Phillips 66 (NYSE: PSX), an energy manufacturing and logistics company,
announces third-quarter earnings of $1,578 million, compared with
earnings of $1,012 million in the second quarter of 2015. Adjusted
earnings were $1,647 million, an increase of $645 million from the last
quarter.
"Our best quarterly earnings this year were driven by stronger results
from Refining and Marketing. Higher refining capacity utilization and
product margins increased financial results for these businesses," said
Greg Garland, Chairman and CEO. "In addition, we announced our 2016
capital budget and a $2 billion increase to the company's share
repurchase program, which reflects our commitment to disciplined capital
allocation."
Midstream
Millions of Dollars
2015
Earnings
Adjusted Earnings
Q3
Q2
Q3
Q2
Transportation
$
77
65
77
65
NGL
26
8
32
8
DCP Midstream
(2
)
(151
)
(18
)
(25
)
Midstream
$
101
(78
)
91
48
Phillips 66's Midstream third-quarter adjusted earnings were $91
million, an increase of $43 million from the second quarter.
Phillips 66's Transportation business generated earnings of $77 million
during the third quarter, an increase of $12 million from the second
quarter. Improved earnings were due to lower operating costs and
increased equity earnings primarily driven by higher volumes.
Adjusted earnings from the NGL business were $32 million for the third
quarter. The $24 million increase from the prior quarter was largely
related to higher realized margins, as well as inventory gains.
Phillips 66 Partners (PSXP) contributed $31 million to the Midstream
segment's third-quarter earnings. Distributions per limited partner unit
increased by 7 percent from the second quarter to $0.428 per unit.
Distributions to Phillips 66 from PSXP were up 13 percent in the third
quarter, compared with the prior quarter, reflecting the impact of
incentive distribution rights.
For the third quarter of 2015, the company's equity investment in DCP
Midstream, LLC (DCP Midstream) had an adjusted loss of $18 million,
compared with a $25 million adjusted loss in the prior quarter. DCP
Midstream's improved results were primarily due to higher natural gas
and natural gas liquids marketing margins, as well as the second-quarter
loss on the sale of its interest in the Benedum gas processing plant,
partially offset by lower commodity prices.
Chemicals
Millions of Dollars
2015
Earnings
Adjusted Earnings
Q3
Q2
Q3
Q2
Olefins and Polyolefins (O&P)
$
261
267
261
267
Specialties, Aromatics and Styrenics (SA&S)
(3
)
38
17
38
Other
(6
)
(10
)
(6
)
(10
)
Chemicals
$
252
295
272
295
The Chemicals segment reflects Phillips 66's equity investment in
Chevron Phillips Chemical Company LLC (CPChem). Third-quarter Chemicals
adjusted earnings were $272 million, compared with earnings of $295
million in the second quarter.
During the third quarter, CPChem's Olefins and Polyolefins business
contributed $261 million to Phillips 66's Chemicals earnings. This was a
decrease of $6 million compared with the prior quarter, as higher sales
volumes and lower operating costs primarily due to lower turnaround
activity were more than offset by insurance recoveries recognized in the
prior quarter and lower ethylene margins. Global utilization for O&P was
94 percent, up from 91 percent in the second quarter.
CPChem's Specialties, Aromatics and Styrenics business contributed $17
million of adjusted earnings in the third quarter, a decrease of $21
million from the prior quarter. The decrease was primarily due to lower
earnings at CPChem's SA&S equity affiliates, as well as lower volumes.
Refining
Millions of Dollars
2015
Earnings
Adjusted Earnings
Q3
Q2
Q3
Q2
Refining
$
1,003
604
1,052
604
Refining adjusted earnings were $1,052 million in the third quarter,
compared with $604 million in the second quarter.
The increase in earnings was largely driven by improved realized
gasoline and secondary product margins, as well as higher volumes.
Global realized margins improved $2.26 per barrel, while market capture
increased to 72 percent, compared with 62 percent in the prior quarter.
Phillips 66's worldwide refining crude utilization increased to 96
percent, compared to 90 percent in the second quarter. The improvement
was primarily due to the completion of a major turnaround at the Humber
Refinery in the U.K. early in the third quarter, as well as higher
utilization in the Gulf Coast. Turnaround costs for the third quarter
were $69 million. Phillips 66's worldwide clean product yield was 84
percent in the third quarter.
Marketing and Specialties
Millions of Dollars
2015
Earnings
Adjusted Earnings
Q3
Q2
Q3
Q2
Marketing and Other
$
285
266
291
134
Specialties
53
48
53
48
Marketing and Specialties
$
338
314
344
182
Marketing and Specialties (M&S) third-quarter adjusted earnings were
$344 million, compared with $182 million in the second quarter.
Adjusted earnings for Marketing and Other were $291 million, an increase
of $157 million from the prior quarter. The increase in earnings was
largely due to improved realized global margins driven by favorable
market conditions, as well as continued high volumes. Refined product
exports in the third quarter were 118,000 barrels per day (BPD),
compared with 143,000 BPD in the prior quarter. The decrease in exports
was primarily due to advantaged domestic markets.
Phillips 66's Specialties businesses generated earnings of $53 million
during the third quarter. The $5 million increase from the prior quarter
was mainly due to improved lubricants margins.
Corporate and Other
Millions of Dollars
2015
Earnings
Adjusted Earnings
Q3
Q2
Q3
Q2
Corporate and Other
$
(116
)
(123
)
(112
)
(127
)
Corporate and Other adjusted costs were $112 million after-tax in the
third quarter, an improvement of $15 million compared to the prior
quarter.
Financial Position, Liquidity and Return of Capital
During the third quarter, Phillips 66 generated $1.4 billion of cash
from operations. Operating cash flow excluding working capital changes
was $1.5 billion. Capital expenditures and investments totaled $1.0
billion, primarily supporting execution of the company's Midstream
growth strategy.
Phillips 66 returned $673 million to shareholders during the quarter,
consisting of $300 million in dividends and the repurchase of 4.7
million shares of common stock for $373 million. Since July 2012, the
company has repurchased 88 million shares for $6 billion and increased
its quarterly dividend by 180 percent to $0.56 per share. Phillips 66
ended the quarter with 533 million shares outstanding. Phillips 66
recently announced a $2 billion increase to its share repurchase
program, resulting in approximately $3 billion of remaining capacity
under its current authorization.
Q3 2015
Adjusted Phillips 66
Phillips 66 Partners
Phillips 66 Consolidated
Total Debt, $MM
7,851
1,100
8,951
Total Equity, $MM
23,227
805
24,032
Debt-to-capital ratio
25
%
27
%
Total Cash, $MM
4,749
73
4,822
Net-debt-to-capital ratio
12
%
15
%
As of Sept. 30, 2015, cash and cash equivalents were $4.8 billion and
debt was $9.0 billion, including $1.1 billion in Phillips 66 Partners.
The company's consolidated debt-to-capital ratio was 27 percent.
Excluding Phillips 66 Partners, the debt-to-capital ratio was 25
percent. Additionally, Phillips 66 reported a year-to-date annualized
return on capital employed (ROCE) of 16 percent and a year-to-date
annualized adjusted ROCE of 15 percent.
Strategic Update
Phillips 66 continues to execute its strategy to grow its higher-valued
Midstream and Chemicals businesses and enhance Refining returns, while
returning capital to shareholders in the form of dividends and share
repurchases.
Millions of Dollars
2015
2016
Phillips 66 Consolidated Capital Budget
Midstream (1)
$
2,956
2,032
Phillips 66 Partners (2)
207
314
Chemicals
-
-
Refining
1,112
1,217
Marketing and Specialties
170
137
Corporate and Other
155
180
$
4,600
3,880
(1) Excludes Phillips 66 Partners.
(2) Includes 100% of Phillips 66 Partners.
Phillips 66's 2015 capital budget is primarily focused on major
Midstream growth projects. Through the end of the third quarter, total
capital expenditures for 2015 were $3.3 billion.
Approximately two-thirds of the 2016 capital budget is allocated to
growth capital, mostly related to Midstream projects, as well as
Refining projects to improve product yields and lower feedstock costs.
The remainder is sustaining capital, primarily to be invested in
Refining reliability, safety and environmental projects. The 2016
capital spending for joint ventures DCP Midstream, CPChem, and WRB
Refining is expected to be self-funded.
Phillips 66 has executed an agreement with Spectra Energy Corp and DCP
Midstream under which Phillips 66 will contribute $1.5 billion in cash
and Spectra Energy will contribute its one-third ownership interests in
the Sand Hills and Southern Hills pipelines to DCP Midstream. These
equity contributions will provide DCP Midstream with a stronger balance
sheet and increased financial flexibility, while positioning it to grow
through future commodity cycles. The transaction is expected to close
later today.
Development of the $3 billion Sweeny Hub is ongoing with the startup of
the 100,000 BPD Sweeny Fractionator One expected by year end.
Additionally, the 150,000 BPD Freeport LPG Export Terminal startup is
expected in the second half of 2016.
The company is participating in joint ventures to develop the
approximately 470,000 BPD Dakota Access Pipeline (DAPL) and Energy
Transfer Crude Oil Pipeline (ETCOP) system. Phillips 66 has a 25 percent
interest in these joint ventures with Energy Transfer Partners and
Sunoco Logistics Partners. Commercial operations are expected to begin
in the fourth quarter of 2016.
Bayou Bridge Pipeline, LLC is a joint venture developing a pipeline from
the Phillips 66 and Sunoco Logistics terminals in Nederland, Texas, to
St. James, Louisiana. Construction is underway on the first segment of
the pipeline, which will deliver crude oil from Nederland, Texas, to
Lake Charles, Louisiana. Commercial operations for this segment are
expected to begin in the first quarter of 2016. The joint venture has
commenced an expansion open season for service from Lake Charles to St.
James to determine the pipeline diameter of this segment, which is
scheduled to commence service in the second half of 2017. Phillips 66
Partners has agreed to acquire Phillips 66's 40 percent interest in
Bayou Bridge in the fourth quarter of 2015.
In Chemicals, overall progress on CPChem's world-scale U.S. Gulf Coast
Petrochemicals Project is approximately 60 percent complete, with
startup expected in mid-2017. This $6 billion project consists of an
ethane cracker and related polyethylene facilities that will increase
CPChem's U.S. olefins and polyolefins capacity by approximately
one-third.
Later today, members of Phillips 66 executive management will host a
webcast at noon EDT to discuss the company's third-quarter performance
and provide an update on strategic initiatives. To access the webcast
and view related presentation materials, go towww.phillips66.com/investors
and click on "Events & Presentations." For detailed supplemental
information, go to www.phillips66.com/supplemental.
Earnings
Millions of Dollars
2015
2014
Q3
YTD
Q3
YTD
Midstream
$
101
90
115
411
Chemicals
252
750
230
870
Refining
1,003
2,145
558
1,254
Marketing and Specialties
338
956
368
667
Corporate and Other
(116
)
(364
)
(91
)
(293
)
Discontinued Operations
-
-
-
706
Phillips 66
$
1,578
3,577
1,180
3,615
Adjusted Earnings
Millions of Dollars
2015
2014
Q3
YTD
Q3
YTD
Midstream
$
91
206
115
411
Chemicals
272
770
299
939
Refining
1,052
2,151
558
1,254
Marketing and Specialties
344
720
259
558
Corporate and Other
(112
)
(364
)
(91
)
(293
)
Phillips 66
$
1,647
3,483
1,140
2,869
About Phillips 66
Phillips 66 is a diversified energy manufacturing and logistics company.
With a portfolio of Midstream, Chemicals, Refining, and Marketing and
Specialties businesses, the company processes, transports, stores and
markets fuels and products globally. Phillips 66 Partners, the company's
master limited partnership, is an integral asset in the portfolio.
Headquartered in Houston, the company has 14,000 employees committed to
safety and operating excellence. Phillips 66 had $49 billion of assets
as of Sept. 30, 2015. For more information, visit www.phillips66.com
or follow us on Twitter @Phillips66Co.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This news release contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended,
which are intended to be covered by the safe harbors created thereby.
Words and phrases such as "is anticipated," "is estimated," "is
expected," "is planned," "is scheduled," "is targeted," "believes,"
"intends," "objectives," "projects," "strategies" and similar
expressions are used to identify such forward-looking statements.
However, the absence of these words does not mean that a statement is
not forward-looking. Forward-looking statements relating to Phillips
66's operations (including joint venture operations) are based on
management's expectations, estimates and projections about the company,
its interests and the energy industry in general on the date this news
release was prepared. These statements are not guarantees of future
performance and involve certain risks, uncertainties and assumptions
that are difficult to predict. Therefore, actual outcomes and results
may differ materially from what is expressed or forecast in such
forward-looking statements. Factors that could cause actual results or
events to differ materially from those described in the forward-looking
statements include fluctuations in NGL, crude oil, and natural gas
prices, and petrochemical and refining margins; unexpected changes in
costs for constructing, modifying or operating our facilities;
unexpected difficulties in manufacturing, refining or transporting our
products; lack of, or disruptions in, adequate and reliable
transportation for our NGL, crude oil, natural gas, and refined
products; potential liability from litigation or for remedial actions,
including removal and reclamation obligations under environmental
regulations; limited access to capital or significantly higher cost of
capital related to illiquidity or uncertainty in the domestic or
international financial markets; and other economic, business,
competitive and/or regulatory factors affecting Phillips 66's businesses
generally as set forth in our filings with the Securities and Exchange
Commission. Phillips 66 is under no obligation (and expressly disclaims
any such obligation) to update or alter its forward-looking statements,
whether as a result of new information, future events or otherwise.
Use of Non-GAAP Financial Information -- This news release
includes the terms adjusted earnings, adjusted earnings per share,
operating cash flow excluding working capital, adjusted debt-to-capital,
and adjusted ROCE. These are non-GAAP financial measures that are
included to help facilitate comparisons of company operating performance
across periods.
References in the release to earnings refer to net income
attributable to Phillips 66.
Millions of Dollars
Except as Indicated
2015
2014
Q3
Q2
Sep YTD
Q3
Sep YTD
Reconciliation of Earnings to Adjusted Earnings
Consolidated
Earnings
$
1,578
1,012
3,577
1,180
3,615
Adjustments:
Asset dispositions
(18
)
(132
)
(265
)
(109
)
(109
)
Impairments by equity affiliates
22
126
148
69
69
Pending claims and settlements
19
(4
)
(23
)
-
-
Pension settlement expenses
46
-
46
-
-
Discontinued operations
-
-
-
-
(706
)
Adjusted earnings
$
1,647
1,002
3,483
1,140
2,869
Earnings per share of common stock (dollars)
$
2.90
1.84
6.52
2.09
6.28
Adjusted earnings per share of common stock (dollars)
$
3.02
1.83
6.34
2.02
4.98
Midstream
Earnings (loss)
$
101
(78
)
90
115
411
Adjustments:
Asset dispositions
(18
)
-
(18
)
-
-
Impairments by equity affiliates
2
126
128
-
-
Pension settlement expenses
6
-
6
-
-
Adjusted earnings
$
91
48
206
115
411
Chemicals
Earnings
$
252
295
750
230
870
Adjustments:
Impairments by equity affiliates
20
-
20
69
69
Adjusted earnings
$
272
295
770
299
939
Refining
Earnings
$
1,003
604
2,145
558
1,254
Adjustments:
Asset dispositions
-
-
(5
)
-
-
Pending claims and settlements
19
-
(19
)
-
-
Pension settlement expenses
30
-
30
-
-
Adjusted earnings
$
1,052
604
2,151
558
1,254
Marketing and Specialties
Earnings
$
338
314
956
368
667
Adjustments:
Asset dispositions
-
(132
)
(242
)
(109
)
(109
)
Pension settlement expenses
6
-
6
-
-
Adjusted earnings
$
344
182
720
259
558
Corporate and Other
Earnings (loss)
$
(116
)
(123
)
(364
)
(91
)
(293
)
Adjustments:
Pending claims and settlements
-
(4
)
(4
)
-
-
Pension settlement expenses
4
-
4
-
-
Adjusted earnings (loss)
$
(112
)
(127
)
(364
)
(91
)
(293
)
Millions of Dollars
Q3
2015
Cash Flows from Operating Activities
Net Cash Provided by Operating Activities, excluding working
capital
