On Wednesday, Phillips 66 (NYSE:PSX) reported its third quarter earnings and discussed the following topics in its earnings conference call. Take a look.
Edward Westlake – Credit Suisse: I guess a quick question; firstly you’ve got very strong free cash generation, so I guess our thoughts are going to turn to additional opportunities as well as distributions and I’m sure you can get lots of these questions at the Analyst Day, but can I ask you a question about returns? What sort of hurdle rates do you think are appropriate for, say, volatile chemical cracking or NGL fractionation versus sort of longer term more stable logistics contracts?
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Tim G. Taylor – EVP, Commercial, Marketing, Transportation & Business Development: I think when you look at the Midstream and the fee based kinds of projects, we see returns in the low double-digits to mid-teens. As you think about the Chemicals space, we would plan in the 15 or higher kinds of returns for that and similar kinds of thoughts around the NGL expansions.
Edward Westlake – Credit Suisse: When I’m talking about the – obviously we can see a lot of logistics growth potential in North America, but I guess I’m less familiar with the potential in Chemicals, I mean you’ve talked very clearly about the Gulf Coast ethane cracker, but I’m just wondering, could you give us some any thoughts about other opportunities outside of that big project that you could potentially go for?
Tim G. Taylor – EVP, Commercial, Marketing, Transportation & Business Development: I think when you look at the Chemicals business, it’s a global business and the investment thesis really for CPChem has been the focus of advantaged feedstocks. So it’s gone for the Middle East in the early 2000s to really now strong positioning in North America and so they continued to look at where they can have a competitive advantage in terms of project development on a global basis. So I think initially still the Middle East, North America arrives to the top, but there is always an interest in Asia as well because of the growth in the market.
Edward Westlake – Credit Suisse: Any opportunities further downstream or will just stay pretty much upstream?
Tim G. Taylor – EVP, Commercial, Marketing, Transportation & Business Development: First downstream from ethylene…
Edward Westlake – Credit Suisse: So you mean – so I think really the focus has been on the polyolefins and olefins and ethylene derivatives chain and there are other options as you begin to look at other kinds of materials, we have strong presence in the Aromatics business as well, but right now, the biggest opportunity has been really in the olefins part of the chain.
West Coast Opportunities
Douglas Terreson – ISI: So you guys have been very opportunistic on use of advantaged feedstock, especially on the West Coast, Midcontinent and the Gulf Coast too and on this point, I want to see whether or not you consider their to be significant opportunities on the West Coast as well and how you’re maybe thinking about some of those options? Also on the West Coast, some of your competitors appear to be reconsidering their desire to participate in the California market because of some of the costs that may be associated with the new regulatory plan. So, my question regards to your strategic view of the West Coast market and whether you feel that the positions out there are sufficiently advantaged, that they warrant continued participation and so just kind of a strategic update on the position on the West Coast as a whole as well?
Tim G. Taylor – EVP, Commercial, Marketing, Transportation & Business Development: Let me take those a little bit in terms of the market opportunity in the West Coast. Clearly, when we look at the West Coast, it’s been one of the more challenged markets from a recovery standpoint post-recession. In California specifically, it’s a tough regulatory environment as well, so costs are higher and there is lot of potential additional cost as new regulations come into effect. That said, it’s still a very significant market and we think it’s really important to look at how can we get some of these crudes out of the middle part of the country into the West Coast, particularly California, so we are working hard on that to try and change that, Doug. The comment I’d make on Washington is that that’s got a natural access to the Bakken in North Dakota and Canadian crudes and so I – we kind of separate, I think, the Washington piece from the California piece that way, but I think everyone’s working hard to look at some crude solutions for the West Coast to improve its competitive position.