Adjusted earnings of $187 million or $0.40 per
share
Highlights
- Returned $708 million to shareholders
through dividends and share repurchases
- Achieved 98% O&P capacity
utilization in Chemicals
- Delivered record utilization at Sweeny
fractionator and Freeport LPG export facility
- Advanced several large-scale Midstream
growth projects
- Executed major turnaround program
impacting five refineries
- Six refineries received industry
recognition for exemplary safety performance
- Re-imaged over 300 branded sites in
Marketing
Phillips 66 (NYSE: PSX), a diversified energy manufacturing and
logistics company, announces first-quarter 2019 earnings of $204
million, compared with $2.2 billion in the fourth quarter of 2018.
Excluding special items of $17 million in the first quarter of
2019, adjusted earnings were $187 million, compared with
fourth-quarter 2018 adjusted earnings of $2.3 billion.
“Our first-quarter results reflect the benefit of our
diversified portfolio despite a weak market environment,” said Greg
Garland, chairman and CEO of Phillips 66. “In Chemicals, CPChem
operated at 98% O&P utilization, and in Midstream, we had
strong operating performance across our NGL value chain. We
executed major turnaround activities at several refineries and were
impacted by unplanned downtime. We returned $708 million to
shareholders through dividends and share repurchases in the
quarter. We continued to advance our major growth projects,
including the Gray Oak Pipeline and the new Sweeny
fractionators.”
“We are dedicated to operating excellence and maintaining safe
and reliable operations. We have a strong portfolio of growth
projects and are focused on executing our capital
program. Disciplined capital allocation is fundamental to our
strategy, and we will invest in 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 Q1 2019
Q4 2018 Q1 2019 Q4 2018
Transportation $ 203 234 203 234 NGL
and Other 90 120 90 122 DCP Midstream 23
25 23 53
Midstream
$ 316 379 316
409
Midstream first-quarter 2019 pre-tax income was $316 million,
compared with $379 million in the fourth quarter of 2018. Midstream
results in the fourth quarter of 2018 included a $28 million impact
to equity earnings from asset impairments at DCP Midstream, as well
as $2 million of pension settlement expense.
Transportation first-quarter 2019 adjusted pre-tax income of
$203 million was $31 million lower than fourth-quarter 2018
adjusted pre-tax income of $234 million, mainly reflecting lower
pipeline and terminal throughput volumes, driven by seasonal
refinery turnaround activities, as well as lower equity affiliate
earnings.
NGL and Other adjusted pre-tax income for the first quarter of
2019 was $90 million, a $32 million decrease from the fourth
quarter of 2018, primarily due to fourth-quarter inventory
impacts.
The company’s equity investment in DCP Midstream generated
adjusted pre-tax income of $23 million in the first quarter of
2019, compared with $53 million in the fourth quarter of 2018. The
decrease reflects higher fourth-quarter hedging results from
falling crude and natural gas liquid (NGL) prices, partially offset
by lower operating costs.
Chemicals
Millions of Dollars Pre-Tax Income
Adjusted Pre-Tax Income Q1 2019
Q4 2018 Q1 2019 Q4 2018
Olefins and Polyolefins $ 219 158 219
158 Specialties, Aromatics and Styrenics 26 16 26 16 Other
(18) (22) (18) (22)
Chemicals $ 227
152 227 152
The Chemicals segment reflects Phillips 66’s equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals’
first-quarter 2019 pre-tax income was $227 million, compared with
$152 million in the fourth quarter of 2018.
CPChem’s Olefins and Polyolefins (O&P) business contributed
$219 million of adjusted pre-tax income in the first quarter of
2019, compared with $158 million in the fourth quarter of 2018. The
increase mainly reflects lower turnaround and maintenance costs and
higher polyethylene sales volumes, partially offset by lower
margins. Global O&P utilization was 98%.
CPChem’s Specialties, Aromatics and Styrenics (SA&S)
business contributed $26 million of adjusted pre-tax income in the
first quarter of 2019, an increase of $10 million from the prior
quarter. The increase primarily reflects higher earnings from
international equity affiliates due to improved volumes and
margins.
Refining
Millions of Dollars Pre-Tax Income
(Loss) Adjusted Pre-Tax Income (Loss)
Q1 2019 Q4 2018 Q1 2019
Q4 2018 Refining
$ (198) 2,001
(219) 2,008
Refining had a first-quarter 2019 pre-tax loss of $198 million,
compared with pre-tax income of $2 billion in the fourth quarter of
2018. Refining results in the first quarter of 2019 included $21
million of claim settlements. Fourth-quarter 2018 results included
pension settlement expense of $11 million, as well as $4 million of
favorable U.K. R&D expenditure credits.
Refining had an adjusted pre-tax loss of $219 million in the
first quarter of 2019, compared with adjusted pre-tax income of $2
billion in the fourth quarter of 2018. The decrease was a result of
a decline in realized margins, as well as lower volumes due to
maintenance activity and unplanned downtime. Realized margins were
down 56% to $7.23 per barrel in the first quarter, driven by
narrowing of inland crude differentials, primarily Canadian crude,
and lower clean product realizations.
Phillips 66’s worldwide crude utilization rate was 84%, down
from 99% in the fourth quarter of 2018. Pre-tax turnaround costs
for the first quarter of 2019 were $148 million, compared with
fourth-quarter 2018 costs of $130 million. Clean product yield was
85% in the first quarter.
Marketing and Specialties
Millions of Dollars Pre-Tax Income
Adjusted Pre-Tax Income Q1 2019
Q4 2018 Q1 2019 Q4
2018 Marketing and Other $ 138 525 138
528 Specialties 67 64 67
64
Marketing and Specialties $
205 589 205
592
Marketing and Specialties (M&S) first-quarter 2019 pre-tax
income was $205 million, compared with $589 million in the fourth
quarter of 2018. M&S results in the fourth quarter of 2018
included pension settlement expense of $3 million.
Adjusted pre-tax income for Marketing and Other was $138 million
in the first quarter of 2019, a decrease of $390 million from the
fourth quarter of 2018. The decrease was mainly due to lower
domestic and international marketing margins driven by less
favorable market conditions. Refined product exports in the first
quarter were 200,000 barrels per day (BPD).
Specialties generated adjusted pre-tax income of $67 million
during the first quarter, up from $64 million.
Corporate and Other
Millions of Dollars Pre-Tax Loss
Adjusted Pre-Tax Loss Q1 2019
Q4 2018 Q1 2019
Q4 2018 Corporate and Other
$ (210) (203)
(210) (201)
Corporate and Other first-quarter 2019 pre-tax costs were $210
million, compared with pre-tax costs of $203 million in the fourth
quarter of 2018. Corporate and Other pre-tax costs in the fourth
quarter of 2018 included pension settlement expense of $2
million.
Financial Position, Liquidity and Return of Capital
Cash used in operations was $478 million in the first quarter.
Operating cash flow was $923 million excluding $1.4 billion of
working capital impacts mainly due to inventory builds. Cash
distributions from equity affiliates totaled $632 million,
including CPChem and WRB Refining distributions to Phillips 66 of
$200 million and $138 million, respectively.
Capital expenditures and investments in the first quarter were
$1.1 billion. Excluding $422 million of capital spending funded by
Gray Oak joint venture partners, adjusted capital spending was $675
million. Phillips 66 funded $364 million of dividends and $344
million of share repurchases in the quarter. The company ended the
quarter with 454 million shares outstanding.
As of March 31, 2019, cash and cash equivalents were $1.3
billion, and consolidated debt was $11.3 billion, including $3.2
billion at Phillips 66 Partners (PSXP). The company’s consolidated
debt-to-capital ratio was 30% and its net debt-to-capital ratio was
27%. Excluding PSXP, the debt-to-capital ratio was 25% and the net
debt-to-capital ratio was 22%.
Strategic Update
Phillips 66 Partners is constructing the 900,000 BPD Gray Oak
Pipeline, which is anticipated to be in service by the end of
2019. The pipeline will provide crude oil transportation from
the Permian and Eagle Ford to destinations in Corpus Christi,
Texas, and the Sweeny, Texas, area, including the company's Sweeny
Refinery. Phillips 66 Partners has a 42.25% ownership in the
pipeline.
The Gray Oak Pipeline will connect to multiple terminals in
Corpus Christi, including the South Texas Gateway Terminal
currently being constructed by Buckeye Partners, L.P. The marine
export terminal will have two deepwater docks, with initial storage
capacity of 7 million barrels and up to 800,000 BPD of throughput
capacity. Phillips 66 Partners owns a 25% 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
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 the fourth quarter of 2020, the Sweeny Hub will have
400,000 BPD of fractionation capacity and 15 million barrels of
storage at Clemens Caverns.
The company is constructing 2.2 million barrels of additional
crude oil storage at its Beaumont Terminal. Upon completion in the
first quarter of 2020, the terminal will have 16.8 million barrels
of total crude and product storage capacity.
During the quarter, the Bayou Bridge Pipeline segment from Lake
Charles, Louisiana, to St. James, Louisiana, was completed. The
pipeline now transports crude oil from Nederland, Texas, to St.
James. Phillips 66 Partners owns a 40% interest in the pipeline
joint venture. In addition, Phillips 66 Partners continues to
advance the ACE Pipeline System, which would provide crude oil
transportation from St. James to destinations in Southeast
Louisiana, including the company's Alliance Refinery.
DCP Midstream has a 25% interest in the Gulf Coast Express
Pipeline project to transport approximately 2 billion cubic feet
per day of natural gas from the Permian 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 at the end of the second quarter of
2019.
In Chemicals, CPChem’s new ethane cracker at Cedar Bayou
continues to operate above original design capacity. Effective
January 1, 2019, the capacity was increased to 1.7 million metric
tons per year, 15% above original design. CPChem is developing a
second U.S. Gulf Coast project that would add world-scale ethylene
and derivative capacity. CPChem also continues to evaluate
additional low-cost, high-return debottleneck opportunities.
CPChem has a study underway to add a world-scale 1-Hexene unit,
which would expand production of normal alpha olefins (NAO).
1-Hexene is a critical component used to produce high-strength
polyethylene products.
In Refining, Phillips 66 is upgrading the fluid catalytic
cracking unit (FCC) 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. Phillips 66 Partners is constructing a 25,000 BPD
isomerization unit at the Lake Charles Refinery to increase
production of higher-octane gasoline blend components. The project
is expected to be completed in the third quarter of 2019.
The company has a portfolio of renewable fuel projects under
development that leverage existing infrastructure. Waste fats,
recycled cooking oils and other renewable feedstocks will be used
for diesel production. The company has projects at the Humber
and Ferndale refineries, as well as supply and offtake agreements
with third-party facilities in Nevada. Renewable fuel
opportunities are also being evaluated at the company’s California
refineries.
In Marketing, the company continues its program to roll out
updated signature image designs for Phillips 66, 76 and Conoco
branded sites. During the first quarter, over 300 domestic sites
were re-imaged. Since the program’s inception in 2015,
approximately 2,900 U.S. sites have been re-imaged.
Six Phillips 66 refineries were recognized by the American Fuel
and Petrochemical Manufacturers (AFPM) for exemplary safety
performance in 2018. The Ponca City Refinery received the
Distinguished Safety Award. This is the highest annual safety award
the industry recognizes, and the third year in a row that one of
the company's refineries has received this recognition. The
Ferndale and Los Angeles refineries received the second-highest
recognition, the Elite Gold Award. The Billings and Borger
refineries, as well as the San Francisco Refinery’s Santa Maria
site, were selected as recipients of the Elite Silver Award, which
recognizes the industry's top 5% for safety performance.
In Chemicals, the AFPM selected five CPChem facilities as
recipients of their Elite Silver Award. The facilities recognized
were Cedar Bayou, Conroe, Pasadena, Port Arthur and Sweeny. In
Midstream, Phillips 66 and DCP Midstream received first place
company awards in their respective divisions from the Gas
Processors Association for outstanding safety performance in
2018.
Investor Webcast
Later today, members of Phillips 66 executive management will
host a webcast at noon EDT to discuss the company’s first-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 2019
2018 Q1 Q4 Q1
Midstream $ 316 379 280 Chemicals 227 152 286
Refining (198 ) 2,001 112 Marketing and Specialties 205 589 235
Corporate and Other (210 ) (203 )
(196 )
Pre-Tax Income 340 2,918
717 Less: Income tax expense 70 602 132 Less: Noncontrolling
interests 66 76 61
Phillips 66 $ 204
2,240 524
Adjusted
Earnings
Millions of Dollars 2019 2018 Q1
Q4 Q1 Midstream $ 316 409 280 Chemicals
227 152 286 Refining (219 ) 2,008 110 Marketing and Specialties 205
592 222 Corporate and Other (210 ) (201 )
(212 )
Pre-Tax Income 319 2,960
686 Less: Income tax expense 66 624 120 Less: Noncontrolling
interests 66 76 54
Phillips 66 $ 187
2,260 512
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 14,300 employees committed to safety and operating excellence.
Phillips 66 had $58 billion of assets as of March 31, 2019. 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. Additionally, this release includes
adjusted capital spending, a non-GAAP financial measure that
demonstrates Phillips 66's net share of capital spending.
References in the release to earnings refer to net income
attributable to Phillips 66. References to net income are inclusive
of noncontrolling interests.
Millions of Dollars Except as Indicated
2019 2018 Q1 Q4
Q1 Reconciliation of Consolidated Earnings to
Adjusted Earnings Consolidated Earnings $
204 2,240 524 Pre-tax adjustments: Pending
claims and settlements (21 ) — — Pension settlement expense — 18 —
Impairments by equity affiliates — 28 — Certain tax impacts — (4 )
(15 ) Tax impact of adjustments* 4 (12 ) 3 U.S. tax reform — 55 (7
) Other tax impacts — (65 ) — Noncontrolling interests
— — 7
Adjusted
earnings $ 187 2,260
512 Earnings per share of
common stock (dollars) $ 0.44 4.82
1.07 Adjusted earnings per share of common stock
(dollars)† $ 0.40
4.87 1.04
Reconciliation of Segment Pre-Tax Income (Loss) to Adjusted
Pre-Tax Income (Loss) Midstream Pre-Tax Income $
316 379 280 Pre-tax adjustments: Pension
settlement expense — 2 — Impairments by equity affiliates
— 28 —
Adjusted
pre-tax income $ 316
409 280 Chemicals
Pre-Tax Income $ 227 152 286
Pre-tax adjustments: None — —
—
Adjusted pre-tax income
$ 227 152
286 Refining Pre-Tax Income (Loss) $
(198 ) 2,001 112 Pre-tax adjustments:
Pending claims and settlements (21 ) — — Certain tax impacts — (4 )
(2 ) Pension settlement expense — 11
—
Adjusted pre-tax income (loss)
$ (219 ) 2,008
110 Marketing and Specialties Pre-Tax
Income $ 205 589 235 Pre-tax
adjustments: Pension settlement expense — 3 — Certain tax impacts
— — (13 )
Adjusted
pre-tax income $ 205
592 222 Corporate and
Other Pre-Tax Loss $ (210 ) (203
) (196 ) Pre-tax adjustments: Pension
settlement expense — 2 — U.S. tax reform — —
(16 )
Adjusted pre-tax loss
$ (210 ) (201 )
(212 )
*We generally tax effect taxable
U.S.-based special items using a combined federal and state
statutory income tax rate of approximately 25%. 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 Q1 2019 Q4 2018
Realized Refining Margins Income (loss) before income taxes
$ (198 ) 2,001 Plus: Taxes other than income taxes 75 66
Depreciation, amortization and impairments 212 211 Selling, general
and administrative expenses 11 69 Operating expenses 1,011 1,010
Equity in earnings of affiliates (81 ) (349 ) Other segment
(income) expense, net 7 (4 ) Proportional share of refining gross
margins contributed by equity affiliates 284 528 Special items:
Pending claims and settlements (21 ) — Certain tax impacts
— (4 )
Realized refining margins
$ 1,300 3,528
Total processed inputs (thousands of barrels) 161,712 190,481
Adjusted total processed inputs (thousands of barrels)*
179,715 213,444
Income (loss) before
income taxes (dollars per barrel)** $ (1.22
) 10.50 Realized refining margins (dollars per
barrel)*** $ 7.23
16.53
*Adjusted total processed inputs include
our proportional share of processed inputs of an equity
affiliate.
**Income (loss) 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
March 31, 2019 Debt-to-Capital Ratio
Phillips 66
Consolidated
PSXP* Phillips 66
Excluding PSXP
Total Debt $ 11,298 3,188 8,110 Total Equity 26,745
2,494 24,251
Debt-to-Capital Ratio 30 % 25 %
Total Cash $ 1,253 2
1,251
Net Debt-to-Capital Ratio
27 %
22 %
*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/20190430005291/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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