- Reported second-quarter earnings of $3.2 billion or $6.53 per
share; adjusted earnings of $3.3 billion or $6.77 per share
- Generated $1.8 billion of operating cash flow; $3.6 billion
excluding working capital
- Repaid $1.5 billion of debt
- Returned $533 million to shareholders through dividends and
share repurchases
- Continued record-setting NGL fractionated volumes
- Strong refining operations including execution of planned
turnarounds
- Received API pipeline safety award for second consecutive
year
- Announced final investment decision on Rodeo Renewed
project
Phillips 66 (NYSE: PSX), a diversified energy company, announces
second-quarter 2022 earnings of $3.2 billion, compared with
earnings of $582 million in the first quarter of 2022. Excluding
special items of $118 million, the company had adjusted earnings of
$3.3 billion in the second quarter, compared with first-quarter
adjusted earnings of $595 million.
“Our earnings reflect the strong market environment during the
second quarter driven by a tight global product supply and demand
balance,” said Mark Lashier, President and CEO of Phillips 66. “We
are focused on reliably providing critical energy products,
including transportation fuels, to meet peak summer demand. We also
advanced strategic capital projects to help meet the growing demand
for renewable fuels and NGLs.
“During the second quarter, we paid down $1.5 billion of debt,
increased our dividend and resumed share repurchases. Additionally,
we are transforming our business to achieve sustained annual cost
savings of at least $700 million to ensure we remain competitive in
any market environment. We will continue to prioritize operating
excellence and disciplined capital allocation.”
Midstream
Millions of Dollars
Pre-Tax Income (Loss)
Adjusted Pre-Tax Income
(Loss)
Q2 2022
Q1 2022
Q2 2022
Q1 2022
Transportation
$ 250
278
250
278
NGL and Other
152
91
152
91
DCP Midstream
130
31
130
31
NOVONIX
(240)
(158)
(240)
(158)
Midstream
$ 292
242
292
242
Midstream second-quarter 2022 pre-tax income was $292 million,
compared with $242 million in the first quarter of 2022.
Transportation second-quarter adjusted pre-tax income was $250
million, compared with adjusted pre-tax income of $278 million in
the first quarter. The decrease was mainly due to lower equity
earnings driven by reduced Bakken Pipeline crude volumes associated
with winter storm impacts.
NGL and Other adjusted pre-tax income was $152 million in the
second quarter, compared with adjusted pre-tax income of $91
million in the first quarter. The increase was attributable to
improved margins and volumes at the Sweeny Hub and higher equity
earnings from the Sand Hills Pipeline.
The company’s equity investment in DCP Midstream, LLC generated
second-quarter adjusted pre-tax income of $130 million, a $99
million increase from the prior quarter. The increase was mainly
driven by improved gathering and processing results and hedging
impacts.
In the second quarter, the fair value of the company’s
investment in NOVONIX, Ltd., decreased by $240 million compared
with a $158 million decrease in the first quarter.
Chemicals
Millions of Dollars
Pre-Tax Income (Loss)
Adjusted Pre-Tax Income
(Loss)
Q2 2022
Q1 2022
Q2 2022
Q1 2022
Olefins and Polyolefins
$ 216
377
216
377
Specialties, Aromatics and Styrenics
59
32
59
32
Other
(2)
(13)
(2)
(13)
Chemicals
$ 273
396
273
396
The Chemicals segment reflects Phillips 66’s equity investment
in Chevron Phillips Chemical Company LLC (CPChem). Chemicals
second-quarter 2022 pre-tax income was $273 million, compared with
$396 million in the first quarter of 2022.
CPChem’s Olefins and Polyolefins (O&P) business contributed
$216 million of adjusted pre-tax income in the second quarter,
compared with $377 million in the first quarter. The $161 million
decrease was primarily due to lower margins resulting from higher
feedstock costs, as well as increased utility and turnaround costs.
Global O&P utilization was 94% for the quarter.
CPChem’s Specialties, Aromatics and Styrenics (SA&S)
business contributed second-quarter adjusted pre-tax income of $59
million, compared with $32 million in the first quarter. The $27
million increase was primarily due to higher margins and equity
earnings.
The $11 million decrease in Other adjusted costs in the second
quarter mainly reflects lower employee-related expenses and higher
capitalized interest related to growth projects.
Refining
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2022
Q1 2022
Q2 2022
Q1 2022
Refining
$ 3,036
123
3,132
140
Refining second-quarter 2022 pre-tax income was $3.0 billion,
compared with pre-tax income of $123 million in the first quarter
of 2022. Refining results in the first quarter included $17 million
of hurricane-related maintenance and repair costs. Refining results
in the second quarter included $70 million of costs related to the
finalization of RIN obligations for prior year compliance periods
and $26 million of costs related to the conversion of the Alliance
Refinery to a terminal.
Adjusted pre-tax income for Refining was $3.1 billion in the
second quarter, compared with adjusted pre-tax income of $140
million in the first quarter. The improvement was primarily due to
higher realized margins driven by market crack spreads. The
composite global market crack increased to $46.72 per barrel, up
from $21.93 per barrel in the first quarter. Realized margins were
$28.31 per barrel in the second quarter, up from $10.55 per barrel
in the first quarter.
Pre-tax turnaround costs for the second quarter were $223
million, compared with first-quarter costs of $102 million. Crude
utilization rate was 90% and clean product yield was 83% in the
second quarter.
Marketing and Specialties
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax
Income
Q2 2022
Q1 2022
Q2 2022
Q1 2022
Marketing and Other
$ 656
203
656
203
Specialties
109
113
109
113
Marketing and Specialties
$ 765
316
765
316
Marketing and Specialties (M&S) second-quarter 2022 pre-tax
income was $765 million, compared with $316 million in the first
quarter of 2022.
Adjusted pre-tax income for Marketing and Other was $656 million
in the second quarter, an increase of $453 million from the first
quarter. The increase was mainly due to higher realized fuel
margins including inventory impacts. Refined product exports in the
second quarter were 153,000 barrels per day (BPD).
Specialties generated second-quarter adjusted pre-tax income of
$109 million, in line with the prior quarter.
Corporate and Other
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q2 2022
Q1 2022
Q2 2022
Q1 2022
Corporate and Other
$ (260)
(249)
(235)
(249)
Corporate and Other second-quarter 2022 pre-tax costs were $260
million, compared with pre-tax costs of $249 million in the first
quarter of 2022. Pre-tax costs in the second quarter included
business transformation restructuring costs of $25 million.
Adjusted pre-tax loss was $235 million in second-quarter 2022.
The decrease in the second quarter was mainly driven by lower
administrative and net interest expenses.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $1.8 billion in cash from operations in
the second quarter of 2022, including cash distributions from
equity affiliates of $527 million. Excluding working capital
impacts, operating cash flow was $3.6 billion. The working capital
impact was primarily due to higher accounts receivable.
During the quarter, the company repaid $1.5 billion of debt and
funded $467 million of dividends, $66 million of share repurchases
and $376 million of capital expenditures and investments.
As of June 30, 2022, Phillips 66 had $7.8 billion of liquidity,
reflecting $2.8 billion of cash and cash equivalents and
approximately $5.0 billion of total committed capacity under the
company’s revolving credit facility. Consolidated debt was $13.0
billion at June 30, 2022. The company’s consolidated
debt-to-capital ratio was 35% and its net debt-to-capital ratio was
29%.
Strategic Update
Phillips 66 is continuing its business transformation that will
enable sustainable cost reductions of at least $700 million
annually across the enterprise. Phillips 66 will provide a business
transformation and strategy update at its investor day in New York
City on November 9.
In Midstream, Phillips 66 was awarded the American Petroleum
Institute’s (API) large operator Distinguished Pipeline Safety
Award for the second consecutive year. In addition, the company
received the Platinum Safety Award in the large-company division
from the International Liquid Terminals Association.
At the Sweeny Hub, Frac 4 startup is expected late 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. Construction is underway on the 586
million pounds per year unit located in Old Ocean, Texas. The
project utilizes CPChem’s proprietary technology. Startup is
expected in the second half of 2023.
- Expanding propylene splitting capacity by 1 billion pounds per
year with a new unit located at its Cedar Bayou facility. Startup
is expected in the second half of 2023.
- Increasing polyalphaolefins capacity production in Belgium by
over 130 million pounds per year. Startup is expected in 2024.
- 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 this year.
In Refining, Phillips 66 made a final investment decision to
convert its San Francisco Refinery in Rodeo, California, into one
of the world’s largest renewable fuels facilities. The Rodeo
Renewed refinery conversion project is expected to begin commercial
operations in the first quarter of 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-intensity
transportation fuels. The total project is anticipated to cost
approximately $850 million.
In Marketing, subsidiaries of Phillips 66 and H2 Energy Europe
recently formed JET H2 Energy Austria GmbH (JET H2 Energy), a 50-50
joint venture to develop approximately 250 retail hydrogen
refueling stations across Germany, Austria and Denmark by 2026. JET
H2 Energy’s network of hydrogen refueling stations will include
existing Phillips 66’s JET® branded retail stations as well as new
locations on major transport routes.
The company published its 2022 Sustainability Report in June.
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 matters. To view
Phillips 66’s 2022 Sustainability Report, go to
phillips66.com/sustainability.
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
phillips66.com/investors and click on “Events & Presentations.”
For detailed supplemental information, go to
phillips66.com/supplemental.
Earnings
(Loss)
Millions of Dollars
2022
2021
Q2
Q1
Jun YTD
Q2
Jun YTD
Midstream
$ 292
242
534
312
388
Chemicals
273
396
669
623
777
Refining
3,036
123
3,159
(729)
(1,769)
Marketing and Specialties
765
316
1,081
476
766
Corporate and Other
(260)
(249)
(509)
(246)
(497)
Pre-Tax Income (Loss)
4,106
828
4,934
436
(335)
Less: Income tax expense (benefit)
924
171
1,095
62
(70)
Less: Noncontrolling interests
15
75
90
78
93
Phillips 66
$ 3,167
582
3,749
296
(358)
Adjusted Earnings
(Loss)
Millions of Dollars
2022
2021
Q2
Q1
Jun YTD
Q2
Jun YTD
Midstream
$ 292
242
534
316
592
Chemicals
273
396
669
657
841
Refining
3,132
140
3,272
(706)
(1,732)
Marketing and Specialties
765
316
1,081
479
769
Corporate and Other
(235)
(249)
(484)
(244)
(495)
Pre-Tax Income (Loss)
4,227
845
5,072
502
(25)
Less: Income tax expense
927
175
1,102
95
11
Less: Noncontrolling interests
15
75
90
78
144
Phillips 66
$ 3,285
595
3,880
329
(180)
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 earnings (loss) or consolidated
earnings (loss) refer to net income (loss) attributable to Phillips
66.
Millions of Dollars
Except as Indicated
2022
2021
Q2
Q1
Jun YTD
Q2
Jun YTD
Reconciliation of Consolidated Earnings
(Loss) to Adjusted Earnings (Loss)
Consolidated Earnings (Loss)
$ 3,167
582
3,749
296
(358)
Pre-tax adjustments:
Impairments
—
—
—
—
198
Pension settlement expense
—
—
—
47
47
Hurricane-related costs
—
17
17
—
—
Winter-storm-related costs
—
—
—
19
65
Alliance shutdown-related costs††
26
—
26
—
—
Regulatory compliance costs
70
—
70
—
—
Restructuring costs
25
—
25
—
—
Tax impact of adjustments*
(28)
(4)
(32)
(16)
(64)
Other tax impacts
25
—
25
(17)
(17)
Noncontrolling interests
—
—
—
—
(51)
Adjusted earnings (loss)
$ 3,285
595
3,880
329
(180)
Earnings (loss) per share of common
stock (dollars)
$ 6.53
1.29
8.00
0.66
(0.83)
Adjusted earnings (loss) per share of
common stock (dollars)†
$ 6.77
1.32
8.28
0.74
(0.43)
Reconciliation of Segment Pre-Tax
Income (Loss) to Adjusted Pre-Tax Income (Loss)
Midstream Pre-Tax Income
$ 292
242
534
312
388
Pre-tax adjustments:
Impairments
—
—
—
—
198
Pension settlement expense
—
—
—
4
4
Winter-storm-related costs
—
—
—
—
2
Adjusted pre-tax income
$ 292
242
534
316
592
Chemicals Pre-Tax Income
$ 273
396
669
623
777
Pre-tax adjustments:
Pension settlement expense
—
—
—
18
18
Winter-storm-related costs
—
—
—
16
46
Adjusted pre-tax income
$ 273
396
669
657
841
Refining Pre-Tax Income (Loss)
$ 3,036
123
3,159
(729)
(1,769)
Pre-tax adjustments:
Pension settlement expense
—
—
—
20
20
Hurricane-related costs
—
17
17
—
—
Winter-storm-related costs
—
—
—
3
17
Alliance shutdown-related costs††
26
—
26
—
—
Regulatory compliance costs
70
—
70
—
—
Adjusted pre-tax income (loss)
$ 3,132
140
3,272
(706)
(1,732)
Marketing and Specialties Pre-Tax
Income
$ 765
316
1,081
476
766
Pre-tax adjustments:
Pension settlement expense
—
—
—
3
3
Adjusted pre-tax income
$ 765
316
1,081
479
769
Corporate and Other Pre-Tax
Loss
$ (260)
(249)
(509)
(246)
(497)
Pre-tax adjustments:
Pension settlement expense
—
—
—
2
2
Restructuring costs
25
—
25
—
—
Adjusted pre-tax loss
$ (235)
(249)
(484)
(244)
(495)
*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.
† 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 $26 million pre-tax in the second quarter
of 2022. Shutdown-related costs recorded in the Refining segment
include pre-tax charges for the disposal of materials and supplies
of $20 million and asset retirements of $6 million recorded in
depreciation and amortization expense.
Millions of Dollars
Except as Indicated
June 30, 2022
Debt-to-Capital Ratio
Total Debt
$ 12,969
Total Equity
24,573
Debt-to-Capital Ratio
35 %
Total Cash
$ 2,809
Net Debt-to-Capital Ratio
29 %
Millions of Dollars
Except as Indicated
2022
Q2
Q1
Realized Refining Margins
Income before income taxes
$ 3,036
123
Plus:
Taxes other than income taxes
72
88
Depreciation, amortization and
impairments
214
198
Selling, general and administrative
expenses
52
48
Operating expenses
1,177
1,092
Equity in (earnings) losses of
affiliates
(223)
21
Other segment expense, net
11
9
Proportional share of refining gross
margins contributed by equity affiliates
495
228
Special items:
Regulatory compliance costs
70
—
Realized refining margins
$ 4,904
1,807
Total processed inputs (thousands of
barrels)
155,211
152,734
Adjusted total processed inputs (thousands
of barrels)*
173,205
171,310
Income before income taxes (dollars per
barrel)**
$ 19.56
0.81
Realized refining margins (dollars per
barrel)***
$ 28.31
10.55
*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/20220727006168/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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