Adjusted earnings of $548 million or $1.07 per
share
Highlights
Fourth Quarter
- Generated $1.9 billion in cash from
operations
- Returned $816 million to shareholders
through dividends and share repurchases
- Achieved 100 percent capacity
utilization in Refining
- Reached mechanical completion at
CPChem's Cedar Bayou world-scale ethane cracker
- Completed $2.4 billion dropdown to
Phillips 66 Partners
- Announced $2.3 billion 2018 capital
budget
Full-Year 2017
- Achieved record-low recordable injury
rate
- Delivered $5.1 billion of earnings and
$2.3 billion of adjusted earnings
- Generated $3.6 billion of operating
cash flow
- Returned $3.0 billion to shareholders
through dividends and share repurchases
- Increased quarterly dividend 11 percent
to $0.70 per common share
- Achieved 95 percent capacity
utilization in Refining during heavy turnaround year
- Started up the Bakken Pipeline and
commissioned additional storage at the Beaumont Terminal
- Reached commercial operations at
CPChem's Old Ocean polyethylene units
Phillips 66 (NYSE: PSX), an energy manufacturing and logistics
company, announces fourth-quarter 2017 earnings of $3.2 billion,
compared with $823 million in the third quarter of 2017. Excluding
special items, primarily a $2.7 billion benefit from U.S. tax
reform, adjusted earnings were $548 million, compared with
third-quarter adjusted earnings of $858 million.
“We ended 2017 with a strong quarter, running at record levels
and delivering solid financial results,” said Greg Garland,
chairman and CEO of Phillips 66. “In our Midstream business, we
achieved significant growth at Phillips 66 Partners through our
recent dropdown. In Refining, we ran at 100 percent capacity
utilization and continued to operate safely and reliably. In
Chemicals, CPChem has recovered from Hurricane Harvey at its Cedar
Bayou facility and is commissioning its new world-scale ethane
cracker.”
“Our strategy for long-term value creation remains
unchanged. This includes capturing growth opportunities in our
Midstream and Chemicals businesses and enhancing returns in
Refining and Marketing. Also fundamental to our strategy are
shareholder distributions consisting of a competitive, secure and
growing dividend complemented with share repurchases.”
Midstream
Millions of Dollars Net Income
Adjusted Net Income Q4 2017 Q3 2017
Q4 2017 Q3 2017 Transportation $ 105
119 108 98 NGL and Other 20
(3
)
20 — DCP Midstream 14 1 14 1
Midstream $ 139
117 142 99
Midstream's fourth-quarter net income was $139 million, compared
with $117 million in the third quarter of 2017. Midstream net
income in the fourth quarter included hurricane-related costs of $3
million. Third-quarter results included a favorable legal
settlement of $23 million, partially offset by hurricane-related
costs of $3 million and pension settlement expense of $2
million.
Transportation adjusted net income for the fourth quarter of
2017 was $108 million, an increase of $10 million from the third
quarter. The increase reflects higher terminal and pipeline
throughput volumes.
NGL and Other adjusted net income was $20 million in the fourth
quarter compared with break-even results in the third quarter. The
increase primarily reflects the acquisition of Merey Sweeny, L.P.
by Phillips 66 Partners (PSXP) during the quarter.
The company’s equity investment in DCP Midstream generated
adjusted net income of $14 million in the fourth quarter, compared
with $1 million in the prior quarter. This increase was primarily
due to the absence of third-quarter asset impairments, as well as
higher NGL prices and improved volumes.
Chemicals
Millions of Dollars Net Income
Adjusted Net Income Q4 2017 Q3 2017
Q4 2017 Q3 2017 Olefins and Polyolefins
(O&P) $ 1 105 95 137 Specialties, Aromatics and Styrenics
(SA&S) 34 22 34 22 Other
(8
)
(6
)
(8
)
(6
)
Chemicals $ 27 121
121 153
The Chemicals segment reflects Phillips 66's equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals'
fourth-quarter net income was $27 million, compared with $121
million in the third quarter of 2017. Chemicals net income in the
fourth quarter of 2017 included hurricane-related costs of $75
million and an asset impairment of $19 million, compared with $32
million of hurricane-related costs in the third quarter.
CPChem's O&P business contributed $95 million of adjusted
net income to the Chemicals segment in the fourth quarter of 2017.
The $42 million decrease from the prior quarter was due primarily
to lower sales volumes and higher depreciation, maintenance and
operating costs, partially offset by improved polyethylene margins.
Global O&P utilization was 79 percent for the quarter,
reflecting hurricane-related downtime at the Cedar Bayou facility
and an unplanned outage impacting a Q-Chem II facility.
CPChem's SA&S business contributed $34 million of adjusted
net income in the fourth quarter of 2017, an increase of $12
million from the prior quarter. The improvement was primarily
related to higher margins and lower operating costs.
Refining
Millions of Dollars Net Income
Adjusted Net Income Q4 2017 Q3
2017 Q4 2017 Q3 2017 Refining
$ 371 550 358
548
Refining's fourth-quarter net income was $371 million, compared
with $550 million in the third quarter of 2017. Refining results in
the fourth quarter included favorable U.K. tax credits of $23
million, partially offset by hurricane-related costs of $7 million
and pension settlement expense of $3 million. Third-quarter net
income included favorable tax and other settlements of $18 million,
mostly offset by pension settlement expense of $8 million and
hurricane-related costs of $8 million.
Refining's adjusted net income was $358 million in the fourth
quarter of 2017, compared with $548 million in the third quarter.
The decrease was primarily due to a 35 percent decline in gasoline
market crack spreads and higher turnaround costs, partially offset
by improved clean product differentials and increased volumes.
Realized margins for the quarter were $8.98 per barrel, compared
with $10.49 per barrel in the third quarter. Phillips 66’s
worldwide crude utilization rate was 100 percent. Pre-tax
turnaround costs for the fourth quarter were $99 million, compared
with third-quarter costs of $43 million. Clean product yield was 87
percent in the fourth quarter, compared with 85 percent in the
third quarter.
Marketing and Specialties
Millions of Dollars Net Income
Adjusted Net Income Q4 2017 Q3
2017 Q4 2017 Q3 2017 Marketing and Other $
86 160 87 163 Specialties 37 48
37 48
Marketing and Specialties
$ 123 208 124 211
Marketing and Specialties (M&S) fourth-quarter net income
was $123 million, compared with $208 million in the third quarter
of 2017. M&S fourth-quarter net income included pension
settlement expense of $1 million. Third-quarter results included a
charge of $2 million for pension settlement expense and
hurricane-related costs of $1 million.
Adjusted net income for Marketing and Other was $87 million in
the fourth quarter of 2017, a decrease of $76 million from the
prior quarter. The decrease was largely due to reduced margins as
well as seasonally lower demand for branded volumes. Refined
product exports in the fourth quarter were 236,000 barrels per day
(BPD).
Phillips 66’s Specialties businesses generated adjusted net
income of $37 million during the fourth quarter. The $11
million decrease from the prior quarter was mainly due to lower
base oil and finished lubricant margins.
Corporate and Other
Millions of Dollars Net Income
Adjusted Net Income Q4 2017 Q3
2017 Q4 2017 Q3 2017 Corporate and
Other $ 2,595
(147
)
(140
)
(127
)
Corporate and Other’s fourth-quarter net income was $2.6
billion, compared with net costs of $147 million in the third
quarter of 2017. Corporate and Other fourth-quarter net income
included a $2.7 billion benefit from U.S. tax reform, primarily
associated with the revaluation of the company's net deferred tax
liabilities. Third-quarter results included $20 million in charges
for legal and pension settlement expenses.
The $13 million increase in adjusted net costs in the fourth
quarter was primarily due to tax adjustments in the third
quarter.
Financial Position, Liquidity and Return of Capital
During the fourth quarter, Phillips 66 generated $1.9 billion in
cash from operations. Excluding working capital impacts, operating
cash flow was $1.0 billion. In addition, PSXP raised $1.0 billion
through equity issuances to partially fund the acquisition of
assets from Phillips 66.
Phillips 66 funded $537 million of capital expenditures and
investments, $463 million in share repurchases and $353 million in
dividends during the quarter. The company ended the quarter with
502 million shares outstanding.
As of Dec. 31, 2017, cash and cash equivalents were $3.1
billion, and consolidated debt was $10.1 billion, including $2.9
billion at PSXP. The company's consolidated debt-to-capital ratio
and net-debt-to-capital ratio were 27 percent and 20 percent,
respectively. Excluding PSXP, the debt-to-capital ratio was 22
percent and net-debt-to-capital ratio was 14 percent.
Strategic Update
Phillips 66 continues to execute its plan to selectively grow
higher-valued businesses. Capital spending for 2017 was $1.8
billion, including $352 million at PSXP. Capital expenditures
funded growth projects in Midstream, return-enhancing investments
in Refining, and sustaining capital to maintain asset integrity and
ensure safe, reliable and environmentally responsible operations.
Phillips 66's proportionate share of capital spending by joint
ventures CPChem, DCP Midstream and WRB Refining in 2017 was $1.2
billion.
In Midstream, the company completed expansion of the Beaumont
Terminal’s export facilities from 400,000 BPD to 600,000 BPD in the
fourth quarter. An additional 3.5 million barrels of crude storage
is expected to be in service by the end of 2018, bringing the
terminal's total crude and products storage capacity to 14.6
million barrels.
In December 2017, Phillips 66 and Enbridge Inc. announced an
open season for the Gray Oak Pipeline project to transport crude
oil from the Permian Basin to markets along the Texas Gulf Coast.
Depending on shipper interest, the pipeline is expected to have
initial throughput capacity of 385,000 BPD and be placed in service
during the second half of 2019.
The Bayou Bridge Pipeline, in which PSXP holds a 40 percent
interest, currently operates from the Phillips 66 Beaumont Terminal
to Lake Charles, Louisiana. The segment from Lake Charles to St.
James, Louisiana, has received all permits and construction is
underway. Commercial operations on the St. James segment are
expected to begin in the second half of 2018.
PSXP is proceeding with the construction of a new 25,000 BPD
isomerization unit at the Lake Charles Refinery. The unit will
increase production of higher octane gasoline blend components,
with completion anticipated by the end of 2019.
DCP Midstream’s expansion of the Sand Hills NGL Pipeline
capacity from 280,000 BPD to 365,000 BPD is expected to be complete
in the first quarter of 2018. In addition, further expansion of the
line to 450,000 BPD is expected in the second half of 2018. Sand
Hills is owned two-thirds by DCP and one-third by Phillips 66
Partners. DCP continues construction of two additional gas
processing plants in the high-growth DJ basin. The Mewbourn 3 plant
is anticipated to be complete in the third quarter of 2018, and the
O’Connor 2 plant is scheduled for completion in mid-2019.
DCP Midstream announced a final investment decision to proceed
with joint development of the Gulf Coast Express Pipeline project,
which will provide an outlet for natural gas production in the
Permian Basin to markets along the Texas Gulf Coast. DCP holds a 25
percent equity interest in the project, which is expected to be
complete in the fourth quarter of 2019.
In Chemicals, CPChem is nearing completion of its U.S. Gulf
Coast Petrochemicals Project with the commissioning of its new
world-scale ethane cracker at Cedar Bayou. The startup of the
cracker is expected in the first quarter, with ramp up to full
production in the second quarter. The Project will increase
CPChem’s global ethylene and polyethylene capacity by approximately
one-third.
In Refining, the company continues to focus on high-return,
quick-payout projects. Refining has multiple yield enhancing
projects that are expected to deliver 25,000 BPD of additional
clean products by the end of 2018. This includes the diesel
recovery project at the Ponca City Refinery, which was completed in
the fourth quarter. In addition, the company is modernizing fluid
catalytic cracking (FCC) units at both the Bayway and Wood River
refineries with anticipated completion during the second quarter of
2018. Refining also has projects to reduce feedstock costs, such as
at the Lake Charles Refinery where efforts are underway to increase
advantaged North American crude processing capability.
In December 2017, Phillips 66 announced a 2018 capital budget of
$2.3 billion, which includes $595 million at PSXP. Phillips 66's
proportionate share of capital spending by joint ventures CPChem,
DCP Midstream and WRB Refining is expected to be $946 million.
Investor Webcast
Later today, members of Phillips 66 executive management will
host a webcast at noon EST to discuss the company’s fourth-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 Q4
Q3 Year Q4
Year Midstream $ 139 117 464 35 280 Chemicals 27 121 525 136
583 Refining 371 550 1,404
(38
)
374 Marketing and Specialties 123 208 686 190 891 Corporate and
Other 2,595
(147
)
2,169
(129
)
(484
)
Net Income 3,255 849 5,248 194
1,644 Less: Noncontrolling interests 57
26 142 31 89
Phillips 66
$ 3,198 823
5,106 163 1,555
Adjusted
Earnings
Millions of Dollars 2017 2016 Q4
Q3 Year Q4
Year Midstream $ 142 99 454 69 289 Chemicals 121 153 671 124
660 Refining 358 548 1,137
(95
)
277 Marketing and Specialties 124 211 694 140 841 Corporate and
Other
(140
)
(127
)
(545
)
(124
)
(480
)
Net Income 605 884 2,411 114
1,587 Less: Noncontrolling interests 57
26 142 31 89
Phillips 66
$ 548 858
2,269 83 1,498
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 $54 billion of assets as of
Dec. 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,” “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. References to net income are inclusive of
noncontrolling interests.
Millions of Dollars Except as Indicated
2017 2016 Q4 Q3
Year Q4 Year Reconciliation
of Earnings to Adjusted Earnings
Consolidated Earnings $ 3,198 823
5,106 163 1,555 Pre-tax adjustments: Pending
claims and settlements — (36 ) (60 ) — (117 ) Pension settlement
expense 7 21 83 — — Equity affiliate ownership restructuring — — —
33 33 Impairments by equity affiliates 31 — 64 — 95 Certain tax
impacts (23 ) — (23 ) (32 ) (32 ) Recognition of deferred logistics
commitments — — — — 30 Gain on consolidation of business — — (423 )
— — Railcar lease residual value deficiencies and related costs — —
— 40 40 Hurricane-related costs 140 70 210 — — Tax impact of
adjustments* (70 ) (20 ) 47 (27 ) 4 U.S. tax reform (2,735 ) —
(2,735 ) — — Other tax impacts — —
— (94 ) (110 )
Adjusted earnings
$ 548 858
2,269 83 1,498
Earnings per share of common stock (dollars)
$ 6.25 1.60 9.85 0.31
2.92 Adjusted earnings per share of common stock
(dollars)† $ 1.07
1.66 4.38 0.16
2.82 Reconciliation of Net
Income to Adjusted Net Income by Segment Midstream Net
Income $ 139 117 464 35
280 Pre-tax adjustments: Pending claims and settlements —
(37 ) (37 ) — (45 ) Equity affiliate ownership restructuring
—
—
—
33 33 Impairments by equity affiliates
—
— — — 6 Pension settlement expense 1 3 12 — — Hurricane-related
costs 6 4 10 — — Tax impact of adjustments* (4 ) 12 5 (12 ) 2 Other
tax impacts — — —
13 13
Adjusted net income
$ 142 99
454 69 289
Chemicals Net Income $ 27 121
525 136 583 Pre-tax adjustments: Impairments
by equity affiliates 31 — 64 — 89 Hurricane-related costs 122 53
175 — — Tax impact of adjustments* (59 ) (21 ) (93 ) — — Other tax
impacts — — — (12
) (12 )
Adjusted net income $
121 153 671
124 660 Refining Net
Income $ 371 550 1,404 (38
) 374 Pre-tax adjustments: Pending claims and
settlements — (30 ) (51 ) — (70 ) Gain on consolidation of business
— — (423 ) — — Recognition of deferred logistics commitments — — —
— 30 Certain tax impacts (23 ) — (23 ) (32 ) (32 ) Railcar lease
residual value deficiencies and related costs — — — 40 40 Pension
settlement expense 5 13 53 — — Hurricane-related costs 12 12 24 — —
Tax impact of adjustments* (7 ) 3 153 (15 ) 1 Other tax impacts
— — — (50 )
(66 )
Adjusted net income $ 358
548 1,137
(95 ) 277 Marketing
and Specialties Net Income $ 123 208
686 190 891 Pre-tax adjustments: Pension
settlement expense 1 3 11 — — Hurricane-related costs — 1 1 — — Tax
impact of adjustments* — (1 ) (4 ) — — Other tax impacts
— — — (50 ) (50 )
Adjusted net income $ 124
211 694 140
841 Corporate and Other Net Income
(Loss) $ 2,595 (147 ) 2,169
(129 ) (484 ) Pre-tax adjustments:
Pending claims and settlements — 31 28 — (2 ) Pension settlement
expense — 2 7 — — Tax impact of adjustments* — (13 ) (14 ) — 1 U.S.
tax reform (2,735 ) — (2,735 ) — — Other tax impacts
— — — 5 5
Adjusted net income (loss) $
(140 ) (127 ) (545
) (124 ) (480 )
*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 Q4 Q3 Realized Refining
Margins Net income $ 371 550 Plus: Income tax expense 145 313
Taxes other than income taxes 69 47 Depreciation, amortization and
impairments 213 205 Selling, general and administrative expenses 54
50 Operating expenses 875 818 Equity in earnings of affiliates (162
)
(144
)
Other segment (income) expense, net (2 ) 8 Proportional share of
refining gross margins contributed by equity affiliates 339 305
Special items: Certain tax impacts (23 ) — Realized
refining margins $ 1,879 2,152 Total
processed inputs (thousands of barrels) 187,489 183,010 Adjusted
total processed inputs (thousands of barrels)*
209,297 205,218
Net income (dollars per
barrel)** $ 1.98 3.01
Realized refining margins (dollars per
barrel)*** 8.98 10.49
* Adjusted total processed inputs include
our proportional share of processed inputs of equity
affiliates.
** Net income 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 due to rounding.
Millions of Dollars December 31,
2017 Debt-to-Capital Ratio
Phillips 66
Consolidated
PSXP* Phillips 66
Excluding PSXP
Total Debt $ 10,110 2,945 7,165 Total Equity
27,428 2,314 25,114
Debt-to-Capital Ratio 27 % 22 %
Total Cash $ 3,119 185
2,934
Net-Debt-to-Capital Ratio
20 % 14 %
*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/20180202005134/en/
Phillips 66Jeff Dietert, 832-765-2297
(investors)jeff.dietert@p66.comorRosy
Zuklic, 832-765-2297
(investors)rosy.zuklic@p66.comorDennis
Nuss, 832-765-1850 (media)dennis.h.nuss@p66.com
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