2014 baml-presentation

PHILLIPS 66 2014 BANK OF AMERICA MERRILL LYNCH REFINING CONFERENCE

Clayton Reasor, SVP Investor Relations, Strategy and Corporate Affairs

2

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 crude oil, NGL, and natural gas prices, and refining 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 crude oil, natural gas, NGL, 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.

CAUTIONARY STATEMENT

3

Operating excellence

Growth

Returns

Distributions

High-performing organization

STRATEGY

0

50

100

150

200

250

2002 2004 2006 2008 2010 20120

0.5

1

1.5

2

2.5

Total Recordable Rates

OPERATING EXCELLENCE

4

(Incidents per 200,000 Hours Worked)

20

09

20

10

20

11

20

12

20

13

U.S. Refining Emissions (Lb/MBbl)

(SOx, NOx, and Particulate Matter)

Industry Average

Phillips 66 CPChem DCP

See appendix for footnotes.

Midstream: Growth

Build on integrated Transportation system

Utilize Phillips 66 Partners LP as a growth vehicle

Expand DCP

Grow NGL Operations

Chemicals: Growth

Grow CPChem

Advance olefins and polyolefins projects

Capitalize on domestic feedstock advantage

Marketing & Specialties: Selective growth

Expand European Retail Marketing

Grow Lubricants

Ensure refinery pull-through

5

Refining: Enhance returns

Process more advantaged crudes

Expand export capability

Increase yields

Decrease costs

Optimize portfolio

SEGMENT STRATEGY

Gulf Coast Fractionator, Mont Belvieu, Texas.

2013 Sept Annualized ROCE


15%

8%

7%

6%

PSX

OKE

EPD

KMP

HIGH-PERFORMING BUSINESSES

6

26%

23%

21%

19%

9%

PSX

LYB

WLK

XOM Chem

DOW

Chemicals ROCE

Midstream ROCE

17%

15%

8%

8%

6%

PSX

MPC

CVX

VLO

TSO

Refining and M&S ROCE

MIDSTREAM

MACRO ENVIRONMENT

7

1

2

3

4

5

6

2003 2008 2013 2018 2023

EIA Consultant A Consultant B Consultant C

Consultant D Consultant E Consultant F

Forecast History

Growing domestic NGL production is

reshaping U.S. midstream business

Wide range of consultant forecasts

Infrastructure needed to move new

production to market centers

U.S. NGL Production (MMBD)

500

1,000

1,500

2,000

2,500

3,000

2000 2005 2010 2015 2020 2025 2030

Demand

High Production

Low Production

8

Ethylene Production Cost Curve ($/ton)

U.S. Ethane Production and Demand (MBD)

CHEMICALS

MACRO ENVIRONMENT


0

300

600

900

1,200

10 40 70 100 130

Cumulative Capacity MM tons

M.E. Ethane

N.A. Ethane

N.A. LPG/Naphtha M.E. LPG/Naphtha

Other LPG/Naphtha

Asia LPG/Naphtha

Europe LPG/Naphtha

Cumulative Capacity MM Tons

-25

-20

-15

-10

-5

0

5

1Q09 1Q10 1Q11 1Q12 1Q13

-25

-20

-15

-10

-5

0

5

1Q09 1Q10 1Q11 1Q12 1Q13

9

-25

-20

-15

-10

-5

0

5

1Q09 1Q10 1Q11 1Q12 1Q13

LLS - Brent (Nominal $/bbl)

WTI - LLS (Nominal $/bbl)

2009 – 2013 avg:

$-10.04/bbl

Maya - LLS (Nominal $/bbl)

2009 – 2013 avg:

$-11.25/bbl

REFINING

MACRO ENVIRONMENT

2009 – 2013 avg:

$1.18/bbl

7.4

5.4

0

2

4

6

8

10

2010 2013

Heavy Sweet Heavy Sour

Light/Medium Sweet Light/Medium Sour

10

U.S. tight oil and Canadian

production are displacing imports

Most grades of U.S. waterborne

imports have diminished

Expect trend to continue

Total U.S. Waterborne Crude Imports

(MMBD)

REFINING

MACRO ENVIRONMENT


11

Build on integrated Transportation system

Utilize Phillips 66 Partners LP as a growth vehicle

Expand DCP

Grow NGL Operations

MIDSTREAM

GROWTH

MLP. Pecan Grove Crude Terminal, Carlyss, LA.

Crude rail cars

Jones Act ships

Unit train crude unloading facility projects

Clean products export facility projects

Terminal butane blending

Re-commission idle pipelines

New refinery storage

TRANSPORTATION

12 Jones Act tanker delivering Eagle Ford crude.

PHILLIPS 66 PARTNERS LP

13

Strategic relationship with PSX

Significant growth potential

Low cost capital source

Financial flexibility

$700 MM initial acquisition

Figures shown are 100% DCP.

14

2015+

DCP MIDSTREAM

Goliad Gas Plant

200 MMCFD

Granite Wash Gathering System

Expansion

140 MMCFD

National Helium Gas Plant

600 MMCFD

Rawhide Gas Plant

75 MMCFD

O’Connor Gas Plant

100 -- 160 MMCFD

Sand Hills

720 miles, 200 -- 350 MBD

Southern Hills

800 miles, 175 MBD

Front Range

435 miles, 150 -- 230 MBD

Texas Express

580 miles, 280 -- 400 MBD

Gathering and Processing NGL Pipelines

G&P Plant

Under construction/development

Expansion/Restart

DCP Legacy

New/Growth

Sand Hills and Southern Hills startup

Butane and butylene storage hub

Sweeny fractionator and pipelines

Freeport export terminal and de-ethanizer

Clemens salt dome storage

15

NGL OPERATIONS

Sand Hills Pipeline. Metering station. Mont Belvieu, Texas.

0.0

0.5

1.0

1.5

2.0

2010 2011 2012 2013 2014E

MIDSTREAM

GROWTH

16

Capital Program ($B)

NGL Operations

DCP Midstream

Transportation


DC

P

NG

L O

ps a

nd

Tra

nsp

ort

ati

on

G&P in Execution

2013 2015 2017+ 2014 2016

Sand Hills and Southern Hills pipelines

Rail Offloading Facilities

Rail Cars

Butane and Butylene

Storage Hub

Sweeny fractionator, storage,

and pipelines

G&P Expansions

Freeport export terminal and de-ethanizer

New pipelines

2012

CHEMICALS

GROWTH

17

Grow CPChem

Advance olefins and polyolefins projects

Capitalize on domestic feedstock advantage

CPChem. Mesaieed, Qatar

-

5

10

15

20

25

CPC CPC '17 DOW XOM LYB WLK

Other

M.E. region

N.A. light feedstock

18

Portfolio concentrated in

advantaged feedstock regions

U.S. 100% light feedstock based

Leading Middle East position

First mover on U.S. expansions


Other category is predominantly heavy feedstock capacity.

N.A. light feedstock is predominantly ethane, propane, and butane.

CHEMICALS

FEEDSTOCK ADVANTAGE

Worldwide Ethylene Capacity (Billion Lbs)

Estimated capex and EBITDA figures are 100% CPChem.

Estimated EBITDA based on 2012 IHS industry margins. 19

CHEMICALS

ADVANCING OLEFINS AND POLYOLEFINS PROJECTS

1-Hexene Unit

Sweeny Ethylene Furnace

NAO Expansion

US Gulf Coast

Petrochemicals Project

Capacity increase

25% from 2013 to 2017

Estimated project spending

$6.5 -- 7.0 B

Additional EBITDA

$1.3 -- 1.6 B per year 2017+

CPChem. Mesaieed, Qatar

20

0.0

0.4

0.8

1.2

2010 2011 2012 2013 2014E

CHEMICALS

EXECUTING GROWTH


2013 2015 2017+ 2014 2016

1-Hexene Unit

250 kMTA

Sweeny Ethylene

Furnace

90 kMTA

USGC Petrochemicals

1,500 kMTA (ethylene), 1,000 kMTA (polyethylene)

NAO Expansion

~130 kMTA


2012

21

Process more advantaged crudes

Expand export capability

Increase yields

Decrease costs

Optimize portfolio

REFINING

ENHANCE RETURNS

San Francisco Refinery, Rodeo Facility. San Francisco, California.

REFINING

DIVERSIFIED PORTFOLIO

22

MI

Germany

HU WG

Ireland

United Kingdom

ME

Malaysia

Western / Pacific 440 MBD Central Region 475 MBD Gulf Coast 733 MBD Atlantic Basin / Europe 588 MBD

LA

SF

FD

BI

BG PC

BW

AL SW

WR

LC

Refinery system runs ~50% Sweet - 50% Sour crudes; ~65% Light/Medium - 35% Heavy crudes See appendix for footnotes.

REFINING

ADVANTAGED CRUDE

23

U.S. Refining (MBD)

Other

Light/Medium

Brent

Heavy

Canadian

WTI/WTS


Current 3+ Years

Gasoline Gasoline

Distillate

Distillate

East East East

Gulf Gulf

Gulf

West

West

West

REFINING

ENHANCE RETURNS

24

Increase product placement optionality

Capture global demand growth

Maintain high utilization rates

2012 2013 3+ Years

Actual Actual Capacity Capacity Capacity

Domestic Exports (MBD)

100

285

180

410

500


0%

10%

20%

30%

2010 2011 2012 2013

Adjusted ROCE (%)

REFINING

ENHANCE RETURNS

25

0.0

1.0

2.0

2010 2011 2012 2013 2014E

Refining WRB


26

Expand European Retail Marketing

Grow Lubricants

Ensure refinery pull-through

MARKETING AND SPECIALTIES

SELECTIVE GROWTH

Berlin, Germany

27

1.6

3.5

6.4

9.0

6.7

2%

6%

14%

22%

14%

2009 2010 2011 2012 2013

Midstream

Chemicals

Marketing & Specialties

Refining

Corporate

ROCE

Adjusted EBITDA and ROCE ($B)

FINANCIAL SUMMARY

Disciplined capital allocation

Enhanced financial flexibility

Growing shareholder distributions

20% - 30%

19.0 20.6 20.8 21.4 21.7 22.0 22.4

8.0 8.0 7.0 7.0 6.5 6.2 6.2

30%28%

25% 25%23%

22% 22%

2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013

Equity $B Debt $B Debt to Capital

CAPITAL STRUCTURE

28

0

1

2

3

4

5

2012 2013 2014E 2012 2013 2014E 2012 2013 2014E

Midstream

Refining


Corporate

TOTAL CAPITAL PROGRAM

29

$B


Phillips 66 Consolidated Selected Joint Ventures Total

DCP

CPChem

WRB

SHAREHOLDER DISTRIBUTIONS

30

0.0

1.0

2.0

3.0

4.0

3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 Total

Dividends

Share

Repurchases

Regular dividends

Secure

Growing

Competitive

Share repurchase

Immediate EPS growth

Below intrinsic value

Announced $5 B in buybacks

Distributions ($B)

$3.7 B capital returned to shareholders

A PROMISING FUTURE

31

Operating excellence

Growth

Returns

Distributions

High-performing organization

INSTITUTIONAL INVESTORS CONTACT

Rosy Zuklic

Manager, Investor Relations

[email protected] 832-765-2297

Save the date:

2014 Phillips 66 Analyst meeting

April 10, 2014

New York, NY

FOOTNOTES

33

Slide 4

Injury statistics do not include major projects.

Industry Averages are from: Phillips 66 –American Fuels and Petrochemical Manufacturers (AFPM) refining data, CPChem – American Chemistry Council (ACC), DCP – Gas Processors Association (GPA).

U.S. Refining emissions exclude Trainer. Values are calculated as pounds of SOx, NOx, and particulate matter per thousand barrels of clean product produced. WRB is included at 50%.

Slide 6

To facilitate peer comparison, PSX’s Refining and Marketing & Specialties segments were combined for the Downstream ROCE calculation and recast to exclude impacts of PSPI.

Downstream ROCE for MPC, VLO and TSO are total company.

Downstream ROCE for CVX estimated based on Downstream excluding Chemicals.

XOM Chem refers to Exxon Mobil’s Chemicals segment.

Slide 8

US Ethane Supply/Demand Imbalance Source: Historical: EIA; Forecast: P66 internal analysis

2013 Ethylene Production Cost Curve – Source: Wood Mackenzie, 2012 estimated data using Brent $112/bbl and Henry Hub $3/mbtu

Slide 10

Source: ClipperData

Crude definitions: Light >32API, Medium 32-34 API, Heavy <24 API. Sweet <0.5 sulfur, Sour >=0.5 sulfur

FOOTNOTES

34

Slide 16

DCP Midstream capital program includes equity share of DCP Midstream capital.

2012 NGL Ops includes acquisition costs for one-third interest of Sand Hills and Southern Hills Pipelines totaling approximately $0.5 B. This amount was also included in DCP Midstream's capital spending, primarily in 2012.

Slide 18

Source: ICIS , 10-K filings, and external press releases

Slide 20

Project capacities are gross capacity.

Chemicals capital program denotes equity share of CPChem capital.

Slide 22 Sour is defined as sulfur > 0.54wt% Heavy is defined as API < 24

Slide 23

U.S. advantaged crude percentages are on an equity basis. Light and medium Canadian crude are in the WTI/WTS category.

Slide 25

Capital program denotes equity share of WRB capital as well as non-cash capital leases.

Slide 29

Total capital program includes non-cash capital leases and our net share of certain equity affiliate investments.

PSXP - FIRST ACQUISITION OVERVIEW 35

PHILLIPS 66 PARTNERS LP

$700 MM Initial Acquisition in Feb 2014 Asset Overview

Gold Product Pipeline System

‒ 735-mile, 10-16” pipeline system

‒ Four truck rack terminals with an aggregate

capacity of 172 MBD

Two refinery grade propylene (RGP) spheres

‒ Newly constructed asset in Medford, OK

‒ 70 MBbls working capacity

‒ RGP outlet from Ponca City refinery

‒ Commercial operations began March 2014

2014 SENSITIVITIES

36

Sensitivities shown above are independent and are only valid within a limited price range

Net Income $MM

Midstream

1¢/Gal Increase in NGL price 4

10¢/MMBtu Increase in Natural Gas price 2

$1/BBL Increase in WTI price 2

Chemicals

1¢/Lb Increase in Olefins Chain Margin (Ethylene, Polyethylene, NAO) 35

Worldwide Refining (assuming 94% refining utilization)

$1/BBL Increase in Refining Margin 440

$1/BBL Widening LLS / Maya Differential (LLS less Maya) 50

$1/BBL Widening WTI / WCS Differential (WTI less WCS) 40

$1/BBL Widening WTI / WTS Differential (WTI less WTS) 15

$1/BBL Widening LLS / WCS Differential (LLS less WCS) 10

$1/BBL Widening ANS / WCS Differential (ANS less WCS) 10

$0.10/MMBtu Increase in Natural Gas price (10)

Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators:

NON-GAAP RECONCILIATIONS

ADJUSTED EARNINGS SLIDE 6

37

2013 2012 2011 2010 2009

Year Year Year Year Year

Midstream

Earnings (loss) 469$ 53$ 2,149$ 386$ 386$

Adjustments:

Net (gain) loss on asset sales - - (1,618) - (19)

Impairments - 330 4 - 79

Pending claims and settlements - (23) - - -

Gain on share issuance by equity affiliate - - - - (88)

Hurricane-related costs - 2 - - -

Adjusted earnings 469$ 362$ 535$ 386$ 358$

Chemicals

Earnings (loss) 986$ 823$ 716$ 486$ 228$

Adjustments:

Impairments - 27 - - -

Premium on early debt retirement - 89 - - -

Repositioning tax impacts - 41 - - -


Millions of Dollars


ADJUSTED EARNINGS SLIDE 6

38

2013 2012 2011 2010 2009


Refining

Earnings (loss) 1,851$ 3,217$ 1,529$ (545)$ (536)$

Adjustments:

Net (gain) loss on asset sales - (104) 96 - -

Impairments - 606 314 1,110 -

Canceled projects - - 28 29 -

Severance accruals - - 15 28 -

Tax law impacts (13) - - - -

Pending claims and settlements - 19 - - 25



Adjusted earnings 1,838$ 3,844$ 1,982$ 622$ (511)$


Earnings (loss) 790$ 417$ 530$ 537$ 519$

Adjustments:

Net (gain) loss on asset sales (23) (2) (23) (116) (13)

Impairments - - - 8 37

Pending claims and settlements (16) 38 - (35) -

Exit of business line 34 - - - -




Millions of Dollars


2013 ROCE SLIDE 7

39 * Total equity plus total debt

September 30, 2013 YTDMidstream Chemicals

Refining and

M&S

Numerator ($MM)

Net Income 358$ 725$ 2,118$

After-tax interest expense - - -

GAAP ROCE earnings 358 725 2,118

Special Items - - (22)

Adjusted ROCE earnings 358$ 725$ 2,096$

Denominator ($MM)

GAAP average capital employed* 3,182$ 3,731$ 16,678$

Annual Adjusted ROCE 15% 26% 17%

Annual GAAP ROCE 15% 26% 17%


CPCHEM EBITDA SLIDE 20

40

Incremental Project Earnings Projections

EBITDA Reconcilation to Net Income - $MM

Estimated incremental net income (CPChem View) Low High

Estimated incremental net income 1,000 1,313

Estimated depreciation 280 260

Estimated interest - -

Estimated taxes 20 27

Estimated incremental EBITDA 1,300 1,600


REFINING ROCE SLIDE 26


2013 2012 2011 2010

Year Year Year Year

Refining - ROCE

Numerator

Net Income 1,851$ 3,217$ 1,529$ (545)$

After-tax interest expense - - - -

GAAP ROCE earnings 1,851 3,217 1,529 (545)

Special Items (13) 627 453 1,167

Adjusted ROCE earnings 1,838$ 3,844$ 1,982$ 622$

Denominator

GAAP average capital employed* 14,252$ 14,331$ 15,160$ 16,829$

Annual Adjusted ROCE 13% 27% 13% 4%

Annual GAAP ROCE 13% 22% 10% -3%

Millions of Dollars

Except as Indicated


ROCE SLIDE 28


2013 2012 2011 2010 2009


Phillips 66 - ROCE

Numerator

Net Income 3,743$ 4,131$ 4,780$ 740$ 479$

After-tax interest expense 178 160 11 1 1

GAAP ROCE earnings 3,921 4,291 4,791 741 480

Special Items (83) 1,215 (1,227) 994 2

Adjusted ROCE earnings 3,838$ 5,506$ 3,564$ 1,735$ 482$

Denominator

GAAP average capital employed* 28,163$ 25,732$ 25,064$ 26,906$ 26,417$

Discontinued Operations (191) (176)$ (163)$ (168)$ (173)$

Adjusted average capital employed* 27,972$ 25,556$ 24,901$ 26,738$ 26,244$

Annual Adjusted ROCE 14% 22% 14% 6% 2%

Annual GAAP ROCE 14% 17% 19% 3% 2%

Millions of Dollars

Except as Indicated


ADJUSTED EBITDA SLIDE 28

43

2013 2012 2011 2010 2009


Phillips 66

Net Income 3,743$ 4,131$ 4,780$ 740$ 479$

Less: Income from discontinued operations 61 48 43 30 19

Plus:

Income taxes 1,844 2,473 1,822 562 357

Net interest expense 258 231 (16) (41) (44)

Depreciation and amortization 947 906 902 874 873

EBITDA from continuing operations 6,731$ 7,693$ 7,445$ 2,105$ 1,646$

Adjustments (pre-tax):

Net (gain) loss on asset sales (40) (189) (1,636) (234) (37)


Impairments - 1,197 506 1,512 129





Pending claims and settlements (25) 56 - (56) 39


Repositioning costs - 85 - - -


Adjusted EBITDA 6,692$ 9,042$ 6,383$ 3,461$ 1,642$

Millions of Dollars



44

2013 2012 2011 2010 2009


Midstream

Net Income 486$ 60$ 2,154$ 391$ 389$

Income taxes 265 29 454 186 205

Net interest expense - - - - -


EBITDA 839$ 172$ 2,690$ 651$ 693$


Net (gain) loss on asset sales - - (1,830) - (15)

Impairments - 523 6 - 70

Pending claims and settlements - (37) - - -



Adjusted EBITDA 839$ 660$ 866$ 651$ 613$

Millions of Dollars



45

2013 2012 2011 2010 2009


Chemicals

Net Income 986$ 823$ 716$ 486$ 228$

Income taxes 375 366 252 194 67

EBITDA 1,361$ 1,189$ 968$ 680$ 295$




Adjusted EBITDA 1,361$ 1,376$ 968$ 680$ 295$

Millions of Dollars



46

2013 2012 2011 2010 2009


Refining

Net Income 1,851$ 3,217$ 1,529$ (545)$ (536)$

Income taxes 1,091 2,067 902 (56) (286)

Net interest expense - - (1) (2) (1)


EBITDA 3,627$ 5,939$ 3,094$ 56$ (182)$


Net (gain) loss on asset sales - (185) 234 - -

Impairments - 606 500 1,500 -




Pending claims and settlements - 31 - - 39


Adjusted EBITDA 3,605$ 6,445$ 3,896$ 1,690$ (143)$

Millions of Dollars



47

2013 2012 2011 2010 2009


Marketing & Specialities

Net Income 790$ 417$ 530$ 537$ 519$

Income taxes 376 250 311 331 446

Net interest expense - - (32) (40) (44)


EBITDA 1,269$ 814$ 962$ 969$ 1,053$


Net (gain) loss on asset sales (40) (4) (40) (234) (22)

Impairments - - - 12 59

Pending claims and settlements (25) 62 - (56) -



Adjusted EBITDA 1,252$ 872$ 922$ 691$ 1,090$

Millions of Dollars



48

2013 2012 2011 2010 2009


Corporate

Net Income (431)$ (434)$ (192)$ (159)$ (140)$

Income taxes (263) (239) (97) (93) (75)

Net interest expense 258 231 17 1 1

Depreciation and amortization 71 21 3 - 1

EBITDA (365)$ (421)$ (269)$ (251)$ (213)$



Repositioning costs - 85 - - -

Adjusted EBITDA (365)$ (311)$ (269)$ (251)$ (213)$

Millions of Dollars


SWEENY FRAC AND EXPORT EBITDA

49

Millions of Dollars

First Year

Sweeny Fractionator & Export Facility

Estimated net income 190$

Estimated income taxes 117

Estimated net interest expense 5

Estimated depreciation and amortization 118

Estimated EBITDA 430$


CPCHEM EBITDA

50 * Primarily related to premium on early debt retirement

Millions of Dollars

2012

Year

CPChem

Net Income 2,403$

Income taxes 67

Net interest expense 9

Depreciation and amortization 356

CPChem EBITDA 2,835$

Adjustments* 252

Adjusted CPChem EBITDA 3,087$

2014 baml-presentation

Investor Relations

Transcript of 2014 baml-presentation