- Reported first-quarter earnings of $582 million or $1.29 per
share; adjusted earnings of $595 million or $1.32 per share
- Generated $1.1 billion of operating cash flow; $1.3 billion
excluding working capital
- Repaid $1.45 billion of debt in April
- Announced plan to restart share repurchases
- Received industry recognition for exemplary safety performance
in Chemicals and Refining
- Recently announced CEO transition plan
Phillips 66 (NYSE: PSX), a diversified energy company, announces
first-quarter 2022 earnings of $582 million, compared with earnings
of $1.3 billion in the fourth quarter of 2021. Excluding special
items of $13 million, the company had adjusted earnings of $595
million in the first quarter, compared with fourth-quarter adjusted
earnings of $1.3 billion.
“In the first quarter, we generated strong cash flow in a
volatile market environment with seasonally lower margins across
our businesses,” said Greg Garland, Chairman and CEO of Phillips
66. “While first-quarter results were lower quarter-on-quarter, we
saw substantially improved financial results from our operations in
March and expect continued strong performance in the second
quarter. We believe current market conditions will allow us to
increase shareholder returns by restarting share repurchases and
increasing the dividend. In April, we repaid $1.45 billion of debt
and plan to repay additional debt this year.
“Our focus remains on operating excellence and our strategic
initiatives. We are progressing a transformation effort to improve
the cost structure across the enterprise. In Midstream, we advanced
Frac 4 construction at the Sweeny Hub. In Chemicals, CPChem
continued to execute growth and optimization projects. Our Humber
Refinery completed its first delivery of sustainable aviation fuel,
and we announced a joint venture to develop retail hydrogen fueling
stations in Europe. In addition, we announced a 2050 greenhouse gas
emissions reduction target demonstrating our commitment to a
lower-carbon future.
“Earlier this month, we announced that Mark Lashier will become
President and CEO of Phillips 66 effective July 1. I am confident
that Mark will serve Phillips 66, our employees, communities and
shareholders well, and is the right leader to position the company
to thrive in the years ahead.”
Midstream
Millions of Dollars
Pre-Tax Income (Loss)
Adjusted Pre-Tax Income
(Loss)
Q1 2022
Q4 2021
Q1 2022
Q4 2021
Transportation
$ 278
203
278
273
NGL and Other
91
133
91
138
DCP Midstream
31
111
31
111
NOVONIX
(158)
146
(158)
146
Midstream
$ 242
593
242
668
Midstream first-quarter 2022 pre-tax income was $242 million,
compared with $593 million in the fourth quarter of 2021.
Fourth-quarter results included asset retirement costs of $70
million related to the shutdown of the Alliance Refinery in
connection with plans to convert it to a terminal, $4 million of
hurricane-related maintenance and repair costs and $1 million of
pension settlement expense.
Transportation first-quarter adjusted pre-tax income was $278
million, in line with the previous quarter.
NGL and Other adjusted pre-tax income was $91 million in the
first quarter, compared with adjusted pre-tax income of $138
million in the fourth quarter. The decrease was primarily due to
inventory impacts, partially offset by improved butane and propane
trading results.
The company’s equity investment in DCP Midstream, LLC generated
first-quarter adjusted pre-tax income of $31 million, an $80
million decrease from the prior quarter. The decrease was mainly
driven by unfavorable hedging impacts, partially offset by lower
operating costs.
In the first quarter, the fair value of the company’s investment
in NOVONIX, Ltd., decreased by $158 million compared with a $146
million increase in the fourth quarter.
Chemicals
Millions of Dollars
Pre-Tax Income (Loss)
Adjusted Pre-Tax Income
(Loss)
Q1 2022
Q4 2021
Q1 2022
Q4 2021
Olefins and Polyolefins
$ 377
416
377
405
Specialties, Aromatics and Styrenics
32
37
32
36
Other
(13)
(17)
(13)
(17)
Chemicals
$ 396
436
396
424
The Chemicals segment reflects Phillips 66’s equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals
first-quarter 2022 pre-tax income was $396 million, compared with
$436 million in the fourth quarter of 2021. Chemicals results in
the fourth quarter included a $14 million benefit from insurance
proceeds associated with winter-storm-related damages, partially
offset by a $2 million reduction to equity earnings for pension
settlement expense.
CPChem’s Olefins and Polyolefins (O&P) business contributed
$377 million of adjusted pre-tax income in the first quarter,
compared with $405 million in the fourth quarter. The $28 million
decrease was primarily due to lower polyethylene margins, partially
offset by higher sales volumes. Global O&P utilization was 99%
for the quarter.
CPChem’s Specialties, Aromatics and Styrenics (SA&S)
business contributed first-quarter adjusted pre-tax income of $32
million, in line with the fourth quarter.
Refining
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q1 2022
Q4 2021
Q1 2022
Q4 2021
Refining
$ 123
346
140
404
Refining had first-quarter 2022 pre-tax income of $123 million,
compared with a pre-tax income of $346 million in the fourth
quarter of 2021. Refining results in the first quarter included $17
million of hurricane-related costs. Fourth-quarter results included
$122 million of asset retirement and exit costs related to the
shutdown of the Alliance Refinery in connection with plans to
convert it to a terminal, as well as $30 million of
hurricane-related costs and $5 million of pension settlement
expense. These costs were partially offset by an $88 million
reduction in estimated RIN obligations for the 2020 compliance year
and other tax benefits of $11 million.
Refining had adjusted pre-tax income of $140 million in the
first quarter, compared with adjusted pre-tax income of $404
million in the fourth quarter. The decrease was due to lower
realized margins, as well as lower clean product volumes driven by
planned maintenance. First-quarter realized margins were $10.55 per
barrel, down from $11.60 per barrel in the fourth quarter.
Favorable impacts from higher market crack spreads were more than
offset by higher RIN costs, lower Gulf Coast clean product
realizations, lower secondary product margins, and inventory
impacts. The higher RIN costs were primarily due to the absence of
the reduction in the 2021 compliance year obligation recorded in
the fourth quarter.
Pre-tax turnaround costs for the first quarter were $102
million, compared with fourth-quarter costs of $106 million. Crude
utilization rate was 89% and clean product yield was 84% in the
first quarter.
Marketing and Specialties
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q1 2022
Q4 2021
Q1 2022
Q4 2021
Marketing and Other
$ 203
401
203
402
Specialties
113
97
113
97
Marketing and Specialties
$ 316
498
316
499
Marketing and Specialties (M&S) first-quarter 2022 pre-tax
income was $316 million, compared with $498 million in the fourth
quarter of 2021. M&S results in the fourth quarter included $1
million of pension settlement expense.
Adjusted pre-tax income for Marketing and Other was $203 million
in the first quarter, a decrease of $199 million from the fourth
quarter. The decrease was primarily due to lower marketing margins
mainly resulting from rising spot prices, as well as seasonally
lower demand. Refined product exports in the first quarter were
134,000 barrels per day (BPD).
Specialties generated first-quarter adjusted pre-tax income of
$113 million, up from $97 million in the prior quarter mainly due
to higher finished lubricant margins.
Corporate and Other
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q1 2022
Q4 2021
Q1 2022
Q4 2021
Corporate and Other
$ (249)
(246)
(249)
(245)
Corporate and Other first-quarter 2021 pre-tax costs were $249
million, compared with pre-tax costs of $246 million in the fourth
quarter of 2021. Fourth-quarter pre-tax costs included $1 million
of pension settlement expense.
Adjusted pre-tax loss was $249 million in first-quarter 2021, in
line with the previous quarter.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $1.1 billion in cash from operations in
the first quarter of 2022, including cash distributions from equity
affiliates of $585 million. Excluding working capital impacts,
operating cash flow was $1.3 billion. The company funded capital
expenditures and investments of $370 million and paid dividends of
$404 million during the quarter.
As of March 31, 2022, Phillips 66 had $9.0 billion of liquidity,
reflecting $3.3 billion of cash and cash equivalents and
approximately $5.7 billion of total committed capacity under
revolving credit facilities. Consolidated debt was $14.4 billion at
March 31, 2022. The company’s consolidated debt-to-capital ratio
was 39% and its net debt-to-capital ratio was 33%. In April 2022,
the company repaid $1.45 billion of maturing debt.
The company announced plans to restart share repurchases. As of
March 31, 2022, the company had $2.5 billion remaining on its
existing share repurchase authorization, with no expiration
date.
Strategic Update
Phillips 66 continues to focus on delivering long-term
competitiveness and value creation for its shareholders. The
company is progressing a business transformation effort that will
identify and implement sustainable cost reductions across the
enterprise.
Phillips 66 acquired all of the limited partner interests in
Phillips 66 Partners not already owned by Phillips 66 and its
affiliates on March 9, 2022. The transaction resulted in the
Partnership becoming a wholly owned subsidiary of Phillips 66 and
no longer a publicly traded partnership.
At the Sweeny Hub, Frac 4 is expected to be completed in the
third quarter of 2022, adding 150,000 BPD of capacity. The total
project cost is expected to be approximately $525 million. Upon
completion, total Sweeny Hub fractionation capacity will be 550,000
BPD. The fractionators are supported by long-term commitments.
In Chemicals, CPChem is pursuing a portfolio of high-return
growth projects:
- Growing its normal alpha olefins business with a second
world-scale unit to produce 1-hexene, a critical component in
high-performance polyethylene. The 586 million pounds per year unit
will be located in Old Ocean, Texas. The project will utilize
CPChem’s proprietary technology and startup is expected in
2023.
- Expanding CPChem’s propylene splitting capacity by 1 billion
pounds per year with a new unit located at its Cedar Bayou
facility. Startup is expected in 2023.
- Continuing development of world-scale petrochemical facilities
on the U.S. Gulf Coast and in Ras Laffan, Qatar, jointly with Qatar
Energy. CPChem expects to make a final investment decision for its
U.S. Gulf Coast project in 2022.
Phillips 66 is advancing its plans at the San Francisco Refinery
in Rodeo, California, to meet the growing demand for renewable
fuels. The Rodeo Renewed refinery conversion project is expected to
be finished in early 2024, subject to permitting and approvals.
Upon completion, the facility will initially 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. The total project
cost is anticipated to be approximately $850 million.
The company is leveraging its Emerging Energy efforts to advance
its lower-carbon strategy. Recent activities include:
- The Humber Refinery made its first delivery of sustainable
aviation fuel (SAF) under a supply agreement with British
Airways.
- Phillips 66 entered into an agreement with H2 Energy Europe to
form a joint venture to develop up to 250 retail hydrogen refueling
stations across Germany, Austria and Denmark by 2026. The agreement
is subject to regulatory approvals and customary closing
conditions.
The American Fuel and Petrochemical Manufacturers (AFPM)
recognized three Phillips 66 refineries for exemplary safety
performance in 2021. The Sweeny Refinery received the Distinguished
Safety Award, which is the highest annual safety award the industry
recognizes. The Billings Refinery received the second-highest
recognition, the Elite Gold Award, and the Bayway Refinery earned
an Elite Silver Award for top 10 percentile safety performance.
CPChem received an Elite Gold and Elite Silver for two of its
sites.
The company added a 2050 greenhouse gas emissions intensity
reduction target to reduce Scope 1 and Scope 2 emissions by 50%
from its operations, below 2019 levels. The new target builds upon
the company’s 2030 target announced last year.
Investor Webcast
Later today, members of Phillips 66 executive management will
host a webcast at noon EST to discuss the company’s first-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
2022
2021
Q1
Q4
Q1
Midstream
$ 242
593
76
Chemicals
396
436
154
Refining
123
346
(1,040)
Marketing and Specialties
316
498
290
Corporate and Other
(249)
(246)
(251)
Pre-Tax Income (Loss)
828
1,627
(771)
Less: Income tax expense (benefit)
171
256
(132)
Less: Noncontrolling interests
75
98
15
Phillips 66
$ 582
1,273
(654)
Adjusted Earnings
(Loss)
Millions of Dollars
2022
2021
Q1
Q4
Q1
Midstream
$ 242
668
276
Chemicals
396
424
184
Refining
140
404
(1,026)
Marketing and Specialties
316
499
290
Corporate and Other
(249)
(245)
(251)
Pre-Tax Income (Loss)
845
1,750
(527)
Less: Income tax expense (benefit)
175
354
(84)
Less: Noncontrolling interests
75
98
66
Phillips 66
$ 595
1,298
(509)
About Phillips 66
Phillips 66 (NYSE: PSX) manufactures, transports and markets
products that drive the global economy. The diversified energy
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 or Twitter.
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 “anticipated,”
“estimated,” “expected,” “planned,” “scheduled,” “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 effects of any widespread
public health crisis 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); 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 (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.
References in the release to total consolidated earnings (loss)
refer to net income (loss) attributable to Phillips 66.
Millions of Dollars
Except as Indicated
2022
2021
Q1
Q4
Q1
Reconciliation of Consolidated Earnings
(Loss) to Adjusted Earnings (Loss)
Consolidated Earnings (Loss)
$ 582
1,273
(654)
Pre-tax adjustments:
Impairments
—
—
198
Certain tax impacts
—
(11)
—
Pension settlement expense
—
10
—
Hurricane-related costs
17
34
—
Winter-storm-related costs
—
(14)
46
Alliance shutdown-related costs††
—
192
—
Regulatory compliance costs
—
(88)
—
Tax impact of adjustments*
(4)
(33)
(48)
Other tax impacts
—
(65)
—
Noncontrolling interests
—
—
(51)
Adjusted earnings (loss)
$ 595
1,298
(509)
Earnings (loss) per share of common
stock (dollars)
$ 1.29
2.88
(1.49)
Adjusted earnings (loss) per share of
common stock (dollars)†
$ 1.32
2.94
(1.16)
Reconciliation of Segment Pre-Tax
Income to Adjusted Pre-Tax Income
Midstream Pre-Tax Income
$ 242
593
76
Pre-tax adjustments:
Impairments
—
—
198
Pension settlement expense
—
1
—
Hurricane-related costs
—
4
—
Winter-storm-related costs
—
—
2
Alliance shutdown-related costs††
—
70
—
Adjusted pre-tax income
$ 242
668
276
Millions of Dollars
Except as Indicated
2022
2021
Q1
Q4
Q1
Reconciliation of Segment Pre-Tax
Income to Adjusted Pre-Tax Income
Chemicals Pre-Tax Income
$ 396
436
154
Pre-tax adjustments:
Pension settlement expense
—
2
—
Winter-storm-related costs
—
(14)
30
Adjusted pre-tax income
$ 396
424
184
Refining Pre-Tax Income (Loss)
$ 123
346
(1,040)
Pre-tax adjustments:
Certain tax impacts
—
(11)
—
Pension settlement expense
—
5
—
Hurricane-related costs
17
30
—
Winter-storm-related costs
—
—
14
Alliance shutdown-related costs††
—
122
—
Regulatory compliance costs
—
(88)
—
Adjusted pre-tax income (loss)
$ 140
404
(1,026)
Marketing and Specialties Pre-Tax
Income
$ 316
498
290
Pre-tax adjustments:
Pension settlement expense
—
1
—
Adjusted pre-tax income
$ 316
499
290
Corporate and Other Pre-Tax
Loss
$ (249)
(246)
(251)
Pre-tax adjustments:
Pension settlement expense
—
1
—
Adjusted pre-tax loss
$ (249)
(245)
(251)
*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 2022 is based on adjusted
weighted-average diluted shares of 450,129 thousand. 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.
††Costs related to the shutdown of the
Alliance Refinery totaled $192 million pre-tax in 4Q 2021.
Shutdown-related costs recorded in the Refining segment included
asset retirements of $91 million pre-tax recorded in depreciation
and amortization expense and pre-tax charges for severance and
other exit costs of $31 million. Shutdown-related costs in the
Midstream segment included asset retirements of $70 million pre-tax
recorded in depreciation and amortization expense.
Millions of Dollars
Except as Indicated
March 31, 2022
Debt-to-Capital Ratio
Total Debt
$ 14,434
Total Equity
22,121
Debt-to-Capital Ratio
39 %
Total Cash
$ 3,335
Net Debt-to-Capital Ratio
33 %
Millions of Dollars
Except as Indicated
2022
2021
Q1
Q4
Realized Refining Margins
Income before income taxes
$ 123
346
Plus:
Taxes other than income taxes
88
37
Depreciation, amortization and
impairments
198
313
Selling, general and administrative
expenses
48
47
Operating expenses
1,092
1,154
Equity in losses of affiliates
21
22
Other segment expense, net
9
12
Proportional share of refining gross
margins contributed by equity affiliates
228
216
Special items:
Certain tax impacts
—
(4)
Regulatory compliance costs
—
(88)
Realized refining margins
$ 1,807
2,055
Total processed inputs (thousands of
barrels)
152,734
155,382
Adjusted total processed inputs (thousands
of barrels)*
171,310
177,118
Income before income taxes (dollars per
barrel)**
$ 0.81
2.23
Realized refining margins (dollars per
barrel)***
$ 10.55
11.60
*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/20220427006141/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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