- Reported a second-quarter loss of $141 million or $0.33 per
share; adjusted loss of $324 million or $0.74 per share
- Generated $764 million of operating cash flow
- Issued $2 billion of senior notes during the quarter; increased
term loan capacity by $1 billion
- Started full operations on the Gray Oak Pipeline
- Reached milestone at South Texas Gateway Terminal with first
export cargo loaded in July
- Operated at 103% O&P utilization in Chemicals; record
polyethylene sales volumes
- Recently acquired 95 sites in U.S. West Coast retail marketing
joint venture
Phillips 66 (NYSE: PSX), a diversified energy manufacturing and
logistics company, announces a second-quarter 2020 loss of $141
million, compared with a loss of $2.5 billion in the first quarter
of 2020. Excluding special items of $183 million in the second
quarter, primarily a tax adjustment related to first-quarter
impairments, the company had an adjusted loss of $324 million,
compared with first-quarter adjusted earnings of $450 million.
“The global pandemic has presented challenges unlike any we have
seen before,” said Greg Garland, chairman and CEO of Phillips 66.
“We are proud of how Phillips 66 employees are demonstrating
steadfast commitment to our values as we deliver essential energy
products to our customers. Our top priority remains the health and
safety of our employees, their families and communities.
“Our second-quarter results reflect the disruption in refined
product demand from COVID-19 and weak margins across our
businesses. Despite the challenging market environment, we operated
safely and reliably, and reached key strategic milestones. In
Midstream, the Gray Oak Pipeline started full operations during the
quarter, and the South Texas Gateway Terminal began commercial
operations in July. CPChem operated at 103% utilization, meeting
strong polymer demand for food packaging and medical supplies. In
Marketing, the U.S. West Coast retail joint venture recently
completed the previously announced acquisition of 95 sites.
“We took steps to enhance the company’s financial flexibility
and liquidity with the issuance of senior notes and an increase of
our term loan capacity. With our dedicated employees, diversified
portfolio and financial strength, Phillips 66 is well positioned to
successfully manage through the current environment. We remain
committed to operating excellence, a strong balance sheet,
disciplined capital allocation and delivering returns to
shareholders.”
Midstream
Millions of Dollars
Pre-Tax Income (Loss)
Adjusted Pre-Tax
Income
Q2 2020
Q1 2020
Q2 2020
Q1 2020
Transportation
$
214
200
130
200
NGL and Other
78
179
83
179
DCP Midstream
32
(1,081)
32
81
Midstream
$
324
(702)
245
460
Midstream second-quarter pre-tax income was $324 million,
compared with a pre-tax loss of $702 million in the first quarter.
Midstream results in the second quarter included an $84 million
gain related to recognition of Phillips 66 Partners’ prior-year
sale of an interest in the Gray Oak Pipeline, as well as $5 million
of pension settlement expense. First-quarter results included a
$1.2 billion impairment of Phillips 66’s equity investment in DCP
Midstream, LLC (DCP Midstream).
Transportation second-quarter adjusted pre-tax income of $130
million was $70 million lower than the first quarter. The decrease
was due to lower pipeline and terminal volumes, driven by decreased
refinery utilization, and lower equity affiliate earnings from
reduced pipeline throughput volumes.
NGL and Other adjusted pre-tax income was $83 million in the
second quarter, compared with $179 million in the first quarter.
The decrease was primarily due to lower margins and volumes at the
Sweeny Hub, as well as inventory impacts.
The company’s equity investment in DCP Midstream generated
second-quarter adjusted pre-tax income of $32 million, a $49
million decrease from the prior quarter, mainly reflecting lower
hedging impacts.
Chemicals
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2020
Q1 2020
Q2 2020
Q1 2020
Olefins and Polyolefins
$
70
177
106
193
Specialties, Aromatics and Styrenics
—
4
11
12
Other
(28)
(12)
(28)
(12)
Chemicals
$
42
169
89
193
The Chemicals segment reflects Phillips 66’s equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals’
second-quarter 2020 pre-tax income was $42 million, compared with
$169 million in the first quarter of 2020. Chemicals results in the
second quarter included reductions to equity earnings of $32
million in lower-of-cost-or-market inventory adjustments, as well
as a $15 million asset write-off related to an international joint
venture. First-quarter results included a reduction to equity
earnings related to lower-of-cost-or-market inventory
adjustments.
CPChem’s Olefins and Polyolefins (O&P) business contributed
$106 million of adjusted pre-tax income in the second quarter of
2020, compared with $193 million in the first quarter. The $87
million decrease was primarily due to lower polyethylene and normal
alpha olefins margins, driven by lower sales prices and higher
feedstock costs, partially offset by higher volumes. Global O&P
utilization was 103% for the quarter.
CPChem’s Specialties, Aromatics and Styrenics (SA&S)
business contributed second-quarter 2020 adjusted pre-tax income of
$11 million, in line with the prior quarter.
The $16 million increase in Other adjusted net costs in the
second quarter mainly reflects higher employee-related and interest
expenses.
Refining
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q2 2020
Q1 2020
Q2 2020
Q1 2020
Refining
$
(878)
(2,261)
(867)
(401)
Refining had a second-quarter pre-tax loss of $878 million,
compared with a pre-tax loss of $2.3 billion in the first quarter
of 2020. Refining results in the second quarter included $26
million of pension settlement expense, and first-quarter results
included a $1.8 billion goodwill impairment. Results in both
periods also included impacts to equity earnings from
lower-of-cost-or-market inventory adjustments.
Refining had an adjusted pre-tax loss of $867 million in the
second quarter of 2020, compared with an adjusted pre-tax loss of
$401 million in the first quarter of 2020. The decreased results
were largely driven by lower realized margins and reduced volumes,
partially offset by lower controllable costs. Second-quarter
realized margins were $2.60 per barrel, down 63% from the prior
quarter due to a decline in 3:2:1 market crack spreads and lower
clean product realizations, partially offset by higher secondary
product margins. Phillips 66’s worldwide crude utilization rate was
75% in the second quarter, down from 83% in the first quarter,
reflecting reduced refining runs due to lower clean product
demand.
Pre-tax turnaround costs for the second quarter were $38
million, a decrease of $291 million from the first quarter. Clean
product yield was 83% in the second quarter.
Marketing and Specialties
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2020
Q1 2020
Q2 2020
Q1 2020
Marketing and Other
$
255
471
259
434
Specialties
31
42
34
54
Marketing and Specialties
$
286
513
293
488
Marketing and Specialties (M&S) second-quarter pre-tax
income was $286 million, compared with $513 million in the first
quarter of 2020. M&S results in the second quarter included $4
million of pension settlement expense, and first-quarter results
included a $37 million favorable legal settlement. Results in both
periods also included reductions to equity earnings from
lower-of-cost-or-market inventory adjustments.
Adjusted pre-tax income for Marketing and Other was $259 million
in the second quarter of 2020, a decrease of $175 million from the
first quarter of 2020. The decrease primarily reflects lower
volumes, driven by COVID-19-related demand impacts, as well as
lower realized margins due to rising refined product spot prices in
the quarter compared with falling first-quarter prices. Refined
product exports in the second quarter were 160,000 barrels per day
(BPD).
Specialties generated second-quarter adjusted pre-tax income of
$34 million, down from $54 million in the first quarter. The
decrease was due to lower finished lubricant volumes.
Corporate and Other
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q2 2020
Q1 2020
Q2 2020
Q1 2020
Corporate and Other
$
(219)
(197)
(224)
(197)
Corporate and Other second-quarter pre-tax costs were $219
million, compared with pre-tax costs of $197 million in the first
quarter of 2020. Second-quarter pre-tax costs included $8 million
of net interest benefits related to tax audit adjustments, as well
as $3 million of pension settlement expense.
The $27 million increase in Corporate and Other adjusted pre-tax
costs in the second quarter was mainly driven by higher net
interest and employee-related expenses, partially offset by lower
environmental expense.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $764 million in cash from operations
during the second quarter, including $459 million of cash
distributions from equity affiliates. Excluding working capital
impacts, operating cash flow was $670 million.
In April, Phillips 66 increased the size of its 364-day term
loan facility to $2 billion, with $1 billion of capacity remaining
undrawn at June 30, 2020. The company also issued $1 billion of
senior unsecured notes in April and an additional $1 billion of
senior unsecured notes in June. During the second quarter, Phillips
66 repaid $500 million of maturing debt, including $300 million of
senior unsecured notes and a $200 million term loan.
Capital expenditures and investments in the second quarter were
$939 million. Excluding $38 million of capital funded by Gray Oak
joint venture partners, adjusted capital spending was $901 million.
Phillips 66 funded $393 million of dividends in the quarter.
As of June 30, 2020, cash and cash equivalents were $1.9
billion, and consolidated debt was $14.4 billion, including $3.7
billion at Phillips 66 Partners (PSXP). The company’s consolidated
debt-to-capital ratio was 38% and its net debt-to-capital ratio was
35%. Excluding PSXP, the debt-to-capital ratio was 34% and the net
debt-to-capital ratio was 30%.
Strategic Update
During the quarter, the Gray Oak Pipeline commenced full
operations from West Texas and Eagle Ford to Texas Gulf Coast
destinations, marking the completion of the project. Phillips 66
Partners has a 42.25% effective ownership interest in the 900,000
BPD pipeline.
The Gray Oak Pipeline connects to multiple terminals in Corpus
Christi, Texas, including the South Texas Gateway Terminal being
constructed by Buckeye Partners, L.P. The first dock and 3.4
million barrels of storage capacity have been commissioned, and the
terminal began crude oil export operations in July after receiving
its first crude oil supply from the Gray Oak Pipeline. Marine
operations are expected to ramp up through the end of this year as
additional phases of construction are completed. Upon expected
project completion in the first quarter of 2021, the marine export
terminal will have two deepwater docks with up to 800,000 BPD of
throughput capacity, along with storage capacity of 8.6 million
barrels. Phillips 66 Partners owns a 25% interest in the
terminal.
Phillips 66 is expanding the Sweeny Hub with the addition of two
150,000 BPD fractionators that are supported by long-term customer
commitments. During the quarter, the company completed tie-in work
to integrate the fractionators with the Freeport LPG export
facility. Upon final completion of the fractionators in the fourth
quarter of 2020, the Sweeny Hub will have 400,000 BPD of
fractionation capacity.
Also at the Sweeny Hub, Phillips 66 Partners recently completed
its expansion of storage capacity at Clemens Caverns from 9 million
barrels to 16.5 million barrels. Phillips 66 Partners continues
construction of the C2G Pipeline, a 16 inch ethane pipeline that
will connect Clemens Caverns to petrochemical facilities in
Gregory, Texas, near Corpus Christi. The project is backed by
long-term commitments and is expected to be completed in
mid-2021.
The company is adding a 200,000 BPD dock at its Beaumont
Terminal, bringing the terminal’s total dock capacity to 800,000
BPD. The new dock is expected to be completed in the fourth quarter
of 2020. The terminal also has total crude and product storage
capacity of 16.8 million barrels.
In Chemicals, CPChem and Qatar Petroleum are jointly pursuing
development of petrochemical facilities on the U.S. Gulf Coast and
in Ras Laffan, Qatar. CPChem is closely monitoring economic
developments and has deferred final investment decision for its
U.S. Gulf Coast project.
Phillips 66 is developing renewable fuel projects that leverage
existing infrastructure. Waste fats, recycled cooking oils and
other renewable feedstocks will be used for diesel production that
complies with low-carbon fuel standards. The company is producing
renewable diesel at its Humber Refinery with a capacity increase
expected in mid-2021. In addition, Phillips 66 is progressing its
renewable diesel project at the San Francisco Refinery and has
supply and offtake agreements for two third-party renewable diesel
manufacturing facilities under construction in Nevada.
In Marketing, the U.S. West Coast retail joint venture recently
completed the previously announced acquisition of 95 sites. This
joint venture, with a network of approximately 680 sites, enables
increased long-term placement of Phillips 66 refinery production
and increases the company’s exposure to retail margins.
In the U.S., the company continues its program to roll out
updated signature image designs for Phillips 66, 76 and Conoco
branded sites. During the quarter, 284 sites were reimaged. Since
the program’s inception in 2015, approximately 4,720 sites have
been reimaged.
In Europe, the company continues its program to update signature
image designs for JET branded sites. During the quarter, 29 sites
were reimaged. Since the program’s inception in 2019, approximately
120 sites have been reimaged.
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
(Loss)
Millions of Dollars
2020
2019
Q2
Q1
Jun YTD
Q2
Jun YTD
Midstream
$
324
(702)
(378)
423
739
Chemicals
42
169
211
275
502
Refining
(878)
(2,261)
(3,139)
983
785
Marketing and Specialties
286
513
799
353
558
Corporate and Other
(219)
(197)
(416)
(205)
(415)
Pre-Tax Income (Loss)
(445)
(2,478)
(2,923)
1,829
2,169
Less: Income tax expense (benefit)
(378)
(51)
(429)
325
395
Less: Noncontrolling interests
74
69
143
80
146
Phillips 66
$
(141)
(2,496)
(2,637)
1,424
1,628
Adjusted Earnings
(Loss)
Millions of Dollars
2020
2019
Q2
Q1
Jun YTD
Q2
Jun YTD
Midstream
$
245
460
705
423
739
Chemicals
89
193
282
275
502
Refining
(867)
(401)
(1,268)
983
764
Marketing and Specialties
293
488
781
353
558
Corporate and Other
(224)
(197)
(421)
(205)
(415)
Pre-Tax Income (Loss)
(464)
543
79
1,829
2,148
Less: Income tax expense (benefit)
(190)
24
(166)
370
436
Less: Noncontrolling interests
50
69
119
80
146
Phillips 66
$
(324)
450
126
1,379
1,566
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
integral to the portfolio. Headquartered in Houston, the company
has 14,500 employees committed to safety and operating excellence.
Phillips 66 had $55 billion of assets as of June 30, 2020. 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
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, 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;
potential disruption of our operations due to accidents, weather
events, including as a result of climate change, terrorism or
cyberattacks; general economic and political developments
including: armed hostilities; expropriation of assets; changes in
governmental policies relating to NGL, crude oil, natural gas or
refined petroleum products pricing, regulation or taxation; and
other political, economic and diplomatic developments, including
those caused by public health issues and outbreaks; the impact of
adverse market conditions or other similar risks to those
identified herein affecting PSXP, as well as the ability of PSXP to
successfully execute its growth plans; 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 (loss),” “adjusted earnings
(loss) per share” and “adjusted pre-tax income (loss).” 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, by
excluding items that do not 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. This release includes
“adjusted capital spending,” a non-GAAP financial measure that
demonstrates the portion of total consolidated capital expenditures
and investments funded by Phillips 66. This release also includes
“realized refining margin,” a non-GAAP financial measure that
demonstrates how well we performed relative to benchmark industry
margins.
References in the release to total consolidated earnings (loss)
refer to net income (loss) attributable to Phillips 66.
Millions of Dollars
Except as Indicated
2020
2019
Q2
Q1
Jun YTD
Q2
Jun YTD
Reconciliation of Consolidated Earnings
(Loss) to Adjusted Earnings (Loss)
Consolidated Earnings (Loss)
$
(141)
(2,496)
(2,637)
1,424
1,628
Pre-tax adjustments:
Pending claims and settlements
—
(37)
(37)
—
(21)
Pension settlement expense
38
—
38
—
—
Impairments
—
3,006
3,006
—
—
Impairments by equity affiliates
15
—
15
—
—
Lower-of-cost-or-market inventory
adjustments
20
52
72
—
—
Certain tax impacts
(8)
—
(8)
—
—
Asset dispositions
(84)
—
(84)
—
—
Tax impact of adjustments*
(208)
(75)
(283)
—
4
Other tax impacts
20
—
20
(45)
(45)
Noncontrolling interests
24
—
24
—
—
Adjusted earnings (loss)
$
(324)
450
126
1,379
1,566
Earnings (loss) per share of common
stock (dollars)
$
(0.33)
(5.66)
(6.00)
3.12
3.55
Adjusted earnings (loss) per share of
common stock (dollars)†
$
(0.74)
1.02
0.28
3.02
3.42
Reconciliation of Segment Pre-Tax
Income (Loss) to Adjusted Pre-Tax Income (Loss)
Midstream Pre-Tax Income (Loss)
$
324
(702)
(378)
423
739
Pre-tax adjustments:
Impairments
—
1,161
1,161
—
—
Pension settlement expense
5
—
5
—
—
Lower-of-cost-or-market inventory
adjustments
—
1
1
—
—
Asset dispositions
(84)
—
(84)
—
—
Adjusted pre-tax income
$
245
460
705
423
739
Chemicals Pre-Tax Income
$
42
169
211
275
502
Pre-tax adjustments:
Lower-of-cost-or-market inventory
adjustments
32
24
56
—
—
Impairments by equity affiliates
15
—
15
—
—
Adjusted pre-tax income
$
89
193
282
275
502
Refining Pre-Tax Income (Loss)
$
(878)
(2,261)
(3,139)
983
785
Pre-tax adjustments:
Pending claims and settlements
—
—
—
—
(21)
Pension settlement expense
26
—
26
—
—
Impairments
—
1,845
1,845
—
—
Lower-of-cost-or-market inventory
adjustments
(15)
15
—
—
—
Adjusted pre-tax income (loss)
$
(867)
(401)
(1,268)
983
764
Marketing and Specialties Pre-Tax
Income
$
286
513
799
353
558
Pre-tax adjustments:
Lower-of-cost-or-market inventory
adjustments
3
12
15
—
—
Pending claims and settlements
—
(37)
(37)
—
—
Pension settlement expense
4
—
4
—
—
Adjusted pre-tax income
$
293
488
781
353
558
Corporate and Other Pre-Tax
Loss
$
(219)
(197)
(416)
(205)
(415)
Pre-tax adjustments:
Pension settlement expense
3
—
3
—
—
Certain tax impacts
(8)
—
(8)
—
—
Adjusted pre-tax loss
$
(224)
(197)
(421)
(205)
(415)
*We generally tax effect taxable
U.S.-based special items using a combined federal and state annual
statutory income tax rate of approximately 25%. 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.
†Q1 2020 and YTD 2020 are based
on adjusted weighted-average diluted shares outstanding of 442,302
thousand and 440,653 thousand, respectively, and 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
June 30, 2020
Debt-to-Capital Ratio
Phillips 66
Consolidated
PSXP*
Phillips 66 Excluding
PSXP
Total Debt
$
14,446
3,707
10,739
Total Equity
23,295
2,550
20,745
Debt-to-Capital Ratio
38
%
34
%
Total Cash
$
1,890
7
1,883
Net Debt-to-Capital Ratio
35
%
30
%
*PSXP’s third-party debt and
Phillips 66’s noncontrolling interests attributable to PSXP.
Millions of Dollars
Except as Indicated
Q2 2020
Q1 2020
Realized Refining Margins
Loss before income taxes
$
(878)
(2,261)
Plus:
Taxes other than income taxes
76
104
Depreciation, amortization and
impairments
220
2,066
Selling, general and administrative
expenses
38
36
Operating expenses
803
1,105
Equity in losses of affiliates
81
52
Other segment (income) expense, net
7
(3)
Proportional share of refining gross
margins contributed by equity affiliates
108
129
Special items:
Lower-of-cost-or-market inventory
adjustments
(35)
35
Realized refining margins
$
420
1,263
Total processed inputs (thousands of
barrels)
146,668
156,623
Adjusted total processed inputs (thousands
of barrels)*
161,957
177,569
Loss before income taxes (dollars per
barrel)**
$
(5.99)
(14.44)
Realized refining margins (dollars per
barrel)***
$
2.60
7.11
*Adjusted total processed inputs
include our proportional share of processed inputs of an equity
affiliate.
**Loss 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/20200731005065/en/
Jeff Dietert (investors) 832-765-2297 jeff.dietert@p66.com
Brent Shaw (investors) 832-765-2297 brent.d.shaw@p66.com
Dennis Nuss (media) 855-841-2368 dennis.h.nuss@p66.com
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