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Investor Update November 2016
NYSE: PSX www.phillips66.com
Cautionary Statement
2
This presentation contains forward-looking statements. 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 the operations of Phillips 66 and Phillips 66 Partners LP (including joint venture operations) are based on management’s expectations, estimates and projections, their 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 can be found in filings by Phillips 66 and Phillips 66 Partners LP with the Securities and Exchange Commission. Phillips 66 and Phillips 66 Partners LP are under no obligation (and expressly disclaim any such obligation) to update or alter their 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 the websites of Phillips 66 and Phillips 66 Partners LP.
Diversified Downstream Company
3
Refining: Enhance Returns
Midstream: Growth
Chemicals: Growth
Marketing & Specialties:
Selective Growth Execute Sweeny Hub
Grow integrated transportation system
PSXP as a funding vehicle
Pursue organic and M&A opportunities
Grow CPChem organically
Advance olefins and polyolefins projects
Capitalize on domestic feedstock advantage
Leverage proprietary technology
Optimize crude slate
Expand export capability
Increase yields
Maintain cost discipline
Enhance portfolio
Expand European retail marketing
Grow lubricants
Ensure domestic refinery pull-through
Corporate Strategy
4
Operating Excellence
Growth
Returns
Distributions
High-Performing Organization
Committed to safety, reliability and environmental stewardship while protecting shareholder value
Reshaping our portfolio by capturing growth opportunities in Midstream and Chemicals
Enhancing returns by maximizing earnings from existing assets and investing capital efficiently
Committed to dividend growth, share repurchases and financial strength
Building capability, pursuing excellence and doing the right thing
Industry Average
Operating Excellence
5
Total Recordable Rates (Incidents per 200,000 Hours Worked)
’12 ’13 ’14 ’15
Refining Environmental Metrics
Refining Capacity Utilization (%)
Operating Costs and SG&A ($B)
Phillips 66 CPChem DCP Midstream
See appendix for footnotes.
5.7 5.7 6.1 6.0 4.3
2012 2013 2014 2015 3Q YTD2016
430 317 300 279 188
2012 2013 2014 2015 3Q YTD2016
93% 93% 94% 91% 97%
3% 3% 4% 5% 1%
2012 2013 2014 2015 3Q YTD2016
Planned Maintenance & Turnarounds
3Q YTD ‘16
27 36 42 33 28
2012 2013 2014 2015 3Q YTD2016
Energy Prices and Margins
6
112 109 99 52 42
2012 2013 2014 2015 3Q YTD2016
Brent ($/bbl)
82 90 89
45 43
2012 2013 2014 2015 3Q YTD2016
NGL Weighted Average (cpg) PE Cash Chain Margin (cpp)
Global Market Crack ($/bbl)
16.66 14.03 13.42 16.62 12.48
2012 2013 2014 2015 3Q YTD2016
See appendix for footnotes.
Midstream
7
Integrated network Transportation DAPL/ETCOP Beaumont Terminal Bayou Bridge Bakken JVs
NGL Sweeny Complex Sand Hills and Southern Hills JV Fractionators
DCP Midstream Gathering and Processing
Sweeny Complex
8
Integrated world-scale midstream, refining and chemicals assets
Sweeny Fractionator One Running to design
LPG Export Terminal Commissioning and start-up 4Q 2016
Global LPG organization securing sales
Narrow international export arb
Platform for long-term earnings growth
Midstream Growth
9
EBITDA ($B)
0.6 1.1
0.4
CurrentOperating
Assets
Growth Market 2018ERun-Rate
Substantial backlog of investments
Focus on enhancing and extending logistics around our assets
Fewer near-term, large investment opportunities
PSXP 2018E run-rate EBITDA of $1.1 B
2018E EBITDA guidance reduced 10-20% from $2.3 B
PSXP
PSX
~ 2.3
Current operating assets, as of October 31, 2016, including logistics assets included in Refining segment. See appendix for additional footnotes.
Phillips 66 Partners
See appendix for footnotes.
10
Distribution / LP Unit ($) Distribution / LP Unit (cents)
21.3 22.5 27.4 30.2 31.7 34.0 37.0 40.0 42.8 45.8 48.1 50.5 53.1
3Q2013
4Q2013
1Q2014
2Q2014
3Q2014
4Q2014
1Q2015
2Q2015
3Q2015
4Q2015
1Q2016
2Q2016
3Q2016
Coverage Ratio 1.13x 1.10x 1.10x 1.44x 1.32x 1.28x 1.14x 1.15x 1.40x 1.44x 1.15x 1.21x 1.24x
Strong sponsorship
Access to capital markets
Organic opportunities
Recent acquisitions
Distribution guidance unchanged
PSXP Value to PSX
11
Attractive cost of capital
Growing distributions
Funding Midstream growth
PSX multiple uplift
Cumulative Dropdown Proceeds ($B)
Cumulative LP & GP Distributions ($MM)
0.5 1.8 2.7
2013 2014 2015 3Q YTD2016
0
20 96
232
387
2013 2014 2015 3Q YTD2016
Limited Partner General PartnerSee appendix for footnotes.
DCP Midstream
12
Self-help initiatives to improve cash flow
Operating and cost improvements
Contract realignment
Portfolio optimization
Capital discipline
Strengthened balance sheet
Expect to be self-funding
NGL Production (MBD)
402 426 454 410 400
2012 2013 2014 2015 3Q YTD2016
DCP Midstream Adjusted EBITDA ($MM)
DCP Midstream adjusted EBITDA represents Phillips 66’s share. See appendix for additional footnotes.
495 585 487
170 205
2012 2013 2014 2015 3Q YTD2016
Source: Wood Mackenzie, as of August 2016.
Chemicals
13
Middle East and North America NGL continue advantaged feedstock position
Petrochemical production costs reduced globally
Ethane available to supply new U.S. crackers
2016E Average Ethylene Production Cost Curve ($/ton)
Cumulative Capacity MM Tons
0
150
300
450
600
750
0 15 30 45 60 75 90 105 120 135 150
CPChem
M.E. Ethane
N.A. LPG N.A. Ethane
M.E. LPG/Naphtha
W. Europe Naphtha
N.A. Naphtha
W. Europe LPG
Asia Naphtha
Asia LPG/Ethane Rest of World
Asia Coal
CPChem
14
USGC Petrochemicals Project
1,000 kMTA (polyethylene) at Old Ocean, TX
Start-up expected mid-2017 1,500 kMTA (ethylene) at Cedar Bayou, TX
Start-up expected 2H 2017
Expect increased distributions USGC project completion 2018 capital spend ~ $1 B Incremental EBITDA ~ $1 B
Next major project FID post-2018
EBITDA estimate is on a CPChem 100% basis and is based on January 2016 IHS forecast premises.
CPChem USGC Ethane Cracker, Baytown, TX
Refining
15
Diversified portfolio
Enhancing returns
Portfolio management
Yield enhancement
Feedstock flexibility
Growing export capacity
Platform for Midstream growth
Refining Discipline
16 See appendix for footnotes.
(0.2) 1.5
3.7
6.4
3.6 3.4 4.8 1.3
3.3
2009 2010 2011 2012 2013 2014 2015 3Q YTD2016
Adjusted EBITDA ($B) Operating excellence
Volatile business
Market cracks
Crude differentials
Regulatory environment
Significant source of cash
Run well and optimize business
2009–2015 Average
0.7 0.8 1.0 1.1 1.1
2012 2013 2014 2015 2016E
Sustaining Return
Total Capex ($B)
Marketing and Specialties
17
Stable, high-return businesses
Marketing
Enhancing U.S. fuels brands
Adding 100+ European sites by 2020
Growing branded and unbranded gasoline sales
Providing ratable refinery off-take
Specialties
Growing high-performance lubricants
See appendix for footnotes.
1.1 1.4 1.4 1.5
1.1
2012 2013 2014 2015 3Q YTD2016
Adjusted EBITDA ($B)
Adjusted ROCE (%)
18 28 32 35 35
2012 2013 2014 2015 3Q YTD2016
Capital Allocation
18 2015 PSX adjusted capital expenditures excludes investment in DCP Midstream of $1.5 billion. See appendix for additional footnotes.
Maintain financial strength
Fund sustaining and growth capital
Growing dividend and ongoing share repurchases
Phillips 66 Cash Sources and Uses ($B)
4.3
5.9
4.0
7.0
~ 5
~ 6
2.3
4.8
7.1 6.7
~ 5 ~ 5
2016C 2012 2014 2015 2017C 2013
PSXP Contributions
Dividends/Share Repurchase
PSX Adjusted Capital Expenditures
PSX Adjusted CFO
20.8 22.0 21.6 23.1 22.9
7.8 7.7
20.8 22.4 22.0
23.9 24.3
6.9 6.1 8.6 8.9 8.9
25%
21%
28% 27% 27%
Capital Structure
Investment-grade credit ratings
PSX – BBB+ / A3
PSXP – BBB / Baa3
Over $7 B of available liquidity at PSX
~3.5x debt/EBITDA target at PSXP
Equity and Debt
2012 2014 2015 3Q 2016 2013
PSX Equity $B PSX Debt $B PSX Noncontrolling Interest Attributable to PSXP $B
PSXP Third-party Debt $B
Consolidated Debt-to-Capital 19
Capital Spending
3.5 3.5
5.6
7.7
5.3 4.4
2012 2013 2014 2015 2016Budget
2016E
Consolidated WRB DCP CPChem
1.7 1.8
3.8
5.8
3.9 ~ 3
2012 2013 2014 2015 2016Budget
2016E
Refining M&S PSXPMidstream Investment in DCP Corporate
Consolidated ($B)
Capital Program ($B)
20 Capital program includes Phillips 66’s portion of capital spending by DCP Midstream, CPChem and WRB.
See appendix for footnotes.
Distributions
0.45 1.33 1.89 2.18 2.45
2H 2012 2013 2014 2015 2016E
Annual Dividend ($/sh)
Cumulative Distributions ($B)
0.6 3.7
8.4 11.1
12.8
2H 2012 2013 2014 2015 3Q YTD2016
Share Repurchases and Exchanges Dividends
Important source of shareholder value
Growing, secure and competitive dividends
Committed to share repurchases
21
Delivering Shareholder Returns
Integrated portfolio
Disciplined capital allocation
Returns focused
Value-added growth
Strong balance sheet
Compelling investment -20%
20%
60%
100%
140%
180%
220%
May-12 Feb-13 Nov-13 Aug-14 May-15 Feb-16 Nov-16
PSX +168%
S&P 100 +61%
Peers +70%
Total Shareholder Return
See appendix for footnotes.
22
Institutional Investors Contact Rosy Zuklic
General Manager, Investor Relations
C.W. Mallon Manager, Investor Relations
[email protected] 832-765-2297
Investor Update November 2016
NYSE: PSXP www.phillips66partners.com
Phillips 66 Partners Ownership Structure
Phillips 66 Partners GP LLC (PSXP General Partner) General Partner Units
IDRs
Operating Subsidiaries
PSXP Public Unitholders
(NYSE: PSX)
(NYSE: PSXP)
100% ownership interest
39% limited partner interest
Joint Ventures
2% general partner interest
59% limited partner interest
25 As of October 31, 2016.
Phillips 66 Partners
Strong alignment with Phillips 66
Highly integrated assets
Stable and predictable cash flows
Significant growth potential
Financial flexibility
Pecan Grove Marine Dock
26
Distribution Growth
21.25 22.48 27.43 30.17 31.68 34.00 37.00 40.00 42.80 45.80 48.10 50.50 53.10
3Q2013
4Q2013
1Q2014
2Q2014
3Q2014
4Q2014
1Q2015
2Q2015
3Q2015
4Q2015
1Q2016
2Q2016
3Q2016
3Q 2013 distribution represents the minimum quarterly distribution, actual distribution of 15.48 cents equal to MQD prorated.
27
Distribution / LP Unit (cents)
Coverage Ratio 1.13x 1.10x 1.10x 1.44x 1.32x 1.28x 1.14x 1.15x 1.40x 1.44x 1.15x 1.21x 1.24x
64.5 74.0
64.1 84.4
101.9
3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016
Financial Performance
Adjusted EBITDA ($MM)
73.3 87.0
73.8
97.3 110.9
3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016
Distributable Cash Flow ($MM)
Adjusted EBITDA and Distributable Cash Flow shown are attributable to PSXP.
28
Third-Party Acquisitions 2H 2016
29
Explorer Pipeline Acquisition of an additional 2.5% equity interest
Approximately 600 Mbd petroleum products pipeline delivering to more than 70 major cities in 16 states
STACK 50/50 JV with Plains All American Pipeline, L.P. Acquisition of 50% interest
Pipeline transporting crude oil from STACK play in northwestern Oklahoma to Cushing, Okla.
South Louisiana NGL Logistics Assets Announced acquisition of NGL pipeline system and storage caverns in southeastern Louisiana
Recent Acquisitions from Phillips 66
30
1Q 2016 $236 MM, 25% controlling interest in Sweeny Fractionator & Clemens NGL Caverns funded with:
$24 MM take-back equity of PSXP LP and GP units $212 MM sponsor loan payable to PSX
2Q 2016 $775 MM, Standish Pipe & remaining 75% interest in Sweeny Fractionator & Clemens NGL Caverns funded with:
$100 MM take-back equity of PSXP LP and GP units $675 MM sponsor loan payable to PSX
Sponsor loan paid down to $19 MM with $656 MM net proceeds from public unit offering
4Q 2016 $1.3 B, 30 Phillips 66 Crude, Products, and NGL Logistics Assets funded with:
$1.1 B net proceeds from Senior Notes offering $196 MM take-back equity of PSXP LP and GP units
$300 MM 2016 Organic Growth Plan Bayou Bridge Pipeline
Transports crude from Nederland, TX to Lake Charles, LA, and eventually to St. James, LA Increases crude supply options for LA refineries Nederland to Lake Charles leg began operations in April 2016 Expected completion of St. James segment in 2H 2017
Sacagawea Pipeline 76-mile Sacagawea Pipeline and central delivery facility for gathering systems Connection into 100 MBD Palermo crude oil rail-loading facility Provides increased logistics options for shippers in the Bakken region Terminal completed in 4Q 2015; pipeline mechanically complete; expected to be operational in 4Q 2016
Sand Hills Pipeline Adding lateral connections and increasing pumping capacity
31
Highly Integrated and Diversified Asset Portfolio
32 As of October 31, 2016.
PSXP Debt Profile
0.3
0.5 0.5
0.3
0.6
2020 2025 2026 2045 2046
$2.2 B Total Debt as of October 31, 2016 5-Year $300 MM notes, 2.646% coupon
10-Year $500 MM notes, 3.605% coupon
10-Year $500 MM notes, 3.550% coupon
30-Year $300 MM notes, 4.680% coupon
30-Year $625 MM notes, 4.900% coupon
Average cost of 3.97%
BBB / Baa3 credit rating
Debt Maturity Profile ($B)
33
Financial Flexibility
Investment-grade credit rating
Financial targets:
30% distribution CAGR 2013-2018
3.5x debt / EBITDA
1.1x annual coverage ratio
Support Phillips 66 Midstream growth
34
-50%
0%
50%
100%
150%
200%
250%
300%
Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16
Closed $340 MM acquisition
Total Return Since IPO
Closed $700 MM acquisition
PSXP +113% Alerian MLP Index -22%
IPO Closed $1.0 B
acquisition
Closed $70 MM acquisition
Chart reflects total unitholder return July 22, 2013 to November 3, 2016. Distributions assumed to be reinvested in units. Source: Bloomberg.
35
Closed $236 MM acquisition
Closed $775 MM acquisition
Closed $1.3 B acquisition
Institutional Investors Contact Rosy Zuklic – General Manager, Investor Relations [email protected] | 832-765-2297 C.W. Mallon – Manager, Investor Relations [email protected] | 832-765-2297
Appendix
Value Chains
38
Midcontinent Integrated Growth
39
Midstream Palermo rail terminal/Sacagawea pipeline (PSXP) DAPL/ETCOP
Refining, Marketing & Specialties
Ponca City Yield improvements Optimize lease crude purchases
Wood River Dilbit capacity increase ULSD expansion FCC modernization
Billings Vacuum tower project
Marketing & Specialties Grow branded fuels volumes Enhance Phillips 66 brand Marketing JVs and alliances
As of October 31, 2016.
Western Gulf Creating a World-Class Energy Complex
40
Midstream Sweeny Fractionator One (PSXP)
Freeport LPG export terminal
Refining, Marketing & Specialties
Sweeny
Yield improvements
Marketing & Specialties
Grow unbranded fuels volumes Focus on high-quality branded assets Increase high-margin exports
Eastern Gulf Refining Logistics and Midstream Growth
41
Midstream Beaumont terminal expansion: +7 MMBbls Bayou Bridge pipeline
Refining, Marketing & Specialties
Lake Charles
Increase feedstock advantage Product value improvements
Alliance
Product value improvements
Marketing & Specialties
Grow unbranded fuels volumes Leverage brand value through licensing Increase high-margin exports Grow performance lubricants and export sales
West Coast Enhancing Returns
Midstream Los Angeles waterborne crude tank
Santa Maria rail rack
Refining, Marketing & Specialties San Francisco
Yield improvements Los Angeles
FCC energy reduction Marketing & Specialties
Grow branded and unbranded fuels volumes Enhance 76 brand Increase high-margin exports Grow export lubricant sales
42 As of October 31, 2016.
Atlantic Basin Enhancing Returns
Refining, Marketing & Specialties Bayway
FCC reactor modernization Yield improvements
Marketing & Specialties
Grow JET and COOP brands in Europe Increase unbranded volumes in the U.K. and U.S. Expand brand licensing in the U.S.
43
Adjusted Free Cash Flow 2012–3Q YTD 2016 Average
44
Adjusted CFO excludes working capital. Sustaining capex excludes capital leases. Midstream adjusted CFO excludes PSXP. PSXP contributions are calculated as consideration paid by PSXP to PSX in dropdown transactions plus quarterly cash distributions paid from PSXP to PSX. Midstream sustaining capex excludes PSXP. Phillips 66’s share of DCP Midstream, CPChem and WRB adjusted CFO reflects that portion of those entities’ cash flow over which Phillips 66 has significant influence over reinvestment/distribution decisions. DCP Midstream, CPChem and WRB free cash flow calculated based on Phillips 66’s share of after tax cash flow at the enterprise level.
0.9 1.3
0.7 (0.3)
Adjusted CFO & PSXPContributions
Sustaining Capex Available Cash Flow
1.1 0.9
(0.2)
Adjusted CFO Sustaining Capex Adjusted FCF
Midstream ($B) Chemicals ($B)
3.0 2.1
(0.9)
Adjusted CFO Sustaining Capex Adjusted FCF
Refining ($B) Marketing & Specialties ($B)
PSXP Contributions
0.9 0.8
(0.1)
Adjusted CFO Sustaining Capex Adjusted FCF
2009–2016E Average Adjusted Annualized ROCE
45
23% 22%
10% 9%
M&S Chemicals
Refining Midstream
-10%
0%
10%
20%
30%
40%
Average Capital Employed ($B)
Corporate
P66 Total 11%
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28
(11%)
2.3
7.2
4.9
Cash Undrawn RevolvingCredit Facility
TotalCommittedLiquidity
1.5 2.0
4.0 5.0
2016 2017 2018 2019 2020-30 2031-50
Bonds Revolving Credit Facility
Debt and Liquidity
46
Debt Maturity Profile ($B)
Liquidity ($B)
As of September 30, 2016. Excludes PSXP. Debt maturity profile excludes capital leases.
2016 Sensitivities
47
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 25
10¢/MMBtu Increase in Natural Gas price 2
$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 230
$1/BBL Increase in Distillate Margin 200
$1/BBL Widening LLS / Maya Differential (LLS less Maya) 45
$1/BBL Widening WTI / WCS Differential (WTI less WCS) 40
$1/BBL Widening WTI / WTS Differential (WTI less WTS) 20
$1/BBL Widening LLS / Medium Sour Differential (LLS less Medium Sour) 15
$1/BBL Widening ANS / WCS Differential (ANS less WCS) 10
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
2016 Outlook
48
4Q 2016
Global Olefins & Polyolefins utilization Mid-80% Refining crude utilization Low-90% Refining turnaround expenses (pre-tax) $170 MM - $200 MM Corporate & other costs (after-tax) $130 MM - $140 MM Effective income tax rate Mid-30% 2016
Refining turnaround expenses (pre-tax) $525 MM - $575 MM Corporate & Other costs (after-tax) $480 MM - $500 MM Depreciation and amortization $1.2 B
Phillips 66 Capital Program
49
2016ESustaining Growth Total Total
Consolidated Capital Expenditures and InvestmentsMidstream(1) 227 2,119 2,346 ~ 1,600Chemicals - - - - Refining(2) 833 384 1,217 ~ 1,100
Marketing and Specialties & Corporate(2) 237 80 317 ~ 3001,297 2,583 3,880 ~ 3,000
Select Equity Affiliates(3)
DCP 98 125 223 CPChem 241 775 1,016 WRB 129 55 184
467 956 1,423
Capital Program(3)
Midstream 324 2,244 2,568 Chemicals 241 775 1,016 Refining 962 439 1,401
Marketing and Specialties & Corporate(2) 237 80 317 1,764 3,539 5,303
(3) Includes Phillips 66’s portion of self-funded capital spending by DCP Midstream, CPChem and WRB.
2016 Budget
(2) Includes non-cash capitalized leases.(1) Includes 100% of Phillips 66 Partners
Millions of Dollars
Footnotes
50
Slide 5 Industry Averages are from: Phillips 66 – American Fuel & Petrochemical Manufacturers (AFPM) refining data, Chevron Phillips Chemical Company LLC (CPChem) – American Chemistry Council (ACC), DCP Midstream, LLC (DCP Midstream) – Gas Processors Association (GPA). Slide 6 Global Market Crack refers to worldwide market crack spread based on Phillips 66 global crude capacity. NGL weighted average prices are based on index prices from the Mont Belvieu and Conway market hubs that are weighted by DCP Midstream’s NGL component and location mix. PE cash chain margins are ethylene to high-density polyethylene cash chain margins. Source: IHS Energy. Slide 9 Current PSXP EBITDA represents estimated run-rate as of October 31, 2016. Current PSX EBITDA includes terminaling, storage and other logistics assets currently embedded in the Refining segment and represents an estimate of the EBITDA potential of these assets if they were transferred to Midstream at market-based fees. Growth is 2018 estimated run-rate EBITDA of projects completed 2016 or later.
Footnotes
51
Slide 10 3Q 2013 distribution represents the minimum quarterly distribution; actual distribution of 15.48 cents equal to MQD prorated. Slide 11 Cumulative dropdown proceeds represent the cash proceeds paid by Phillips 66 Partners for assets acquired from Phillips 66, including the subsequent repayment of sponsor notes assumed by Phillips 66 Partners in the transaction. Slide 12 DCP Midstream Adjusted EBITDA represents Phillips 66’s proportional share and is net of noncontrolling interests.
Footnotes
52
Slide 16 Adjusted EBITDA is adjusted for special items, noncontrolling interest and proportional share of WRB Refining LP’s (WRB) income taxes, net interest and depreciation and amortization. Refining capex excludes capital leases and excludes Phillips 66’s portion of self-funded capital spending by WRB. Slide 17 Adjusted EBITDA is adjusted for special items, income taxes, net interest and depreciation and amortization. YTD 2016 adjusted ROCE is September 30, 2016 year to date, annualized.
Footnotes
53
Slide 18 2012–2015 PSXP Contributions represent cash received by Phillips 66 in the form of distributions and dropdown proceeds, including the subsequent repayment of sponsor notes assumed by Phillips 66 Partners. 2012–2015 PSX Adjusted Capital Expenditures includes sustaining and growth capital expenditures for Phillips 66 but excludes capital leases and excludes Phillips 66 Partners capital expenditures. 2016C and 2017C PSX Adjusted CFO is calculated using consensus Net Income adding back depreciation and amortization. As of November 2, 2016. Source: S&P Capital IQ. 2016C and 2017C PSXP Contributions represent estimated cash to be received by Phillips 66 in the form of distributions and dropdown proceeds. 2016C and 2017C Dividends/Share Repurchase represent company estimates. 2016C and 2017C PSX Adjusted Capital Expenditures include estimated sustaining and growth capital expenditures for Phillips 66 and exclude Phillips 66 Partners capital expenditures.
Footnotes
54
Slide 21 Annual dividend reflects sum of declared quarterly dividends. There were only two quarterly dividends in 2012 following May 1st spinoff. 2016E reflects one quarterly dividend of $0.56 and three quarterly dividends of $0.63. 2014 share repurchases and exchanges include the PSPI share exchange. Slide 22 Chart reflects total shareholder return May 1, 2012 to November 3, 2016. Dividends assumed to be reinvested in stock. Source: Bloomberg. Peer average includes Delek US Holdings, Inc., HollyFrontier Corporation, Marathon Petroleum Corporation, PBF Energy Inc., Tesoro Corporation, Valero Energy Corporation, Western Refining, Energy Transfer Equity, L.P., Enterprise Products Partners L.P., ONEOK, Inc., Targa Resources Corp., Celanese Corporation, The Dow Chemical Company, Eastman Chemical Company, Huntsman Corporation and Westlake Chemical Corporation.
Footnotes
55
Forecasted and Estimated EBITDA We are unable to present reconciliations of various forecasted and estimated EBITDA included in this presentation, because certain elements of net income, including interest, depreciation and income taxes, are not reasonably available. Together, these items generally result in EBITDA being significantly greater than net income. 3Q YTD 2016 3Q YTD 2016 is as of September 30, 2016, or the nine-month period ended September 30, 2016, as applicable; except as otherwise noted.
Non-GAAP Reconciliations (Slide 12)
56
2012 2013 2014 2015Q3 YTD
2016 Proportional Share of DCP MidstreamProportional Share of DCP Midstream net income (loss) attributable to Phillips 66 179$ 210 135 (324) 4 Plus:
Net income attributable to noncontrolling interestsProvision for income taxes 100 122 79 (139) 3 Depreciation and amortization - - - - -
Proportional Share of DCP Midstream EBITDA 279 332 214 (463) 7
Adjustments (pretax):Proportional share of selected equity affiliates income taxes - 4 3 (2) 2 Proportional share of selected equity affiliates net interest 85 110 118 133 97 Proportional share of selected equity affiliates depreciation and amortization 131 139 150 166 138 Lower-of-cost-or-market inventory adjustments - - 2 - - Gain on asset dispositions - - - (30) - Impairments in equity affiliates - - - 366 6 Pending Claims and settlements - - - - (45)
Proportional Share of DCP Midstream Adjusted EBITDA 495$ 585 487 170 205
Millions of Dollars
Non-GAAP Reconciliations (Slide 16)
57
2009 2010 2011 2012 2013 2014 2015Sep YTD
2016Average
2009-2015RefiningRefining net income (loss) attributable to Phillips 66 (556)$ (661) 1,369 3,091 1,747 1,771 2,555 412 1,331 Plus:
Provision for income taxes (296) (121) 808 1,998 1,035 696 1,104 196 746 Net interest expense (1) (2) (1) - - - - - (1) Depreciation and amortization 641 659 664 655 685 704 738 570 678
Refining EBITDA (212) (125) 2,840 5,744 3,467 3,171 4,397 1,178 2,755
Adjustments (pretax):Proportional share of selected equity affiliates income taxes 1 1 4 5 (4) 3 (3) - 1 Proportional share of selected equity affiliates net interest (179) (160) (140) (118) (95) (19) - - (102) Proportional share of selected equity affiliates depreciation and amortization 178 169 184 236 237 245 252 192 214 Asset dispositions - - 234 (185) - (145) (8) - (15) Impairments - 1,500 500 606 - 131 - - 391 Canceled projects - 106 44 - - - - - 21 Pending claims and settlements 39 - - 31 - 23 30 (70) 18 Severence accruals - 28 24 - - - - - 7 Hurricane-related costs - - - 54 - - - - 8 Certain tax impacts - - - - (22) - - - (3) Lower-of-cost-or-market inventory adjustments - - - - - 40 53 - 13 Pension settlement expenses - - - - - - 53 - 8 Recognition of deferred logistics commitments - - - - - - - 30 -
Refining Adjusted EBITDA (173)$ 1,519 3,690 6,373 3,583 3,449 4,774 1,330 3,316
Millions of Dollars
Non-GAAP Reconciliations (Slide 17)
58
2012 2013 2014 2015Sep YTD
2016Marketing and SpecialtiesMarketing and Specialties net income attributable to Phillips 66 544$ 894 1,034 1,187 701 Plus:
Provision for income taxes 319 433 441 465 359 Net interest expense - - - (2) - Depreciation and amortization 147 103 95 97 81
Marketing and Specialties EBITDA 1,010 1,430 1,570 1,747 1,141
Adjustments (pretax):Asset dispositions (4) (40) (125) (242) - Impairments - - - - - Pending claims and settlements 62 (25) (44) - - Exit of a business line - 54 - - - Tax law impacts - (6) - - - Pension settlement expenses - - - 11 -
Marketing and Specialties Adjusted EBITDA 1,068$ 1,413 1,401 1,516 1,141
Millions of Dollars
Non-GAAP Reconciliations (Slide 17)
59
2012 2013 2014 2015Sep YTD
2016*M&S ROCENumerator Net Income 544$ 894 1,034 1,187 701 After-tax interest expense - - - - - GAAP ROCE earnings 544 894 1,034 1,187 701 Special Items 99 (9) (152) (240) - Adjusted ROCE earnings 643$ 885 882 947 701
DenominatorGAAP average capital employed* 3,547$ 3,160 2,743 2,735 2,687 Discontinued Operations - - - - - Adjusted average capital employed* 3,547$ 3,160 2,743 2,735 2,687 *Total equity plus debt.
Adjusted M&S ROCE (percent) 18% 28% 32% 35% 35%GAAP M&S ROCE (percent) 15% 28% 38% 43% 35%* ROCE for Sep YTD 2016 annualized.
Millions of Dollars
Non-GAAP Reconciliations (Slide 18)
60
2012 2013 2014 2015Phillips 66 Adjusted Cash from Operations Reconciliation Cash From Continuing Operations GAAP 4,259$ 5,942 3,527 5,713 Less: PSXP's portion of CFO(1) - 24 100 176 PSX Adjusted CFO 4,259$ 5,918 3,427 5,537 (1) PSXP's portion of CFO excludes changes in working capital
2012 2013 2014 2015Capital SpendingPSX Consolidated Capital Expenditures 1,701$ 1,779 3,773 5,764 Less: PSXP Capital Expenditures - 4 67 205 Less: Equity Contribution to DCP Midstream - - - 1,500 PSX Adjusted Capital Expenditures 1,701$ 1,775 3,706 4,059
Millions of Dollars
Millions of Dollars
PSXP Adjusted EBITDA and Distributable Cash Flow Reconciliation to Operating Cash Flow (Slide 28)
61
Q3 2015* Q4 2015* Q1 2016* Q2 2016 Q3 2016PSXP Reconciliation to Net Cash Provided by Operating ActivitiesNet Cash Provided by Operating Activities 49.1 97.0 71.4 94.6 84.3Plus:
Net interest expense 9.1 9.2 9.7 10.9 9.9Provision for (benefit from) income taxes 0.1 0.1 0.2 0.4 0.2Changes in working capital 13.8 (16.3) 14.4 (1.8) 12.0Undistributed equity earnings (0.9) (2.6) (0.6) 1.7 2.7Accrued environmental costs (0.5) (0.2) — 0.1 (0.2)Other** (4.5) (8.0) (6.6) (6.9) (0.6)
PSXP EBITDA 66.2 79.2 88.5 99.0 108.3Distributions in excess of equity earnings 4.6 6.6 4.1 2.2 0.3Expenses indemnified or prefunded by Phillips 66 1.1 0.5 0.1 3.9 0.1Transaction costs associated with acquisitions 0.4 0.4 1.0 0.7 2.2EBITDA attributable to noncontrolling interests — — — — —EBITDA attributable to Predecessors 1.0 0.3 (19.9) (8.5) —
PSXP Adjusted EBITDA 73.3 87.0 73.8 97.3 110.9Plus:
Deferred revenue impacts† 2.5 (1.6) 1.4 1.3 4.3Less:
Net interest 9.1 9.2 9.9 10.9 9.9Income taxes paid — (0.1) — 0.3 —Maintenance capital expenditures 2.2 2.3 1.2 3.0 3.4
PSXP Distributable Cash Flow 64.5 74.0 64.1 84.4 101.9*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.**Primarily deferred revenue. †Difference between cash receipts and revenue recognition.
Millions of Dollars
PSXP Adjusted EBITDA and Distributable Cash Flow Reconciliation to Net Income (Slide 28)
62
Q3 2015* Q4 2015* Q1 2016* Q2 2016 Q3 2016PSXP Reconciliation to Net IncomeNet Income 50.9 60.5 64.7 73.2 83.1Plus:
Depreciation 6.1 9.4 13.9 14.5 15.1Net interest expense 9.1 9.2 9.7 10.9 9.9Provision for (benefit from) income taxes 0.1 0.1 0.2 0.4 0.2
PSXP EBITDA 66.2 79.2 88.5 99.0 108.3Distributions in excess of equity earnings 4.6 6.6 4.1 2.2 0.3Expenses indemnified or prefunded by Phillips 66 1.1 0.5 0.1 3.9 0.1Transaction costs associated with acquisitions 0.4 0.4 1.0 0.7 2.2EBITDA attributable to noncontrolling interests — — — — —EBITDA attributable to Predecessors 1.0 0.3 (19.9) (8.5)
PSXP Adjusted EBITDA 73.3 87.0 73.8 97.3 110.9Plus:
Deferred revenue impacts** 2.5 (1.6) 1.4 1.3 4.3Less:
Net interest 9.1 9.2 9.9 10.9 9.9Income taxes paid — (0.1) — 0.3 —Maintenance capital expenditures 2.2 2.3 1.2 3.0 3.4
PSXP Distributable Cash Flow 64.5 74.0 64.1 84.4 101.9 *Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.**Difference between cash receipts and revenue recognition.
Millions of Dollars
Non-GAAP Reconciliations (Slide 44)
63
FCF Reconcilition Numerator Cash From Operations GAAP 809 348 2,714 1,127 Less: Change in Non-Cash Working Cap. 22 - 295 (255) Cash From Operations (excluding WC) 831 348 3,009 872 Less: P66 Equity affiliate cash from ops 199 348 633 - Add: Equity look through cash from ops 373 1,074 574 - Less: PSXP's portion of CFO 103 - - - Adjusted FCF (excl WC) 902 1,074 2,950 872
Total Capex GAAP 1,891 - 945 204 Less: Growth Capex 1,415 - 202 139 Sustaining Capex 476 - 743 65 Less: P66 Equity affiliate sustaining capex 316 - - - Add: Equity look through sustaining capex 128 197 122 - Less: PSXP's portion of sustaining capex 7 - - - Adjusted Sustaining Capex 281 197 865 65
PSXP Contributions 662 - - -
Adjusted Free Cash Flow 1,283 877 2,085 807
Millions of DollarsAverage 2012-Q3 2016
Midstream Chemicals RefiningMarketing & Specialties
Non-GAAP Reconciliations (Slide 45)
64
Phillips 66** Midstream Chemicals Refining M&S Corporate Phillips 66 ROCENumerator Net Income 3,110$ 552 742 1,233 810 (340) After-tax interest expense 118 - - - - 118 GAAP ROCE earnings 3,228 552 742 1,233 810 (223) Special Items (10) (141) 42 248 (56) 10 Adjusted ROCE earnings 3,218$ 411 784 1,481 755 (213)
DenominatorGAAP average capital employed* 28,321 4,471 3,552 14,724 3,214 1,883 Discontinued Operations (114) - - - - - Adjusted average capital employed* 28,208$ 4,471 3,552 14,724 3,214 1,883 *Total equity plus debt.
** Phillips 66 consolidated includes discontinued operations.
Adjusted ROCE (percent) 11% 9% 22% 10% 23% -11%GAAP ROCE (percent) 11% 12% 21% 8% 25% -12%ROCE for Q3 YTD 2016 annualized.
Millions of Dollars Average 2009- 2016E
65
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