PHILLIPS <P> TO EMPHASIZE CASH FLOW TO PARE DEBT
Phillips Petroleum Co will emphasize
improving its short-term cash flow this year to pare its debt,
C.J. "Pete" Silas, chairman, told Reuters in an interview.
    "Our priority is to get cash flow increased from the assets
already installed," he said, but he declined to estimate annual
cash flow for 1987.
    Analysts estimate Phillips" cash flow at over one billion
dlrs for 1987, while long term debt, which resulted from
restructuring to find off corporate raiders in 1985, hovers
about 5.9 billion dlrs as of December 1986.
     Silas said Phillips hope to achieve its goal by raising
the capital expenditures budget to develop its oil and gas
properties.
    "We plan to develop the properties with short-term high cash
flow prospects," he said. He projected a capital expenditure
budget of 730 mln dlrs, up from the 1986 expenditure of 655 mln
dlrs.
    Nearly half of that will be spent on exploration and
production, and most of that will be spend overseas, Silas
said.
    "Phillips' top priority in 1987 will be to get the
waterflooding in Norway and jack up the (Ekofisk) oil fields to
improve our ability to extract oil and increase earnings," Silas
said.
     Phillips estimates that the project, which is expected to
cost 1.5 billion dlrs, will increase recovery by 170 mln gross
barrels of oil over a period of 24 years.
    Phillips is also pursue opportunities in China where Silas
said he was seeking "a modification of terms with the Chinese
government to make oil discoveries (in the offshore Xijang
fields) commercially viable."
    In the U.S. Silas said Phillips hopes to get the Point
Arguello, Calif., field started up by the fourth quarter. "We
expect to start up the first platform then," Silas said.
    But emphasis on short-term cash flow has also forced the
company to part with several oil and gas assets.
    Phillips sold its interests in the T-Block in the U.K.
North Sea and U.S. reserves totaling about 1.3 billion dlrs in
1986 as part of a two billion dlrs asset sales program that is
now completed, Silas said.
     "We sold high cost producing assets. They were not good
value for us but possibly so for someone else," Silas said.
    Silas said the 1986 assets sales will not affect earnings
for the company.
    "Everything we are doing is to manage our cash flow and we
are using that to manage our debt. Even the asset sales, while
regrettable, were necessary to reduce debt," Silas said.
    He said no asset sales are planned this year as long as oil
prices don't fall sharply lower and stay at lower levels  for
several months. "Then, everyone would be looking at sales (of
assets), and we're no different from the others," Silas said.
    In other areas, Silas looks for improved earnings from
Phillips chemical operations, which provided 299 mln dlrs in
earnings for 1986, up from 219 mln dlrs in 1985.
    "This was our second best year pushed by a good supply and
demand balance for products, low feedstocks and energy costs
for our operations," Silas said, "In 1987 we think the market's
supply and demand balance will be just as good but feedstock
and energy costs will rise due to price recovery."
 Reuter
