Fourth Quarter
- Fourth-quarter earnings of $1.3 billion or $2.86 per share;
adjusted earnings of $1.4 billion or $3.09 per share
- $2.2 billion of operating cash flow
- $1.6 billion returned to shareholders through dividends and
share repurchases
- Strong Refining operations at 92% utilization and 107% market
capture
- Record NGL fractionation volumes and LPG export volumes
Full-Year 2023
- Earnings of $7.0 billion or $15.48 per share; adjusted earnings
of $7.2 billion or $15.81 per share
- $7.0 billion of operating cash flow, $8.8 billion excluding
working capital
- $5.9 billion returned to shareholders through dividends and
share repurchases
- Quarterly dividend increased 8% to $1.05 per common share
- $1.2 billion in run-rate business transformation savings
- Strong Refining operations with four consecutive quarters above
industry-average crude utilization
- Advancing Midstream NGL wellhead-to-market strategy; acquired
all outstanding DCP Midstream, LP public common units
Phillips 66 (NYSE: PSX), a leading diversified and integrated
downstream energy company, announced fourth-quarter earnings of
$1.3 billion, compared with earnings of $2.1 billion in the third
quarter. Excluding special items of $102 million, the company had
adjusted earnings of $1.4 billion in the fourth quarter, compared
with third-quarter adjusted earnings of $2.1 billion. In addition,
the company provided an update on progress toward its strategic
priorities.
“In the fourth quarter, our team’s operating and commercial
excellence allowed us to capture value across our diversified and
integrated portfolio and deliver strong earnings,” said Mark
Lashier, president and CEO of Phillips 66.
“In Refining, we increased market capture and continued to
deliver above industry average crude utilization. In Midstream, our
NGL wellhead-to-market business continues to exceed our
expectations, achieving strong results and record volumes in the
quarter.
“As we look forward, we will continue to execute our strategic
priorities to deliver significant shareholder value. During 2023,
we distributed well over 50% of our operating cash flow to
shareholders through dividends and share repurchases. We have
distributed $8.3 billion to shareholders since July 2022, on pace
to achieve our $13 billion to $15 billion target by year-end
2024.”
“The Board is pleased with the company’s results, which reflect
management’s progress on our strategic priorities and our
collective commitment to deliver shareholder value today and in the
future,” stated Glenn Tilton, Lead Independent Director.
Midstream
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q4 2023
Q3 2023
Q4 2023
Q3 2023
Transportation
$
334
386
334
285
NGL and Other
425
335
423
293
NOVONIX
(3)
(9)
(3)
(9)
Midstream
$
756
712
754
569
Midstream fourth-quarter 2023 pre-tax income was $756 million,
compared with $712 million in the third quarter of 2023. Results in
the fourth quarter included a $2 million tax benefit. The third
quarter included a gain of $101 million on the sale of an
investment and a gain of $46 million from a change in inventory
method for an acquired business, partially offset by $4 million of
restructuring costs.
Transportation fourth-quarter adjusted pre-tax income was $334
million, compared with adjusted pre-tax income of $285 million in
the third quarter. The increase mainly reflects recognition of
deferred revenue related to throughput and deficiency
agreements.
NGL and Other adjusted pre-tax income was $423 million in the
fourth quarter, compared with adjusted pre-tax income of $293
million in the third quarter. The increase was primarily due to
higher margins and volumes at the Sweeny Hub, as well as lower
operating costs.
In the fourth quarter, the fair value of the company’s
investment in NOVONIX, Ltd. decreased by $3 million, compared with
a $9 million decrease in the third quarter.
Chemicals
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q4 2023
Q3 2023
Q4 2023
Q3 2023
Chemicals
$
106
104
106
104
The Chemicals segment reflects Phillips 66’s equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals
fourth-quarter 2023 reported and adjusted pre-tax income was $106
million, in line with third quarter 2023 pre-tax income of $104
million.
Global olefins and polyolefins utilization was 94% for the
quarter.
Refining
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q4 2023
Q3 2023
Q4 2023
Q3 2023
Refining
$
814
1,710
797
1,740
Refining fourth-quarter 2023 reported pre-tax income was $814
million, compared with pre-tax income of $1.7 billion in the third
quarter of 2023. Results in the fourth quarter included a $17
million tax benefit. Results in the third quarter included a $30
million legal accrual.
Adjusted pre-tax income for Refining was $797 million in the
fourth quarter, compared with adjusted pre-tax income of $1.7
billion in the third quarter. The decrease was primarily due to
lower realized margins, which decreased from $18.96 per barrel in
the third quarter to $14.41 per barrel in the fourth quarter.
Realized margins declined primarily due to lower market crack
spreads, partially offset by inventory hedge impacts, higher Gulf
Coast clean product realizations and strong commercial results. The
composite RIN adjusted market crack spread decreased 53% from
$28.64 per barrel in the third quarter to $13.41 per barrel in the
fourth quarter.
Refining pre-tax turnaround expense for the fourth quarter was
$100 million, including $14 million related to the Rodeo renewables
facility. Crude utilization rate was 92% and clean product yield
was 87%. Market capture increased from 66% to 107%.
Marketing and Specialties
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q4 2023
Q3 2023
Q4 2023
Q3 2023
Marketing and Specialties
$
432
633
432
633
Marketing and Specialties fourth-quarter 2023 reported and
adjusted pre-tax income was $432 million, compared with $633
million in the third quarter of 2023, mainly due to seasonally
lower domestic wholesale fuel margins.
Corporate and Other
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q4 2023
Q3 2023
Q4 2023
Q3 2023
Corporate and Other
$
(347)
(346)
(297)
(295)
Corporate and Other fourth-quarter 2023 pre-tax costs were $347
million, compared with pre-tax costs of $346 million in the third
quarter of 2023. Results in the fourth and third quarter included
restructuring costs of $50 million and $51 million,
respectively.
Adjusted pre-tax costs were $297 million in the fourth quarter,
in line with adjusted third-quarter pre-tax costs of $295
million.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $2.2 billion in cash from operations in
the fourth quarter of 2023.
During the fourth quarter, Phillips 66 funded $634 million of
capital expenditures and investments, $1.2 billion of share
repurchases and $457 million in dividends. The company ended the
quarter with 430 million shares outstanding.
As of Dec. 31, 2023, the company had $3.3 billion of cash and
cash equivalents and $6.4 billion of committed capacity available
under credit facilities. The company’s consolidated debt-to-capital
ratio was 38% and its net debt-to-capital ratio was 34%.
Strategic Priorities and Business Update
Phillips 66 is executing its strategic priorities to increase
mid-cycle adjusted EBITDA by $4 billion to $14 billion by 2025 and
grow shareholder distributions.
The company achieved $1.2 billion in run-rate cost and
sustaining capital savings as of Dec. 31, 2023, through business
transformation. The company is targeting $1.4 billion run-rate
savings by the end of 2024.
In Refining, the company continues to improve asset reliability
and market capture through high-return, low-capital projects. The
company is implementing 10 to 15 projects annually to increase
market capture by 5% by 2025. In 2023, completed projects added
over 1% to market capture based on mid-cycle pricing.
Phillips 66 is capturing value from its Midstream NGL
wellhead-to-market strategy. Through the end of 2023, the company’s
increased ownership of DCP Midstream has provided an incremental
$1.25 billion toward its 2025 mid-cycle adjusted EBITDA target,
including approximately $250 million of synergies. The company
remains focused on capturing over $400 million of run-rate
commercial and operating synergies by 2025.
In Chemicals, CPChem completed construction and began operations
of a 1 billion pounds per year propylene splitter at its Cedar
Bayou facility in the fourth quarter. CPChem is building
world-scale petrochemical facilities with joint-venture partner
QatarEnergy on the U.S. Gulf Coast and in Ras Laffan, Qatar. Both
projects are expected to start up in 2026.
Phillips 66 is converting its San Francisco Refinery in Rodeo,
California, into one of the world’s largest renewable fuels
facilities. Construction continues on the Rodeo Renewed refinery
conversion project that is expected to begin 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.
Since July 2022 the company has distributed $8.3 billion through
share repurchases and dividends and is on pace to achieve the $13
billion to $15 billion target by year-end 2024.
Phillips 66 also plans to monetize assets that no longer fit its
long-term strategy. These asset dispositions are expected to
generate over $3 billion in proceeds that will support the
company’s strategic priorities, including returns to shareholders.
Timing of these dispositions will be subject to satisfactory market
conditions and any necessary regulatory approvals. Total proceeds
from asset dispositions in 2023 were $392 million.
Investor Webcast
Members of Phillips 66 executive management will host a webcast
at noon ET to provide an update on the company’s strategic
initiatives and discuss the company’s fourth-quarter performance.
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
Q4
Q3
Year
Q4
Year
Midstream
$
756
712
2,774
656
4,734
Chemicals
106
104
600
52
856
Refining
814
1,710
5,266
1,640
7,816
Marketing and Specialties
432
633
2,135
539
2,402
Corporate and Other
(347)
(346)
(1,306)
(340)
(1,169)
Pre-Tax Income
1,761
2,813
9,469
2,547
14,639
Less: Income tax expense
476
670
2,230
535
3,248
Less: Noncontrolling interests
25
46
224
128
367
Phillips 66
$
1,260
2,097
7,015
1,884
11,024
Adjusted
Earnings
Millions of Dollars
2023
2022
Q4
Q3
Year
Q4
Year
Midstream
$
754
569
2,627
674
1,752
Chemicals
106
104
600
52
856
Refining
797
1,740
5,293
1,626
7,891
Marketing and Specialties
432
633
2,135
539
2,402
Corporate and Other
(297)
(295)
(1,076)
(280)
(1,010)
Pre-Tax Income
1,792
2,751
9,579
2,611
11,891
Less: Income tax expense
405
660
2,173
574
2,613
Less: Noncontrolling interests
25
21
243
138
377
Phillips 66
$
1,362
2,070
7,163
1,899
8,901
About Phillips 66
Phillips 66 (NYSE: PSX) is a leading diversified and integrated
downstream energy provider that manufactures, transports and
markets products that drive the global economy. The 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 “adjusted
EBITDA,” “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: fluctuations in NGL, crude oil,
refined petroleum product and natural gas prices, and refining,
marketing and petrochemical margins; 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 effects of any widespread public health crisis and its
negative impact on commercial activity and demand for refined
petroleum products; our ability 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; our ability to achieve the expected benefits of the
integration of DCP Midstream, LP (DCP), including the realization
of synergies; the success of the company’s business transformation
initiatives and the realization of savings and cost reductions from
actions taken in connection therewith; unexpected changes in costs
for constructing, modifying or operating our facilities; our
ability to successfully complete, or any material delay in the
completion of, asset dispositions or acquisitions that we may
pursue; 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; our ability 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),” “adjusted pre-tax costs,” “adjusted earnings per share,”
“realized refining margin per barrel,” and “net debt-to-capital
ratio.” 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. Where applicable, these measures exclude items that do
not reflect the core operating results of our businesses in the
current period or other adjustments to reflect how management
analyzes results. Reconciliations of these non-GAAP financial
measures to the most comparable GAAP financial measure are included
within this release.
This news release also includes the term “mid-cycle adjusted
EBITDA,” which is a non-GAAP financial measure. Mid-cycle 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, and depreciation and
amortization. Adjusted EBITDA is defined as estimated EBITDA plus
the proportional share of selected equity affiliates’ estimated net
interest expense, income taxes, and 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. Mid-cycle adjusted EBITDA
is defined as the average adjusted EBITDA generated over a complete
economic cycle. Mid-cycle adjusted EBITDA estimates or targets
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 of projected mid-cycle adjusted EBITDA to
consolidated net income or segment income before income taxes
without unreasonable effort.
References in the release to earnings refer to net income
attributable to Phillips 66. References in the release to
shareholder distributions refers to the sum of dividends paid to
Phillips 66 stockholders and proceeds used by Phillips 66 to
repurchase shares of its common stock. References to run-rate cost
savings includes cost savings and references to run-rate synergies
include costs savings and other benefits that will be reflected in
the sales and other operating revenues, purchased crude oil and
products costs, operating expenses, selling, general and
administrative expenses and equity in earnings of affiliates lines
on our consolidated statement of income when realized. References
to run-rate sustaining capital savings includes savings that will
be reflected in the capital expenditures and investments on our
consolidated statement of cash flows when realized. References to
run-rate savings represent the sum of run-rate cost savings and
run-rate sustaining capital savings.
Millions of Dollars
Except as Indicated
2023
2022
Q4
Q3
Year
Q4
Year
Reconciliation of Consolidated Earnings
to Adjusted Earnings
Consolidated Earnings
$
1,260
2,097
7,015
1,884
11,024
Pre-tax adjustments:
Certain tax impacts
(19)
—
(19)
—
—
Hurricane-related costs
—
—
—
(14)
(21)
Net gain on asset disposition
—
(101)
(123)
—
—
Alliance shutdown-related costs1
—
—
—
—
26
Regulatory compliance costs
—
—
—
—
70
Legal accrual
—
30
30
—
—
Business transformation restructuring
costs2
50
51
177
60
159
Loss on early redemption of DCP debt
—
—
53
—
—
Merger transaction costs
—
—
—
—
13
Gain on consolidation
—
—
—
—
(3,013)
Change in inventory method for acquired
business
—
(46)
(46)
—
—
DCP integration restructuring costs3
—
4
38
18
18
Tax impact of adjustments4
(12)
10
(26)
(14)
635
Other tax impacts
83
—
83
(25)
—
Noncontrolling interests
—
25
(19)
(10)
(10)
Adjusted earnings
$
1,362
2,070
7,163
1,899
8,901
Earnings per share of common stock
(dollars)
$
2.86
4.69
15.48
3.97
23.27
Adjusted earnings per share of common
stock (dollars)5
$
3.09
4.63
15.81
4.00
18.79
Reconciliation of Segment Pre-Tax
Income (Loss) to Adjusted Pre-Tax Income (Loss)
Midstream Pre-Tax Income
$
756
712
2,774
656
4,734
Pre-tax adjustments:
Certain tax impacts
(2)
—
(2)
—
—
Net gain on asset disposition
—
(101)
(137)
—
—
Merger transaction costs
—
—
—
—
13
Gain on consolidation
—
—
—
—
(3,013)
Change in inventory method for acquired
business
—
(46)
(46)
—
—
DCP integration restructuring costs3
—
4
38
18
18
Adjusted pre-tax income
$
754
569
2,627
674
1,752
Chemicals Pre-Tax Income
$
106
104
600
52
856
Pre-tax adjustments:
None
—
—
—
—
—
Adjusted pre-tax income
$
106
104
600
52
856
Refining Pre-Tax Income
$
814
1,710
5,266
1,640
7,816
Pre-tax adjustments:
Certain tax impacts
(17)
—
(17)
—
—
Hurricane-related costs
—
—
—
(14)
(21)
Net loss on asset disposition
—
—
14
—
—
Alliance shutdown-related costs1
—
—
—
—
26
Regulatory compliance costs
—
—
—
—
70
Legal accrual
—
30
30
—
—
Adjusted pre-tax income
$
797
1,740
5,293
1,626
7,891
Marketing and Specialties Pre-Tax
Income
$
432
633
2,135
539
2,402
Pre-tax adjustments:
None
—
—
—
—
—
Adjusted pre-tax income
$
432
633
2,135
539
2,402
Corporate and Other Pre-Tax
Loss
$
(347)
(346)
(1,306)
(340)
(1,169)
Pre-tax adjustments:
Business transformation restructuring
costs2
50
51
177
60
159
Loss on early redemption of DCP debt
—
—
53
—
—
Adjusted pre-tax loss
$
(297)
(295)
(1,076)
(280)
(1,010)
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 and severance costs.
Additionally, fourth-quarter 2022 included a held-for-sale asset
impairment of $45 million. 3Restructuring costs, related to the
integration of DCP Midstream, primarily reflect severance costs and
consulting fees. 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. 5Q4 2023, Q3 2023 and full year 2022 are based
on adjusted weighted-average diluted shares of 440,582 thousand,
447,255 thousand, and 473,728 respectively. 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
December 31, 2023
Debt-to-Capital Ratio
Total Debt
$
19,359
Total Equity
31,650
Debt-to-Capital Ratio
38 %
Total Cash
3,323
Net Debt-to-Capital Ratio
34 %
Millions of Dollars
Except as Indicated
2023
Q4
Q3
Reconciliation of Refining Income
Before Income Taxes to
Realized Refining Margins
Income before income taxes
$
814
1,710
Plus:
Taxes other than income taxes
87
93
Depreciation, amortization and
impairments
227
211
Selling, general and administrative
expenses
48
39
Operating expenses
1,086
1,142
Equity in (earnings) loss of
affiliates
85
(208)
Other segment (income) expense, net
5
(10)
Proportional share of refining gross
margins contributed by equity affiliates
167
416
Special items:
Certain tax impacts
(15)
—
Realized refining margins
$
2,504
3,393
Total processed inputs (thousands of
barrels)
156,720
156,300
Adjusted total processed inputs (thousands
of barrels)*
173,786
178,929
Income before income taxes (dollars per
barrel)**
$
5.19
10.94
Realized refining margins (dollars per
barrel)***
$
14.41
18.96
*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/20240131379826/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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