NEW YORK (Reuters) - Phillips 66 Partners LP, an investor in the Dakota Access Pipeline (DAPL), may cut capital spending and dividends if the line is shut by court order, company officials said on Friday.
A federal judge on July 6 ordered the oil pipeline closed and drained by early August over environmental permitting concerns. The owners of Dakota Access Pipeline, which carries oil from North Dakota to Illinois, have said a shutdown would cost them $3.5 million a day in revenue. DAPL has appealed the judge’s order.
“The two main levers we’ve got available to ourselves are the distribution and the level of capital spend,” Phillips 66 Partners Chief Financial Officer Kevin Mitchell said during an earnings call on Friday.
Company officials said they are waiting to hear whether an appellate court will stay the shutdown order before taking next steps.
The 557,000-barrel-per-day DAPL pipeline is controlled by Energy Transfer LP, which is fighting the order and seeking to stay the shutdown order.
In the event the pipeline is shut for a prolonged period, Phillips 66 Partners said it could cut capital spending in 2021 substantially below this year’s roughly $900 million budget.
“There’s a potential for it to be quite a bit lower than where we were this year,” Mitchell said.
The company also could see a boost in business at the Palermo, North Dakota, Rail Terminal if DAPL is shut, company officials said. Phillips 66 Partners operates the rail terminal. Rail transport is an alternative to the DAPL pipeline.
The company’s now-postponed Liberty oil pipeline could be revived and revenues from it used to offset DAPL losses, but it would first need to secure shipper commitments, officials said. The Liberty project was deferred earlier this year as oil producers in North Dakota and the Rocky Mountain area pared drilling.
The company’s second-quarter revenues were $430 million, up from $404 million the previous quarter.
Reporting by Laila Kearney; editing by Jonathan Oatis