Adjusted earnings of $569 million or $1.09 per
share
Highlights
- Refining utilization averaged 98
percent following major first-quarter turnarounds
- CPChem achieved 98 percent Olefins and
Polyolefins utilization in Chemicals
- Realized strong margins and volumes in
Marketing and Specialties
- Generated $1.9 billion in cash from
operations
- Increased quarterly dividend by 11
percent to 70 cents per common share
- Returned $741 million to shareholders
through dividends and share repurchases
- CPChem reached mechanical completion of
its two U.S. Gulf Coast polyethylene units
Phillips 66 (NYSE: PSX), an energy manufacturing and logistics
company, announces second-quarter 2017 earnings of $550 million,
compared with $535 million in the first quarter of 2017. Excluding
special items, adjusted earnings were $569 million, compared with
first-quarter adjusted earnings of $294 million.
“We delivered good operating performance, generated strong cash
flow and made significant progress in several growth initiatives
during the quarter,” said Greg Garland, chairman and CEO of
Phillips 66. “The Bakken Pipeline and new storage capacity at the
Beaumont Terminal were placed into service, and CPChem reached
mechanical completion of two polyethylene units as part of its U.S.
Gulf Coast Petrochemicals Project. Additionally, the Billings
Refinery completed an advantaged crude project to enhance returns.
The completion of these projects improves our future earnings and
cash generation capability.”
“In the quarter, we raised our dividend by 11 percent and
increased share repurchases, returning $741 million to
shareholders. In our first five years as a company, we have
increased the dividend at a 30 percent compound annual growth rate
and have repurchased or exchanged 131 million shares, representing
more than 20 percent of our initial shares outstanding.”
Midstream
Millions of Dollars
Earnings Adjusted Earnings Q2
2017 Q1 2017 Q2 2017
Q1 2017 Transportation $ 74 78 74
78 NGL 9 17 14 17 DCP Midstream
13 17 13 17
Midstream net income 96 112 101 112 Less: Noncontrolling interests*
37 35 37
35
Midstream earnings
$ 59 77
64 77 *Included in
Transportation and NGL businesses.
Midstream's second-quarter earnings were $59 million, compared
with $77 million in the first quarter of 2017. Midstream earnings
in the second quarter of 2017 included a $5 million charge for
pension settlement expense.
Transportation net income for the second quarter of 2017 was $74
million, down $4 million from first-quarter net income of $78
million. This decrease was primarily due to seasonally higher
maintenance costs, partially offset by improved volumes.
NGL second-quarter adjusted net income of $14 million was $3
million lower than first-quarter adjusted net income of $17
million, mainly reflecting turnaround impacts at equity-owned
fractionators and seasonally lower propane sales. These items were
partially offset by improved results at the Sweeny Hub.
The company’s equity investment in DCP Midstream generated net
income of $13 million in the second quarter, compared with $17
million in the prior quarter. This decrease reflects lower
commodity prices as well as increased operating and maintenance
costs, partially offset by a gain on the sale of a non-core
gathering system.
Chemicals
Millions of Dollars
Earnings Adjusted Earnings Q2
2017 Q1 2017 Q2 2017
Q1 2017 Olefins and Polyolefins (O&P) $ 179
161 179 161 Specialties, Aromatics and
Styrenics (SA&S) 21 25 21 45 Other
(4 ) (5 ) (4 ) (5 )
Chemicals
$ 196
181 196 201
The Chemicals segment reflects Phillips 66's equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals'
second-quarter earnings were $196 million, compared with $181
million in the first quarter of 2017. Chemicals' earnings in the
first quarter of 2017 included a charge of $20 million related to
an impairment of a CPChem joint venture.
CPChem's O&P business contributed $179 million of earnings
to Chemicals' second-quarter results. The $18 million increase from
the prior quarter was primarily due to improved margins and higher
volumes. Global O&P utilization was 98 percent, up from 89
percent in the first quarter.
CPChem's SA&S business contributed $21 million of adjusted
earnings in the second quarter, a decrease of $24 million from the
prior quarter. The decrease primarily reflects lower equity
earnings as a result of lower margins and unplanned downtime, as
well as a $10 million gain recorded in the first quarter on the
sale of CPChem's K-Resin® SBC business.
Refining
Millions of Dollars
Earnings Adjusted Earnings Q2
2017 Q1 2017 Q2 2017
Q1 2017 Refining $
224 259 233
(2 )
Refining's second-quarter earnings were $224 million, compared
with $259 million in the first quarter of 2017. Second-quarter
earnings included pension settlement expense of $22 million,
partially offset by an insurance claim reimbursement of $13
million. 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 adjusted earnings were $233 million in the second
quarter. The $235 million improvement from the prior quarter was
largely driven by higher volumes and lower costs due to reduced
turnaround activity. Realized margins for the quarter were $8.44
per barrel, compared with $8.55 per barrel in the first quarter.
Phillips 66’s worldwide crude utilization rate was 98 percent, up
from 84 percent in the prior quarter. Pre-tax turnaround costs for
the second quarter were $154 million, compared with first-quarter
costs of $299 million. Clean product yield was 85 percent in the
second quarter, unchanged from the first quarter.
Marketing and Specialties
Millions of Dollars
Earnings Adjusted Earnings Q2
2017 Q1 2017 Q2 2017
Q1 2017 Marketing and Other $ 181 124 185
124 Specialties 33
17 33 17
Marketing and
Specialties $ 214
141 218
141
Marketing and Specialties (M&S) second-quarter earnings were
$214 million, compared with $141 million in the first quarter of
2017. M&S's second-quarter earnings included a charge of $4
million for pension settlement expense.
Adjusted earnings for Marketing and Other were $185 million in
the second quarter, an increase of $61 million. The increase was
largely due to higher realized margins and volumes, reflecting
seasonal demand. Refined product exports in the second quarter were
179,000 barrels per day (BPD), up from 144,000 BPD in the prior
quarter.
Phillips 66’s Specialties businesses generated earnings of $33
million during the second quarter. The $16
million increase from the prior quarter was mainly due to
higher equity earnings from the Excel Paralubes joint venture,
driven by improved base oil margins.
Corporate and Other
Millions of Dollars
Earnings Adjusted Earnings Q2
2017 Q1 2017 Q2 2017
Q1 2017 Corporate and Other
$ (143 ) (123
) (142 ) (123 )
Corporate and Other’s second-quarter net costs were higher than
the prior quarter, mainly due to certain tax adjustments.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $1.9 billion in cash from operations
during the second quarter, including $422 million of cash
distributions from equity affiliates. Excluding working capital
impacts, operating cash flow was $1.2 billion.
During the quarter, Phillips 66 funded $458 million of capital
expenditures and investments, and distributed $360 million in
dividends and $381 million in share repurchases. The company ended
the quarter with 512 million shares outstanding.
As of June 30, 2017, cash and cash equivalents were $2.2
billion, and consolidated debt was $10.0 billion, including $2.3
billion at Phillips 66 Partners (PSXP). The company's consolidated
debt-to-capital ratio and net-debt-to-capital ratio were 30 percent
and 25 percent, respectively. Excluding PSXP, the debt-to-capital
ratio was 26 percent and net-debt-to-capital ratio was 20
percent.
Strategic Update
Phillips 66 reached significant investment milestones during the
second quarter as major capital projects were completed in
Midstream, Chemicals and Refining.
In Midstream, Phillips 66 has a 25 percent interest in joint
ventures that own the 520,000 BPD Dakota Access Pipeline and Energy
Transfer Crude Oil Pipeline, collectively referred to as the Bakken
Pipeline. Commercial operations started during the second
quarter.
At the company's Beaumont Terminal, 1.2 million barrels of
product storage was placed in service during the quarter. An
additional 2.2 million barrels of crude storage is planned to be in
service in the second half of 2018. Expansion of the terminal's
export facilities, from a current capacity of 400,000 BPD to
600,000 BPD, is scheduled to be completed in the first quarter of
2018.
Phillips 66 Partners is advancing 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 first quarter of 2018.
DCP Midstream is expanding the Sand Hills NGL Pipeline capacity
from 280,000 BPD to 365,000 BPD, with an expected in-service date
in the fourth quarter of 2017. In addition, DCP announced plans to
further expand the line to approximately 450,000 BPD. Sand Hills is
owned two-thirds by DCP and one-third by Phillips 66 Partners. DCP
is also expanding its footprint in the DJ Basin with construction
of the Mewbourn 3 gas processing plant, which is expected to start
up in the fourth quarter of 2018.
CPChem completed a major milestone of its U.S. Gulf Coast
Petrochemicals Project as the two 1.1-billion-pound-per-year
polyethylene derivative units reached mechanical completion in
June. The ethane cracker is expected to be mechanically 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 increased its heavy crude processing
capability at the Billings Refinery to 100 percent with the startup
of a new vacuum distillation unit. 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 third quarter of 2017.
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
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 Q2 Q1
JunYTD
Q2
JunYTD
Midstream $ 59 77 136 39
104 Chemicals 196 181 377 190 346 Refining 224 259 483 149 235
Marketing and Specialties 214 141 355 229 434 Corporate and Other
(143 ) (123 )
(266 ) (111 ) (238 )
Phillips 66
$ 550
535 1,085 496
881
Adjusted
Earnings
Millions of Dollars 2017 2016 Q2
Q1
JunYTD
Q2
JunYTD
Midstream $ 64 77 141 39 79 Chemicals 196 201 397 190 346 Refining
233 (2 ) 231 152 238 Marketing and Specialties 218 141 359 229 434
Corporate and Other (142 )
(123 ) (265 ) (111 ) (238 )
Phillips 66 $ 569
294 863
499 859
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 $52 billion of assets as of
June 30, 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,” “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; 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. 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.
Millions of Dollars
Except as Indicated 2017 2016
Q2 Q1
JunYTD
Q2
JunYTD
Reconciliation of Earnings to Adjusted Earnings
Consolidated Earnings
$ 550 535 1,085 496 881
Pre-tax adjustments: Pending claims and settlements (24 ) — (24 ) —
(45 ) Pension settlement expense 55 — 55 — — Impairments by equity
affiliates — 33 33 — 6 Recognition of deferred logistics
commitments — — — 30 30 Gain on consolidation of business — (423 )
(423 ) — — Tax impact of adjustments* (12 ) 149 137 (11 ) 3 Other
tax impacts — —
— (16 ) (16 )
Adjusted
earnings $ 569
294 863
499 859 Earnings per
share of common stock (dollars) $ 1.06
1.02 2.07 0.93 1.65 Adjusted
earnings per share of common stock (dollars)†
$ 1.09
0.56 1.65 0.94
1.61 Midstream Earnings
$ 59 77 136 39 104
Pre-tax adjustments: Pending claims and settlements — — — — (45 )
Impairments by equity affiliates — — — — 6 Pension settlement
expense 8 — 8 — — Tax impact of adjustments*
(3 ) — (3 ) —
14
Adjusted earnings
$ 64 77
141 39
79 Chemicals Earnings $
196 181 377 190 346 Pre-tax
adjustments: Impairments by equity affiliates — 33 33 — — Tax
impact of adjustments* —
(13 ) (13 ) — —
Adjusted earnings $
196 201
397 190 346
Refining Earnings $ 224 259 483
149 235 Pre-tax adjustments: Pending claims and
settlements (21 ) — (21 ) — — Gain on consolidation of business —
(423 ) (423 ) — — Recognition of deferred logistics commitments — —
— 30 30 Pension settlement expense 35 — 35 — — Tax impact of
adjustments* (5 ) 162 157 (11 ) (11 ) Other tax impacts
— —
— (16 ) (16 )
Adjusted earnings
$ 233
(2 ) 231 152
238 Marketing and Specialties
Earnings $ 214 141 355 229
434 Pre-tax adjustments: Pension settlement expense 7 — 7 —
— Tax impact of adjustments* (3 )
— (3 ) — —
Adjusted earnings
$ 218 141
359 229 434
Corporate and Other Earnings (loss) $
(143 ) (123 ) (266 )
(111 ) (238 ) Pre-tax adjustments:
Pending claims and settlements (3 ) — (3 ) — — Pension settlement
expense 5 — 5 — — Tax impact of adjustments*
(1 ) — (1 ) —
—
Adjusted earnings (loss)
$ (142 )
(123 ) (265 ) (111
) (238 )
*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 Q2
2017 Debt-to-Capital Ratio
Phillips 66
Consolidated
PSXP*
Phillips 66
Excluding
PSXP
Total Debt $ 9,965 2,252 7,713 Total Equity
23,806 1,410
22,396
Debt-to-Capital Ratio 30 %
26 % Total Cash $
2,161 1 2,160
Net-Debt-to-Capital Ratio
25 % 20
% *PSXP's third-party debt and Phillips 66's noncontrolling
interests attributable to PSXP.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20170801005490/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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