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08 02, 2012 by Fuel Fix
Newly independent refining corporation Phillips 66 is tying its success to North America’s growing bounty of crude, employing a bevy of transportation methods to free its refineries from higher-priced oil imports.
CEO Greg Garland said he’s looking to rail, trucks, pipelines and ships to access U.S. barrels stranded far from the company’s refineries – potentially pricey transportation that will improve margins in the long run.
“It’s a fundamental part of our strategy going forward,” Garland said in an interview. “We’re aggressively pursuing every angle we can.”
The company has reversed plans to sell its Gulf Coast Alliance refinery, forecasting that the price of the North American crude the Alliance plant processes will stay below that of overseas oil imports in coming years, Garland said.
ConocoPhillips began shopping the Louisiana refinery earlier this year, before spinning off Phillips 66 in April to form a stand-alone refining company.
In reporting its first financial results as an independent entity Wednesday, Phillips 66 said its second-quarter profit jumped 14 percent, boosted largely by stronger refining margins in the United States.
In addition to ConocoPhillips’ refineries, Phillips 66 also absorbed its fueling outlets, pipeline ventures and chemicals assets. ConocoPhillips now is an independent oil and gas exploration and production business.
Phillips 66 banked $1.2 billion in earnings, or $1.86 per share, during the quarter ending June 30. That compares with $1 billion, or $1.64 per share, for the same period in 2011, when the refining business operated as part of ConocoPhillips.
Revenue fell 10 percent to $47.8 billion.
“They are taking advantage of cheap domestic crudes,” said Jeff Dietert, a managing director for Simmons & Company International. “The outlook for profitability for the Alliance refinery is much better than a year ago.”
Dietert noted that Phillips 66 and other U.S. refiners stand to profit from a flurry of pipeline construction and remodels that will deliver crude produced from North American shale to refiners on the coasts.
Some coastal refineries, particularly those dependent on imported crude, have suffered from high oil prices in recent years. West Texas Intermediate crude, the domestic benchmark, is trading about $17 per barrel below the global Brent crude price.
‘Try to fix it first’
Garland said Phillips 66 is open to selling assets but declined to say which facilities might be candidates.
“To the extent that we can get advantaged crudes to those refineries, we can improve their performance,” Garland said. “It’s like any other asset in the portfolio. We will try to fix it first.”
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