Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Phillips 66 (PSX, Financial) returned over $11 billion to shareholders through share repurchases and dividends since July 2022.
- Crude utilization during the quarter was the highest in over five years at 98%, with a clean product yield of 86%.
- The company achieved nearly $1 per barrel reduction in refining costs.
- Phillips 66 (PSX) closed on the acquisition of Pinnacle Midstream, enhancing its natural gas gathering and processing business.
- The Rodeo renewable energy complex reached full rates, processing approximately 50,000 barrels per day of renewable feedstocks.
Negative Points
- Refining margins were impacted by weaker distillate prices and lower crack spreads.
- The company anticipates higher turnaround expenses in the third quarter, between $140 million and $160 million.
- There is regulatory uncertainty for the renewable fuels segment, including credit programs and clean energy policies.
- Midstream segment experienced some volatility due to integration efforts and timing of the DCP integration.
- Phillips 66 (PSX) expects lower crude utilization rates in the third quarter due to market softening and discretionary maintenance.
Q & A Highlights
Highlights from Phillips 66 (PSX) Q2 2024 Earnings Call
Q: Can you elaborate on the cost savings in refining and how much of it is structural versus operational improvements?
A: Mark Lashier (CEO) emphasized that the cost savings are primarily structural, driven by efficiencies and cost reductions across the board. Richard Harbison (SVP, Refining) added that over 1,000 employees have engaged in initiatives to reduce inefficiencies, resulting in over $600 million in structural cost savings.
Q: How is the Rodeo renewable diesel project progressing, and what are the next steps?
A: Mark Lashier (CEO) stated that the Rodeo facility is processing 50,000 barrels per day of renewable feedstocks and is transitioning to lower carbon intensity materials. The facility will also start producing sustainable aviation fuel in Q3, with plans to blend up to 20,000 barrels per day.
Q: Can you discuss the strong performance in the midstream segment and what to expect going forward?
A: Dan Baldridge (EVP, Midstream and Chemicals) highlighted strong volumes and synergy capture from the DCP integration. He noted that while Q3 may see some volume impact due to external factors, the segment is well-positioned for continued strong performance.
Q: What is the status of the asset sales, particularly the retail marketing sale in Europe?
A: Mark Lashier (CEO) mentioned that they are in active discussions with strong interest from multiple parties. The sale would be a significant step in their asset disposition program.
Q: How is the TMX pipeline affecting Canadian crude availability and West Coast dynamics?
A: Brian Mandell (Director) noted that the TMX pipeline is running at 650,000-675,000 barrels per day, with two-thirds of the incremental barrels going to Asia. This has benefited their Ferndale and LA refineries by providing more barrels at advantageous prices.
Q: What are your expectations for polyethylene pricing and overall chemical demand in the back half of the year?
A: Kevin Mitchell (CFO) stated that they are seeing strengthening demand in North America and exports, which should support margin recovery. European producers are struggling with current costs, and Middle East producers face export challenges, all favorable for CP Chem.
Q: How confident are you in achieving the $14 billion mid-cycle EBITDA target by 2025?
A: Mark Lashier (CEO) expressed confidence in achieving the $14 billion target, given the projects, cost structure, and initiatives in place. He noted that while some segments like midstream and marketing are performing at or above mid-cycle, refining remains the big question.
Q: Why has the midstream segment been volatile since the DCP deal, and do you expect this to continue?
A: Dan Baldridge (EVP, Midstream and Chemicals) attributed the volatility to the timing of integration efforts. He expects the segment to stabilize around $675 million per quarter as they complete the integration.
Q: How is the West Coast refining operation performing, and have you changed the way you run it due to TMX pipeline impacts?
A: Richard Harbison (SVP, Refining) noted that the West Coast operation is running well, with higher utilization and clean product yields. The shift of the San Francisco refinery to renewable fuels has also cleaned up their cost profile.
Q: What is the outlook for the Marketing and Specialties business for the rest of the year?
A: Brian Mandell (Director) stated that Q2 saw earnings increases due to seasonality and falling prices. He expects this trend to continue in Q3, with the renewable segment contributing $30-$50 million per quarter.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
