Moody's upgrades Phillips 66

Moody's Investors Service said it upgraded the senior debt ratings of Phillips 66 and its guaranteed subsidiaries to A3 from Baa1 and the issuer ratings of Phillips 66 and wholly owned subsidiary Phillips 66 Co. to A3 from Baa1. The outlook is stable.

The agency said the upgrade reflects the company's clearly delineated strategic focus and capital structure since its spinoff from ConocoPhillips (A1/stable) in May 2012.

Phillip 66's A3 rating is driven by the scope and diversity of its refining business, which represents about half of its proportionate EBITDA, coupled with the further diversity provided by ownership of fast-growing chemicals and midstream businesses and moderate financial leverage, Moody’s said.

The rating also considers volatility and secular decline in the refining segment, the structural subordination of distributions received by Phillips 66 from its equity investment in DCP Midstream LLC to debt at DCP Midstream and its master limited partnership, DCP Midstream Partners, and the reliance on a significant component of its growth on DCP Midstream, which is exposed to natural gas and natural gas liquids pricing.

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