Phillips 66 delays repaying lowest-coupon debt as interest rates rise

By Devika Patel

Knoxville, Tenn., June 24 – Phillips 66 could take its time repaying the remaining $1 billion of debt that it took on during the Covid-19 pandemic, having already repaid $3 billion of the total $4 billion taken out during that period, since this is low-cost debt and would have to be replaced with debt sold in a climbing-interest rate environment.

Instead, management plans to build cash and strengthen the balance sheet, increasing the company’s flexibility.

“In terms of the near-term, we have been very focused on the balance sheet, on paying back debt that we added over the course of the pandemic,” executive vice president of finance and chief financial officer Kevin J. Mitchell said at the JPMorgan 2022 Energy, Power & Renewables Conference on Wednesday.

“We added $4 billion [of debt during the pandemic and] we paid off $3 billion of that.

“We have $1 billion to go to get back to pre-pandemic debt levels but, while we have flexibility to do that, what I’d also say is, the debt that gives us the most optionality to pay down is also our lowest-cost debt and so, when you look in this environment, [sic] of where direction of interest rates, you know.

“We are going to be cautious around timing on when we do that and so, as a result, you’ll probably see us build cash and strengthen the balance sheet that way and give us the ultimate in flexibility,” he said.

Phillips 66 is a Houston-based diversified energy manufacturing and logistics company.

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