Warren Buffett Buys More Shares of Phillips 66 (NYSE:PSX)

Phillips 66 and Spectra Energy Corp. (NYSE:SE) recently announced their agreement to contribute assets to strengthen their 50/50 midstream joint venture, called DCP Midstream LLC. Phillips 66 is set to contribute $1.5 billion in cash, which will be used to pay down a part of the venture’s revolving credit facility. Simultaneously, Spectra Energy will contribute with its ownership interest in both the Sand Hills and Southern Hills NGL pipelines. The following deal is anticipated to strengthen DCP Midstream’s balance sheet and also increase its financial flexibility. Let’s not forget to mention that the joint venture has cut 20% of its corporate staff and consolidated its workforces in Houston and Denver in an attempt to maintain profitability, which in turn had been hurt by the oil slump. DCP Midstream has also been pursing operating cost reduction efforts, including the workforce consolidation mentioned above; attempting to sell certain non-core assets; and converting some of its contracts from commodity price-sensitive to fee-based. All of these measures have assisted the joint venture and Phillips 66 as well in combating the turmoil in the energy sector.

We will now take a quick look at some of the company’s financial figures disclosed in its financial report for the second quarter. Phillips 66 posted earnings of $1.01 billion for the quarter, compared to $987 million reported in the first quarter. At the same time, the company returned $636 million to its shareholders during the quarter: $302 million in dividends and $334 million in repurchases of 4.2 million shares. It’s also worth noting that the company’s cash and cash equivalents added up to $5.1 billion at the end of June, while its debt amounted to $9.0 billion. Therefore, the debt-to-capital ratio is 28% as of June 30, which clearly suggests the company’s financial position is quite healthy.

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