- Reported second-quarter earnings of $296 million or $0.66 per
share; adjusted earnings of $329 million or $0.74 per share
- Generated $1.7 billion of operating cash flow; $910 million
excluding working capital
- Delivered record Chemicals earnings
- CPChem began construction on a world-scale 1-hexene unit
- Ramped up renewable diesel production at San Francisco
Refinery
- Recently resumed construction of the 150,000-BPD Frac 4 at the
Sweeny Hub
- Issued 2021 Sustainability Report in July
Phillips 66 (NYSE: PSX), a diversified energy manufacturing and
logistics company, announces second-quarter 2021 earnings of $296
million, compared with a loss of $654 million in the first quarter
of 2021. Excluding special items of $33 million, the company had
adjusted earnings of $329 million in the second quarter, compared
with a first-quarter adjusted loss of $509 million.
“Our second-quarter results reflect the recovery of operations
after the prior quarter’s winter storms, as well as further product
demand improvement as more people across the globe are vaccinated,”
said Greg Garland, Chairman and CEO of Phillips 66. “CPChem
generated record quarterly earnings supported by robust demand,
utilization and margins. Midstream and Marketing and Specialties
delivered strong, consistent earnings, while Refining profitability
remained challenged.
“Across our portfolio, we are advancing our strategic projects
and pursuing lower-carbon opportunities. At Rodeo, renewable diesel
production from the hydrotreater conversion reached full rates in
July, and permitting for the full facility conversion is moving
forward as planned. At the Sweeny Hub, we recently resumed
construction of Frac 4, which we expect to complete in the fourth
quarter of 2022.
“Our recently released 2021 Sustainability Report outlines our
commitment to a lower-carbon future through environmental
stewardship, social responsibility and strong corporate governance.
As previously communicated, we will establish greenhouse gas
emission reduction targets later this year.
“Looking forward, we remain optimistic that demand recovery for
our products will continue. We will adhere to our disciplined
capital allocation framework, including our commitment to debt
reduction as well as a secure, competitive dividend. We anticipate
a return to dividend growth as cash flow recovers. In the second
quarter, we returned $394 million in dividends to
shareholders.”
Midstream
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2021
Q1 2021
Q2 2021
Q1 2021
Transportation
$
224
7
224
206
NGL and Other
79
35
83
36
DCP Midstream
9
34
9
34
Midstream
$
312
76
316
276
Midstream second-quarter 2021 pre-tax income was $312 million,
compared with $76 million in the first quarter of 2021. Midstream
results in the second quarter included $4 million of pension
settlement expense. First-quarter results included a $198 million
impairment resulting from Phillips 66 Partners’ decision to exit
the Liberty Pipeline project, as well as $2 million of
winter-storm-related maintenance and repair costs.
Transportation second-quarter adjusted pre-tax income of $224
million was $18 million higher than the first quarter, primarily
due to improved volumes from increased refinery utilization rates,
partially offset by timing of maintenance and asset integrity
work.
NGL and Other adjusted pre-tax income was $83 million in the
second quarter, compared with $36 million in the first quarter. The
increase was primarily due to lower operating costs and higher
volumes, reflecting recovery from the first-quarter winter
storms.
The company’s equity investment in DCP Midstream, LLC generated
second-quarter adjusted pre-tax income of $9 million, a $25 million
decrease from the prior quarter. The decrease is mainly due to
lower mark-to-market hedging results from higher natural gas and
NGL prices.
Chemicals
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2021
Q1 2021
Q2 2021
Q1 2021
Olefins and Polyolefins
$
562
145
593
174
Specialties, Aromatics and Styrenics
79
26
82
27
Other
(18)
(17)
(18)
(17)
Chemicals
$
623
154
657
184
The Chemicals segment reflects Phillips 66’s equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals
second-quarter 2021 pre-tax income was $623 million, compared with
$154 million in the first quarter of 2021. Chemicals results in the
second quarter included an $18 million reduction to equity earnings
for pension settlement expense and $16 million of
winter-storm-related maintenance and repair costs. First-quarter
results included a reduction to equity earnings of $30 million for
winter-storm-related costs.
CPChem’s Olefins and Polyolefins (O&P) business contributed
$593 million of adjusted pre-tax income in the second quarter,
compared with $174 million in the first quarter. The $419 million
increase was driven by strong demand, tight supplies and recovery
from the first-quarter winter storms that contributed to higher
margins and lower utility costs. Global O&P utilization was
102% for the quarter.
CPChem’s Specialties, Aromatics and Styrenics (SA&S)
business contributed second-quarter adjusted pre-tax income of $82
million, compared with $27 million in the first quarter. The
increase primarily reflects improved margins due to tight industry
supplies following first-quarter winter storm outages, as well as
lower turnaround costs.
Refining
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q2 2021
Q1 2021
Q2 2021
Q1 2021
Refining
$
(729)
(1,040)
(706)
(1,026)
Refining had a second-quarter 2021 pre-tax loss of $729 million,
compared with a pre-tax loss of $1 billion in the first quarter of
2021. Second-quarter results included $20 million of pension
settlement expense and $3 million of winter-storm-related
maintenance and repair costs. Refining results in the first quarter
included $14 million of winter-storm-related costs.
Refining had an adjusted pre-tax loss of $706 million in the
second quarter, compared with an adjusted pre-tax loss of $1
billion in the first quarter. The improvement was primarily due to
lower utility and turnaround costs and higher volumes, partially
offset by lower realized margins. Second-quarter realized margins
were lower, as the benefit of improved market crack spreads was
more than offset by higher RIN costs, lower electricity sales in
the Texas market, decreased secondary product margins, lower clean
product differentials and inventory impacts.
Pre-tax turnaround costs for the second quarter were $118
million, compared with first-quarter costs of $192 million. Crude
utilization rate was 88% in the second quarter, up from 74% in the
first quarter. Clean product yield was 82% in the second quarter,
unchanged from the first quarter.
Marketing and Specialties
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2021
Q1 2021
Q2 2021
Q1 2021
Marketing and Other
$
389
211
392
211
Specialties
87
79
87
79
Marketing and Specialties
$
476
290
479
290
Marketing and Specialties (M&S) second-quarter 2021 pre-tax
income was $476 million, compared with $290 million in the first
quarter of 2021. Second-quarter results included $3 million of
pension settlement expense.
Adjusted pre-tax income for Marketing and Other was $392 million
in the second quarter, an increase of $181 million from the first
quarter. The increase was primarily due to higher domestic margins
and volumes, reflecting stronger demand in key markets. Refined
product exports in the second quarter were 216,000 barrels per day
(BPD).
Specialties generated second-quarter adjusted pre-tax income of
$87 million, up from $79 million in the prior quarter.
Corporate and Other
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q2 2021
Q1 2021
Q2 2021
Q1 2021
Corporate and Other
$
(246)
(251)
(244)
(251)
Corporate and Other second-quarter 2021 pre-tax costs were $246
million, compared with pre-tax costs of $251 million in the first
quarter of 2021. Second-quarter pre-tax costs included $2 million
of pension settlement expense.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $1.7 billion in cash from operations in
the second quarter of 2021, including a working capital benefit of
$833 million and cash distributions from equity affiliates of $612
million. The working capital benefit was primarily due to receipt
of a U.S. federal income tax refund.
During the quarter, Phillips 66 funded $380 million of capital
expenditures and investments and paid $394 million in
dividends.
As of June 30, 2021, Phillips 66 had $7.9 billion of liquidity,
reflecting $2.2 billion of cash and cash equivalents and
approximately $5.7 billion of total committed capacity under
revolving credit facilities. Consolidated debt was $15.4 billion at
June 30, 2021, including $3.9 billion at Phillips 66 Partners
(PSXP). The company’s consolidated debt-to-capital ratio was 43%
and its net debt-to-capital ratio was 39%. Excluding PSXP, the
debt-to-capital ratio was 39% and the net debt-to-capital ratio was
34%.
Strategic Update
Phillips 66 Partners continued construction of the C2G Pipeline,
a 16 inch ethane pipeline that will connect its Clemens Caverns
storage facility to petrochemical facilities in Gregory, Texas,
near Corpus Christi, Texas. The project is backed by long-term
commitments. The pipeline is expected to be operational in the
fourth quarter of 2021.
At the Sweeny Hub, Phillips 66 resumed construction of the
150,000-BPD fourth fractionator. The project is expected to be
completed in the fourth quarter of 2022 and will increase Sweeny
Hub fractionation capacity to 550,000 BPD. The fractionators are
supported by long-term commitments.
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 expects to make a final investment
decision for its U.S. Gulf Coast project in 2022.
CPChem is expanding its alpha olefins business with a second
world-scale unit to produce 1-hexene, a critical component in
high-performance polyethylene. In May, CPChem began construction on
the 266,000 metric tons per year unit, located in Old Ocean, Texas,
near its Sweeny facility. The project will utilize CPChem’s
proprietary technology and is expected to start up in 2023.
In May, CPChem received the annual Re|focus Sustainability
Leadership Innovation Award from the Plastics Industry Association
(PLASTICS) for being among the top 2021 industry innovators in
sustainability. The award recognizes the company’s launch of
Marlex® Anew™ Circular Polyethylene, which uses advanced recycling
technology to convert difficult-to-recycle plastic waste into
high-quality raw materials.
Phillips 66 is advancing its plans at the San Francisco Refinery
in Rodeo, California, to meet the growing demand for renewable
fuels. The hydrotreater conversion reached full rates of 8,000 BPD
(120 million gallons per year) of renewable diesel in July. Subject
to permitting and approvals, full conversion of the refinery is
expected to be finished in early 2024. Upon completion, the
facility will have over 50,000 BPD (800 million gallons per year)
of renewable fuel production capacity. The conversion will reduce
emissions from the facility and produce lower-carbon transportation
fuels.
In Marketing, Phillips 66 is converting 600 branded retail sites
in California to sell renewable diesel produced by the Rodeo
facility. In Switzerland, the Phillips 66 COOP retail joint venture
is adding hydrogen fueling stations. Through the joint venture,
Phillips 66 is exploring hydrogen as a fuel option for heavy-duty
vehicles to support European low-carbon goals and growing demand
for sustainable fuels.
Phillips 66 recently released its 2021 Sustainability Report.
The report includes a detailed analysis of the company’s
climate-related risks and opportunities as well as performance data
on various environmental, social and governance, or ESG, matters.
To view Phillips 66’s 2021 Sustainability Report, go to
www.phillips66.com/sustainability.
Investor Webcast
Later today, members of Phillips 66 executive management will
host a webcast at 1 p.m. 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
2021
2020
Q2
Q1
Jun YTD
Q2
Jun YTD
Midstream
$
312
76
388
324
(378)
Chemicals
623
154
777
42
211
Refining
(729)
(1,040)
(1,769)
(878)
(3,139)
Marketing and Specialties
476
290
766
286
799
Corporate and Other
(246)
(251)
(497)
(219)
(416)
Pre-Tax Income (Loss)
436
(771)
(335)
(445)
(2,923)
Less: Income tax benefit
62
(132)
(70)
(378)
(429)
Less: Noncontrolling interests
78
15
93
74
143
Phillips 66
$
296
(654)
(358)
(141)
(2,637)
Adjusted Earnings
(Loss)
Millions of Dollars
2021
2020
Q2
Q1
Jun YTD
Q2
Jun YTD
Midstream
$
316
276
592
245
705
Chemicals
657
184
841
89
282
Refining
(706)
(1,026)
(1,732)
(867)
(1,268)
Marketing and Specialties
479
290
769
293
781
Corporate and Other
(244)
(251)
(495)
(224)
(421)
Pre-Tax Income (Loss)
502
(527)
(25)
(464)
79
Less: Income tax expense (benefit)
95
(84)
11
(190)
(166)
Less: Noncontrolling interests
78
66
144
50
119
Phillips 66
$
329
(509)
(180)
(324)
126
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 14,000 employees committed to safety and operating excellence.
Phillips 66 had $57 billion of assets as of June 30, 2021. 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: the continuing effects of the COVID-19 pandemic and its
negative impact on commercial activity and demand for refined
petroleum products; the inability 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 like the renewable fuel
standards program, low carbon fuel standards and tax credits for
biofuels; 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; 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; the inability to
comply with governmental regulations or make capital expenditures
to maintain compliance; 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
domestic and international economic and political developments
including armed hostilities, expropriation of assets, and other
political, economic or diplomatic developments, including those
caused by public health issues and international monetary
conditions and exchange controls; changes in governmental policies
relating to NGL, crude oil, natural gas, refined petroleum
products, or renewable fuels pricing, regulation or taxation,
including exports; 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); the operation,
financing and distribution decisions of equity affiliates we do not
control; the impact of adverse market conditions or other similar
risks to those identified herein affecting PSXP, 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.
References in the release to total consolidated earnings (loss)
refer to net income (loss) attributable to Phillips 66.
Millions of Dollars
Except as Indicated
2021
2020
Q2
Q1
Jun YTD
Q2
Jun YTD
Reconciliation of Consolidated Earnings
(Loss) to Adjusted Earnings (Loss)
Consolidated Earnings (Loss)
$
296
(654)
(358)
(141)
(2,637)
Pre-tax adjustments:
Impairments
—
198
198
—
3,006
Impairments by equity affiliates
—
—
—
15
15
Pending claims and settlements
—
—
—
—
(37)
Certain tax impacts
—
—
—
(8)
(8)
Pension settlement expense
47
—
47
38
38
Winter-storm-related costs
19
46
65
—
—
Lower-of-cost-or-market inventory
adjustments
—
—
—
20
72
Asset dispositions
—
—
—
(84)
(84)
Tax impact of adjustments*
(16)
(48)
(64)
(208)
(283)
Other tax impacts
(17)
—
(17)
20
20
Noncontrolling interests
—
(51)
(51)
24
24
Adjusted earnings (loss)
$
329
(509)
(180)
(324)
126
Loss per share of common stock
(dollars)
$
0.66
(1.49)
(0.83)
(0.33)
(6.00)
Adjusted earnings (loss) per share of
common stock (dollars)†
$
0.74
(1.16)
(0.43)
(0.74)
0.28
Reconciliation of Segment Pre-Tax
Income (Loss) to Adjusted Pre-Tax Income (Loss)
Midstream Pre-Tax Income (Loss)
$
312
76
388
324
(378)
Pre-tax adjustments:
Impairments
—
198
198
—
1,161
Pension settlement expense
4
—
4
5
5
Winter-storm-related costs
—
2
2
—
—
Lower-of-cost-or-market inventory
adjustments
—
—
—
—
1
Asset dispositions
—
—
—
(84)
(84)
Adjusted pre-tax income
$
316
276
592
245
705
Chemicals Pre-Tax Income
$
623
154
777
42
211
Pre-tax adjustments:
Impairments by equity affiliates
—
—
—
15
15
Pension settlement expense
18
—
18
—
—
Winter-storm-related costs
16
30
46
—
—
Lower-of-cost-or-market inventory
adjustments
—
—
—
32
56
Adjusted pre-tax income
$
657
184
841
89
282
Refining Pre-Tax Loss
$
(729)
(1,040)
(1,769)
(878)
(3,139)
Pre-tax adjustments:
Impairments
—
—
—
—
1,845
Pension settlement expense
20
—
20
26
26
Winter-storm-related costs
3
14
17
—
—
Lower-of-cost-or-market inventory
adjustments
—
—
—
(15)
—
Adjusted pre-tax loss
$
(706)
(1,026)
(1,732)
(867)
(1,268)
Marketing and Specialties Pre-Tax
Income
$
476
290
766
286
799
Pre-tax adjustments:
Pending claims and settlements
—
—
—
—
(37)
Pension settlement expense
3
—
3
4
4
Lower-of-cost-or-market inventory
adjustments
—
—
—
3
15
Adjusted pre-tax income
$
479
290
769
293
781
Corporate and Other Pre-Tax
Loss
$
(246)
(251)
(497)
(219)
(416)
Pre-tax adjustments:
Certain tax impacts
—
—
—
(8)
(8)
Pension settlement expense
2
—
2
3
3
Adjusted pre-tax loss
$
(244)
(251)
(495)
(224)
(421)
*We generally tax effect taxable
U.S.-based special items using a combined federal and state
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.
†YTD 2020 is based on adjusted
weighted-average diluted shares outstanding of 440,653 thousand 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, 2021
Debt-to-Capital Ratio
Phillips 66
Consolidated
PSXP*
Phillips 66 Excluding
PSXP
Total Debt
$
15,413
3,910
11,503
Total Equity
20,602
2,426
18,176
Debt-to-Capital Ratio
43
%
39
%
Total Cash
$
2,207
2
2,205
Net Debt-to-Capital Ratio
39
%
34
%
*PSXP’s third-party debt and Phillips 66’s
noncontrolling interests attributable to PSXP.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210803005374/en/
Jeff Dietert (investors) 832-765-2297 jeff.dietert@p66.com
Shannon Holy (investors) 832-765-2297 shannon.m.holy@p66.com
Thaddeus Herrick (media) 855-841-2368
thaddeus.f.herrick@p66.com
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