- Reported second-quarter earnings of $1.7 billion or $3.72 per
share; adjusted earnings of $1.8 billion or $3.87 per share
- Generated $1.0 billion of operating cash flow, $2.0 billion
excluding working capital
- Returned $1.8 billion to shareholders through dividends and
share repurchases
- Continued strong Refining operations with above
industry-average crude utilization
- Achieved record NGL fractionation volumes
- Completed $3.8 billion acquisition of DCP Midstream, LP public
common units
Phillips 66 (NYSE: PSX), a diversified energy company, announces
second-quarter 2023 earnings of $1.7 billion compared with earnings
of $2.0 billion in the first quarter. Excluding special items of
$69 million, the company had adjusted earnings of $1.8 billion in
the second quarter, compared with first-quarter adjusted earnings
of $2.0 billion.
“We delivered strong financial results and continued executing
on our strategic priorities,” said Mark Lashier, President and CEO
of Phillips 66.
“We returned $1.8 billion to shareholders, progressed our
business transformation cost reduction initiatives and increased
expected synergy capture to more than $400 million in our Midstream
business. We demonstrated operational excellence across our
portfolio, running above industry-average utilization in Refining
and achieving record NGL frac volumes in Midstream. We also
completed the acquisition of the DCP Midstream, LP public common
units and continue to execute our NGL wellhead-to-market
strategy.”
Midstream
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2023
Q1 2023
Q2 2023
Q1 2023
Transportation
$ 284
306
284
270
NGL and Other
335
408
357
420
NOVONIX
(15)
(12)
(15)
(12)
Midstream
$ 604
702
626
678
Midstream second-quarter 2023 pre-tax income was $604 million,
compared with $702 million in the first quarter of 2023. Results in
the second quarter included $22 million of restructuring costs
related to the integration of DCP Midstream. Results in the first
quarter included a gain of $36 million from the Belle Chasse
terminal sale and $12 million of DCP Midstream restructuring
costs.
Transportation second-quarter adjusted pre-tax income was $284
million, compared with adjusted pre-tax income of $270 million in
the first quarter. The increase was primarily driven by higher
volumes.
NGL and Other adjusted pre-tax income was $357 million in the
second quarter, compared with adjusted pre-tax income of $420
million in the first quarter. The decrease was mainly due to
declining commodity prices.
In the second quarter, the fair value of the company’s
investment in NOVONIX, Ltd. decreased by $15 million compared with
a $12 million decrease in the first quarter.
Chemicals
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2023
Q1 2023
Q2 2023
Q1 2023
Chemicals
$ 192
198
192
198
The Chemicals segment reflects Phillips 66’s equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals
second-quarter 2023 reported and adjusted pre-tax income was $192
million, compared with $198 million in the first quarter of 2023.
Global olefins and polyolefins utilization was 98% for the
quarter.
Refining
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2023
Q1 2023
Q2 2023
Q1 2023
Refining
$ 1,134
1,608
1,148
1,608
Refining second-quarter 2023 reported and adjusted pre-tax
income was $1.1 billion, compared with pre-tax income of $1.6
billion in the first quarter of 2023. Results in the second quarter
include a $14 million loss related to a sale of assets.
The decrease was due to a decline in margins, partially offset
by higher volumes and lower operating expenses. Realized margins
decreased from $20.72 per barrel in the first quarter to $15.32 per
barrel in the second quarter, primarily due to the decline in
market crack spreads and lower feedstock advantage. The composite
market crack spread, excluding RIN costs, decreased from $22.39 per
barrel in the first quarter to $20.96 per barrel in the second
quarter.
Pre-tax turnaround costs for the second quarter were $102
million. Crude utilization rate was 93% and clean product yield was
86%.
Marketing and Specialties
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2023
Q1 2023
Q2 2023
Q1 2023
Marketing and Specialties
$ 644
426
644
426
Marketing and Specialties second-quarter 2023 reported and
adjusted pre-tax income was $644 million, compared with $426
million in the first quarter of 2023, mainly due to higher global
marketing margins on continued strong demand.
Corporate and Other
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q2 2023
Q1 2023
Q2 2023
Q1 2023
Corporate and Other
$ (330)
(283)
(236)
(248)
Corporate and Other second-quarter 2023 pre-tax costs were $330
million, compared with pre-tax costs of $283 million in the first
quarter of 2023. Results in the second quarter included a $53
million loss on early redemption of DCP debt and $41 million of
restructuring costs related to business transformation.
First-quarter results included $35 million of restructuring
costs.
Adjusted pre-tax costs were $236 million in the second quarter.
The improvement in the second quarter was mainly due to timing of
charitable contributions and lower employee-related expenses.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $1.0 billion in cash from operations in
the second quarter of 2023. Excluding working capital impacts,
operating cash flow was $2.0 billion.
During the second quarter, Phillips 66 funded $1.3 billion of
share repurchases, $551 million of capital expenditures and
investments and $474 million in dividends. The company ended the
quarter with 445 million shares outstanding.
Also during the quarter, the company completed the $3.8 billion
acquisition of all publicly held common units of DCP Midstream, LP,
increasing the company’s total economic interest to approximately
87%. The transaction was funded by a $1.25 billion draw under a
term loan agreement and cash on hand. Additionally, DCP Midstream,
LP redeemed its $550 million junior subordinated notes and its $161
million Series B preferred units using borrowings under its credit
facilities.
As of June 30, 2023, the company had $3.0 billion of cash and
cash equivalents and $5.6 billion of committed capacity available
under credit facilities. The company’s consolidated debt-to-capital
ratio was 39% and its net debt-to-capital ratio was 35%.
Strategic Update
Since July 2022 the company has returned $5.4 billion to
shareholders through share repurchases and dividends, progressing
toward its target of $10 billion to $12 billion in shareholder
distributions by year-end 2024.
Phillips 66’s business transformation is on track to deliver $1
billion in run-rate savings by the end of 2023. As of June 30, the
company has implemented $750 million of run-rate savings
initiatives, which includes $200 million of sustaining capital
efficiencies.
In Midstream, the company completed the previously announced
acquisition of all publicly held common units of DCP Midstream, LP
on June 15, 2023. The total increase in the company’s economic
interest in DCP Midstream, LP is expected to generate an
incremental $1 billion of annual adjusted EBITDA. In addition,
Phillips 66 now expects to capture over $400 million of commercial
and operating synergies across its wellhead-to-market value chain
by 2025.
In Chemicals, CPChem continues to pursue a portfolio of
high-return growth projects. CPChem completed construction of the
1-hexene unit in Old Ocean, Texas. Commissioning and startup of the
586 million pounds per year unit have commenced and commercial
operations are expected to begin by the end of the third quarter.
At its Cedar Bayou facility, the 1 billion pounds per year
propylene splitter capacity expansion project is expected to start
up in the fourth quarter.
CPChem and QatarEnergy are building joint-venture petrochemical
facilities on the U.S. Gulf Coast and in Ras Laffan, Qatar. On the
U.S. Gulf Coast, the Golden Triangle Polymers (GTP) facility will
include a 4.6 billion pounds per year ethane cracker and two
high-density polyethylene units with a combined capacity of 4.4
billion pounds per year. CPChem owns a 51% equity share in the
joint venture, which has secured project financing. The GTP
facility is expected to begin operations in 2026. The Ras Laffan
Petrochemical (RLP) facility will include a 4.6 billion pounds per
year ethane cracker and two high-density polyethylene units with a
total capacity of 3.7 billion pounds per year. The joint venture,
owned 30% by CPChem, expects to secure project financing by the end
of the year. The RLP facility is expected to start up in late
2026.
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. The conversion will reduce emissions from the facility and
produce lower carbon-intensity transportation fuels. Upon
completion, the facility will have over 50,000 BPD (800 million
gallons per year) of renewable fuel production capacity.
Investor Webcast
Later today, members of Phillips 66 executive management will
host a webcast at noon EDT to discuss the company’s second-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
2023
2022*
Q2
Q1
Jun YTD
Q2
Jun YTD
Midstream
$ 604
702
1,306
258
470
Chemicals
192
198
390
273
669
Refining
1,134
1,608
2,742
3,096
3,269
Marketing and Specialties
644
426
1,070
739
1,035
Corporate and Other
(330)
(283)
(613)
(260)
(509)
Pre-Tax Income
2,244
2,651
4,895
4,106
4,934
Less: Income tax expense
510
574
1,084
924
1,095
Less: Noncontrolling interests
37
116
153
15
90
Phillips 66
$ 1,697
1,961
3,658
3,167
3,749
Adjusted
Earnings
Millions of Dollars
2023
2022*
Q2
Q1
Jun YTD
Q2
Jun YTD
Midstream
$ 626
678
1,304
258
470
Chemicals
192
198
390
273
669
Refining
1,148
1,608
2,756
3,192
3,382
Marketing and Specialties
644
426
1,070
739
1,035
Corporate and Other
(236)
(248)
(484)
(235)
(484)
Pre-Tax Income
2,374
2,662
5,036
4,227
5,072
Less: Income tax expense
532
576
1,108
927
1,102
Less: Noncontrolling interests
76
121
197
15
90
Phillips 66
$ 1,766
1,965
3,731
3,285
3,880
*Earnings and adjusted earnings for the
second quarter of 2022 and the six-month period ended June 30,2022,
have been recast to reflect a change in the composition of the
company's segments made in the fourth quarter of 2022. See the
Basis of Presentation section below for further information.
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.
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 including
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 achieve the expected benefits of the integration of DCP
Midstream, LP (DCP) and our increased economic ownership of DCP;
the diversion of management’s time on integration-related matters;
the success of the company’s business transformation initiatives
and the realization of savings from actions taken in connection
therewith; 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; current or contemplated changes in
governmental policies or laws that relate to NGL, crude oil,
natural gas, refined petroleum products, or renewable fuels that
regulate profits, pricing, or taxation, or other regulations that
limit or restrict refining, marketing and midstream operations or
restrict exports; the inability to comply with governmental
regulations or make capital expenditures to maintain compliance
with laws; 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 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,” “adjusted pre-tax income
(loss),” and “adjusted pre-tax costs.” 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 refer to net income attributable to Phillips 66.
This news release also includes the terms “sustaining capital”
and “adjusted EBITDA,” which are non-GAAP financial measures.
Sustaining capital is a component of total capital expenditures,
which is the most directly comparable GAAP financial measure.
Adjusted EBITDA, as used in this release, is a forward-looking
non-GAAP financial measure. EBITDA is defined as estimated net
income plus estimated net interest expense, income taxes,
depreciation and amortization. Adjusted EBITDA is defined as
estimated EBITDA plus the proportional share of selected equity
affiliates’ estimated net interest expense, income taxes,
depreciation and amortization less the portion of estimated
adjusted EBITDA attributable to noncontrolling interests. Net
income is the most directly comparable GAAP financial measure for
the consolidated company and income before income taxes is the most
directly comparable GAAP financial measure for operating segments.
Adjusted EBITDA estimates depend on future levels of revenues and
expenses, including amounts that will be attributable to
noncontrolling interests, which are not reasonably estimable at
this time. Accordingly, we cannot provide a reconciliation between
projected adjusted EBITDA to consolidated net income or segment
income before income taxes without unreasonable effort.
Basis of Presentation— During the fourth quarter of 2022,
we changed the internal financial information reviewed by our chief
executive officer to evaluate results and allocate resources to
reflect the realignment of certain businesses between segments and
business lines. We determined this realignment resulted in a change
in the composition of our operating segments. Accordingly, results
in the second quarter of 2022 and the six-month period ended June
30, 2022, have been recast for comparability. The primary effects
of this realignment included moving the results of certain
processing assets at our Sweeny and Lake Charles refineries from
the Midstream segment (NGL and Other) to the Refining segment.
Additionally, commissions charged to the Refining segment by the
Marketing and Specialties segment related to sales of specialty
products were eliminated and the costs of the sales organization
were reclassified from the Marketing and Specialties segment to the
Refining segment. Additionally, we no longer present disaggregated
business line results for our Chemicals and Marketing and
Specialties segments.
Millions of Dollars
Except as Indicated
2023
2022*
Q2
Q1
Jun YTD
Q2
Jun YTD
Reconciliation of Consolidated Earnings
to Adjusted Earnings
Consolidated Earnings
$ 1,697
1,961
3,658
3,167
3,749
Pre-tax adjustments:
Hurricane-related costs
—
—
—
—
17
Net (gain)/loss on asset disposition
14
(36)
(22)
—
—
Alliance shutdown-related costs1
—
—
—
26
26
Regulatory compliance costs
—
—
—
70
70
Business transformation restructuring
costs2
41
35
76
25
25
DCP integration restructuring costs3
22
12
34
—
—
Loss on early redemption of DCP debt
53
—
53
—
—
Tax impact of adjustments4
(22)
(2)
(24)
(28)
(32)
Other tax impacts
—
—
—
25
25
Noncontrolling interests
(39)
(5)
(44)
—
—
Adjusted earnings
$ 1,766
1,965
3,731
3,285
3,880
Earnings per share of common stock
(dollars)
$ 3.72
4.20
7.92
6.53
8.00
Adjusted earnings per share of common
stock (dollars)5
$ 3.87
4.21
8.08
6.77
8.28
Reconciliation of Segment Pre-Tax
Income (Loss) to Adjusted Pre-Tax Income (Loss)
Midstream Pre-Tax Income
$ 604
702
1,306
258
470
Pre-tax adjustments:
Net gain on asset disposition
—
(36)
(36)
—
—
DCP integration restructuring costs3
22
12
34
—
—
Adjusted pre-tax income
$ 626
678
1,304
258
470
Chemicals Pre-Tax Income
$ 192
198
390
273
669
Pre-tax adjustments:
None
—
—
—
—
—
Adjusted pre-tax income
$ 192
198
390
273
669
Refining Pre-Tax Income
$ 1,134
1,608
2,742
3,096
3,269
Pre-tax adjustments:
Hurricane-related costs
—
—
—
—
17
Net loss on asset disposition
14
—
14
—
—
Alliance shutdown-related costs1
—
—
—
26
26
Regulatory compliance costs
—
—
—
70
70
Adjusted pre-tax income
$ 1,148
1,608
2,756
3,192
3,382
Marketing and Specialties Pre-Tax
Income
$ 644
426
1,070
739
1,035
Pre-tax adjustments:
None
—
—
—
—
—
Adjusted pre-tax income
$ 644
426
1,070
739
1,035
Corporate and Other Pre-Tax
Loss
$ (330)
(283)
(613)
(260)
(509)
Pre-tax adjustments:
Business transformation restructuring
costs2
41
35
76
25
25
Loss on early redemption of DCP debt
53
—
53
—
—
Adjusted pre-tax loss
$ (236)
(248)
(484)
(235)
(484)
*Earnings and adjusted earnings for the
second quarter of 2022 and the six-month period ended June 30,2022,
have been recast to reflect a change in the composition of the
company's segments made in the fourth quarter of 2022. See the
Basis of Presentation section above for further information.
1Costs 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.
2Restructuring costs, related to Phillips
66’s multi-year business transformation efforts, are primarily due
to consulting fees.
3Restructuring costs, related to the
integration of DCP Midstream, mainly reflect severance costs,
consulting fees and contract exit costs. A portion of these costs
are attributable to noncontrolling interests.
4We 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.
5Q2 2023 is based on adjusted
weighted-average diluted shares of 456,173 thousand. 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
June 30, 2023
Debt-to-Capital Ratio
Total Debt
$ 19,866
Total Equity
31,060
Debt-to-Capital Ratio
39 %
Total Cash
3,029
Net Debt-to-Capital Ratio
35 %
Millions of Dollars
Except as Indicated
2023
Q2
Q1
Realized Refining Margins
Income before income taxes
$ 1,134
1,608
Plus:
Taxes other than income taxes
99
113
Depreciation, amortization and
impairments
209
202
Selling, general and administrative
expenses
37
45
Operating expenses
941
1,167
Equity in earnings of affiliates
(117)
(199)
Other segment expense, net
15
25
Proportional share of refining gross
margins contributed by equity affiliates
335
428
Special items:
None
—
—
Realized refining margins
$ 2,653
3,389
Total processed inputs (thousands of
barrels)
153,663
145,241
Adjusted total processed inputs (thousands
of barrels)*
173,134
163,552
Income before income taxes (dollars per
barrel)**
$ 7.38
11.07
Realized refining margins (dollars per
barrel)***
$ 15.32
20.72
*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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230801657507/en/
Jeff Dietert (investors) 832-765-2297 jeff.dietert@p66.com
Owen Simpson (investors) 832-765-2297 owen.simpson@p66.com
Thaddeus Herrick (media) 855-841-2368
thaddeus.f.herrick@p66.com
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