Independent refiner, Phillips 66’s (PSX) board of directors has given consent to an increase in 2014 capital spending. The raise in capital spending is to support the company’s growth strategy and authorized returning additional capital to shareholders.
The board has authorized a capital expenditure of $3.9 billion for 2014, up by $1.2 billion or over 44% from the previously approved budget. The increased capital program is intended to ramp up the development of the Sweeny Fractionator One and Freeport Liquid Petroleum Gas Export Terminal. The recently announced acquisitions of the Beaumont Terminal in Texas and specialty lubricants’ company Spectrum Corporation are also expected to be funded through this capital hike.
An additional $2 billion share repurchase program has been approved by the board. The board had authorized a total of $7 billion in share repurchases during the third quarter of 2012. Since then, company’s cumulative share repurchases has totaled $3.2 billion through the first quarter of 2014.
The company is carrying out its growth plans through disciplined organic capital spending and by selective acquisition by its Transportation and Lubricants businesses. Phillips 66’s financial flexibility boosts its investment in higher valued business lines apart from raising dividends and stocks repurchases and thus enhancing value for its shareholders.
The shares will be repurchased in the open market from time to time at the company’s discretion. The repurchases are subject to market conditions and other factors as well as compliance with the applicable regulatory requirements. Phillips 66 may begin, defer or discontinue purchases of common stock under this authorization at any time or periodically without prior notice. The repurchases are expected to be funded by Phillips 66 mainly from cash generated by its operations.
Phillips 66 carries a Zacks Rank #3 (Hold). Meanwhile, one could consider better-ranked players in the same sector like Magellan Midstream Partners L.P (MMP), BPZ Resources, Inc. (BPZ) and EQT Corp. (EQT). All these stocks sport a Zacks Rank #1 (Strong Buy).
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