PSX
#So let me take that and talk about them both.
I think that we've said, in terms of the capital spend at PSX, we've always been on the glide slope towards $3 billion.
There's no question our capital the last two years has been very high as we've tried to advance the midstream business and get PSXP to scale quickly.
That was a decision we took really kind end of 2012, coming into 2013.
When we think about share repurchase, we think about intrinsic value and as long as the shares are trading below intrinsic value, we're going to be in the market buying.
We're in the market every day buying.
Some days we buy more than others.
That's true.
And I'd say consistent with our guidance that we've been giving in 2016, we're going to be between $1 billion and $2 billion of share repurchases this year.
We haven't given outlook on that.
But I would say we'll probably be within that same range in terms of share repurchase for 2017.
Absolutely.
Yes, <UNK>, this is <UNK>.
So bear in mind that the almost $350 million of undistributed equity earnings, so that's reflected in the earnings number, but the distributions aren't coming back.
The bulk of that is in CPChem.
But you also see it at WRB JV, XL power lubes and then the several other smaller JVs.
Some of those, it's reflective of the investment that's taking place inside of those JVs that's consuming that cash.
Some of it, a portion is just a timing effect, the distributions aren't necessarily ratable.
So when you think about the $560 million of cash flow excluding working capital, if you were to add back the undisputed equity earnings to put it on a sort of consistent basis, that's just over $900 million of operating cash flow, which then lines up with what you'd expect from the earnings generated, given the environment.
We've always consistently said we'd never build a speculative frac.
I think our view is that NGLs will continue to grow but they're going to grow slower than what we thought two years ago.
And so I think that the decision to push the FID on frac two simply reflects that, <UNK>.
I think that's always something we look at every day in terms of the inorganic growth.
The other thing I would say is we think we still have a pretty good backlog of organic projects we can invest in around our own infrastructure, whether it's more terminals, butane blending, ethanol blending, more pipes.
I think that just around the portfolio we still have a really good backlog of investable opportunities for the MLP.
There's no question, when you think about the long-haul, third-party where their crude pipes or NGL pipes are fracs, I think those opportunities are probably diminished versus what we thought two years ago.
And, <UNK>, just to comment, we purchased additional small interest in Explorer pipeline as one of the opportunities we look at inorganic.
But that's a pipeline we've been ---+ it's in PSXP today, but predecessor to PSXP, <UNK>lips, we've been investors in that pipe for a long time, so it fits strategically.
But I think those are kinds of inorganic bolt-ons that we look at that say they can add value and they fit strategically with our overall footprint that PSX and PSXP.
Hi, <UNK>.
Yes, <UNK>, it's <UNK>.
So if you look back in history and you think about our spend, we anticipate about $2 billion a year of funding or purchases, if you will, at PSXP.
To the extent that those are PSX, it's a project, just what we do.
I think that's kind of to meet our target on distribution growth and our planned $1.1 billion of PSXP, you're kind of roughly in that $2 billion a year range of purchases.
So that will be a source that equity and debt financing that will finance that.
Yes.
I mean, the majority of ---+ we have a large backlog of organic that we're developing that would fit logically in the MLP.
So that's been the strong connection so far with smaller bolt-on outside inorganic.
But, yes, so the majority of that I think you can think about as PSX and ---+ but we're always looking at opportunities to add to the value through outside opportunities as well.
<UNK> ---+
Run rate EBITDA of $400 million at PSXP today.
We feel really good by end of 2018 being a run rate EBITDA of $1.1 billion.
We see a clear path to get there.
Don't see an issue at all in getting there.
So basically our major maintenance turnaround's still on schedule we planned.
These are relatively small unit turnarounds that just were able to defer.
They just move around sometimes on planning basis.
But the fundamental way that we go about the major turnaround planning is unchanged.
So I think our guidance where we typically get to on turnaround expense is pretty consistent year on year.
Flexes a little depending on which refinery, but we really haven't changed our philosophy on turnaround expenditures and timing of those.
Hi, <UNK>.
Well, it's several projects in midstream beyond frac two that we're looking at.
I also mentioned the project financing of DAPL Epcot.
And so that's going to be a very classic type project finance and so our share of that would be somewhere around $600 million-ish, I would say.
Probably most of it would be in 2016, maybe a little bit spilled over in 2017.
But you just kind of sum all that up and that's really how you get to a $3.3 billion level.
And frankly, we're still working the numbers and I suspect it's going to come in below $3.3 billion when we give you guidance in a couple months.
You're right.
We've had a lot of build of inventory in pad one in New York harbor.
There's been an incentive on Europe to continue to run.
I think that reflects storage economics right now.
But that is a place that needs to rebalance.
Somewhere between the US East Coast and some of the European refineries, we still look at that, say there needs to be some balancing on the inventory side or the production side to balance that out.
And that typically tends to be a more marginal or higher cost area, another reason we think about that.
So a lot of dynamics in play around that and we'll have to see how it shakes out.
No matter how you cut it, some plays you've got to get the production and demand back in balance a bit more on the refining side.
That's why we anticipate that run cuts come and that would seem to be one of the places that we look at that think that could occur.
I would say we're still in process on Whitegate.
I think 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.
I think my comments earlier were around the capital budget and the projects that we have on deck and ensuring that any project we do meets our hurdle rate expectations.
In terms of the overall portfolio, of course, we have the process on Whitegate we just talked about.
I think as we come to the end of the Whitegate process, I don't think there's a lot more in the portfolio that we have on deck.
Certainly for 2016 or thinking about it into 2017.
In terms of potential M&A, we look at every day.
I would say that prices still look relatively high to us, relative to the organic opportunities we may have in front of us.
We would look at that.
If we can find assets for the right value, we're certainly willing to do that.
I think the Explorer one was a good example.
But that was done at the PSXP level and I think, in terms of midstream, you'll see us doing more and more activity at the PSXP level.
Hey, <UNK>.
Yes.
So we're about 97% complete on the LPG terminal.
There's different pieces.
So we're actually right at the front end of our commissioning and drying out process, getting it ready.
So we anticipate that we'll be operational toward the end of the year.
We are actually essentially completing construction and now working into the commissioning piece of that business.
So that's about to become operational.
On the market side, you asked about the contracts, we continue to work the contracts.
<UNK> said the commodity environment's challenged today.
So I think that the commercial arb or opportunity is narrower than what we had originally planned in the short term, but we still fundamentally see that strength.
And as I said, it's got to clear the market here somewhere to really make everything balanced just based on the demand side.
So we feel pretty good about the longer term fundamentals there with some stress short-term, I think, on the commercial side of that.
But the load across that looks really solid to us.
We continue to work that.
We said that the EBITDA on that project, $400 million to $500 million, 20s% or so would be commercial opportunities and so the ramp-up schedule really relates more to the fee.
And I think that what we're seeing is that opportunities for that are going to be a bit lower, but in the commercial arb really where we're seeing most of the compression in terms of that run rate.
But we're ready to ramp up when that thing becomes operational as these contracts start to kick in and we get the asset in play, but that takes a bit of time as you bring up the operation.
So, <UNK>, most of that capital, the capital investment in sites is in Europe.
We have a great market position, good return.
But it's going to be modest, just given the size of the market and the rate at which it's growing.
So it's really, I think, a level that we see continuing to go forward.
On the US side, a little bit of capital on the marketing side for that.
But most of this is done through our dealers and our marketers, our customers.
And so it's part of our marketing structure but making good progress in terms of revamping the sites, particularly on the 76 and the <UNK>lips 66 brand and we're seeing increased pull-through to the branded chain.
So we're strengthening that really through our marketing and commercial relationships versus a capital investment piece that we're driving.
Yes, crude ran up quite a bit in the second quarter and so as it comes off, the margin between, say, a coke and the crude, that differential widens back out.
That said, some of the other products are LPGs.
To the extent that NGL prices ---+ I mean, propane prices come down significantly here recently.
And so as you see that, it's kind of a moving target.
But generally we do better with lower crude prices in terms of the secondary product loss, if you will.
That narrows.
It's basically a boost or tailwind for our margins.
Hey, <UNK>.
It should all be in NGL.
Let me take maybe a 30,000-foot view on this question, if I can, and then <UNK> can come in behind me and give you some of the details.
So I know you have a concern around this and we understand that.
If I can just go to the 30,000-foot level and just talk about the Sweeny hub in general, we still think that that's a great project and we see value creation opportunity there.
You think about NGL pipes coming out of the Permian, West Texas and Eagle Ford and going by Sweeny.
You think about a world class refining, world class petrochemicals.
We have the largest single site ethylene facility at Sweeny.
We're building 2.2 million tons of polyethylene capacity.
We're building the fractionator.
We're building the caverns.
We're building the interconnecting pipes to Bellevue and on to [Preport], and then 150,000-barrel-a-day LPG export facility.
We still like that concept and what we're creating there.
I think short term, what you're seeing in the market, there's going to be stress in the LPG side of it.
The frac is running well.
It's running to design limits.
We're seeing certainly heavier feed than what we premised.
So we're running about 80 a day at the frac today versus 100%.
But it's completely loaded in the back end of the frac.
The other thing I would say is as this project is coming up, we have a lot of project expenses that are hitting us beyond just the frac.
So think about the pipes and the caverns and the commissioning, the start-up of the LPG export facility.
So you should expect to see those costs continue through the end of 2016.
But when you talk about the frac itself, we dropped it, all of it.
It's at PSXP today.
The EBITDA's about $100 million.
So $25 million a quarter.
There's a little bit of leakage that goes to the noncontrolling interest.
So then you take that and bring it to a net income level and that was more than offset by the project expenses we had and the seasonal trading activities that we had in our NGL business.
So I think of that.
But we're not worried about this whole NGL complex that we're building at Sweeny in terms of it coming up and we're looking forward to getting the LPG export up later this year.
We'll start commissioning activities actually in the next couple weeks as we start thinking about that.
And so I just want to say that we still really like this project a lot.
And, <UNK>, if you want to fill in anything I missed, you're welcome to do that.
No, I think it really is about the total.
And <UNK>, so you know, it's a PSXP asset today.
<UNK> said we're down a little bit with the ethane.
As the ethane comes out of rejection, that comes up naturally.
It also starts to load more of a pipe in the caverns that are there.
Relatively small contribution but it's up and it's running a lot better.
We have had great operational improvement the second quarter and so that's what we're focused on and then we've got to get this LPG up and get the entire value chain going on that one.
<UNK>, we haven't disclosed our specific RIN costs in refining or benefits in marketing.
But you highlight the situation, so we do have the RIN exposure in refining.
We have an offset in marketing.
Obviously as RIN prices increase, that's hurting refining more and you see that reflected in our capture rates.
But there's offset in marketing.
But we don't provide the actual numbers.
So the inventory impact is ---+ so to the extent there's an inventory impact in our capture, it's reflected in that other bar.
The actual effect in the quarter was ---+
Yes.
So it's a combination of your RINs expense, product differentials, outbound freight costs, any inventory effect.
They are all in there and inventory is normal.
We don't disclose individuals but, yes, I think, as I made the comment, I think we think about it and look at the light sweet and say where would that incrementally be and based on the products and the configuration.
So rather than ---+ just go ahead and say we always look at that and we'll look at that, make sure that incremental barrel has incremental profit.
And to the extent that we don't, we'll cut crude runs.
No.
Thanks, <UNK>.
So the $1.1 billion is a target of both existing assets when we began as well as our growth projects, as we think about the composition, so exactly what we drop when is something that we always look at.
So it's going to be a combination of both of those.
But as you look at the midstream EBITDA we put out in 2018, we grow from around $1 billion, say, in refining and midstream income when we started in 2013, 2014, pushing that up over $2 billion.
So that's really the growth that's there.
Some of that's commodity as well.
So there's some ---+ depending on the commodity markets, could be some of that about 20%.
And that's really how we think about it is that look through EBITDA, you've got $1 billion plus of EBITDA growth over that period.
But what you put into PSXP is a mixed question that we really don't address specifically.
So the end of 2017 you put the Sweeny hub, you've got DEPL Epcot, you've got Bayou Bridge coming on.
You're pushing up well over $500 million of incremental EBITDA in the midstream, both a combination of PSXP as well as PSX.
So, yes, so debt to cap, 27% fully consolidated at the end of the second quarter.
On a net basis, 22%.
When you exclude PSXP, I think it's 25% total; 19% on a net cash basis.
So still a fair amount of headroom from a balance sheet standpoint, balance sheet capacity to weather the ups and downs in the market.
Most of the capital programming ---+ <UNK> talked about $3.9 million capital budget coming to something $3.3 million-ish for the year.
But a lot of the capital is locked in and so that's where having the balance sheet capability to deal with that over that time period certainly helps us.
The MLP model is a critical part of the overall funding.
So as we continue to grow the ML P dropdown assets, you'll see cash coming back to the PSX level.
And it's going to be in the form of ---+you'll see equity raises like we did in the second quarter and you'll see debt going on the MLP as well.
Just one thing, <UNK>, that I would add to that.
We're kind of on a glide slope to $3 billion.
So think about kind of $1 billion-ish of sustaining capital and $2 billion of growth.
Most of that growth is really directed towards midstream and we fully expect that we can fund that coming out of the MLP.
You bet.
Have a good day.
