Phillips 66 Partners LP (NYSE:PSXP) announces third-quarter 2016 earnings of $83.1 million, or $0.57 per common unit. Cash from operations was $84.3 million, and distributable cash flow was $101.9 million. Adjusted earnings before interest, income taxes, depreciation and amortization (adjusted EBITDA) were $110.9 million in the third quarter, compared with $97.3 million in the second quarter.
“In the quarter, we formed the STACK joint venture, increased our ownership in the Explorer Pipeline and progressed the eastern leg of Bayou Bridge Pipeline,” said Greg Garland, Phillips 66 Partners’ chairman and CEO. “Additionally, the October acquisition of crude, product and NGL logistics assets from Phillips 66 increased our run-rate EBITDA to approximately $580 million. We remain on track to achieve $1.1 billion of run-rate EBITDA by the end of 2018.”
On Oct. 19, 2016, the general partner’s board of directors declared a third-quarter 2016 cash distribution of $0.531 per common unit, which represents a 5 percent increase over the second-quarter 2016distribution of $0.505 per common unit. The Partnership has increased its distribution every quarter since its inception with a compound annual growth rate of 36 percent.
Financial Results
Phillips 66 Partners’ earnings were $83.1 million in the third quarter of 2016, a 23 percent improvement over earnings of $67.5 million in the prior quarter. The increase was primarily due to the May 2016 acquisition of the remaining 75 percent interest in the Sweeny Fractionator and Clemens Caverns, as well as the Standish Pipeline. Earnings from equity affiliates increased in the third quarter, reflecting increased throughput volumes on the Explorer Pipeline and a full quarter’s throughput on the first leg of the Bayou Bridge Pipeline.
Liquidity, Capital Expenditures and Investments
As of Sept. 30, 2016, total debt outstanding was $1.1 billion. The Partnership had $19 million in cash and cash equivalents and $450 million available under its revolving credit facility. In October 2016, the Partnership increased its revolving credit facility from $500 million to $750 million and extended its maturity to October 2021.
In August 2016, Phillips 66 Partners completed the public offering of 6 million common units representing limited partner interests. Net proceeds of $298.5 million from the offering were utilized to fund acquisitions and repay debt.
The Partnership’s total capital spending for the quarter was $113.2 million. Expansion capital spending totaled $109.8 million in the third quarter, reflecting investments in the newly formed STACK joint venture, the additional interest in the Explorer Pipeline Company and the ongoing construction in the Bakken joint ventures.
Strategic Update
In August, Phillips 66 Partners increased its equity investment in Explorer by 2.5 percent to approximately 22 percent.
Also in the third quarter, Phillips 66 Partners announced the formation of STACK Pipeline LLC, a 50/50 joint venture with Plains All American Pipeline, L.P. to own and operate a common carrier crude oil pipeline from northwestern Oklahoma to Cushing. Under the joint venture agreement, Plains contributed storage and pipeline assets and Phillips 66 Partners contributed $50 million.
The Bayou Bridge Pipeline, in which the Partnership holds a 40 percent interest, began operations in April from Nederland, Texas, to Lake Charles, Louisiana. Development continues on the section from Lake Charles to St. James, Louisiana, with commercial operations for this segment expected to begin in the second half of 2017.
The Sacagawea Pipeline is mechanically complete with startup expected in the fourth quarter of 2016. The pipeline, located in the Bakken region in North Dakota, is being developed through a 50 percent-owned joint venture that has an 88 percent interest in the Sacagawea Pipeline.
Acquisition Details
On Oct. 14, 2016, Phillips 66 Partners completed its largest acquisition to date, consisting of crude, refined products and NGL logistics assets from Phillips 66 for total consideration of $1.3 billion. The acquired assets support the Phillips 66-operated Bayway, Billings, Borger and Ponca City refineries.
In connection with the acquisition, Phillips 66 entered into 10-year terminaling and throughput agreements with minimum volume commitments covering approximately 85 percent of forecasted volumes. The Partnership funded the acquisition with $1.1 billion of proceeds from newly issued senior notes and $196 million in common and general partner units issued to Phillips 66.
Investor Webcast
Members of Phillips 66 Partners’ executive management will host a webcast today at 2 p.m. EDT to discuss the Partnership’s third-quarter performance. To listen to the conference call and view related presentation materials, go to www.phillips66partners.com/events. For detailed supplemental information, go to www.phillips66partners.com/reports.
About Phillips 66 Partners
Headquartered in Houston, Phillips 66 Partners is a growth-oriented master limited partnership formed by Phillips 66 to own, operate, develop and acquire primarily fee-based crude oil, refined petroleum product and natural gas liquids pipelines and terminals and other transportation and midstream assets. For more information, visit www.phillips66partners.com.
