulf Coast and the Midwest in the United States.[23]

February 9, 2015: Phillips Completes Sale of Bantry Bay Oil Terminal in West Cork, Ireland

Houston Business Journal reported on February 9, 2015 that Phillips 66 has completed the sale of the Bantry Bay Oil Terminal in West Cork, Ireland to a new Houston energy company founded last year by the Warburg Pincus LLC private equity firm. "We are pleased to have acquired the Bantry Bay Terminal, which serves as a critical commercial link in northwest Europe for crude and refined products," Zenith CEO Jeffrey Armstrong said in a prepared statement. "The terminal's attractive deepwater location on Bantry Bay enables our customers to take advantage of many trade opportunities, and the terminal will remain an important part of Ireland's strategic petroleum reserve." The terminal, located on Whiddy Island in Bantry Bay, has a storage capacity of more than 8 million barrels and is one of the largest in Europe. Zenith said it intends to continue operating the terminal on a commercial basis.[24]

February 9, 2015: Forbes Says Delta Made a Mistake Buying the Trainer Refinery from Phillips 66

Christopher Helman wrote in Forbes Magazine on February 9, 2015 that two-and-a-half years after Delta Airlines decision to buy the Trainer Refinery from Phillips 66 Delta has sunk $420 million of capital into the refinery, which has generated roughly $100 million of losses. "This deal is even more idiotic now than it was then,” says Ed Hirs. Buying a refinery just isn’t a big hedge against fuel prices because the real cost of fuel is the oil, not the refining. “It’s as wrongheaded as buying a bakery to hedge against rising bread prices,” says Hirs. “If you really want to hedge your bread price, then buy a wheat field. Likewise, if these guys want to hedge fuel prices what they should buy are oilfields–which are on sale right now.” Delta would have been better off just waiting for oil prices to fall and then locking in lower fuel prices in the futures market. Instead it’s stuck with an expensive albatross.

Delta still tries to put a good face on Trainer. After sinking some $40 million more into the plant in 2014, Delta said in a December presentation that Trainer was profitable in the fourth quarter because fuel prices did not fall quite as fast as crude oil.[25]

December 5, 2015: Chevron Phillips Chemical Completes Sale of its Ryton® PPS Business to Solvay

Businesswire reported on December 5, 2015 that Chevron Phillips Chemical Company has completed the sale of its Ryton® polyphenylene sulfide (PPS) business to Solvay’s Global Business Unit (GBU) Specialty Polymers (Solvay) for $220 million. As part of the transaction, Solvay purchased the Ryton® PPS unit in Chevron Phillips Chemical’s plant in Borger, Texas; the pilot plant along with the PPS research and development assets in Bartlesville, Oklahoma; the compounding plant in Kallo-Beveren, Belgium; and certain intellectual property relating to the Ryton® PPS business. While the Ryton® PPS business is a better strategic fit for Solvay, we remain committed to our sites in Borger, Texas and Bartlesville, Oklahoma,” said Ron Corn, senior vice president of specialties, aromatics and styrenics for Chevron Phillips Chemical. Chevron Phillips Chemical recently announced plans to build a new polyethylene pilot plant at its research center in Bartlesville.[26]

November 12, 2014: Phillips to Sell Maleka Refinery for $635 Million

FuelFix reported on November 12, 2014 that Phillips has made a deal to sell its 47-percent stake in a Malaysian refinery for $635 million in cash that is expected to close at the end of 2014. “This divestiture allows us to redeploy resources to more strategic areas of our business,” said Larry Ziemba, executive vice president of refining for Phillips 66, in a written statement. Dean Acosta, a spokesman for Phillips 66, said the firm won’t have a refining presence in Asia after the deal closes. “We continually evaluate the assets in our portfolio to identify opportunities to significantly enhance returns,” Acosta said in an email. “We do that through portfolio management as well as improving margins on our current assets.”[27]

October 29, 2014: Sale of Maleka Refinery is an Ongoing Process

Greg Garland told analysts during the third quarter earnings conference call on October 29, 2014 that the sale of the Melaka Refinery is an ongoing process. "We have an ongoing process at Melaka. And I think our expectation is certainly end of this year, first quarter next year, that we'll complete that process."[28]

October 29, 2014: Sale of Whitegate Refinery is a Failed Process

Greg Garland told analysts during the third quarter earnings conference call on October 29, 2014 that the sale of the Whitegate Refinery is a failed process. "Whitegate, really a failed process. No interest in someone buying the Whitegate Refinery, so that asset is essentially off the market for now."[29]

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.[30]

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.[31]

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.[32]

February 14, 2014: Garland Says Phillips Has Gotten Very Good at Selling the Good Things, Needs to Get Very Good at Selling the Not-So-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."[33]

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.[34]

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.[35][36]

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."[37]

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.”[38]

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."[39]

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."[40]

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."[41]

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."[42]

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.[43]

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.[44]

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.[45]

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."[46]

"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."[47]

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."[48]

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 Mineraloelraf?nerie 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.[49][50]

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.[51][52]

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."[53]

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."[54]

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.[55]

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.[56] “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.”[57]

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."[58]

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

File:Wilmingtonrefinery.jpg
California Refineries are in Lower Performing Part of Refinery Portfolio and Must Improve. 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."[59] Photo of Wilmington Refinery by unzarjones Flicker Creative Commons Attribution-NonCommercial 2.0 Generic (CC BY-NC 2.0)

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."[60]

"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."[61]

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."[62]

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.[63]

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.[64]

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."[65]

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."[66]

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."[67]

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."[68][69]

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

File:Alliancerefineryflooding.jpg
Phillips Won't Sell Alliance Refinery. 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)

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.[70]

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

Reuters reported on June 13, 2012 that Delta Airlines is set to close its deal to buy Phillips 66's Trainer Refinery on June 22, allowing Delta to begin a long-delayed maintenance overhaul in early July. A plant-wide turnaround lasting 40 to 50 days is expected to begin after July 4, allowing the idled plant to resume producing fuel. The major maintenance, which is required every five years, was originally due in the spring of 2011, but had been deferred until the plant was shut later that year. Delta expects to reconfigure parts of the refinery to maximizes jet fuel production. About 175 out of the 220 hourly workers are expected to return to the plant, with the remainder either retiring, transferring or getting other employment.[71]

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.[72]

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."[73]

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.[74] 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.[75]

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."[76]

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.[77]

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.[78]

May 1, 2012: Phillips 66 Sells Trainer Refinery

File:Trainerrefinery.jpg
Phillips sold Trainer Refinery in Trainer, Pennsylvania to Delta Airlines in June, 2012. Phillips 66 issued a press release on May 1, 2012 announcing that Phillips 66 and Monroe Energy LLC have signed a purchase and sales agreement for Monroe Energy LLC, a subsidiary of Delta Air Lines, to purchase the Trainer Refinery and associated terminal and pipeline assets for $180 million. The purchase price does not include the value of existing inventories. The transaction is expected to close in the first half of 2012.[79] Photo by Phillips 66

Phillips 66 issued a press release on May 1, 2012 announcing that Phillips 66 and Monroe Energy LLC have signed a purchase and sales agreement for Monroe Energy LLC, a subsidiary of Delta Air Lines, to purchase the Trainer Refinery and associated terminal and pipeline assets for $180 million. The purchase price does not include the value of existing inventories. The transaction is expected to close in the first half of 2012. Phillips 66 also has entered into multi-year agreements with Monroe to supply jet fuel to Monroe in other regions of the country while Phillips 66 will purchase gasoline and other refined products from Monroe at the Trainer Refinery and local terminals.[80]

Critics of Delta's purchase of the refinery have questioned the wisdom of Delta trying to run a refinery in the Northeast. Ed Hirs, a professor of energy economics at the University of Houston, said hedging fuel costs through options can accomplish very much the same agenda without being exposed to the risks of owning a refinery.[81]

Reuters reported on April 9, 2012 that Phillips 66 continue to shore up its refining portfolio and has two refineries up for sale - Trainer and Alliance in Louisiana. Sources familiar with the sales process said Delta Airlines is considering a bid for the Trainer refinery, idled at the end of September 2011, and is in "very critical" negotiations with ConocoPhillips. Reuters also reports that there may be other actions affecting its portfolio.[82]

Andrew Maykuth wrote in the Philadelphia Inquirer that a bid by Delta Airlines to buy the idled Phillips 66 refinery in Trainer to satisfy its enormous thirst for jet fuel appears to be gaining momentum. "Sources close to negotiations believe that Delta Air Lines has emerged as the clear favorite for the idle plant," says Tom Kloza, publisher of Oil Price Information Service. "The action certainly implies that the Trainer refinery will be restarted in the second half of 2012, and perhaps as early as July or August." Delta's interest in buying a business that an experienced oil company wants to jettison has raised eyebrows among some analysts, who believe that the airline has other means available to protect itself from fuel-price fluctuations without investing in manufacturing. "At one level it makes sense to better manage supply," said James Balaschak, a principal with Deloitte Consulting L.L.P. in Philadelphia. "On the other hand it is outside their core business. There are alternative strategies such a hedging which can be as effective."[83]

The Phiadelphia Inquirer reported on April 17, 2012 that US Senator Bob Casey Jr. (D., Pa.) and the Delaware County Council had urged ConocoPhillips to sell its refinery in Trainer to a buyer that would keep the refinery operating as a manufacturing facility rather than turn it into a fuel storage terminal and wrote to ConocoPhillips chief executive James Mulva to urge him to sell the plant to buyer that would operate it as a refinery, which would employ more people and require more investment than a fuel-storage facility.[84]

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."[85]

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."[86] 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."[87][88]

References

  1. ↑ Warwick Courier. "Jobs at risk as Phillips 66 propose to close Warwick office" April 4, 2017.
  2. ↑ PR Newswire. "Irving Oil Welcomes Whitegate to the Team" September 9, 2016.
  3. ↑ Irish Independent. "Canadian firm agrees deal for Cork-based Whitegate oil refinery" August 3, 2016.
  4. ↑ Seeking Alpha. "Phillips 66 Reports Second-Quarter Earnings of $496 Million or $0.93 Per Share" July 29, 2016.
  5. ↑ Seeking Alpha. "Phillips 66 Reports Second-Quarter Earnings of $496 Million or $0.93 Per Share" July 29, 2016.
  6. ↑ ConocoPhillips. "US Refining as of March 31, 2011"
  7. ↑ Irish Examiner. "Sale of Whitegate oil refinery moves closer" by Peter O'Dwyer. May 21, 2016.
  8. ↑ Seeking Alpha. "Phillips 66's (PSX) CEO Greg Garland on Q1 2016 Results - Earnings Call Transcript" April 29, 2016.
  9. ↑ Seeking Alpha. "Phillips 66's (PSX) CEO Greg Garland on Q1 2016 Results - Earnings Call Transcript" April 29, 2016.
  10. ↑ Irish Examiner. "Fuel supply ‘vulnerable’ in event of Brexit" by Peter O'Dwyer. April 21, 2016.
  11. ↑ Irish Examiner. "Whitegate oil refinery of ‘strategic energy importance’ to Ireland" by Peter O'Dwyer. February 2, 2016.
  12. ↑ The Independent. "Concern at proposed sale of Whitegate oil refinery" by Tim Ryan. December 19, 2015.
  13. ↑ Wikipedia. "Dáil Éireann" Retrieved December 20, 2015.
  14. ↑ Irish Examiner. "Securing Whitegate Refinery's future ‘highly desirable’ for Ireland's energy security and economic prospects" by Peter O'Dwyer. November 25, 2015.
  15. ↑ Irish Examiner. "Whitegate oil refinery back on the market after €263m loss" by Peter O'Dwyer. November 24, 2015.
  16. ↑ Evening Echo. "WHITEGATE REFINERY SALE WOULD DAMAGE LOCAL ECONOMY" October 28, 2015.
  17. ↑ Law360. "PDVSA Appeals Conoco's Right To Buy Stake In Refinery Unit" by Matt Sharp. September 10, 2015.
  18. ↑ Reuters. "U.S. judge upholds Conoco as sole owner of coker at Sweeny refinery" September 8, 2015.
  19. ↑ Irish Examiner. "Government ‘powerless’ to secure Whitegate future" by Peter O'Dwyer. July 15, 2015.
  20. ↑ Irish Examiner. "Loss-making refinery faces uncertain future: by Peter O'Dwyer. July 15, 2015.
  21. ↑ Irish Examiner. "Whitegate refinery sale is ‘still on’" by Peter O'Dwyer. July 15, 2015.
  22. ↑ Bezinga. "Oppenheimer: Phillips 66 Restructuring Could Boost Valuation, Share Repurchases Likely To Continue" by Anthony Sanfilippo. April 13, 2015.
  23. ↑ Reuters. "Phillips 66 Partners to expand Texas operations in $1 billion deal" February 16, 2015.
  24. ↑ Houston Business Journal. "New Houston energy company buys major oil terminal from Phillips 66" by Jordan Blum. February 9, 2015.
  25. ↑ Forbes Magazine. "How Cheap Oil Has Delta Air Lines Jet Fooled" by Christopher Helman. February 9, 2015.
  26. ↑ Businesswire. "Chevron Phillips Chemical Completes Sale of its Ryton® PPS Business to Solvay" December 5, 2015.
  27. ↑ FuelFix. "Phillips 66 to sell refining stake in Asia for $635M" November 12, 2014.
  28. ↑ Phillips 66. "PSX - Q3 2014 Phillips 66 Earnings Call" October 29, 2014.
  29. ↑ Phillips 66. "PSX - Q3 2014 Phillips 66 Earnings Call" October 29, 2014.
  30. ↑ Bloomberg. "Solvay Buys Chevron Phillips Car-Plastics Unit for $220 Million" by Andrew Noel. September 4, 2014.
  31. ↑ Irish Examiner. "Whiddy oil terminal sold to US company" by Claire O'Sullivan. Augusut 28, 2014.
  32. ↑ WSJ. "Trying to Sell an Oil Refinery in the British Isles? Good Luck" by Alison Sider. April 3, 2014.
  33. ↑ Credit Suisse Global Energy Summit. "Transcript of Phillips 66 Presentation" by Greg Garland. February 12, 2014
  34. ↑ Credit Suisse Global Energy Summit. "Transcript of Phillips 66 Presentation" by Greg Garland. February 12, 2014
  35. ↑ Oil and Gas Journal. "Phillips 66 Partners to acquire $700M in Phillips 66 assets" February 14, 2014.
  36. ↑ Daily Finance. "This Could Be a Big Buy for Phillips 66 Partners LP" by Aimee Duffy. February 14, 2014.
  37. ↑ Seeking Alpha. "Phillips 66's CEO Discusses Q4 2012 Results - Earnings Call Transcript" January 30, 2013.
  38. ↑ Phillips 66. "Berkshire Hathaway to acquire flow improver business from Phillips 66" December 30, 2013.
  39. ↑ The Street. "Buffett's Berkshire Plays Both Sides of Phillips 66 Breakup" by Antoine Gara. December 31, 2013.
  40. ↑ The Street. "Buffett's Berkshire Plays Both Sides of Phillips 66 Breakup" by Antoine Gara. December 31, 2013.
  41. ↑ Seeking Alpha. "Phillips 66's CEO Discusses Q3 2013 Results - Earnings Call Transcript" October 30, 2013.
  42. ↑ Seeking Alpha. "Phillips 66's CEO Discusses Q3 2013 Results - Earnings Call Transcript" October 30, 2013.
  43. ↑ Reuters. "Phillips 66 says buyers interested in Ireland refinery" September 12, 2013.
  44. ↑ Phillips 66 Partners. "Phillips 66 Partners Launches Initial Public Offering" July 15, 2013.
  45. ↑ Reuters. "UPDATE 1-Phillips 66 to sell Ireland's sole refinery" June 10, 2013.
  46. ↑ Reuters. "UPDATE 1-Phillips 66 to sell Ireland's sole refinery" June 10, 2013.
  47. ↑ Investor's Business Daily. "Exxon, Phillips 66, Chevron In Major Oil Asset Deals" by James Detar. June 11, 2012.
  48. ↑ Grimsby Telegraph. "Swiss firm to buy out plant" May 11, 2013.
  49. ↑ Hydrocarbon Processing. "Phillips 66 mulls sale of European, Asian refineries" by Alison Sider.
  50. ↑ Reuters. "UPDATE 1-Phillips 66 may shed some non-US refineries -executive" March 7, 2013.
  51. ↑ Hydrocarbon Processing. "Phillips 66 mulls sale of European, Asian refineries" by Alison Sider.
  52. ↑ Reuters. "UPDATE 1-Phillips 66 may shed some non-US refineries -executive" March 7, 2013.
  53. ↑ Reuters. "Phillips 66 mulling options for California refineries" by Kristen Hays.
  54. ↑ Reuters. "Phillips 66 mulling options for California refineries" by Kristen Hays.
  55. ↑ Reuters. "Phillips considers sale of Irish, Malaysian refining stakes" December 13, 2012.
  56. ↑ Marketwatch. "Phillips 66 down 3.3%; announces new entity" December 13, 2012.
  57. ↑ Phillips 66. "Phillips 66 Announces 2013 Capital Program and Intent to Form MLP" December 13, 2012.
  58. ↑ Reuters. "S&P rates Phillips 66 Co. 'BBB' with stable outlook" by Standard and Poor. December 3, 2012.
  59. ↑ Philips 66. "Phillips Third Quarter Earnings Conference" October 31, 2012
  60. ↑ Philips 66. "Phillips Third Quarter Earnings Conference" October 31, 2012
  61. ↑ Philips 66. "Phillips Third Quarter Earnings Conference" October 31, 2012
  62. ↑ Philips 66. "Phillips Third Quarter Earnings Conference" October 31, 2012
  63. ↑ TimesCall. "Phillips 66 to sell 432-acre campus in Louisville" by Alice Wallace. October 17, 2012.
  64. ↑ Sacramento Bee. "United Refining to buy Phillips 66 terminal" October 9, 2012.
  65. ↑ FuelFix. "Phillips 66 CEO says exports will ease U.S. refining challenges" September 19, 2012.
  66. ↑ FuelFix. "Phillips 66 CEO says exports will ease U.S. refining challenges" September 19, 2012.
  67. ↑ Phillips 66. "2012 Barclays CEO Energy-Power Conference" presented by Phillips CEO Greg Garland. September 5, 2012.
  68. ↑ Reuters. "Phillips 66 profit jumps 14 pct, shares up" by Kristin Hays. August 2, 2012
  69. ↑ Phillips 66. "Transcript for Phillips 66 second-quarter earnings call" August 1, 2012
  70. ↑ Reuters. "Phillips 66 profit jumps 14 pct, shares up" by Kristin Hays. August 2, 2012
  71. ↑ Reuters. "Delta set to close refinery deal, begin maintenance: sources" June 13, 2012.
  72. ↑ Barrons. "Wall Street Should Pump Up Phillips 66's P/E" by Andrew Bary. June 9, 2012.
  73. ↑ Phillips 66. "Greg Garland's 2012 Presentation to the Citi Global Energy Conference" June 5, 2012.
  74. ↑ Nasdaq. "Phillips 66 CEO: Louisiana Refinery Sale Decision to Come in Summer" by Ben Lefebre. June 5, 2012.
  75. ↑ Fox News. "Phillips 66 CEO Says Decision on Louisiana Refinery Will Come in Summer: June 5, 2012.
  76. ↑ Wall Street Journal. "Phillips 66 Rethinks Plan to Sell Louisiana Refinery" by Ben Lefebvre. June 7, 2012.
  77. ↑ Fox News. "Phillips 66 CEO Says Decision on Louisiana Refinery Will Come in Summer: June 5, 2012.
  78. ↑ Seeking Alpha. "ConocoPhillips And Phillips 66 Stand Apart From Peers" by Alen Good. Mary 23, 2012.
  79. ↑ ConocoPhillips. "US Refining as of March 31, 2011"
  80. ↑ MarketWatch. "Phillips 66 Sells Trainer, Pa., Refinery to Delta Air Lines" April 30, 2012.
  81. ↑ Forbes Magazine. "Delta Pulls The Trigger On Purchase Of Philly Refinery From Phillips 66" by Steve Schaefer. May 1, 2012.
  82. ↑ Reuters. "Conoco spinoff's CEO has no comment on Trainer sale" April 9, 2012.
  83. ↑ Philadelphia Inquirer. "Delta bid for Trainer refinery gaining momentum" by Andrew Maykuth. April 17, 2012.
  84. ↑ Philadelphia Inquirer. "Pols: Keep it as a refinery" April 19, 2012.
  85. ↑ Reuters. "Phillips 66 aims to run more shale oil" by Kristen Hays. May 1, 2012.
  86. ↑ Forbes Magazine. "As ConocoPhillips Spins Off Refining Assets, Think Twice Before Buying The New Phillips 66" by Christopher Helman. April 30, 2012.
  87. ↑ ConocoPhillips Final Transcript "ConocoPhillips Conference Call to Discuss its Pursuing Plan to Separate Into Two Stand-Alone, Publicly Traded Companies" July 14, 2011.
  88. ↑ ConocoPhillips. "Creating Two Leading Energy Companies" July 14, 2011.
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Master Index of Articles about Phillips 66

The North Tower and the South Tower, part of Phillips 66's Refinery Complex in Ponca City, contain over 250,000 square feet of Class A office space that is essentially unused. Research West contains another 230,000 square feet of unused Class A office space. Photo: Hugh Pickens
Ponca: A Core Asset. Phillips CEO Greg Garland told members of the Bartlesville Chamber of Commerce on August 27, 2013 that the refinery at Ponca is a 'core asset' of Phillips 66. The refinery in Ponca City "is making very good money for us," Garland told his Bartlesville audience. Garland added that he expects gas demands in the U.S. to decline by 20 percent in the next 10 years, but that demand for refined products in South America and Africa will more than offset that decline.

by Hugh Pickens, Ponca City Oklahoma

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