- Reported third-quarter earnings of $5.4 billion or $11.16 per
share; adjusted earnings of $3.1 billion or $6.46 per share
- Generated $3.1 billion of operating cash flow
- Returned $1.2 billion to shareholders through dividends and
share repurchases
- Increased economic interest in DCP Midstream, LP and offered to
acquire all outstanding public common units
- Strong Refining operations and market capture
- Recently started operations of Sweeny Frac 4
Phillips 66 (NYSE: PSX), a diversified energy company, announces
third-quarter 2022 earnings of $5.4 billion, compared with earnings
of $3.2 billion in the second quarter of 2022. Excluding special
items of $2.3 billion, the company had adjusted earnings of $3.1
billion in the third quarter, compared with second-quarter adjusted
earnings of $3.3 billion.
“Third-quarter results reflect a continued favorable market
environment, as well as strong operating performance and improved
market capture,” said Mark Lashier, President and CEO of Phillips
66. “Our focus remains on operating safely and reliably producing
critical energy products.
“In Midstream, we increased our economic interest in DCP
Midstream to capture the value of a fully integrated NGL business
from wellhead to market. Our Sweeny Frac 4 started up on time and
under budget. With this latest expansion, we are now processing
over 550,000 barrels per day of natural gas liquids at our Sweeny
Hub.
“We demonstrated our commitment to shareholder distributions,
returning $1.2 billion through share repurchases and dividends
during the quarter. We look forward to providing an update on our
strategic initiatives and how we will continue to deliver
shareholder value at our upcoming investor day.”
Midstream
On August 17, 2022, Phillips 66 announced a realignment of its
economic and governance interests in DCP Midstream, LP and Gray Oak
Pipeline, LLC (Gray Oak Pipeline) resulting from the merger of DCP
Midstream, LLC and Gray Oak Holdings, LLC. In connection with the
merger, Phillips 66 was delegated DCP Midstream, LLC’s governance
rights over DCP Midstream, LP and its general partner entities. As
a result, starting on August 18, 2022, the company’s financial
results reflect the consolidation of DCP Midstream, LP and its
general partner entities (collectively referred to as DCP
Midstream), as well as DCP Sand Hills Pipeline, LLC (Sand Hills
Pipeline) and DCP Southern Hills Pipeline, LLC (Southern Hills
Pipeline). The results of these entities after the merger and our
share of DCP Midstream, LLC’s results prior to the merger are
reported in the NGL and Other amounts shown below. Additionally,
our economic interest in Gray Oak Pipeline decreased to 6.5%.
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q3 2022
Q2 2022
Q3 2022
Q2 2022
Transportation
$ 411
250
229
250
NGL and Other
3,267
282
449
282
NOVONIX
(33)
(240)
(33)
(240)
Midstream
$ 3,645
292
645
292
Midstream third-quarter 2022 pre-tax income was $3.6 billion,
compared with $292 million in the second quarter of 2022. Midstream
results in the third quarter include a net gain of $3.0 billion
related to the consolidation of DCP Midstream, Sand Hills Pipeline
and Southern Hills Pipeline and the transfer of interest in Gray
Oak Pipeline.
Transportation third-quarter adjusted pre-tax income was $229
million, compared with adjusted pre-tax income of $250 million in
the second quarter. The decrease was mainly due to lower equity
earnings from the Gray Oak Pipeline resulting from the merger.
NGL and Other adjusted pre-tax income was $449 million in the
third quarter, compared with adjusted pre-tax income of $282
million in the second quarter. The increase was mainly driven by
the consolidation of DCP Midstream, Sand Hills Pipeline and
Southern Hills Pipeline as a result of the merger.
In the third quarter, the fair value of the company’s investment
in NOVONIX, Ltd., decreased by $33 million compared with a $240
million decrease in the second quarter.
Chemicals
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q3 2022
Q2 2022
Q3 2022
Q2 2022
Olefins and Polyolefins
$ 105
216
105
216
Specialties, Aromatics and Styrenics
60
59
60
59
Other
(30)
(2)
(30)
(2)
Chemicals
$ 135
273
135
273
The Chemicals segment reflects Phillips 66’s equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals
third-quarter 2022 pre-tax income was $135 million, compared with
$273 million in the second quarter of 2022.
CPChem’s Olefins and Polyolefins (O&P) business contributed
$105 million of adjusted pre-tax income in the third quarter,
compared with $216 million in the second quarter. The $111 million
decrease mainly reflects a sharp decline in polyethylene margins,
partially offset by lower turnaround costs. Global O&P
utilization was 90% for the quarter.
CPChem’s Specialties, Aromatics and Styrenics (SA&S)
business contributed third-quarter adjusted pre-tax income of $60
million, in line with the second quarter.
The $28 million increase in Other adjusted costs in the third
quarter mainly reflects legal contingencies.
Refining
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q3 2022
Q2 2022
Q3 2022
Q2 2022
Refining
$ 2,851
3,036
2,827
3,132
Refining third-quarter 2022 pre-tax income was $2.9 billion,
compared with pre-tax income of $3.0 billion in the second quarter
of 2022. Refining results in the third quarter included a $24
million hurricane-related insurance recovery benefit.
Second-quarter results included $70 million of costs related to the
finalization of RIN obligations for prior year compliance periods
and $26 million of costs related to the conversion of the Alliance
Refinery to a terminal.
Adjusted pre-tax income for Refining was $2.8 billion in the
third quarter, compared with adjusted pre-tax income of $3.1
billion in the second quarter. The decrease was primarily due to
lower realized margins, partially offset by higher volumes.
Realized margins declined 6% from $28.31 per barrel in the second
quarter to $26.58 per barrel in the third quarter as the impact of
lower market crack spreads was largely offset by improved crude and
product differentials. The composite global market crack decreased
22% from $46.72 in the second quarter to $36.29 per barrel in the
third quarter.
Pre-tax turnaround costs for the third quarter were $225
million, compared with second-quarter costs of $223 million. Crude
utilization rate was 91% and clean product yield was 85% in the
third quarter.
Marketing and Specialties
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q3 2022
Q2 2022
Q3 2022
Q2 2022
Marketing and Other
$ 717
656
717
656
Specialties
130
109
130
109
Marketing and Specialties
$ 847
765
847
765
Marketing and Specialties third-quarter 2022 pre-tax income was
$847 million, compared with $765 million in the second quarter of
2022.
Adjusted pre-tax income for Marketing and Other was $717 million
in the third quarter compared with $656 million in the second
quarter, reflecting higher international margins, partially offset
by lower domestic results, including inventory impacts.
Specialties generated third-quarter adjusted pre-tax income of
$130 million, up from $109 million in the prior quarter, largely
due to improved base oil margins.
Corporate and Other
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q3 2022
Q2 2022
Q3 2022
Q2 2022
Corporate and Other
$ (320)
(260)
(246)
(235)
Corporate and Other third-quarter 2022 pre-tax costs were $320
million, compared with pre-tax costs of $260 million in the second
quarter of 2022. Pre-tax costs included $74 million and $25 million
of business transformation restructuring costs in the third quarter
and second quarter, respectively.
Adjusted pre-tax loss was $246 million in third-quarter 2022.
The increase in the third quarter was mainly due to higher interest
expense from the DCP Midstream consolidation, partially offset by
increased interest income driven by higher interest rates and cash
balances.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $3.1 billion in cash from operations in
the third quarter of 2022.
During the quarter, the company funded $466 million of dividends
and $694 million of share repurchases. Capital expenditures and
investments for the quarter were $735 million, including the
company’s $306 million investment in DCP Midstream, LLC in
connection with the merger, net of cash acquired. The company ended
the quarter with 473 million shares outstanding.
As of Sept. 30, 2022, the company had $10.5 billion of
liquidity, reflecting $3.7 billion of cash and cash equivalents,
approximately $5.0 billion of total committed capacity under a
Phillips 66 revolving credit facility and $1.8 billion under DCP
Midstream, LP’s credit and accounts receivable facilities. The
company’s consolidated debt-to-capital ratio was 35% and its net
debt-to-capital ratio was 29%.
Strategic Update
Phillips 66 will provide an update on its plans to continue to
deliver shareholder value and its strategic initiatives, including
business transformation, at the company’s investor day in New York
on November 9.
In Midstream, Phillips 66 completed Sweeny Frac 4, adding
150,000 BPD of capacity. Frac 4 achieved full rates in early
October. Total Sweeny Hub fractionation capacity is 550,000 BPD.
The fractionators are supported by long-term commitments.
Additionally, the company’s increased economic interest in DCP
Midstream, LP allows for further integration and optimization of
its NGL business that builds on the company’s existing value chain
from wellhead to market, creating a platform for enhanced
commercial opportunities and value generation. Phillips 66 also
submitted a non-binding proposal to acquire all publicly held
common units of DCP Midstream, LP for cash.
In Chemicals, CPChem is pursuing a portfolio of high-return
growth projects:
- Growing its normal alpha olefins business with a second
world-scale unit to produce 1-hexene, a critical component in
high-performance polyethylene. Construction is underway on the 586
million pounds per year unit located in Old Ocean, Texas. The
project utilizes CPChem’s proprietary technology. Startup is
expected in the second half of 2023.
- Expanding propylene splitting capacity by 1 billion pounds per
year with a new unit located at its Cedar Bayou facility. Startup
is expected in the second half of 2023.
- Increasing polyalphaolefins production capacity in Belgium by
over 130 million pounds per year. Startup is expected in 2024.
- Continuing development of world-scale petrochemical facilities
on the U.S. Gulf Coast and in Ras Laffan, Qatar, jointly with Qatar
Energy. CPChem expects to make a final investment decision for its
U.S. Gulf Coast project in the fourth quarter.
In Refining, Phillips 66 is converting its San Francisco
Refinery in Rodeo, California, into one of the world’s largest
renewable fuels facilities. The Rodeo Renewed refinery conversion
project is expected to begin commercial operations in the first
quarter of 2024. Upon completion, the facility will have over
50,000 BPD (800 million gallons per year) of renewable fuel
production capacity. The conversion will reduce emissions from the
facility and produce lower carbon-intensity transportation fuels.
The total project is anticipated to cost approximately $850
million.
Investor Webcast
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 to
phillips66.com/investors and click on “Events & Presentations.”
For detailed supplemental information, go to
phillips66.com/supplemental.
Earnings
Millions of Dollars
2022
2021
Q3
Q2
Sep YTD
Q3
Sep YTD
Midstream
$ 3,645
292
4,179
629
1,017
Chemicals
135
273
804
631
1,408
Refining
2,851
3,036
6,010
(1,126)
(2,895)
Marketing and Specialties
847
765
1,928
545
1,311
Corporate and Other
(320)
(260)
(829)
(231)
(728)
Pre-Tax Income
7,158
4,106
12,092
448
113
Less: Income tax expense (benefit)
1,618
924
2,713
(40)
(110)
Less: Noncontrolling interests
149
15
239
86
179
Phillips 66
$ 5,391
3,167
9,140
402
44
Adjusted
Earnings
Millions of Dollars
2022
2021
Q3
Q2
Sep YTD
Q3
Sep YTD
Midstream
$ 645
292
1,179
642
1,234
Chemicals
135
273
804
634
1,475
Refining
2,827
3,132
6,099
184
(1,548)
Marketing and Specialties
847
765
1,928
547
1,316
Corporate and Other
(246)
(235)
(730)
(230)
(725)
Pre-Tax Income
4,208
4,227
9,280
1,777
1,752
Less: Income tax expense
937
927
2,039
286
297
Less: Noncontrolling interests
149
15
239
88
232
Phillips 66
$ 3,122
3,285
7,002
1,403
1,223
About Phillips 66
Phillips 66 (NYSE: PSX) manufactures, transports and markets
products that drive the global economy. The diversified energy
company’s portfolio includes Midstream, Chemicals, Refining, and
Marketing and Specialties businesses. Headquartered in Houston,
Phillips 66 has employees around the globe who are committed to
safely and reliably providing energy and improving lives while
pursuing a lower-carbon future. For more information, visit
phillips66.com or follow @Phillips66Co on LinkedIn or
Twitter.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE
“SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
This news release contains forward-looking statements within the
meaning of the federal securities laws. Words such as
“anticipated,” “estimated,” “expected,” “planned,” “scheduled,”
“targeted,” “believe,” “continue,” “intend,” “will,” “would,”
“objective,” “goal,” “project,” “efforts,” “strategies” and similar
expressions that convey the prospective nature of events or
outcomes generally indicate forward-looking statements. However,
the absence of these words does not mean that a statement is not
forward-looking. Forward-looking statements included in this news
release are based on management’s expectations, estimates and
projections as of the date they are made. These statements are not
guarantees of future performance and you should not unduly rely on
them as they 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: the effects of any widespread
public health crisis and its negative impact on commercial activity
and demand for refined petroleum products; the inability to timely
obtain or maintain permits necessary for capital projects; changes
to worldwide government policies relating to renewable fuels and
greenhouse gas emissions that adversely affect programs like the
renewable fuel standards program, low carbon fuel standards and tax
credits for biofuels; fluctuations in NGL, crude oil, and natural
gas prices, and petrochemical and refining margins; our ability to
consummate the proposed transaction to acquire all of the
outstanding public common units of DCP Midstream, LP and the timing
and cost associated therewith; our ability to achieve the expected
benefits of the integration of DCP Midstream, LP and from the
proposed transaction, if consummated; the diversion of management’s
time on transaction and integration-related matters; unexpected
changes in costs for constructing, modifying or operating our
facilities; unexpected difficulties in manufacturing, refining or
transporting our products; the level and success of drilling and
production volumes around our Midstream assets; risks and
uncertainties with respect to the actions of actual or potential
competitive suppliers and transporters of refined petroleum
products, renewable fuels or specialty 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; failure to
complete construction of capital projects on time and within
budget; the inability to comply with governmental regulations or
make capital expenditures to maintain compliance; limited access to
capital or significantly higher cost of capital related to
illiquidity or uncertainty in the domestic or international
financial markets, which may also impact our ability to repurchase
shares and declare and pay dividends; potential disruption of our
operations due to accidents, weather events, including as a result
of climate change, acts of terrorism or cyberattacks; general
domestic and international economic and political developments
including armed hostilities (including the Russia-Ukraine war),
expropriation of assets, and other political, economic or
diplomatic developments; international monetary conditions and
exchange controls; changes in governmental policies relating to
NGL, crude oil, natural gas, refined petroleum products, or
renewable fuels pricing, regulation or taxation, including exports;
changes in estimates or projections used to assess fair value of
intangible assets, goodwill and property and equipment and/or
strategic decisions with respect to our asset portfolio that cause
impairment charges; investments required, or reduced demand for
products, as a result of environmental rules and regulations;
changes in tax, environmental and other laws and regulations
(including alternative energy mandates); political and societal
concerns about climate change that could result in changes to our
business or increase expenditures, including litigation-related
expenses; the operation, financing and distribution decisions of
equity affiliates we do not control; 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 (loss),” “adjusted earnings
(loss) per share” and “adjusted pre-tax income (loss).” These are
non-GAAP financial measures that are included to help facilitate
comparisons of operating performance across periods and to help
facilitate comparisons with other companies in our industry, by
excluding items that do not reflect the core operating results of
our businesses in the current period.
References in the release to earnings (loss) or consolidated
earnings (loss) refer to net income (loss) attributable to Phillips
66.
Millions of Dollars
Except as Indicated
2022
2021
Q3
Q2
Sep YTD
Q3
Sep YTD
Reconciliation of Consolidated Earnings
to Adjusted Earnings
Consolidated Earnings
$ 5,391
3,167
9,140
402
44
Pre-tax adjustments:
Impairments
—
—
—
1,298
1,496
Pension settlement expense
—
—
—
20
67
Hurricane-related costs
(24)
—
(7)
11
11
Winter-storm-related costs
—
—
—
—
65
Alliance shutdown-related costs*
—
26
26
—
—
Regulatory compliance costs
—
70
70
—
—
Restructuring costs
74
25
99
—
—
Merger transaction costs
13
—
13
—
—
Gain on consolidation
(3,013)
—
(3,013)
—
—
Tax impact of adjustments†
681
(28)
649
(323)
(387)
Other tax impacts
—
25
25
(3)
(20)
Noncontrolling interests
—
—
—
(2)
(53)
Adjusted earnings
$ 3,122
3,285
7,002
1,403
1,223
Earnings per share of common stock
(dollars)
$ 11.16
6.53
19.31
0.91
0.08
Adjusted earnings per share of common
stock (dollars)††
$ 6.46
6.77
14.79
3.18
2.76
Reconciliation of Segment Pre-Tax
Income (Loss) to Adjusted Pre-Tax Income (Loss)
Midstream Pre-Tax Income
$ 3,645
292
4,179
629
1,017
Pre-tax adjustments:
Impairments
—
—
—
10
208
Pension settlement expense
—
—
—
3
7
Winter-storm-related costs
—
—
—
—
2
Merger transaction costs
13
—
13
—
—
Gain on consolidation
(3,013)
—
(3,013)
—
—
Adjusted pre-tax income
$ 645
292
1,179
642
1,234
Chemicals Pre-Tax Income
$ 135
273
804
631
1,408
Pre-tax adjustments:
Pension settlement expense
—
—
—
2
20
Hurricane-related costs
—
—
—
1
1
Winter-storm-related costs
—
—
—
—
46
Adjusted pre-tax income
$ 135
273
804
634
1,475
Refining Pre-Tax Income (Loss)
$ 2,851
3,036
6,010
(1,126)
(2,895)
Pre-tax adjustments:
Impairments
—
—
—
1,288
1,288
Pension settlement expense
—
—
—
12
32
Hurricane-related costs
(24)
—
(7)
10
10
Winter-storm-related costs
—
—
—
—
17
Alliance shutdown-related costs*
—
26
26
—
—
Regulatory compliance costs
—
70
70
—
—
Adjusted pre-tax income (loss)
$ 2,827
3,132
6,099
184
(1,548)
Marketing and Specialties Pre-Tax
Income
$ 847
765
1,928
545
1,311
Pre-tax adjustments:
Pension settlement expense
—
—
—
2
5
Adjusted pre-tax income
$ 847
765
1,928
547
1,316
Corporate and Other Pre-Tax
Loss
$ (320)
(260)
(829)
(231)
(728)
Pre-tax adjustments:
Pension settlement expense
—
—
—
1
3
Restructuring costs
74
25
99
—
—
Adjusted pre-tax loss
$ (246)
(235)
(730)
(230)
(725)
*Costs related to the shutdown of the
Alliance Refinery totaled $26 million pre-tax in the second quarter
of 2022. Shutdown-related costs recorded in the Refining segment
include pre-tax charges for the disposal of materials and supplies
of $20 million and asset retirements of $6 million recorded in
depreciation and amortization expense.
†We generally tax effect taxable
U.S.-based special items using a combined federal and state
statutory income tax rate of approximately 24%. Taxable special
items attributable to foreign locations likewise use a local
statutory income tax rate. Nontaxable events reflect zero income
tax. These events include, but are not limited to, most goodwill
impairments, transactions legislatively exempt from income tax,
transactions related to entities for which we have made an
assertion that the undistributed earnings are permanently
reinvested, or transactions occurring in jurisdictions with a
valuation allowance.
††Q3 2022 and Q1 2022 are based on
adjusted weighted-average diluted shares of 483,035 thousand and
450,129 thousand, respectively. Other periods are based on the same
weighted-average diluted shares outstanding as that used in the
GAAP diluted earnings per share calculation. Income allocated to
participating securities, if applicable, in the adjusted earnings
per share calculation is the same as that used in the GAAP diluted
earnings per share calculation.
Millions of Dollars
Except as Indicated
September 30, 2022
Debt-to-Capital Ratio
Total Debt
$ 17,657
Total Equity
33,345
Debt-to-Capital Ratio
35 %
Total Cash
3,744
Net Debt-to-Capital Ratio
29 %
Millions of Dollars
Except as Indicated
2022
Q3
Q2
Realized Refining Margins
Income before income taxes
$ 2,851
3,036
Plus:
Taxes other than income taxes
79
72
Depreciation, amortization and
impairments
216
214
Selling, general and administrative
expenses
65
52
Operating expenses
1,204
1,177
Equity in earnings of affiliates
(291)
(223)
Other segment expense, net
5
11
Proportional share of refining gross
margins contributed by equity affiliates
539
495
Special items:
Regulatory compliance costs
—
70
Realized refining margins
$ 4,668
4,904
Total processed inputs (thousands of
barrels)
153,919
155,211
Adjusted total processed inputs (thousands
of barrels)*
175,609
173,205
Income before income taxes (dollars per
barrel)**
$ 18.52
19.56
Realized refining margins (dollars per
barrel)
$ 26.58
28.31
*Adjusted total processed inputs include
our proportional share of processed inputs of an equity
affiliate.
**Income before income taxes divided by
total processed inputs.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20221031005800/en/
Jeff Dietert (investors) 832-765-2297 jeff.dietert@p66.com
Shannon Holy (investors) 832-765-2297 shannon.m.holy@p66.com
Thaddeus Herrick (media) 855-841-2368
thaddeus.f.herrick@p66.com
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