Adjusted earnings of $858 million or $1.66 per
share
Highlights
- Achieved 98 percent utilization in
Refining
- CPChem successfully started up
operations of its two new U.S. Gulf Coast polyethylene units
- Further reducing 2017 capital
guidance
- Returned $817 million to shareholders
through dividends and share repurchases
- Announced new $3 billion share
repurchase program
- Phillips 66 Partners announced $2.4
billion acquisition from Phillips 66 and raised $1.7 billion
through equity and debt offerings in October
Phillips 66 (NYSE: PSX), an energy manufacturing and logistics
company, announces third-quarter 2017 earnings of $823 million,
compared with $550 million in the second quarter of 2017. Excluding
special items, adjusted earnings were $858 million, compared with
second-quarter adjusted earnings of $569 million.
“We operated well during the quarter while facing the challenges
associated with Hurricane Harvey,” said Greg Garland, chairman and
CEO of Phillips 66. “While the storm impacted our Gulf Coast
operations, we delivered strong financial results from our diverse
business portfolio. We are proud of how our employees responded
during the storm. They assisted families, friends and neighbors and
worked tirelessly to safeguard our assets and communities. Through
their efforts, we were able to ensure business continuity and
supply critical energy products to first responders and
consumers.”
“During the quarter, we funded $367 million of capital
expenditures and returned $817 million to shareholders through
dividends and share repurchases,” added Garland. “Earlier this
month we also announced a new $3 billion share repurchase program,
increasing total authorizations to $12 billion since 2012.
Prudently managing capital allocation and delivering shareholder
returns remain fundamental to Phillips 66.”
Midstream
Millions of Dollars Earnings
Adjusted Earnings Q3 2017 Q2
2017 Q3 2017 Q2 2017 Transportation
$ 119 74 98 74 NGL (3 ) 9 — 14 DCP
Midstream 1 13 1
13 Midstream net income 117 96 99 101 Less:
Noncontrolling interests* 32 37
32 37
Midstream earnings
$ 85 59
67 64 *Included in
Transportation and NGL businesses.
Midstream's third-quarter earnings were $85 million, compared
with $59 million in the second quarter of 2017. Midstream earnings
in the third quarter of 2017 included a favorable settlement of $23
million, partially offset by hurricane-related costs of $3 million
and pension settlement expense of $2 million. Second-quarter
earnings included pension settlement expense of $5 million.
Transportation adjusted net income for the third quarter of 2017
was $98 million, an increase of $24 million from the second
quarter. The increase reflects a full quarter of commercial
operations of the Bakken Pipeline, as well as higher throughput
volumes due to less planned refinery downtime.
NGL adjusted net income was break-even in the third quarter of
2017, compared with second-quarter adjusted net income of $14
million. The decrease mainly reflects hurricane impacts on
fractionation and export volumes.
The company’s equity investment in DCP Midstream generated net
income of $1 million in the third quarter, compared with $13
million in the prior quarter. This decrease primarily reflects the
impact of rising NGL prices on forward hedges, as well as asset
impairments of $6 million.
Chemicals
Millions of Dollars Earnings
Adjusted Earnings Q3 2017 Q2
2017 Q3 2017 Q2 2017 Olefins and
Polyolefins (O&P) $ 105 179 137 179
Specialties, Aromatics and Styrenics (SA&S) 22 21 22 21 Other
(6 ) (4 ) (6 ) (4 )
Chemicals $ 121
196 153 196
The Chemicals segment reflects Phillips 66's equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals'
third-quarter earnings were $121 million, compared with $196
million in the second quarter of 2017. Chemicals' earnings in the
third quarter of 2017 included hurricane-related costs of $32
million.
During the quarter, CPChem's O&P business contributed $137
million of adjusted earnings to the Chemicals segment. The $42
million decrease from the prior quarter was primarily due to lower
margins and volumes. Global O&P utilization was 83 percent,
reflecting hurricane-related downtime at U.S. Gulf Coast
facilities. Second quarter utilization was 98 percent.
CPChem's SA&S business contributed $22 million of adjusted
earnings in the third quarter, in line with the prior quarter, as
lower margins were more than offset by higher equity earnings due
to a reduction in unplanned downtime.
Refining
Millions of Dollars
Earnings Adjusted Earnings Q3
2017 Q2 2017 Q3 2017
Q2 2017 Refining $
550 224 548
233
Refining's third-quarter earnings were $550 million, compared
with $224 million in the second quarter of 2017. Refining's
earnings in the third quarter of 2017 included favorable
settlements of $18 million, mostly offset by pension settlement
expense of $8 million and hurricane-related costs of $8 million.
Second-quarter earnings included pension settlement expense of $22
million, partially offset by an insurance claim reimbursement of
$13 million.
Refining's adjusted earnings were $548 million in the third
quarter of 2017, compared with $233 million in the prior quarter.
This increase was largely driven by higher distillate and gasoline
margins, as the market crack spreads were up 41 percent and 24
percent, respectively. Realized margins for the quarter were $10.49
per barrel, compared with $8.44 per barrel in the second quarter.
Phillips 66’s worldwide crude utilization rate was 98 percent,
reflecting strong operations across the system and limited
hurricane impacts to the company's Gulf Coast refineries. Pre-tax
turnaround costs for the third quarter were $43 million, compared
with second-quarter costs of $154 million. Clean product yield was
85 percent in the third quarter, unchanged from the second
quarter.
Marketing and Specialties
Millions of Dollars Earnings
Adjusted Earnings Q3 2017
Q2 2017 Q3 2017 Q2 2017
Marketing and Other $ 160 181 163 185
Specialties 48 33
48 33
Marketing and Specialties
$ 208 214
211 218
Marketing and Specialties (M&S) third-quarter earnings were
$208 million, compared with $214 million in the second quarter of
2017. M&S’s third-quarter earnings included pension settlement
expense of $2 million and hurricane-related costs of $1 million.
Second-quarter earnings included a charge of $4 million for pension
settlement expense.
Adjusted earnings for Marketing and Other were $163 million in
the third quarter of 2017, a decrease of $22 million from the prior
quarter. The decrease was largely due to lower U.S. margins.
Refined product exports in the third quarter were 179,000 barrels
per day (BPD), unchanged from the prior quarter.
Phillips 66’s Specialties businesses generated earnings of $48
million during the third quarter. The $15
million increase from the prior quarter was mainly due to
higher equity earnings from the Excel Paralubes joint venture,
driven by higher utilization during the third quarter.
Corporate and Other
Millions of Dollars
Earnings Adjusted Earnings Q3
2017 Q2 2017 Q3 2017
Q2 2017 Corporate and Other
$ (141 ) (143
) (121 ) (142 )
Corporate and Other’s third-quarter net costs were $141 million,
in line with the prior quarter. Third quarter results included a
$20 million charge for a legal settlement.
The $21 million decrease in adjusted net costs was primarily due
to certain tax adjustments.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $401 million in cash from operations
during the third quarter. Excluding working capital impacts,
operating cash flow was $596 million. Cash from operations was
reduced by pension plan contributions of $423 million.
During the quarter, Phillips 66 funded $367 million of capital
expenditures and investments, and distributed $356 million in
dividends and $461 million in share repurchases. The company ended
the quarter with 507 million shares outstanding.
As of Sept. 30, 2017, cash and cash equivalents were $1.5
billion, and consolidated debt was $10.2 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 27 percent, respectively. Excluding PSXP, the debt-to-capital
ratio was 26 percent and net-debt-to-capital ratio was 22
percent.
Strategic Update
In Midstream, the company continues to invest in the Beaumont
Terminal to increase storage capacity and export capabilities. An
additional 3.5 million barrels of crude storage is expected to be
in service by the end of 2018. Expansion of the terminal's export
facilities, from a current capacity of 400,000 BPD to 600,000 BPD,
is on schedule for completion in the first quarter of 2018.
In October 2017, Phillips 66 contributed its 25 percent interest
in the Bakken Pipeline and 100 percent interest in Merey Sweeny,
L.P. (MSLP) to PSXP in a transaction valued at $2.4 billion,
including $625 million of non-recourse Bakken Pipeline debt and
$100 million of MSLP debt. Consideration for the transaction was
$1.7 billion including cash, the Partnership’s assumption of
certain Phillips 66 term loans, and $240 million of newly issued
PSXP common and general partner units.
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, with
completion expected in the second half of 2018. Sand Hills is owned
two-thirds by DCP and one-third by Phillips 66 Partners.
DCP continues to expand its footprint in the high-growth DJ
basin through the construction of two gas processing plants. DCP
also announced plans to jointly develop the Gulf Coast Express
Pipeline Project, which would provide an outlet for increased
natural gas production in the Permian Basin to markets along the
Texas Gulf Coast.
CPChem’s U.S. Gulf Coast Petrochemicals Project, which consists
of a world-scale ethane cracker and two polyethylene units, is
nearing completion. During the third quarter, CPChem commissioned
and successfully started up the new polyethylene units in Old
Ocean, Texas. Due to impacts from Hurricane Harvey, commissioning
of the ethane cracker at the Cedar Bayou facility in Baytown,
Texas, is now expected to begin in the first quarter of 2018. The
Project will increase CPChem’s global ethylene and polyethylene
capacity by approximately one-third.
In Refining, the company is progressing return projects to
improve clean product yields. A diesel recovery project at the
Ponca City Refinery is expected to start up in the fourth quarter
of 2017. The company is modernizing fluid catalytic cracking (FCC)
units at both the Bayway and Wood River refineries with an
anticipated completion during the first half of 2018.
Phillips 66 capital expenditures and investments for 2017 are
expected to be approximately $2 billion, a reduction from the
original budget of $2.7 billion. This decrease is primarily due to
deferral of a final investment decision on incremental
fractionation capacity. Capital expenditures and investments for
2018 are expected to be between $2 billion and $3 billion, with
additional information to be provided in December 2017.
Investor Webcast
Later today, members of Phillips 66 executive management will
host a webcast at noon EDT to discuss the company’s third-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 Q3
Q2
Sep
YTD
Q3
Sep
YTD
Midstream $ 85 59 221 75 179 Chemicals 121 196 498 101 447 Refining
550 224 1,033 177 412 Marketing and Specialties 208 214 563 267 701
Corporate and Other (141 ) (143 )
(407 ) (109 ) (347 )
Phillips 66
$ 823 550
1,908 511
1,392
Adjusted
Earnings
Millions of Dollars 2017 2016 Q3
Q2
Sep
YTD
Q3
Sep
YTD
Midstream $ 67 64 208 75 154 Chemicals 153 196 550 190 536 Refining
548 233 779 134 372 Marketing and Specialties 211 218 570 267 701
Corporate and Other (121 ) (142 )
(386 ) (110 ) (348 )
Phillips 66
$ 858 569
1,721 556
1,415
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 $53 billion of assets as of Sept. 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 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.
Millions of Dollars Except as Indicated
2017 2016 Q3
Q2
Sep
YTD
Q3
Sep
YTD
Reconciliation of Earnings to Adjusted Earnings
Consolidated
Earnings $ 823 550 1,908 511
1,392 Pre-tax adjustments: Pending claims and settlements
(36 ) (24 ) (60 ) (72 ) (117 ) Pension settlement expense 21 55 76
— — Impairments by equity affiliates — — 33 89 95 Recognition of
deferred logistics commitments — — — — 30 Gain on consolidation of
business — — (423 ) — — Hurricane-related costs 70 — 70 — — Tax
impact of adjustments* (20 ) (12 ) 117 28 31 Other tax impacts
— —
— — (16 )
Adjusted earnings
$ 858 569
1,721 556
1,415 Earnings per share of common
stock (dollars) $ 1.60 1.06 3.66
0.96 2.61 Adjusted earnings per share of common
stock (dollars)† $ 1.66
1.09 3.30
1.05 2.66
Midstream Earnings $ 85 59 221
75 179 Pre-tax adjustments: Pending claims and
settlements (37 ) — (37 ) — (45 ) Impairments by equity affiliates
— — — — 6 Pension settlement expense 3 8 11 — — Hurricane-related
costs 4 — 4 — — Tax impact of adjustments* 12
(3 ) 9 —
14
Adjusted earnings $
67 64
208 75 154
Chemicals Earnings $ 121 196
498 101 447 Pre-tax adjustments: Impairments
by equity affiliates — — 33 89 89 Hurricane-related costs 53 — 53 —
— Tax impact of adjustments* (21 )
— (34 ) — —
Adjusted earnings $ 153
196 550
190 536
Refining Earnings $ 550 224
1,033 177 412 Pre-tax adjustments: Pending
claims and settlements (30 ) (21 ) (51 ) (70 ) (70 ) Gain on
consolidation of business — — (423 ) — — Recognition of deferred
logistics commitments — — — — 30 Pension settlement expense 13 35
48 — — Hurricane-related costs 12 — 12 — — Tax impact of
adjustments* 3 (5 ) 160 27 16 Other tax impacts
— — — —
(16 )
Adjusted earnings
$ 548 233
779 134 372
Marketing and Specialties Earnings $
208 214 563 267 701 Pre-tax
adjustments: Pension settlement expense 3 7 10 — —
Hurricane-related costs 1 — 1 — — Tax impact of adjustments*
(1 ) (3 ) (4 ) —
—
Adjusted earnings
$ 211 218
570 267 701
Corporate and Other Earnings
(loss)
$
(141
)
(143
)
(407
)
(109
)
(347
)
Pre-tax adjustments:
Pending claims and settlements
31
(3
)
28
(2
)
(2
)
Pension settlement expense
2
5
7
—
—
Tax impact of adjustments*
(13
)
(1
)
(14
)
1
1
Adjusted earnings (loss)
$
(121
)
(142
)
(386
)
(110
)
(348
)
*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 Except as Indicated
2017 Q3 Q2 Realized Refining
Margins Net income attributable to Phillips 66
refining segment $ 550 224 Plus (Less): Provision for income taxes
313 83 Taxes other than income taxes 47 70 Depreciation,
amortization and impairments 205 219 Selling, general and
administrative expenses 50 49 Operating expenses 818 897 Equity in
earnings of affiliates (144 ) (22 ) Other segment expense, net 8 3
Proportional share of refining gross margins contributed by equity
affiliates 305 191
Realized refining margins $ 2,152
1,714 Total processed inputs (thousands of
barrels) 183,010 181,730 Adjusted total processed inputs (thousands
of barrels)* 205,218 203,117
Net income attributable to Phillips 66 per barrel
(dollars per barrel)** $ 3.01 1.23
Realized refining margins
(dollars per barrel)*** 10.49
8.44
* Adjusted total processed inputs include
our proportional share of processed inputs of equity
affiliates.
** Net income attributable to Phillips 66
divided by total processed inputs.
*** Realized refining margin divided by
adjusted total processed inputs.
Millions of Dollars September 30, 2017
Debt-to-Capital Ratio
Phillips 66
Consolidated
PSXP* Phillips
66
Excluding PSXP
Total Debt $ 10,201 2,290 7,911 Total Equity 23,959
1,406
22,553
Debt-to-Capital Ratio 30 %
26 % Total Cash $ 1,547
2 1,545
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: http://www.businesswire.com/news/home/20171027005163/en/
Phillips 66Jeff Dietert, 832-765-2297
(investors)jeff.dietert@p66.comorRosy Zuklic,
832-765-2297 (investors)rosy.zuklic@p66.comorC.W.
Mallon, 832-765-2297
(investors)c.w.mallon@p66.comorDennis
Nuss, 832-765-1850 (media)dennis.h.nuss@p66.com
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