Phillips 66 Starts Red Oak Pipeline Supplemental Open Season
Zacks Investment Research | Jul 07, 2019 09:30PM ET
Phillips 66 (NYSE:PSX) recently announced the start of a supplemental open season for the Red Oak Pipeline, in pursuit of additional shipping commitments of crude oil. Plains All American Pipeline, L.P. (NYSE:PAA) is its 50/50 joint venture partner in the Red Oak Pipeline project.
This pipeline will enable producers in Cushing and the Permian Basin to reach markets in Corpus Christi, Ingleside, Houston, and Beaumont of Texas. Given the dearth of takeaway capacity haunting producers in the Permian Basin for the last few quarters, the Red Oak Pipeline system is expected to serve as an oasis.
Notably, the $2.5-billion Red Oak Pipeline project is expected to start operation in the March quarter of 2021. While the project will be constructed by Plains All American, it will be operated by Phillips 66. This is in line with the company’s long-term strategy of growing the midstream business via projects that will generate stable fee-based revenues.
The JV is expected to lease capacity in Plains All American’s Sunrise Pipeline system. It will likely build a 30-inch new pipeline from Cushing to Wichita Falls and Sealy, TX. From Sealy, it is expected to create another 30-inch pipeline segment connecting Corpus Christi and Ingleside, as well as a 20-inch pipeline segment to Beaumont and Houston. Per Energy Web Atlas, the pipeline will likely have a shipping capacity of 400,000 barrels per day.
Phillips 66 is a diversified energy manufacturing and logistics company with chemicals, midstream, marketing and specialties, and refining businesses. As of Mar 31, 2019, it had about 14,300 employees and $58 billion of assets. The company operates through four business segments, namely Midstream, Chemicals, Refining, and Marketing and Specialties.
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Phillips 66 has gained 12.4% year to date against the 3.6% collective decline of the stocks belonging to the Original post
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