phillips 66 first quarter conference...
TRANSCRIPT
PHILLIPS 66 THIRD QUARTER 2017 CONFERENCE CALL October 27, 2017
This presentation 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,” “intends,” “objectives,” “projects,”
“strategies” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a
statement is not forward-looking. Forward-looking statements relating to Phillips 66’s operations (including joint venture operations) are based on
management’s expectations, estimates and projections about the company, its interests and the energy industry in general on the date this
presentation was prepared. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that
are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking
statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include
fluctuations in NGL, crude oil, petroleum products and natural gas prices, and refining, marketing and petrochemical margins; unexpected changes in
costs for constructing, modifying or operating our facilities; unexpected difficulties in manufacturing, refining or transporting our products; lack of, or
disruptions in, adequate and reliable transportation for our NGL, crude oil, natural gas and refined products; potential liability from litigation or for
remedial actions, including removal and reclamation obligations, under environmental regulations; limited access to capital or significantly higher cost
of capital related to illiquidity or uncertainty in the domestic or international financial markets; and other economic, business, competitive and/or
regulatory factors affecting Phillips 66’s businesses generally as set forth in our filings with the Securities and Exchange Commission. Phillips 66 is
under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new
information, future events or otherwise.
This presentation includes non-GAAP financial measures. You can find the reconciliations to comparable GAAP financial measures at the end of the
presentation materials or in the “Investors” section of our website.
CAUTIONARY STATEMENT
2
3
EXECUTING THE STRATEGY
CPChem Polyethylene Units, Old Ocean, TX
4
OVERVIEW 3Q 2017
Adjusted earnings $858 MM
Adjusted EPS $1.66
Operating cash flow excluding working capital $596 MM
Capital expenditures and investments $367 MM
Shareholder distributions1 $817 MM
(1) Shareholder distributions include dividends and share repurchases
Net-debt-to-capital ratio 27%
Annualized adjusted YTD ROCE 8%
569
858
3
(43)
315
(7)
21
2Q 2017 Midstream Chemicals Refining Marketing
& Specialties
Corporate
& Other
3Q 2017
3Q 2017
$MM
67 (121) 548 153 211
ADJUSTED EARNINGS 3Q 2017
5
64 67
24
(14)
(12)
5
2Q 2017
Adjusted
Earnings
Transportation NGL DCP
Midstream
Noncontrolling
Interests
3Q 2017
Adjusted
Earnings
MIDSTREAM 3Q 2017
98 0 1
3Q 2017 Adjusted Net Income
6
$MM
First full quarter of Bakken
Pipeline commercial operations
NGL business impacted by
Hurricane Harvey
DCP impacted by hedge positions
in a rising price market
6
(32)
196 153
(42)
1
(2)
2Q 2017
Adjusted
Earnings
Olefins &
Polyolefins
Specialties,
Aromatics &
Styrenics
Other 3Q 2017
Adjusted
Earnings
CHEMICALS 3Q 2017
137 22 (6)
3Q 2017 Adjusted Earnings
7
$MM 83% O&P capacity utilization
Significant Hurricane Harvey
impact at Cedar Bayou
USGC Petrochemicals Project
started polyethylene operations
7
233
548
63 21
169
62
2Q 2017
Adjusted
Earnings
Atlantic
Basin /
Europe
Gulf Coast Central
Corridor
West Coast 3Q 2017
Adjusted
Earnings
$MM
REFINING 3Q 2017
8
172 198 77 101
3Q 2017 Adjusted Earnings
98% crude utilization
85% clean product yield
$10.49/BBL realized margin
$43 MM pre-tax turnaround costs
18.19
10.49
(3.02)
(2.10)
0.62
(3.20)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
WORLDWIDE REFINING $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2017
9
Avg Market Crude: $51.04/BBL 58% Market Capture
218 211
(22)
15
2Q 2017
Adjusted
Earnings
Marketing
& Other
Specialties 3Q 2017
Adjusted
Earnings
MARKETING AND SPECIALTIES 3Q 2017
163 48
3Q 2017 Adjusted Earnings
10
Lower Marketing margins
Volume uplift at re-imaged sites
Strong margins and higher
volumes at Excel Paralubes
$MM
(142)(121)
(2)
23
2Q 2017
Adjusted
Net Loss
Net Interest
Expense
Corporate
Overhead
& Other
3Q 2017
Adjusted
Net Loss
$MM
CORPORATE AND OTHER 3Q 2017
11
2.7
1.5
(1.3)
0.6
2.6
(0.9)
(2.2)
December 31,
2016Cash
Balance*
CFO
(excludingWorking
Capital)
Working
Capital
Capital
Expenditures& Investments
Shareholder
Distributions
Other September 30,
2017Cash
Balance*
$B
CASH FLOW YTD 2017
12 * Includes cash and cash equivalents.
Global Olefins & Polyolefins utilization High-70%
Refining crude utilization Mid-90%
Corporate & Other costs (after-tax) $125 MM - $140 MM
Refining turnaround expenses (pre-tax) $100 MM - $130 MM
13
OUTLOOK 4Q 2017
PHILLIPS 66 THIRD QUARTER 2017 CONFERENCE CALL
Questions and Answers
PHILLIPS 66 THIRD QUARTER 2017 CONFERENCE CALL
Appendix
ESTIMATED SENSITIVITIES 2017
16 Sensitivities shown above are independent and are only valid within a limited price range
Midstream - DCP (net to Phillips 66)
10¢/Gal Increase in NGL price 5
10¢/MMBtu Increase in Natural Gas price 1
$1/BBL Increase in WTI price 1
Chemicals - CPChem (net to Phillips 66)
1¢/Lb Increase in Chain Margin (Ethylene, Polyethylene, NAO) 35
Worldwide Refining
$1/BBL Increase in Gasoline Margin 215
$1/BBL Increase in Distillate Margin 190
$1/BBL Widening WTI / WCS Differential (WTI less WCS) 40
$1/BBL Widening LLS / Maya Differential (LLS less Maya) 35
$1/BBL Widening LLS / Medium Sour Differential (LLS less Medium Sour) 20
$1/BBL Widening WTI / WTS Differential (WTI less WTS) 10
$1/BBL Widening LLS / WTI Differential (LLS less WTI) 10
$1/BBL Widening ANS / Medium Sour Differential (ANS less Medium Sour) 10
$1/BBL Widening ANS / WCS Differential (ANS less WCS) 5
10¢/MMBtu Increase in Natural Gas price (10)
Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators:
Annual Net Income $MM
22. 0 23. 9 23. 7 23. 7 23. 8 24. 0
21. 6
23. 1 22. 4 22. 4 22. 4 22. 6
8. 6 8. 9
10. 1 10. 2 10. 0 10. 2 8. 6 7. 8 7. 7 7. 9 7. 7 7. 9
5.2 3.1 2.7 1.5 2.2 1.5
5.2 3.0 2.7
1.5 2.2 1.5
28%27%
30% 30% 30% 30%28%
25% 26% 26% 26% 26%
13%
20%
24%
27%
25%
27%
14%
17%18%
22%
20%
22%
2014 2015 2016 1Q
2017
2Q
2017
3Q
2017
2014 2015 2016 1Q
2017
2Q
2017
3Q
2017
Equity $B Debt $B Cash & Cash Equivalents $B Debt-to-Capital Net-Debt-to-Capital
CAPITAL STRUCTURE 2014 – 2017
17
Consolidated PSX Excluding PSXP
18.50
10.02
(3.07)(0.86)
(1.94)
(2.61)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
ATLANTIC BASIN / EUROPE $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2017
18
Market 3:2:1 – Dated Brent / Gasoline 83.7 RBOB NYH / Diesel 15ppm NYH
Brent: $52.08/BBL 103% Crude Capacity Utilization 54% Market Capture
15.42
7.26
(3.26)
(2.45)
1.73
(4.18)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
GULF COAST $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2017
19
Market 3:2:1 – LLS / Gasoline 85 CBOB / Diesel 62 10ppm
LLS: $51.65/BBL 93% Crude Capacity Utilization 47% Market Capture
20.20
14.04
(2.34)
(2.56)
1.72
(2.98)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
CENTRAL CORRIDOR $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2017
20
Market 3:2:1 – WTI / Gasoline Unl Sub Octane Group 3 / ULSD Group 3
WTI: $48.16/BBL 97% Crude Capacity Utilization 69% Market Capture
20.70
12.95
(3.03)
(2.76)
1.01
(2.97)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
WEST COAST $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2017
21
Market 3:2:1 – ANS / Los Angeles CARBOB / Los Angeles No. 2 CARB
ANS: $52.20/BBL 102% Crude Capacity Utilization 63% Market Capture
556
858
(8)(37)
414
(56) (11)
3Q 2016 Midstream Chemicals Refining Marketing
& Specialties
Corporate
& Other
3Q 2017
3Q 2017
$MM
ADJUSTED EARNINGS 3Q 2017 VS. 3Q 2016
22
67 (121) 548 153 211
75 67
19
(15)
(8)(4)
3Q 2016
Adjusted
Earnings
Transportation NGL DCP
Midstream
Noncontrolling
Interests
3Q 2017
Adjusted
Earnings
$MM
MIDSTREAM 3Q 2017 VS. 3Q 2016
23
98 0 1
3Q 2017 Adjusted Net Income
(32)
190
153
(28)(9)
0
3Q 2016
Adjusted
Earnings
Olefins &
Polyolefins
Specialties,
Aromatics &
Styrenics
Other 3Q 2017
Adjusted
Earnings
$MM
CHEMICALS 3Q 2017 VS. 3Q 2016
24
137 (6) 22
3Q 2017 Adjusted Earnings
134
548 167
90
56
101
3Q 2016
Adjusted
Earnings
Atlantic
Basin /
Europe
Gulf
Coast
Central
Corridor
West Coast 3Q 2017
Adjusted
Earnings
$MM
REFINING 3Q 2017 VS. 3Q 2016
25
172 198 77 101
3Q 2017 Adjusted Earnings
267
211
(65)
9
3Q 2016
Adjusted
Earnings
Marketing
& Other
Specialties 3Q 2017
Adjusted
Earnings
$MM
MARKETING AND SPECIALTIES 3Q 2017 VS. 3Q 2016
26
163 48
3Q 2017 Adjusted Earnings
(110) (121)
(19)
8
3Q 2016
Adjusted
Net Loss
Net Interest
Expense
Corporate
Overhead
& Other
3Q 2017
Adjusted
Net Loss
$MM
CORPORATE AND OTHER 3Q 2017 VS. 3Q 2016
27
28
NON-GAAP RECONCILIATIONS
* We generally tax effect taxable U.S.-based special items using a combined federal and state statutory income tax rate of approximately 38 percent. Taxable special items attributable to foreign locations
likewise use a local statutory income tax rate. Nontaxable events reflect zero income tax. These events include, but are not limited to, most goodwill impairments, transactions legislatively exempt from
income tax, transactions related to entities for which we have made an assertion that the undistributed earnings are permanently reinvested, or transactions occurring in jurisdictions with a valuation
allowance.
** Weighted-average diluted shares outstanding and income allocated to participating securities, if applicable, in the adjusted earnings per share calculation are the same as those used in the GAAP diluted
earnings per share calculation.
2017
Sep YTD 3Q 2Q Sep YTD 3Q
Phillips 66
Net Income (Loss) Attributable to Phillips 66 1,908$ 823$ 550$ 1,392$ 511$
Pre-tax Adjustments:
Pending claims and settlements (60) (36) (24) (117) (72)
Pension settlement expense 76 21 55
Impairments by equity affiliates 33 95 89
Recognition of deferred logistics commitments 30 -
Gain on consolidation of business (423)
Hurricane-related costs 70 70 - - -
Tax impact of adjustments * 117 (20) (12) 31 28
Other tax impacts - - - (16) -
Adjusted Net Income (Loss) Attributable to Phillips 66 1,721$ 858$ 569$ 1,415$ 556$
Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars) ** 3.66$ 1.60$ 1.06$ 2.61$ 0.96$
Adjusted Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars) ** 3.30$ 1.66$ 1.09$ 2.66$ 1.05$
Millions of Dollars
Except as Indicated
2016
29
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Midstream
Net Income (Loss) Attributable to Phillips 66 221$ 85$ 59$ 179$ 75$
Pre-tax Adjustments:
Pending claims and settlements (37) (37) (45)
Pension settlement expense 11 3 8
Impairments by equity affiliates 6
Hurricane-related costs 4 4
Tax impact of adjustments 9 12 (3) 14
Adjusted Net Income (Loss) Attributable to Phillips 66 208$ 67$ 64$ 154$ 75$
Chemicals
Net Income (Loss) Attributable to Phillips 66 498$ 121$ 196$ 447$ 101$
Pre-tax Adjustments:
Impairments by equity affiliates 33 89 89
Hurricane-related costs 53 53
Tax impact of adjustments (34) (21)
Adjusted Net Income (Loss) Attributable to Phillips 66 550$ 153$ 196$ 536$ 190$
2017 2016
Millions of Dollars
Except as Indicated
30
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Refining
Net Income (Loss) Attributable to Phillips 66 1,033$ 550$ 224$ 412$ 177$
Pre-tax Adjustments:
Pending claims and settlements (51) (30) (21) (70) (70)
Pension settlement expense 48 13 35
Recognition of deferred logistics commitments 30
Gain on consolidation of business (423)
Hurricane-related costs 12 12
Tax impact of adjustments 160 3 (5) 16 27
Other tax impacts (16)
Adjusted Net Income (Loss) Attributable to Phillips 66 779$ 548$ 233$ 372$ 134$
Marketing & Specialties
Net Income (Loss) Attributable to Phillips 66 563$ 208$ 214$ 701$ 267$
Pre-tax Adjustments:
Pension settlement expense 10 3 7
Hurricane-related costs 1 1
Tax impact of adjustments (4) (1) (3)
Adjusted Net Income (Loss) Attributable to Phillips 66 570$ 211$ 218$ 701$ 267$
Corporate and Other
Net Income (Loss) Attributable to Phillips 66 (407)$ (141)$ (143)$ (347)$ (109)$
Pre-tax Adjustments:
Pending claims and settlements 28 31 (3) (2) (2)
Pension settlement expense 7 2 5
Tax impact of adjustments (14) (13) (1) 1 1
Adjusted Net Income (Loss) Attributable to Phillips 66 (386)$ (121)$ (142)$ (348)$ (110)$
Millions of Dollars
Except as Indicated
2017 2016
31
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Midstream - Transportation
Net Income (Loss) 271$ 119$ 74$ 241$ 79$
Pre-tax Adjustments:
Pending claims and settlements (37) (37)
Hurricane-related costs 3 3
Tax impact of adjustments 13 13
Adjusted Net Income (Loss) 250$ 98$ 74$ 241$ 79$
Midstream - NGL
Net Income (Loss) 23$ (3)$ 9$ -$ 15$
Pre-tax Adjustments:
Pension settlement expense 11 3 8
Hurricane-related costs 1 1
Tax impact of adjustments (4) (1) (3)
Adjusted Net Income (Loss) 31$ -$ 14$ -$ 15$
Midstream - DCP Midstream
Net Income (Loss) Attributable to Phillips 66 31$ 1$ 13$ 4$ 9$
Pre-tax Adjustments:
Pending claims and settlements (45)
Impairments by equity affiliates 6
Tax impact of adjustments 14
Adjusted Net Income (Loss) Attributable to Phillips 66 31$ 1$ 13$ (21)$ 9$
Millions of Dollars
Except as Indicated
2017 2016
32
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Refining - Atlantic Basin / Europe
Net Income (Loss) Attributable to Phillips 66 228$ 171$ 107$ 41$ 5$
Pre-tax Adjustments:
Pending claims and settlements (7) (2) (5)
Pension settlement expense 13 4 9
Recognition of deferred logistics commitments 30
Tax impact of adjustments (3) (1) (2) (11)
Other tax impacts (16)
Adjusted Net Income (Loss) Attributable to Phillips 66 231$ 172$ 109$ 44$ 5$
Refining - Gulf Coast
Net Income (Loss) Attributable to Phillips 66 448$ 67$ 53$ 103$ 30$
Pre-tax Adjustments:
Pending claims and settlements (9) (2) (7) (70) (70)
Pension settlement expense 16 4 12
Gain on consolidation of business (423)
Hurricane-related costs 12 12
Tax impact of adjustments 156 (4) (2) 27 27
Adjusted Net Income (Loss) Attributable to Phillips 66 200$ 77$ 56$ 60$ (13)$
Millions of Dollars
Except as Indicated
2017 2016
33
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Refining - Central Corridor
Net Income (Loss) Attributable to Phillips 66 286$ 197$ 27$ 217$ 142$
Pre-tax Adjustments:
Pending claims and settlements (7) (2) (5)
Pension settlement expense 11 3 8
Tax impact of adjustments (1) (1)
Adjusted Net Income (Loss) Attributable to Phillips 66 289$ 198$ 29$ 217$ 142$
Refining - West Coast
Net Income (Loss) Attributable to Phillips 66 71$ 115$ 37$ 51$ -$
Pre-tax Adjustments:
Pending claims and settlements (28) (24) (4)
Pension settlement expense 8 2 6
Tax impact of adjustments 8 8
Adjusted Net Income (Loss) Attributable to Phillips 66 59$ 101$ 39$ 51$ -$
Millions of Dollars
Except as Indicated
2017 2016
34
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Marketing & Specialties - Marketing & Other
Net Income (Loss) Attributable to Phillips 66 465$ 160$ 181$ 589$ 228$
Pre-tax Adjustments:
Pension settlement expense 10 3 7
Hurricane-related costs 1 1
Tax impact of adjustments (4) (1) (3)
Adjusted Net Income (Loss) Attributable to Phillips 66 472$ 163$ 185$ 589$ 228$
Marketing & Specialties - Specialties
Net Income (Loss) Attributable to Phillips 66 98$ 48$ 33$ 112$ 39$
Pre-tax Adjustments:
Tax impact of adjustments
Adjusted Net Income (Loss) Attributable to Phillips 66 98$ 48$ 33$ 112$ 39$
Millions of Dollars
Except as Indicated
20162017
35
NON-GAAP RECONCILIATIONS
Atlantic
Basin/EuropeGulf Coast Central Corridor West Coast Worldwide
Realized Refining Margins
Net income (loss) attributable to Phillips 66 refining segment 171$ 67$ 197$ 115$ 550$
Plus (Minus):
Provision for income taxes 76 42 120 75 313
Taxes other than income taxes 14 24 9 - 47
Depreciation, amortization and impairments 47 68 32 58 205
Selling, general and administrative expenses 16 14 8 12 50
Operating expenses 185 298 123 212 818
Equity in (earnings) losses of affiliates 3 (1) (146) - (144)
Other segment (income) expense, net (2) - 8 2 8
Proportional share of refining gross margins contributed by equity affiliates 15 - 290 - 305
Realized refining margins 525$ 512$ 641$ 474$ 2,152$
Total processed inputs (thousands of barrels) 52,306 70,544 23,525 36,635 183,010
Adjusted total processed inputs (thousands of barrels)* 52,306 70,544 45,733 36,635 205,218
Net income attributable to Phillips 66 per barrel (dollars per barrel)** 3.27$ 0.95$ 8.37$ 3.14$ 3.01$
Realized refining margins (dollars per barrel)*** 10.02$ 7.26$ 14.04$ 12.95$ 10.49$
Millions of Dollars
2017
3Q
* Adjusted total processed inputs include our proportional share of processed inputs of equity affiliates.
** Net income attributable to Phillips 66 divided by total processed inputs.
*** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels.
As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts due to rounding.
36
* Capital employed is total equity plus total debt
NON-GAAP RECONCILIATIONS
2017 September YTD Phillips 66
Numerator ($MM)
Net Income 1,993$
After-tax interest expense 211$
GAAP ROCE earnings 2,204$
After-tax special items (187)$
Adjusted ROCE earnings 2,017$
Denominator ($MM)
GAAP average capital employed * 34,012$
2017 Annualized GAAP ROCE 9%
2017 Annualized Adjusted ROCE 8%
37
NON-GAAP RECONCILIATIONS
* PSXP's third-party debt and Phillips 66's noncontrolling interest attributable to PSXP
Phillips 66
Consolidated
Phillips 66
Partners *
Adjusted
Phillips 66
Total Debt 10,201$ 2,290$ 7,911$
Total Equity 23,959$ 1,406$ 22,553$
Debt-to-Capital Ratio 30% 26%
Total Cash & Cash Equivalents 1,547$ 2$ 1,545$
Net-Debt-to-Capital Ratio 27% 22%
2017
September 30
Millions of Dollars
38
NON-GAAP RECONCILIATIONS
Growth Sustaining Total Growth Sustaining Total
Capital Expenditures and Investments
Midstream 136$ 42$ 178$ 445$ 114$ 559$
Refining 57$ 91$ 148$ 265$ 358$ 623$
Marketing & Specialties 16$ 11$ 27$ 37$ 28$ 65$
Corporate and Other -$ 14$ 14$ 1$ 47$ 48$
Total 209$ 158$ 367$ 748$ 547$ 1,295$
Millions of Dollars Millions of Dollars
2017 2017
3Q September YTD
39
NON-GAAP RECONCILIATIONS
PSX Effective Tax Rate Millions of Dollars
2017
3Q
Effective Tax Rates
Income before taxes 1,256$
Special items 55$
Adjusted income before taxes 1,311$
Provision for taxes 407$
Special items 20$
Adjusted provision for taxes 427$
GAAP effective tax rate 32.4%
Adjusted effective tax rate 32.6%
PSXP Run-rate EBITDA:
PSXP’s run-rate EBITDA is a forecast of future EBITDA, and is based on the Partnership’s projections of annual EBITDA inclusive of both currently
owned assets and future potential acquisitions by the Partnership. Run-rate EBITDA is included to demonstrate the historical growth of the
Partnership, as well as management’s intention of future growth through acquisitions and organic projects. We are unable to present a reconciliation
of run-rate EBITDA to net income, which is the nearest GAAP financial measure, because certain elements of net income, including interest,
depreciation and taxes, were not used in the forecasts and are therefore not available. Together, these items generally result in run-rate EBITDA
being significantly greater than net income.