Shares of refining company Phillips 66 (PSX -0.23%) tumbled 18.1% in February, according to data provided by S&P Global Market Intelligence. The main issue weighing on the stock was the COVID-19 outbreak, which is starting to sap demand for oil. That more than offset some positive developments last month.
Crude oil prices cratered at the end of February due to concerns that the spreading COVID-19 outbreak was hurting demand for refined products. Because of that, refining margins will likely weaken until consumption starts picking back up after fears fade. That's bad news for Phillips 66, which battled against challenging market conditions during the fourth quarter.
Despite its near-term challenges, Phillips 66 announced some positive developments last month. It sold its 50% stake in the Liberty Pipeline development to its master limited partnership Phillips 66 Partners (PSXP) for $75 million. As a result, it will off-load that project's $800 million construction price tag to Phillips 66 Partners.
That will free up those funds to potentially build the Bluewater Texas project, an offshore oil port near the Port of Corpus Christi, Texas. Phillips 66 took an important step on that project last month by forming a 50-50 joint venture with Trafigura, which had proposed building a competing terminal. By joining forces, it not only increases the probability that Phillips 66 moves forward with its project, but that the company will also unload half the financing to its new partner.
By off-loading the funding for the Liberty Pipeline and half of the Bluewater Texas project, Phillips 66 will be able to maintain a strong financial profile while it keeps expanding its operations. Because of that, the refining company will have the financial flexibility to continue returning cash to shareholders even as market conditions weaken. That will allow it to take advantage of its recent sell-off to buy more shares via its stock repurchase program.