Some thoughts as I think about the 2025 capital budget and what it implies at PSX:
Same level of spend as prior years, adjusted for their acquisition of WRB. This suggests that PSX views capital spend as a constant and something that has to be spent regardless of market environment. As an investor that concerns me regarding their ability to show returns over the long term. This likely is the result of their outdated views on midcycle and how capital is spent relative to other priorities.
PSX continue to chase a short-term EBITDA target in Midstream while margins in the business are declining. This jeopardizes long-term returns at PSX in favor of short term stock appreciation.
PSX continues to spend significantly at CPChem at a time when two large projects will put additional pressure on margins. This downward margin pressure will compromise their project returns and jeopardize the returns at PSX for years to come.
PSX is spending $1.1B on Refining but can cite only one large project. This is in contrast to their peers that are making real market calls on how they are spending their capital. It potentially suggests that PSX does not have projects identified that are at scale and that they may struggle to have a read on the market environment to know where to invest.
VLO is spending $1.6B on refining with several large projects cited to reposition their refineries. Perhaps this is why PSX struggle to outperform VLO.
MPC is spending $1.25B on refining projects and is making real market calls at several refineries
At a time when PSX needs to show they can operate refineries well, one would think they would have more detail on projects that will reposition their assets. Instead, we get the same answer we get every year and a capital budget that looks like the one the year before.