Refiner Phillips 66 Better Than Expected Earnings as Refining Margins Recover

Houston based oil refiner Phillips 66 $PSX on Friday reported better than expected 3Q17 earnings as refining and petrochemical revenues strengthened.  While Phillips 66 is diversifying from refining in both it’s chemical and pipeline sectors $224 million in earnings came from refining. 

Houston based oil refiner Phillips 66 $PSX on Friday reported better than expected 3Q17 earnings as refining and petrochemical revenues strengthened. While Phillips 66 is diversifying from refining in both it’s chemical and pipeline sectors $224 million in earnings came from refining.

Phillips66 Station

Phillips 66 now labels itself an energy manufacturing and logistics company.The refining sector is recovering some after low fuel prices aligned to weak crude oil prices, shrinking profit margins.

$PSX has 13 refineries in the United States and Europe process crude oil and other feedstocks and focus on operating excence, optimization, safety and increasing margins. The business has a global refining capacity of 2.2 million barrels of crude oil per day.

Earnings:  Q3 EPS of $1.66 beats by $0.09.

Reaction: Phillips 66 NYSE: $PSX

Oct 27 Close $91.99 +.80 (+0.88%)

Highlights

  • Achieved 98 percent utilization in Refining
  • CPChem successfully started up operations of its two new U.S. Gulf Coastpolyethylene units
  • Further reducing 2017 capital guidance
  • Returned $817 million to shareholders through dividends and share repurchases
  • Announced new $3 billion share repurchase program
  • Phillips 66 Partners (PSXP) announced $2.4 billion acquisition from Phillips 66 and raised $1.7 billion through equity and debt offerings in October

Midstream’s third-quarter earnings were $85 million, compared with $59 million in the second quarter of 2017. Midstream earnings in the third quarter of 2017 included a favorable settlement of $23 million, partially offset by hurricane-related costs of $3 million and pension settlement expense of $2 million. Second-quarter earnings included pension settlement expense of $5 million.

Transportation adjusted net income for the third quarter of 2017 was $98 million, an increase of $24 million from the second quarter. The increase reflects a full quarter of commercial operations of the Bakken Pipeline, as well as higher throughput volumes due to less planned refinery downtime.

NGL adjusted net income was break-even in the third quarter of 2017, compared with second-quarter adjusted net income of $14 million. The decrease mainly reflects hurricane impacts on fractionation and export volumes.

The company’s equity investment in DCP Midstream generated net income of $1 million in the third quarter, compared with $13 million in the prior quarter. This decrease primarily reflects the impact of rising NGL prices on forward hedges, as well as asset impairments of $6 million.

The Chemicals segment reflects Phillips 66’s equity investment in Chevron Phillips Chemical Company LLC (CPChem). Chemicals’ third-quarter earnings were $121 million, compared with $196 million in the second quarter of 2017. Chemicals’ earnings in the third quarter of 2017 included hurricane-related costs of $32 million.

During the quarter, CPChem’s O&P business contributed $137 million of adjusted earnings to the Chemicals segment. The $42 million decrease from the prior quarter was primarily due to lower margins and volumes. Global O&P utilization was 83 percent, reflecting hurricane-related downtime at U.S. Gulf Coast facilities. Second quarter utilization was 98 percent.

CPChem’s SA&S business contributed $22 million of adjusted earnings in the third quarter, in line with the prior quarter, as lower margins were more than offset by higher equity earnings due to a reduction in unplanned downtime.

Refining’s third-quarter earnings were $550 million, compared with $224 million in the second quarter of 2017. Refining’s earnings in the third quarter of 2017 included favorable settlements of $18 million, mostly offset by pension settlement expense of $8 million and hurricane-related costs of $8 million. Second-quarter earnings included pension settlement expense of $22 million, partially offset by an insurance claim reimbursement of $13 million.

Refining’s adjusted earnings were $548 million in the third quarter of 2017, compared with $233 million in the prior quarter. This increase was largely driven by higher distillate and gasoline margins, as the market crack spreads were up 41 percent and 24 percent, respectively. Realized margins for the quarter were $10.49 per barrel, compared with $8.44 per barrel in the second quarter. Phillips 66’s worldwide crude utilization rate was 98 percent, reflecting strong operations across the system and limited hurricane impacts to the company’s Gulf Coast refineries. Pre-tax turnaround costs for the third quarter were $43 million, compared with second-quarter costs of $154 million. Clean product yield was 85 percent in the third quarter, unchanged from the second quarter.

Last Quarter Earnings: Phillips 66 $PSX Earnings Strength From Refining and Petrochemicals

$PSX’s BoD approved a new $3Bil share repurchase program, increasing the total to $12Bil since 3Q12.

The BoD also declared a quarterly dividend of $0.70 per share, payable on Dec. 1, 2017 to shareholders of record on Nov. 17. 2017

In other segments the controversial Dakota Access Pipeline, which Phillips 66 owns 25 percent of, came online in the second quarter. It’s joint venture, Chevron Phillips Chemical, is due to complete a massive, $6 billion chemicals and plastics expansion in Baytown and Sweeny by the end of the year.

Source: Phillips 66

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