Phillips 66 Profits Soared as Refineries Run at Record Capacity Despite Crack Spread Falling

Houston based oil refiner Phillips 66 $PSX on Tuesday reported better than expected third quarter earnings of $5.4 billion compared with $402 million during the same period last year. Tight refining market supported high gasoline prices with refineries running at record levels this year, strong export demand amid a squeezed supply due to Russia’s invasion of Ukraine and plant closings. The composite global market crack actually fell 22% from $46.72 in the second quarter to $36.29 per barrel in the third quarter.

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Phillips 66 Q3 22 Earnings:

Highlights

  • Earnings of $5.4 billion, or $11.16 per share
  • Up from $402 million, or 91 cents per share, a year earlier.
  • Adj EPS $6.46 (est $5.04)
  • Generated $3.1 billion of operating cash flow
  • Refining Adj Pre-tax $2.8 billion, v Adj Pre-tax $3.1 billion in Q2
  • Composite global market crack decreased 22% from $46.72 in the second quarter to $36.29 per barrel in the third quarter.
  • Chemicals Adj. Pretax $135M, (est. $111M)
  • Midstream Adj. Pretax $645M, +0.5% Y/Y
  • Phillips returned $1.2 billion through share repurchases and dividends during the quarter.

CVX Stock Market Reaction

  • Record & 52wk $111.28 High today $109.97
  • 107.44 ▲ +3.15 (+3.02%) Pre-Market
  • 107.44 ▲ +29.28 (+37.47%) past year
  • 107.44 ▲ +13.81 (+14.76%) past 5 years

“Third-quarter results reflect a continued favorable market environment, as well as strong operating performance and improved market capture,” Phillips 66 CEO Mark Lashier said. “Our focus remains on operating safely and reliably producing critical energy products.”

“In Midstream, we increased our economic interest in DCP Midstream to capture the value of a fully integrated NGL business from wellhead to market. Our Sweeny Frac 4 started up on time and under budget. With this latest expansion, we are now processing over 550,000 barrels per day of natural gas liquids at our Sweeny Hub.

Financial Position, Liquidity and Return of Capital

Phillips 66 generated $3.1 billion in cash from operations in the third quarter of 2022.

During the quarter, the company funded $466 million of dividends and $694 million of share repurchases. Capital expenditures and investments for the quarter were $735 million, including the company’s $306 million investment in DCP Midstream, LLC in connection with the merger, net of cash acquired. The company ended the quarter with 473 million shares outstanding.

As of Sept. 30, 2022, the company had $10.5 billion of liquidity, reflecting $3.7 billion of cash and cash equivalents, approximately $5.0 billion of total committed capacity under a Phillips 66 revolving credit facility and $1.8 billion under DCP Midstream, LP’s credit and accounts receivable facilities. The company’s consolidated debt-to-capital ratio was 35% and its net debt-to-capital ratio was 29%.

Renewables Outlook

Phillips 66 is converting its San Francisco Refinery in Rodeo, California, into one of the world’s largest renewable fuels facilities. The Rodeo Renewed refinery conversion project is expected to begin commercial operations in the first quarter of 2024.

Upon completion, the facility will have over 50,000 BPD (800 million gallons per year) of renewable fuel production capacity. The conversion will reduce emissions from the facility and produce lower carbon-intensity transportation fuels. The total project is anticipated to cost approximately $850 million.

About Phillips 66

Phillips 66 (NYSE: PSX) manufactures, transports and markets products that drive the global economy. The diversified energy company’s portfolio includes Midstream, Chemicals, Refining, and Marketing and Specialties businesses. Headquartered in Houston, Phillips 66 has employees around the globe who are committed to safely and reliably providing energy and improving lives while pursuing a lower-carbon future.

Source: Phillips 66

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