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Analysis of Phillips 66, an American energy company that manufactures liquefied natural gas and petrochemical products

Analysis of Phillips 66, an American energy company that manufactures liquefied natural gas and petrochemical products

11 November 2020

Phillips 66 is an American energy company. It is engaged in the production of liquefied natural gas and petrochemical products. The company was ranked 27th on the Fortune 500 in 2018. Despite the fact that the company has about 14 thousand employees, Phillips 66 is noticeably inferior to ExxonMobil or Shell both in terms of production and market capitalization. The company has three main items of revenue – transportation of energy resources, refining of petroleum products and marketing (product promotion). The company owns its network of gas stations in the United States.

Despite the fact that the company does not produce petroleum products, the company’s quotes have significantly decreased compared to the beginning of the year (by about 50%), since the company’s revenue still depends on quotes for petroleum products. This drop is primarily due to the drop in oil prices, as well as low demand in the final market where the company operates.

During the pandemic, the number of debt obligations increased. However, the company takes debts not to buy back shares or pay dividends, but to expand production. Even so, the company’s interest coverage ratio is 4, which is not a very good indicator of the industry average.

The company pays generous dividends and has increased them in recent years. Given the current share price, the dividend yield is 6.5%, which is a good indicator for the US market. It should be noted that the company carries out share buybacks, and accordingly the company’s quotes are growing more actively. However, it is too early to say something about the resumption of this procedure, too much uncertainty remains on the market, even despite the vaccine.

Thus, if Phillips 66 manages to grow revenues and profits to pre-crisis levels and pay off debts, then the company will really look attractive to investors. At the moment, investing in a company may be unreasonably risky. Even the company’s forward P / E is 15, which is higher than the average for the American market. Moreover, no analyst will undertake to predict that the oil price will show steady growth next year.


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11 November 2020
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