Adjusted earnings of $2.3 billion or $4.87 per
share
Highlights
Fourth Quarter
- Delivered strong reported earnings and
record adjusted earnings
- Generated $4.1 billion of operating
cash flow, including $840 million from equity affiliates
- Returned $864 million to shareholders
through dividends and share repurchases
- Achieved 99 percent Refining
utilization and record market capture
- Generated record Midstream and
Marketing results
- Phillips 66 Partners achieved five-year
30 percent distribution CAGR
Full-Year 2018
- Sustained record-low recordable injury
rate
- Reported record earnings of $5.6
billion with ROCE of 17 percent
- Generated $7.6 billion of operating
cash flow, including $2.9 billion from equity affiliates
- Returned $6.1 billion to shareholders
through dividends and share repurchases
- Increased quarterly dividend 14 percent
to $0.80 per common share
- Achieved 95 percent utilization in
Refining
- CPChem completed the U.S. Gulf Coast
petrochemicals project
- Began Sweeny Hub expansion, including
additional 300-MBPD NGL fractionation capacity
- Phillips 66 Partners started
construction of the 900-MBPD Gray Oak Pipeline
Phillips 66 (NYSE: PSX), a diversified energy manufacturing and
logistics company, announces fourth-quarter 2018 earnings of $2.2
billion, compared with $1.5 billion in the third quarter of 2018.
Excluding special items of $20 million in the fourth quarter,
adjusted earnings were $2.3 billion, compared with third-quarter
adjusted earnings of $1.5 billion.
“We delivered another quarter of strong operating and financial
performance, capping a record year for Phillips 66,” said Greg
Garland, chairman and CEO of Phillips 66. “For the year, we
sustained our industry-leading safety performance, achieved our
highest ever earnings and operating cash flow, and rewarded our
shareholders with substantial distributions. Refining operated at
95 percent utilization and captured strong margins from advantaged
feedstocks. In Marketing, we generated strong earnings while
enhancing our fuels brand image. Our Midstream results reflect
growth from value-enhancing capital projects completed over the
past two years. CPChem achieved full operations at its new U.S.
Gulf Coast petrochemical assets, contributing to increased cash
distributions. Phillips 66 Partners generated record earnings and
achieved its five-year distribution growth target.”
“During 2018, we increased our quarterly dividend 14 percent and
repurchased 10 percent of shares outstanding, resulting in $6.1
billion distributed to shareholders. Since our company’s formation
in 2012, we have returned $22.5 billion to shareholders through
dividends and share repurchases and exchanges. Share repurchases
and exchanges have reduced our initial shares outstanding by 30
percent.”
“Looking to 2019, we remain focused on operating excellence and
executing our strong portfolio of growth projects. Disciplined
capital allocation is fundamental to our strategy and we will
continue to invest in new opportunities with attractive returns,
while returning capital to shareholders through dividends and share
buybacks.”
Midstream
Millions of Dollars Pre-Tax Income
Adjusted Pre-Tax Income Q4 2018
Q3 2018 Q4 2018 Q3 2018 Transportation
$ 234 209 234 209 NGL and Other 120 46 122 74 DCP
Midstream 25 29 53 29
Midstream
$ 379 284 409
312
Midstream fourth-quarter pre-tax income was $379 million,
compared with $284 million in the third quarter of 2018. Midstream
results in the fourth quarter included a $28 million impact to
equity earnings from an asset impairment at DCP Midstream, as well
as $2 million of pension settlement expense. Third-quarter results
included $28 million in expenses related to claims and pension
settlement.
Transportation fourth-quarter adjusted pre-tax income of $234
million was $25 million higher than third-quarter adjusted pre-tax
income of $209 million, mainly reflecting higher pipeline and
terminal throughput volumes.
NGL and Other adjusted pre-tax income for the fourth quarter was
$122 million, a $48 million increase from the third quarter,
primarily due to inventory impacts.
The company’s equity investment in DCP Midstream generated
adjusted pre-tax income of $53 million in the fourth quarter,
compared with $29 million in the third quarter. The increase
reflects improved hedging results, partially offset by higher
operating costs.
Chemicals
Millions of Dollars Pre-Tax Income
Adjusted Pre-Tax Income Q4 2018
Q3 2018 Q4 2018 Q3 2018 Olefins and
Polyolefins $ 158 225 158 225 Specialties, Aromatics
and Styrenics 16 51 16 51 Other (22) (13) (22)
(13)
Chemicals $ 152
263 152 263
The Chemicals segment reflects Phillips 66’s equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals’
fourth-quarter pre-tax income was $152 million, compared with $263
million in the third quarter of 2018.
CPChem’s Olefins and Polyolefins (O&P) business contributed
$158 million of adjusted pre-tax income in the fourth quarter of
2018, compared with $225 million in the third quarter. The decrease
mainly reflects seasonally lower sales volumes and higher operating
costs driven by turnaround and maintenance activity. These items
were partially offset by higher margins from lower feedstock costs.
Global O&P utilization was 95 percent.
CPChem’s Specialties, Aromatics and Styrenics (SA&S)
business contributed $16 million of adjusted pre-tax income in the
fourth quarter of 2018, a decrease of $35 million from the prior
quarter. The decrease primarily reflects lower earnings from
CPChem’s equity affiliates and higher domestic turnaround
costs.
The $9 million increase in Other adjusted net costs in the
fourth quarter mainly reflects the impact of a contingent
liability.
Refining
Millions of Dollars Pre-Tax Income
Adjusted Pre-Tax Income Q4 2018
Q3 2018 Q4 2018 Q3 2018 Refining
$ 2,001 1,232
2,008 1,263
Refining fourth-quarter pre-tax income was $2.0 billion,
compared with $1.2 billion in the third quarter of 2018. Refining
results included pension settlement expense of $11 million and $32
million in the fourth quarter and third quarter, respectively.
Fourth-quarter results also included $4 million of favorable U.K.
R&D expenditure credits.
Refining adjusted pre-tax income was $2.0 billion in the fourth
quarter of 2018, compared with $1.3 billion in the third quarter of
2018. While 3:2:1 market crack spreads were down across all
regions, realized margins increased $3.17 per barrel due to crude
feedstock advantage, strengthening distillate crack spreads and
clean product realizations. Realized margins also benefited from
optimization across our integrated logistics network to capture
market opportunities associated with widening Bakken, Canadian and
other inland crude differentials.
The increase in fourth-quarter results was largely driven by the
Central Corridor and Gulf Coast regions. Central Corridor
refineries captured the benefit of expanded discounts on Canadian
crudes by running at 106 percent utilization during the quarter.
The Gulf Coast region operated at 100 percent utilization and
benefited from improved clean product realizations and wider crude
differentials.
Phillips 66’s worldwide crude utilization rate was 99 percent.
Pre-tax turnaround costs for the fourth quarter were $130 million,
compared with third-quarter costs of $55 million. Clean product
yield was 86 percent in the fourth quarter.
Marketing and Specialties
Millions of Dollars Pre-Tax Income
Adjusted Pre-Tax Income Q4 2018
Q3 2018 Q4 2018 Q3 2018 Marketing and
Other $ 525 361 528 323 Specialties 64
62 64 62
Marketing and Specialties
$ 589 423 592
385
Marketing and Specialties (M&S) fourth-quarter pre-tax
income was $589 million, compared with $423 million in the third
quarter of 2018. M&S results included pension settlement
expense of $3 million and $6 million in the fourth quarter and
third quarter, respectively. Third-quarter results also included
benefits from biodiesel blender tax credits.
Adjusted pre-tax income for Marketing and Other was $528 million
in the fourth quarter of 2018, an increase of $205 million from the
third quarter. Marketing benefited from market conditions during
the quarter that contributed to a 32 percent increase in realized
margins. Refined product exports in the fourth quarter were 249,000
barrels per day (BPD).
Specialties generated adjusted pre-tax income of $64 million
during the fourth quarter, up from $62 million in the prior quarter
due to higher margins.
Corporate and Other
Millions of Dollars Pre-Tax Income
Adjusted Pre-Tax Income Q4 2018
Q3 2018 Q4 2018 Q3 2018 Corporate
and Other $ (203)
(227) (201) (223)
Corporate and Other fourth-quarter pre-tax costs were $203
million, compared with pre-tax costs of $227 million in the third
quarter of 2018. Pre-tax costs included pension settlement expense
of $2 million and $4 million in the fourth quarter and third
quarter, respectively.
The $22 million decrease in Corporate and Other adjusted pre-tax
costs in the fourth quarter was mainly due to third-quarter
severance costs, as well as lower net interest expense.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $4.1 billion in cash from operations
during the fourth quarter, including $840 million of cash
distributions from equity affiliates. WRB Refining and CPChem
distributed $348 million and $300 million, respectively, to
Phillips 66 in the fourth quarter. Excluding working capital
impacts, operating cash flow was $2.8 billion.
During the quarter, Phillips 66 funded $497 million of share
repurchases, $367 million of dividends, $994 million of capital
expenditures and investments, and prepaid $300 million of floating
rate notes due 2019. The company ended the quarter with 456 million
shares outstanding.
As of Dec. 31, 2018, cash and cash equivalents were $3.0
billion, and consolidated debt was $11.2 billion, including $3.0
billion at Phillips 66 Partners (PSXP). The company’s consolidated
debt-to-capital ratio was 29 percent and its net-debt-to-capital
ratio was 23 percent. Excluding PSXP, the debt-to-capital ratio was
25 percent and the net-debt-to-capital ratio was 17 percent.
Strategic Update
Phillips 66 Partners is constructing the 900,000-BPD Gray Oak
Pipeline, which will provide crude oil transportation from the
Permian and Eagle Ford to destinations in Corpus Christi and
Freeport, including the Sweeny Refinery. Phillips 66 Partners will
have a 42.25 percent ownership in the pipeline, which is
anticipated to be in service by the end of 2019.
The Gray Oak Pipeline will connect to multiple terminals in
Corpus Christi, including the new South Texas Gateway Terminal
under development by Buckeye Partners, L.P. The marine terminal
will have two deepwater docks and planned storage capacity of 6.5
million to 7 million barrels. Phillips 66 Partners owns a 25
percent interest in the terminal, which is expected to start up by
mid-2020.
At the Sweeny Hub, the company is constructing two 150,000-BPD
natural gas liquids (NGL) fractionators and associated pipeline
infrastructure, and Phillips 66 Partners is adding 6 million
barrels of storage capacity at Clemens Caverns. Upon completion of
the expansion, expected in late 2020, the Sweeny Hub will have
400,000 BPD of fractionation capacity and 15 million barrels of
storage at Clemens Caverns.
During the fourth quarter of 2018, the company added 1.3 million
barrels of crude oil storage at the Beaumont Terminal, bringing
total crude and products storage capacity to 14.6 million barrels.
A further expansion of 2.2 million barrels of crude oil storage is
planned for completion in the first quarter of 2020.
The company and Phillips 66 Partners commenced a project to
expand the products system from the Sweeny Hub to Phillips 66
Partners’ Pasadena Terminal. Phillips 66 Partners’ Sweeny to
Pasadena Pipeline will be expanded by 80,000 BPD, and 300,000
barrels of products storage will be added at the Pasadena Terminal.
The project is expected to be completed in the second quarter of
2020.
DCP Midstream completed the Sand Hills Pipeline expansion
project in the fourth quarter of 2018, increasing the capacity to
485,000 BPD. The pipeline transports NGL from the Permian and Eagle
Ford to the Texas Gulf Coast and is owned two-thirds by DCP
Midstream and one-third by Phillips 66 Partners. Also in the
Permian, DCP Midstream has a 25 percent interest in the Gulf Coast
Express Pipeline project to transport approximately 2 billion cubic
feet per day (BCFD) of natural gas to Gulf Coast markets. The
project is anticipated to be completed in the fourth quarter of
2019. DCP Midstream is adding gas processing capacity in the DJ
Basin with the construction of the O’Connor 2 plant, which is
expected to be completed in the second quarter of 2019.
In Chemicals, CPChem’s new U.S. Gulf Coast (USGC) petrochemical
assets are operating well, and the ethane cracker continues to
demonstrate utilization above original design capacity. CPChem has
a leading position in olefins and polyolefins to supply the world’s
growing demand for high-quality polymers. CPChem’s portfolio
of cost advantaged assets is strategically located in the U.S. and
Middle East. CPChem is developing a second USGC project that would
include ethylene and derivative capacity. CPChem is also evaluating
additional capacity across multiple product lines through
debottleneck opportunities on existing units.
In Refining, the company completed crude unit modifications
during the fourth quarter at the Lake Charles Refinery to run
additional advantaged domestic crudes. Also at the Lake Charles
Refinery, Phillips 66 Partners is constructing a 25,000-BPD
isomerization unit to increase production of higher-octane gasoline
blend components. The project is expected to complete in the third
quarter of 2019.
A fluid catalytic cracking (FCC) unit upgrade project is
underway at the Sweeny Refinery to increase production of
higher-value petrochemical products and higher-octane gasoline. The
project is anticipated to be completed in the second quarter of
2020.
In Marketing, the company continues its program to roll out
updated signature image designs for Phillips 66, 76 and Conoco
branded sites. A total of 466 domestic sites were re-imaged during
the fourth quarter. In 2018, re-imaged sites had increased
same-site sales by 2 percent on average. Since the program’s
inception in 2015, approximately 2,600 U.S. sites have been
re-imaged. In 2019, an additional 1,800 sites are scheduled for
re-imaging and the remainder of the U.S. branded network will be
re-imaged by the end of 2020. International marketing will continue
to grow under the JET brand and will add 25 to 30 new sites in
2019.
Investor Webcast
Later today, members of Phillips 66 executive management will
host a webcast at noon EST to discuss the company’s fourth-quarter
performance and provide an update on strategic initiatives. To
access the webcast and view related presentation materials, go to
www.phillips66.com/investors and click
on “Events & Presentations.” For detailed supplemental
information, go to www.phillips66.com/supplemental.
Earnings
Millions of Dollars 2018 2017 Q4
Q3 Year Q4 Year Midstream
$ 379 284 1,181 189 638 Chemicals 152 263 1,025 8 716 Refining
2,001 1,232 4,535 516 2,076 Marketing and Specialties 589 423 1,557
167 1,020 Corporate and Other (203 ) (227 )
(853 ) (226 ) (895 )
Pre-Tax Income
2,918 1,975 7,445 654 3,555
Less: Income Tax Expense (Benefit) 602 407 1,572 (2,601 ) (1,693 )
Less: Noncontrolling Interests 76 76
278 57 142
Phillips
66 $ 2,240
1,492 5,595 3,198
5,106
Adjusted
Earnings
Millions of Dollars 2018 2017 Q4
Q3 Year Q4 Year Midstream
$ 409 312 1,239 196 623 Chemicals 152 263 1,025 161 955 Refining
2,008 1,263 4,572 510 1,656 Marketing and Specialties 592 385 1,453
168 1,032 Corporate and Other (201 ) (223 )
(863 ) (226 ) (860 )
Pre-Tax Income
2,960 2,000 7,426 809 3,406
Less: Income Tax Expense 624 467 1,604 204 995 Less: Noncontrolling
Interests 76 77 272
57 142
Phillips 66
$ 2,260 1,456
5,550 548 2,269
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
integral to the portfolio. Headquartered in Houston, the company
has 14,200 employees committed to safety and operating excellence.
Phillips 66 had $54 billion of assets as of Dec. 31, 2018. 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,” “continues,” “intends,” “will,” “would,”
“objectives,” “goals,” “projects,” “efforts,” “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; the impact of adverse market conditions or other
similar risks to those identified herein affecting PSXP, as well as
the ability of PSXP to successfully execute its growth plans; 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,
and adjusted pre-tax income. These are non-GAAP financial measures
that are included to help facilitate comparisons of company
operating performance across periods and with peer companies, by
excluding items that do not reflect the core operating results of
our businesses in the current period. This release includes
realized refining margin, a non-GAAP financial measure that
demonstrates how well we performed relative to benchmark industry
margins. This release also includes a debt-to-capital ratio
excluding PSXP. This non-GAAP measure is provided to
differentiate the capital structure of Phillips 66 compared with
that of Phillips 66 Partners.
References in the release to earnings refer to net income
attributable to Phillips 66. References to adjusted earnings refer
to earnings excluding special items, as detailed in the tables to
this release. References to net income are inclusive of
noncontrolling interests.
Millions of Dollars Except as Indicated
2018 2017 Q4 Q3
Year Q4 Year Reconciliation
of Consolidated Earnings to Adjusted Earnings
Consolidated Earnings $ 2,240
1,492 5,595 3,198 5,106 Pre-tax
adjustments: Pending claims and settlements — 21 21 — (60 ) Pension
settlement expense 18 49 67 7 83 Impairments by equity affiliates
28 — 28 31 64 Certain tax impacts (4 ) (45 ) (119 ) (23 ) (23 )
Gain on consolidation of business — — — — (423 ) Hurricane-related
costs — — — 140 210 Tax impact of adjustments* (12 ) (6 ) (1 ) (70
) 47 U.S. tax reform 55 (49 ) 23 (2,735 ) (2,735 ) Other tax
impacts (65 ) (5 ) (70 ) — — Noncontrolling interests
— (1 ) 6 — —
Adjusted earnings $ 2,260
1,456 5,550 548
2,269 Earnings per share of common
stock (dollars) $ 4.82 3.18 11.80
6.25 9.85 Adjusted earnings per share of common
stock (dollars)† $ 4.87
3.10 11.71
1.07 4.38
Reconciliation of Segment Pre-Tax Income to Adjusted Pre-Tax
Income Midstream Pre-Tax Income $ 379
284 1,181 189 638 Pre-tax adjustments:
Pending claims and settlements — 21 21 — (37 ) Pension settlement
expense 2 7 9 1 12 Impairments by equity affiliates 28 — 28 — —
Hurricane-related costs — —
— 6 10
Adjusted pre-tax
income $ 409
312 1,239 196
623 Chemicals Pre-Tax Income $
152 263 1,025 8 716 Pre-tax
adjustments: Impairments by equity affiliates — — — 31 64
Hurricane-related costs — —
— 122 175
Adjusted pre-tax
income $ 152
263 1,025 161
955 Refining Pre-Tax Income $
2,001 1,232 4,535 516 2,076
Pre-tax adjustments: Pending claims and settlements — — — — (51 )
Gain on consolidation of business — — — — (423 ) Certain tax
impacts (4 ) (1 ) (6 ) (23 ) (23 ) Pension settlement expense 11 32
43 5 53 Hurricane-related costs — —
— 12 24
Adjusted
pre-tax income $ 2,008
1,263 4,572 510
1,656 Marketing and Specialties
Pre-Tax Income $ 589 423 1,557
167 1,020 Pre-tax adjustments: Pension settlement
expense 3 6 9 1 11 Hurricane-related costs — — — — 1 Certain tax
impacts — (44 ) (113 ) —
—
Adjusted pre-tax income
$ 592 385
1,453 168 1,032
Corporate and Other Pre-Tax Loss $ (203
) (227 ) (853 ) (226
) (895 ) Pre-tax adjustments: Pending claims
and settlements — — — — 28 Pension settlement expense 2 4 6 — 7
U.S. tax reform — — (16 )
— —
Adjusted pre-tax loss
$ (201 ) (223 )
(863 ) (226 ) (860
)
*We generally tax effect taxable
U.S.-based special items using a combined federal and state
statutory income tax rate of approximately 25 percent beginning in
2018, and approximately 38 percent for periods prior to 2018.
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.
†Weighted-average diluted shares
outstanding and income allocated to participating securities, if
applicable, in the adjusted earnings per share calculation are the
same as those used in the GAAP diluted earnings per share
calculation.
Millions of Dollars Except as
Indicated 2018 Q4 Q3
Realized Refining Margins Income before income taxes $ 2,001
1,232 Plus: Taxes other than income taxes 66 72 Depreciation,
amortization and impairments 211 213 Selling, general and
administrative expenses 69 47 Operating expenses 1,010 922 Equity
in earnings of affiliates (349 ) (297 ) Other segment (income)
expense, net (4 ) 2 Proportional share of refining gross margins
contributed by equity affiliates 528 488 Special items: Certain tax
impacts (4 ) (1 )
Realized refining margins
$ 3,528 2,678
Total processed inputs (thousands of barrels) 190,481 176,888
Adjusted total processed inputs (thousands of barrels)*
213,444 200,520
Income before income taxes
(dollars per barrel)** $ 10.50 6.96
Realized refining margins (dollars per barrel)***
$ 16.53 13.36
*Adjusted total processed inputs include
our proportional share of processed inputs of an equity
affiliate.
**Income before income taxes divided by
total processed inputs.
***Realized refining margins per barrel,
as presented, are calculated using the underlying realized refining
margin amounts, in dollars, divided by adjusted total processed
inputs, in barrels. As such, recalculated per barrel amounts using
the rounded margins and barrels presented may differ from the
presented per barrel amounts due to rounding.
Millions of Dollars Except as
Indicated December 31, 2018 Debt-to-Capital Ratio
Phillips 66Consolidated
PSXP*
Phillips 66Excluding
PSXP
Total Debt $ 11,160 3,048 8,112 Total Equity 27,153
2,469 24,684
Debt-to-Capital Ratio 29 % 25 %
Total Cash $ 3,019 1
3,018
Net-Debt-to-Capital Ratio
23 % 17 %
*PSXP’s third-party debt and Phillips 66’s
noncontrolling interests attributable to PSXP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190208005093/en/
Jeff Dietert
(investors)832-765-2297jeff.dietert@p66.com
Brent Shaw
(investors)832-765-2297brent.d.shaw@p66.com
Dennis Nuss
(media)832-765-1850dennis.h.nuss@p66.com
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