Adjusted earnings of $294 million or $0.56 per
share
Highlights
- Delivered strong results in
Chemicals
- Completed major turnarounds in Refining
and Chemicals
- Returned $611 million to shareholders
through dividends and share repurchases
- Completed first full quarter of
Freeport LPG Export Terminal operations
- Construction completed on DAPL/ETCOP
joint venture pipelines
- Commissioned additional crude storage
at the Beaumont Terminal
Phillips 66 (NYSE: PSX), an energy manufacturing and logistics
company, announces first-quarter earnings of $535 million, compared
with $163 million in the fourth quarter of 2016. First-quarter
earnings included the net benefit of a gain on consolidation of a
petroleum coking venture and an impairment taken by an equity
affiliate. Excluding these items, adjusted earnings for the first
quarter were $294 million, an increase of $211 million from the
last quarter.
“We have successfully completed several major turnarounds in
Refining and Chemicals,” said Greg Garland, chairman and CEO of
Phillips 66. “First-quarter earnings reflect this downtime and also
highlight the benefit of a diversified portfolio. Our Chemicals
business had solid results on good demand and improved margins. The
Freeport LPG Export Terminal is fully operational, and we have
several Midstream and Chemicals projects nearing completion. Our
safety performance did not meet expectations this quarter. We
remain dedicated to operating excellence, executing our Midstream
and Chemicals growth strategy, enhancing returns in Refining, and
returning cash to shareholders."
“We demonstrated our commitment to shareholder distributions,
returning over $600 million in share repurchases and dividends
during the quarter. Since our inception in 2012, we have
distributed $14 billion to shareholders in the form of dividends,
share repurchases and exchanges.”
Midstream
Millions of Dollars
Earnings Adjusted Earnings* Q1
2017 Q4 2016 Q1 2017
Q4 2016 Transportation $ 78 70
78 68 NGL 17 2 17 7 DCP Midstream
17 (37 )
17
(6 ) Midstream net income 112 35 112 69 Less:
Noncontrolling interests** 35
36 35 36
Midstream earnings
(loss) $
77
(1 )
77
33 * Excludes special items. **Included
in Transportation and NGL businesses.
Midstream's first-quarter earnings were $77 million, compared
with a loss of $1 million in the fourth quarter of 2016. Midstream
earnings in the fourth quarter of 2016 included a $34 million net
charge related to DCP Midstream's restructuring and certain tax
adjustments, resulting in adjusted earnings of $33
million.
Transportation net income for the first quarter of 2017 was $78
million, improved $10 million from fourth-quarter adjusted net
income of $68 million. This was primarily due to seasonally lower
maintenance costs and higher equity earnings.
NGL first-quarter net income of $17 million was $10 million
higher than fourth-quarter adjusted net income of $7 million,
mainly due to higher Freeport LPG Export Terminal earnings,
reflecting a full quarter of operations.
The company’s equity investment in DCP Midstream generated net
income of $17 million in the first quarter, compared with a $6
million adjusted net loss in the prior quarter. DCP benefited from
hedging and lower costs, partially offset by reduced volumes.
Chemicals
Millions of Dollars
Earnings Adjusted Earnings* Q1
2017 Q4 2016 Q1 2017
Q4 2016 Olefins and Polyolefins
(O&P) $ 161 115 161 105
Specialties, Aromatics and Styrenics (SA&S) 25 26 45 24 Other
(5 ) (5 ) (5 )
(5 )
Chemicals $
181 136 201
124 * Excludes special items.
The Chemicals segment reflects Phillips 66's equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals'
first-quarter earnings were $181 million, compared with $136
million in the fourth quarter of 2016. Chemicals' earnings in the
first quarter of 2017 included a charge of $20 million related to
an impairment of a CPChem joint venture, while earnings in the
fourth quarter included a net benefit of $12 million for certain
tax adjustments.
During the first quarter, CPChem's O&P business contributed
$161 million of earnings to the Chemicals segment. The $56 million
increase from the prior quarter's adjusted earnings was primarily
due to improved margins, higher volumes, and lower operating costs.
Global utilization for O&P was 89 percent.
CPChem's SA&S business contributed $45 million of adjusted
earnings in the first quarter, an increase of $21 million from the
prior quarter due to improved benzene margins and a $10 million
gain on the sale of its K-Resin® SBC business.
Refining
Millions of Dollars
Earnings Adjusted Earnings* Q1
2017 Q4 2016 Q1 2017
Q4 2016 Refining
$ 259 (38 )
(2 ) (95 ) * Excludes
special items.
Refining's first-quarter earnings were $259 million, compared
with a $38 million loss in the fourth quarter of 2016. Refining's
earnings in the first quarter of 2017 included a $261 million gain
resulting from the consolidation of the MSLP petroleum coking
venture following the resolution of an ownership dispute.
Refining's fourth-quarter 2016 earnings included a $57 million net
benefit, related to certain tax adjustments that were partially
offset by railcar lease termination costs.
Refining's adjusted loss was $2 million in the first quarter.
The $93 million improvement from the prior quarter was largely
driven by higher realized margins, partially offset by higher costs
and lower volumes due to turnaround activity. Although the global
market crack spread was comparable to the fourth quarter, realized
margins improved to $8.55 per barrel from $6.47 per barrel. This
resulted in a capture rate of 70 percent, up from 53 percent in the
prior quarter. Realized margins benefited from lower RIN costs and
improved clean product differentials, including the absence of
negative timing impacts incurred in the fourth quarter.
Phillips 66’s worldwide crude utilization rate was 84 percent
and its clean product yield was 85 percent in the first quarter.
Pre-tax turnaround costs for the first quarter were $299 million,
compared with fourth-quarter costs of $205 million.
Marketing and Specialties
Millions of Dollars
Earnings Adjusted Earnings* Q1
2017 Q4 2016 Q1 2017
Q4 2016 Marketing and Other $ 124 158
124 114 Specialties 17
32 17 26
Marketing and
Specialties $ 141
190 141 140
* Excludes special items.
Marketing and Specialties (M&S) first-quarter earnings were
$141 million, compared with $190 million in the fourth quarter of
2016. M&S's fourth-quarter earnings included a net benefit of
$50 million related to certain tax adjustments.
Earnings for Marketing and Other were $124 million in the first
quarter, an increase of $10 million from the prior quarter's
adjusted earnings, largely due to higher realized margins. Refined
product exports in the first quarter were 144,000 barrels per day
(BPD), versus 175,000 BPD in the prior quarter.
Phillips 66’s Specialties businesses generated earnings of $17
million during the first quarter. The $9 million decrease
from the prior quarter's adjusted earnings was mainly due to
turnaround activity at the Excel Paralubes joint venture.
Corporate and Other
Millions of Dollars
Earnings Adjusted Earnings* Q1
2017 Q4 2016 Q1 2017
Q4 2016 Corporate and
Other $ (123 )
(124 ) (123 )
(119 ) * Excludes special items.
Corporate and Other’s first-quarter net costs were in line with
the prior quarter.
Financial Position, Liquidity and Return of Capital
During the first quarter, cash used in operations was $549
million, including the impact of a seasonal inventory build.
Excluding working capital impacts, operating cash flow was $748
million.
During the quarter, Phillips 66 funded $470 million of capital
expenditures and investments, and distributed $326 million in
dividends and $285 million in share repurchases. Phillips 66 ended
the quarter with 516 million shares outstanding.
As of March 31, 2017, cash and cash equivalents were $1.5
billion, and debt was $10.2 billion, including $2.4 billion of debt
at PSXP. The company's consolidated debt-to-capital ratio and
net-debt-to-capital ratio were 30 percent and 27 percent,
respectively.
Strategic Update
Phillips 66 continues to advance its growth projects in
Midstream and Chemicals and invest in return-enhancing projects in
Refining.
In Midstream, the Freeport LPG Export Terminal was completed and
became fully operational late in the fourth quarter of 2016. The
export terminal has a capacity of 150,000 BPD that is being
utilized for term and spot cargos. The facility demonstrated its
ability to operate at design capacity in the first quarter.
Phillips 66 has a 25 percent interest in joint ventures to
develop the 470,000 BPD Dakota Access Pipeline (DAPL) and Energy
Transfer Crude Oil Pipeline (ETCOP). Construction on both pipelines
has been completed. Commercial operations are expected to begin by
June 1.
The company continues to expand its Beaumont Terminal, which now
has 9 million barrels of crude and product storage capacity. An
additional 1.2 million barrels of product storage is planned to be
in service by mid-2017. The facility is capable of exporting
400,000 BPD of crude or products, and this capacity is being
expanded to 600,000 BPD.
Phillips 66 Partners continues to advance its organic growth
program. Progress continues on the Bayou Bridge Pipeline segment
from Lake Charles to St. James, Louisiana, with commercial
operations expected to begin in the fourth quarter of 2017. In
addition, the Partnership is developing a new isomerization unit at
Phillips 66’s Lake Charles Refinery to increase production of
higher octane gasoline blend components. Final project approval is
expected in the first half of 2018.
DCP Midstream recently simplified its structure, which better
positions it for growth and improved capital allocation. Phillips
66 expects to receive distributions from DCP in 2017. DCP is
expanding the Sand Hills Pipeline capacity to 365,000 BPD, with an
expected in-service date in the fourth quarter of 2017. DCP is also
expanding its DJ Basin footprint with construction of the new 200
million cubic feet per day Mewbourn 3 gas processing plant, which
is expected to be in service in the fourth quarter of 2018.
CPChem continues to progress its U.S. Gulf Coast Petrochemicals
Project, which consists of a world-scale ethane cracker and two
polyethylene derivative units. The polyethylene units are expected
to be completed in mid-2017, and the cracker is expected to be
complete in the fourth quarter of 2017. This project will increase
CPChem's global ethylene and polyethylene capacity by approximately
one-third.
In Refining, the company is nearing completion of the project to
increase heavy crude processing capability at the Billings Refinery
to 100 percent, with start-up expected in June. At both the Bayway
and Wood River refineries, the company is modernizing fluid
catalytic cracking units to increase clean product yield. Both
projects are expected to be complete in the first half of 2018.
Phillips 66 is also implementing yield improvement efforts at
several other refineries, including Ponca City, where a diesel
recovery project is expected to be complete in the second half of
2017.
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 2017
2016 Q1 Q4
Q1 Midstream $ 77 (1 ) 65 Chemicals 181 136
156 Refining 259 (38 ) 86 Marketing and Specialties 141 190 205
Corporate and Other (123 ) (124 )
(127 )
Phillips 66
$ 535 163
385
Adjusted
Earnings
Millions of Dollars 2017 2016 Q1
Q4 Q1 Midstream $ 77 33 40 Chemicals
201 124 156 Refining (2 ) (95 ) 86 Marketing and Specialties 141
140 205 Corporate and Other (123 ) (119
) (127 )
Phillips 66
$ 294 83
360
About Phillips 66
Phillips 66 is a diversified energy manufacturing and logistics
company. With a portfolio of Midstream, Chemicals, Refining, and
Marketing and Specialties businesses, the company processes,
transports, stores and markets fuels and products globally.
Phillips 66 Partners, the company's master limited partnership, is
an integral asset in the portfolio. Headquartered in Houston, the
company has 14,600 employees committed to safety and operating
excellence. Phillips 66 had $51 billion of assets as of
March 31, 2017. For more information, visit www.phillips66.com or follow us on Twitter
@Phillips66Co.
CAUTIONARY STATEMENT FOR THE PURPOSES
OF THE "SAFE HARBOR" PROVISIONS
OF THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
This news release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbors
created thereby. Words and phrases such as “is anticipated,” “is
estimated,” “is expected,” “is planned,” “is scheduled,” “is
targeted,” “believes,” “intends,” “objectives,” “projects,”
“strategies” and similar expressions are used to identify such
forward-looking statements. However, the absence of these words
does not mean that a statement is not forward-looking.
Forward-looking statements relating to Phillips 66’s operations
(including joint venture operations) are based on management’s
expectations, estimates and projections about the company, its
interests and the energy industry in general on the date this news
release was prepared. These statements are not guarantees of future
performance and involve certain risks, uncertainties and
assumptions that are difficult to predict. Therefore, actual
outcomes and results may differ materially from what is expressed
or forecast in such forward-looking statements. Factors that could
cause actual results or events to differ materially from those
described in the forward-looking statements include fluctuations in
NGL, crude oil, and natural gas prices, and petrochemical and
refining margins; unexpected changes in costs for constructing,
modifying or operating our facilities; unexpected difficulties in
manufacturing, refining or transporting our products; lack of, or
disruptions in, adequate and reliable transportation for our NGL,
crude oil, natural gas, and refined products; potential liability
from litigation or for remedial actions, including removal and
reclamation obligations under environmental regulations; limited
access to capital or significantly higher cost of capital related
to illiquidity or uncertainty in the domestic or international
financial markets; and other economic, business, competitive and/or
regulatory factors affecting Phillips 66’s businesses generally as
set forth in our filings with the Securities and Exchange
Commission. Phillips 66 is under no obligation (and expressly
disclaims any such obligation) to update or alter its
forward-looking statements, whether as a result of new information,
future events or otherwise.
Use of Non-GAAP Financial Information -- This news
release includes the terms adjusted earnings, adjusted earnings per
share, and adjusted net 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 don't 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.
Millions of Dollars Except as
Indicated 2017 2016 Q1
Q4 Q1 Reconciliation of Earnings to
Adjusted Earnings Consolidated Earnings $
535 163 385 Pre-tax adjustments: Impairments
by equity affiliates 33 — 6 Pending claims and settlements — — (45
) Equity affiliate ownership restructuring — 33 — Railcar lease
residual value deficiencies and related costs — 40 — Gain on
consolidation of business (423 ) — — Certain tax impacts* — (32 ) —
Tax impact of adjustments** 149 (27 ) 14 Other tax impacts
— (94 ) —
Adjusted earnings $
294 83 360
Earnings per share of common stock (dollars) $
1.02 0.31 0.72 Adjusted earnings per share
of common stock (dollars)†
$ 0.56 0.16
0.67 Midstream Earnings $ 77
(1 ) 65 Pre-tax adjustments: Pending claims
and settlements — — (45 ) Impairments by equity affiliates — — 6
Equity affiliate ownership restructuring — 33 — Tax impact of
adjustments** — (12 ) 14 Other tax impacts
— 13 —
Adjusted
earnings $ 77
33 40 Chemicals
Earnings $ 181 136 156 Pre-tax
adjustments: Impairments by equity affiliates 33 — — Tax impact of
adjustments** (13 ) — — Other tax impacts
— (12 ) —
Adjusted
earnings $ 201
124 156 Refining
Earnings $ 259 (38 ) 86
Pre-tax adjustments: Certain tax impacts* — (32 ) — Gain on
consolidation of business (423 ) — — Railcar lease residual value
deficiencies and related costs — 40 — Tax impact of adjustments**
162 (15 ) — Other tax impacts —
(50 ) —
Adjusted earnings
$ (2 ) (95 )
86 Marketing and Specialties
Earnings $ 141 190 205 Other tax
impacts — (50 ) —
Adjusted earnings
$ 141 140
205 Corporate and Other Earnings (loss)
$ (123 ) (124 ) (127
) Other tax impacts — 5
—
Adjusted earnings (loss)
$ (123 )
(119 ) (127 )
*Pre-tax impact only. Tax-only adjusting items included in
"other tax impacts."
**We generally tax effect taxable U.S.-based special items using
a combined federal and state statutory income tax rate of
approximately 38 percent. 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 Q1
2017 Debt-to-Capital Ratio Total Debt $ 10,210
Total Equity 23,725
Debt-to-Capital Ratio 30 % Total Cash
$ 1,513
Net-Debt-to-Capital
Ratio 27 %
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170428005175/en/
Phillips 66Jeff Dietert (investors)832-765-2297jeff.dietert@p66.comorRosy Zuklic
(investors)832-765-2297rosy.zuklic@p66.comorC.W. Mallon
(investors)832-765-2297c.w.mallon@p66.comorDennis Nuss
(media)832-765-1850dennis.h.nuss@p66.com
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