Phillips 66 will create a master limited partnership from a portion of its transportation assets, possibly including pipelines, rail and terminals, the company announced Thursday.
An initial public offering will be filed in the second quarter of 2013. The company expects to sell a minority interest in the MLP during the second half of the year, raising about $300 million to $400 million in gross cash proceeds.
The MLP structure carries tax advantages for certain publicly traded entities.
“We expect to use the master limited partnership as an efficient vehicle to fund growth investments in the transportation and midstream sectors,” CEO Greg Garland said in a written statement. “We believe the proposed MLP will enable us to enhance value for our shareholders and increase the transparency of our business.”
The Houston-based company, which operates a portfolio of refineries, pipelines and petrochemical businesses, also announced a $3.7 billion capital program for 2013, 6 percent higher than its 2012 spending.
About $1.5 billion will target Phillips 66′s refining and marketing segment and its investment in joint-venture WRB refining. Another approximately $1.5 billion will focus on midstream operations, including pipelines and rail, with most of the funds supporting the company’s DCP Midstream joint venture with Spectra Energy.
About $549 million of the capital program will go toward Chevron Phillips Chemical, a joint venture with Chevron. The remaining $161 million will support corporate operations and other spending, according to the company.
Phillips 66′s planned capital spending for the joint ventures totals $1.8 billion, which doesn’t require cash outlays, according to the company.
Phillips 66 will use capital to improve its access to low-cost U.S. crude from shale regions and expand its exports, highlights of Garland’s strategic plan to grow profit margins. Phillips 66 plans to replace about 500,000 barrels of oil it refines each day with lower-cost crude in the next several years. It plans to grow its export capacity from Gulf Coast and West Coast refineries by 100,000 barrels per day by 2014.
The company processes about 2.2 million barrels of crude per day.
“Our ability to capture advantaged feedstocks, coupled with the growing international demand for refined products, enables us to maintain high utilization rates and reduce costs per unit,” Garland said in a statement. “We will continue to primarily serve domestic markets and will explore opportunities to meet growing demand overseas.”
The company plans to cut debt by $2 billion by the end of 2013.