Source: Phillips 66.

Global oil, gas, and petrochemicals giant Phillips 66 (NYSE:PSX) has seen its stock take a beating over the past six months, even as the business has grown stronger. Oil prices have plummeted, but since the company doesn't drill for oil, it is largely insulated from falling prices, and its petrochemical business -- CPChem, a joint venture with Chevron (NYSE:CVX) -- actually benefits from cheap oil and natural gas. Furthermore, the midstream business of moving oil and gas products around in pipelines also has little relation to commodity prices, but is more tied to demand. 

With those things in mind, here are the three things that -- from the most recent earnings conference call -- management wants to make sure investors understand about the company. 

1. Investments in growth for midstream are important 

Source: Phillips 66.

One of the interesting dynamics of the resurgent U.S. oil and gas industry is that a lot of the new oilfields aren't connected to the legacy pipelines, and it will take billions of dollars of investment to build new pipelines to service these areas. In his opening remarks, CEO Greg Garland made several comments about the company's commitment to invest in expanding the midstream business. 

Recently, the company announced that its capital budget for 2015 will be $4.6 billion, $3.2 billion of which is for expanding the midstream business. The company's stake in joint ventures and MLPs add another $2.2 billion in capital spending by those interests, meaning that $6.8 billion will be invested in growing the business, with the majority tied to midstream interests.

Source: Phillips 66 release.

In short, the company still has some pretty strong levers for growth. 

2. CPChem's U.S. production will be fine through cheap oil 

Source: CPChem.

The interesting thing about CPChem is how it benefits from lower commodity costs, but only to a point. The company manufactures a number of products, but olefins are maybe the most important category. This group of molecules is used in hundreds of industrial and consumer products, including plastics, polyester, tires, and many more.

The thing is, much of the company's investment in production in the U.S. is tied to cheap natural gas. NG as a feedstock gives CPChem a cost advantage against international producers using oil. What this means is that if oil drops too far, CPChem loses this advantage. Tim Taylor, president of Phillips 66, had this to say:

I think crude is going to fall substantially to take away that advantage ... Probably, I think more about it just in terms of favorability of the feedstock, but we have always had a strategy at CPChem around ethane-based cracking and that's been a very good place to be, so we looked in the Middle East, looked in North America; and I think fundamentally, we would say that crude would have to go quite a bit lower before we'd see that advantage dissipating. 

In other words, the company doesn't see the current low oil price environment remaining the reality for the long term. 

3. Management to continue returning capital to shareholders 
Over the past three quarters, the company returned almost $4 billion to shareholders in dividends and share buybacks, and management intends to do more of it. CEO Greg Garland:

As a management team, we remain focused on capital allocation. You should expect double digit increases in dividends for the next couple of years. Our view is that our dividends are secure. They need to be growing and they need to be competitive. We have increased the dividend 28% this year. Of the $7 billion of share repurchases that have been authorized by our board, we have repurchased $4.4 billion. During the quarter, we repurchased 6 million shares, and at quarter end, we had 554 million shares outstanding. We will continue to buy our shares, as long as they trade below the intrinsic value. We believe doing so creates value for the shareholders of Phillips 66.

Phillips 66 management is committed to funding growth at reasonable levels, and then returning excess capital back to its shareholders. So far, it has executed quite well on that commitment. 

Looking ahead 
While none of us can see the future, Phillips 66 looks to be in a great position going forward. Management is investing in sustainable growth in the midstream and chemical businesses, and then returning additional cash generated back to shareholders via both dividends, and share repurchases. The three details I've looked at here demonstrate how central these things are to the company's plans and future. 

If you're looking for a solid long-term income play with some potential for growth, Phillips 66 looks like a solid bet. Its management team's commitment to these three things is one of the reasons why. 



Jason Hall has no position in any stocks mentioned. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.