Psx q3 2016 earnings slides final
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Transcript of Psx q3 2016 earnings slides final
PHILLIPS 66 THIRD QUARTER CONFERENCE CALL October 28, 2016
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
4
OVERVIEW 3Q 2016
Adjusted Earnings $556 MM
Adjusted EPS $1.05
Operating cash flow $883 MM
Capital expenditures and investments $661 MM
Shareholder distributions 1 $508 MM
(1) Shareholder distributions include dividends and share repurchases
Net-debt-to-capital ratio 21%
Annualized adjusted YTD ROCE 7%
PSXP equity offering proceeds $299 MM
499 556
36 0
(18)
38 1
2Q 2016
Adjusted
Earnings
Midstream Chemicals Refining Marketing
& Specialties
Corporate
& Other
3Q 2016
Adjusted
Earnings
3Q 2016 Adjusted Earnings
$MM
75 (110) 134 190 267
ADJUSTED EARNINGS 3Q 2016
5
39
75
18
(2)
20
2Q 2016
Adjusted
Earnings
Transportation NGL DCP
Midstream
3Q 2016
Adjusted
Earnings
MIDSTREAM 3Q 2016
63 3 9
3Q 2016 Adjusted Earnings
6
$MM Transportation volumes impacted by
scheduled refinery downtime
NGL improved seasonal trading and
storage
DCP Midstream benefited from higher
natural gas prices and self-help
initiatives
18% increase in PSXP distributions to
Phillips 66
6
190 190
(5)
6
(1)
2Q 2016
Adjusted
Earnings
Olefins &
Polyolefins
Specialties,
Aromatics &
Styrenics
Other 3Q 2016
Adjusted
Earnings
CHEMICALS 3Q 2016
165 31 (6)
3Q 2016 Adjusted Earnings
7
$MM Improved ethylene chain cash margin
and benzene margins
Increased unplanned downtime
91% O&P capacity utilization
7
152 134
87
(30)(18)
(57)
2Q 2016
Adjusted
Earnings
Atlantic
Basin /
Europe
Gulf Coast Central
Corridor
West Coast 3Q 2016
Adjusted
Earnings
$MM
REFINING 3Q 2016
8
5 142 (13) 0
3Q 2016 Adjusted Earnings
97% crude utilization
$117 MM pre-tax turnaround costs
84% clean product yield
$7.23/BBL realized margin
12.96
7.23
(2.26)
(2.94)
1.27
(1.80)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
WORLDWIDE REFINING $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2016
9
Avg Market Crude: $45.68/BBL 56% Market Capture
229 267
29 9
2Q 2016
Adjusted
Earnings
Marketing
& Other
Specialties 3Q 2016
Adjusted
Earnings
MARKETING AND SPECIALTIES 3Q 2016
228 39
3Q 2016 Adjusted Earnings
10
Strong global Marketing margins
Continued strong gasoline demand
Improved Base Oil margins and
volumes
$MM
(111) (110)
2
(1)
2Q 2016
Adjusted
Net Loss
Net Interest
Expense
Corporate
Overhead
& Other
3Q 2016
Adjusted
Net Loss
$MM
CORPORATE AND OTHER 3Q 2016
11
3.1
2.3
1.0
1.8
0.5
(2.0)
(0.3)(1.8)
December 31,
2015Cash
Balance*
CFO
(excludingworking
capital)
Working
Capital
PSXP Equity
Proceeds
Capital
Expenditures& Investments
Shareholder
Distributions
Other September 30,
2016Cash
Balance*
$B
CASH FLOW YTD 2016
12 * Includes cash and cash equivalents
13
OUTLOOK 4Q 2016
Global Olefins & Polyolefins utilization Mid-80%
Refining crude utilization Low-90%
Effective income tax rate Mid-30%
Corporate & Other costs (after-tax) $130 MM - $140 MM
Refining turnaround expenses (pre-tax) $170 MM - $200 MM
PHILLIPS 66 THIRD QUARTER 2016 CONFERENCE CALL
Questions and Answers
PHILLIPS 66 THIRD QUARTER 2016 CONFERENCE CALL
Appendix
ESTIMATED SENSITIVITIES 2016
16 Sensitivities shown above are independent and 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
22.0 23.9 23.6 24.1 24.3
21.6 23.1 22.8 22.9 22.9
8.6 8.9 8.8 8.9 8.9 8.6 7.8 7.7 7.7 7.7
5.2 3.1
1.7 2.2 2.3
5.2 3.0
1.7 2.2 2.3
28%27% 27% 27% 27%
28%
25% 25% 25% 25%
13%
20%
23%
22% 21%
14%
17%
21%
19% 19%
2014 2015 1Q
2016
2Q
2016
3Q
2016
2014 2015 1Q
2016
2Q
2016
3Q
2016
Equity $B Debt $B Cash & Cash Equivalents $B Debt-to-Capital Net-Debt-to-Capital
CAPITAL STRUCTURE 2014 – 2016
17
Consolidated PSX Excluding PSXP
13.11
5.04
(2.48)
(1.64)
(1.42)
(2.53)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
ATLANTIC BASIN/EUROPE $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2016
18
Market 3:2:1 – Dated Brent / Gasoline 83.7 RBOB NYH / Diesel 15ppm NYH
Brent: $45.85/BBL 100% Crude Capacity Utilization 38% Market Capture
10.45
5.47
(2.20)
(3.50)
2.71
(1.99)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
GULF COAST $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2016
19
Market 3:2:1 – LLS / Gasoline 85 CBOB / Diesel 62 10ppm
LLS: $46.53/BBL 94% Crude Capacity Utilization 52% Market Capture
14.57
11.18
(1.96)
(3.46)
2.91
(0.88)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
CENTRAL CORRIDOR $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2016
20
Market 3:2:1 – WTI / Gasoline Unl Sub Octane Group 3 / ULSD Group 3
WTI: $44.88/BBL 99% Crude Capacity Utilization 77% Market Capture
15.66
9.07
(2.03)
(3.28)
0.49
(1.77)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
WEST COAST $/BBL
REFINING MARGINS – MARKET VS. REALIZED 3Q 2016
21
Market 3:2:1 – ANS Spot / Los Angeles CARBOB / Los Angeles No. 2 CARB
ANS: $44.78/BBL 96% Crude Capacity Utilization 58% Market Capture
1,647
556
(16)(82)
(918)(77)
2
3Q 2015
Adjusted
Earnings
Midstream Chemicals Refining Marketing
& Specialties
Corporate
& Other
3Q 2016
Adjusted
Earnings
3Q 2016 Adjusted Earnings
$MM
ADJUSTED EARNINGS 3Q 2016 VS. 3Q 2015
22
75 (110) 134 190 267
91 75
27
(14)
(29)
3Q 2015
Adjusted
Earnings
Transportation NGL DCP
Midstream
3Q 2016
Adjusted
Earnings
$MM
MIDSTREAM 3Q 2016 VS. 3Q 2015
23
63 3 9
3Q 2016 Adjusted Earnings
272
190
(96)
14 0
3Q 2015
Adjusted
Earnings
Olefins &
Polyolefins
Specialties,
Aromatics &
Styrenics
Other 3Q 2016
Adjusted
Earnings
$MM
CHEMICALS 3Q 2016 VS. 3Q 2015
24
165 (6) 31
3Q 2016 Adjusted Earnings
1,052
134
(188)
(298)
(230)
(202)
3Q 2015
Adjusted
Earnings
Atlantic
Basin /
Europe
Gulf
Coast
Central
Corridor
West Coast 3Q 2016
Adjusted
Earnings
$MM
REFINING 3Q 2016 VS. 3Q 2015
25
5 142 (13) 0
3Q 2016 Adjusted Earnings
344
267
(63)(14)
3Q 2015
Adjusted
Earnings
Marketing
& Other
Specialties 3Q 2016
Adjusted
Earnings
$MM
MARKETING AND SPECIALTIES 3Q 2016 VS. 3Q 2015
26
228 39
3Q 2016 Adjusted Earnings
(112) (110)
(7)
9
3Q 2015
Adjusted
Net Loss
Net Interest
Expense
Corporate
Overhead
& Other
3Q 2016
Adjusted
Net Loss
$MM
CORPORATE AND OTHER 3Q 2016 VS. 3Q 2015
27
28
NON-GAAP RECONCILIATIONS
2016
Sep YTD 3Q 2Q Sep YTD 3Q
Phillips 66
Net Income (Loss) Attributable to Phillips 66 1,392$ 511$ 496$ 3,577$ 1,578$
Pre-tax Adjustments:
Asset dispositions - - - (280) (30)
Pension settlement expense - - - 75 75
Impairments by equity affiliates 95 89 - 218 24
Certain tax impacts - - - (5) -
Pending claims and settlements (117) (72) - 30 30
Recognition of deferred logistics commitments 30 - 30 - -
Tax impact of adjustments * 15 28 (27) (132) (30)
Adjusted Net Income (Loss) Attributable to Phillips 66 1,415$ 556$ 499$ 3,483$ 1,647$
Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars) ** 2.61$ 0.96$ 0.93$ 6.52$ 2.90$
Adjusted Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars) ** 2.66$ 1.05$ 0.94$ 6.34$ 3.02$
Millions of Dollars
Except as Indicated
2015
* 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.
29
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Midstream
Net Income (Loss) Attributable to Phillips 66 179$ 75$ 39$ 90$ 101$
Pre-tax Adjustments:
Pension settlement expense - - - 9 9
Impairments by equity affiliates 6 - - 198 4
Asset dispositions - - - (30) (30)
Pending claims and settlements (45) - - - -
Tax impact of adjustments 14 - - (61) 7
Adjusted Net Income (Loss) Attributable to Phillips 66 154$ 75$ 39$ 206$ 91$
Chemicals
Net Income (Loss) Attributable to Phillips 66 447$ 101$ 190$ 750$ 252$
Pre-tax Adjustments:
Impairments by equity affiliates 89 89 - 20 20
Tax impact of adjustments - - - - -
Adjusted Net Income (Loss) Attributable to Phillips 66 536$ 190$ 190$ 770$ 272$
Millions of Dollars
Except as Indicated
2016 2015
30
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Refining
Net Income (Loss) Attributable to Phillips 66 412$ 177$ 149$ 2,145$ 1,003$
Pre-tax Adjustments:
Asset dispositions - - - (8) -
Pension settlement expense - - - 49 49
Pending claims and settlements (70) (70) - 30 30
Recognition of deferred logistics commitments 30 - 30 - -
Tax impact of adjustments - 27 (27) (65) (30)
Adjusted Net Income (Loss) Attributable to Phillips 66 372$ 134$ 152$ 2,151$ 1,052$
Marketing & Specialties
Net Income (Loss) Attributable to Phillips 66 701$ 267$ 229$ 956$ 338$
Pre-tax Adjustments:
Asset dispositions - - - (242) -
Pension settlement expense - - - 10 10
Tax impact of adjustments - - - (4) (4)
Adjusted Net Income (Loss) Attributable to Phillips 66 701$ 267$ 229$ 720$ 344$
Corporate and Other
Net Income (Loss) Attributable to Phillips 66 (347)$ (109)$ (111)$ (364)$ (116)$
Pre-tax Adjustments:
Pending claims and settlements (2) (2) - - -
Pension settlement expense - - - 7 7
Certain tax impacts - - - (5) -
Tax impact of adjustments 1 1 - (2) (3)
Adjusted Net Income (Loss) Attributable to Phillips 66 (348)$ (110)$ (111)$ (364)$ (112)$
Millions of Dollars
Except as Indicated
2016 2015
31
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Midstream - Transportation
Net Income (Loss) Attributable to Phillips 66 200$ 63$ 65$ 207$ 77$
Pre-tax Adjustments:
Tax impact of adjustments - - - - -
Adjusted Net Income (Loss) Attributable to Phillips 66 200$ 63$ 65$ 207$ 77$
Midstream - NGL
Net Income (Loss) Attributable to Phillips 66 (25)$ 3$ (17)$ 48$ 26$
Pre-tax Adjustments:
Pension settlement expense - - - 9 9
Tax impact of adjustments - - - (3) (3)
Adjusted Net Income (Loss) Attributable to Phillips 66 (25)$ 3$ (17)$ 54$ 32$
Midstream - DCP Midstream
Net Income (Loss) Attributable to Phillips 66 4$ 9$ (9)$ (165)$ (2)$
Pre-tax Adjustments:
Impairments by equity affiliates 6 - - 198 4
Pending claims and settlements (45) - - - -
Asset dispositions - - - (30) (30)
Tax impact of adjustments 14 - - (58) 10
Adjusted Net Income (Loss) Attributable to Phillips 66 (21)$ 9$ (9)$ (55)$ (18)$
Millions of Dollars
Except as Indicated
2016 2015
32
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Refining - Atlantic Basin / Europe
Net Income (Loss) Attributable to Phillips 66 41$ 5$ 32$ 383$ 180$
Pre-tax Adjustments:
Pension settlement expense - - - 13 13
Pending claims and settlements - - - 8 8
Recognition of deferred logistics commitments 30 - 30 - -
Tax impact of adjustments (27) - (27) (46) (8)
Adjusted Net Income (Loss) Attributable to Phillips 66 44$ 5$ 35$ 358$ 193$
Refining - Gulf Coast
Net Income (Loss) Attributable to Phillips 66 103$ 30$ 5$ 423$ 269$
Pre-tax Adjustments:
Pension settlement expense - - - 16 16
Pending claims and settlements (70) (70) - 10 10
Tax impact of adjustments 27 27 - (10) (10)
Adjusted Net Income (Loss) Attributable to Phillips 66 60$ (13)$ 5$ 439$ 285$
Millions of Dollars
Except as Indicated
2016 2015
33
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Refining - Central Corridor
Net Income (Loss) Attributable to Phillips 66 217$ 142$ 55$ 771$ 360$
Pre-tax Adjustments:
Pension settlement expense - - - 11 11
Pending claims and settlements - - - 7 7
Tax impact of adjustments - - - (6) (6)
Adjusted Net Income (Loss) Attributable to Phillips 66 217$ 142$ 55$ 783$ 372$
Refining - West Coast
Net Income (Loss) Attributable to Phillips 66 51$ -$ 57$ 568$ 194$
Pre-tax Adjustments:
Asset dispositions - - - (8) -
Pension settlement expense - - - 9 9
Pending claims and settlements - - - 5 5
Tax impact of adjustments - - - (3) (6)
Adjusted Net Income (Loss) Attributable to Phillips 66 51$ -$ 57$ 571$ 202$
Millions of Dollars
Except as Indicated
2016 2015
34
NON-GAAP RECONCILIATIONS
Sep YTD 3Q 2Q Sep YTD 3Q
Marketing & Specialties - Marketing & Other
Net Income (Loss) Attributable to Phillips 66 589$ 228$ 199$ 805$ 285$
Pre-tax Adjustments:
Asset dispositions - - - (242) -
Pension settlement expense - - - 10 10
Tax impact of adjustments - - - (4) (4)
Adjusted Net Income (Loss) Attributable to Phillips 66 589$ 228$ 199$ 569$ 291$
Marketing & Specialties - Specialties
Net Income (Loss) Attributable to Phillips 66 112$ 39$ 30$ 151$ 53$
Pre-tax Adjustments:
Tax impact of adjustments - - - - -
Adjusted Net Income (Loss) Attributable to Phillips 66 112$ 39$ 30$ 151$ 53$
Millions of Dollars
Except as Indicated
20152016
35
* Total equity plus total debt
NON-GAAP RECONCILIATIONS
2016 September YTD Phillips 66
Numerator ($MM)
Net Income 1,450$
After-tax interest expense 162$
GAAP ROCE earnings 1,612$
Special Items 23$
Adjusted ROCE earnings 1,635$
Denominator ($MM)
GAAP average capital employed * 32,997$
2016 Annualized Adjusted ROCE 7%
2016 Annualized GAAP ROCE 7%
36
NON-GAAP RECONCILIATIONS
Phillips 66
Consolidated
Phillips 66
Partners *
Adjusted
Phillips 66
Total Debt 8,858$ 1,141$ 7,717$
Total Equity 24,311$ 1,373$ 22,938$
Debt-to-Capital Ratio 27% 25%
Total Cash 2,337$ 19$ 2,318$
Net-Debt-to-Capital Ratio 21% 19%
Millions of Dollars
2016
3Q
* PSXP's third-party debt and Phillips 66's noncontrolling interest attributable to PSXP
37
NON-GAAP RECONCILIATIONS
Growth Sustaining Total Growth Sustaining Total
Capital expenditures and investments
Midstream 269$ 46$ 315$ 920$ 125$ 1,045$
Refining 83$ 206$ 289$ 252$ 575$ 827$
Marketing & Specialties 12$ 14$ 26$ 34$ 29$ 63$
Corporate and Other 1$ 30$ 31$ 3$ 93$ 96$
Total 365$ 296$ 661$ 1,209$ 822$ 2,031$
Millions of Dollars
2016
September YTD
Millions of Dollars
2016
3Q
38
NON-GAAP RECONCILIATIONS
Millions of Dollars
2016
3Q
Effective Tax Rates
Income before taxes 813$
Special items 17$
Adjusted income before taxes 830$
Provision for taxes 277$
Special items (28)$
Adjusted provision for taxes 249$
GAAP effective tax rate 34%
Adjusted effective tax rate 30%