Release Date: January 31, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Phillips 66 (PSX, Financial) achieved its shareholder distribution target with $13.6 billion distributed through share repurchases and dividends since July 2022.
- The company exceeded its $400 million synergy target on the DCP Midstream acquisition by capturing $500 million of run rate synergies.
- Phillips 66 (PSX) set record clean product yields both in the quarter and for the full year, while reducing costs by $1 per barrel.
- The company has announced $3.5 billion of non-core asset divestitures, exceeding its target of $3 billion.
- Phillips 66 (PSX) plans to grow Midstream and Chemicals mid-cycle adjusted EBITDA by an additional $1 billion by 2027.
Negative Points
- Reported earnings were only $8 million or $0.01 per share, with an adjusted loss of $61 million or $0.15 per share.
- The company experienced a decrease in total company adjusted earnings by $920 million compared with the prior quarter.
- Lower refining results were primarily due to weaker crack spreads and a full quarter of accelerated depreciation for the Los Angeles refinery.
- Marketing and specialties results were mostly lower due to seasonally lower margins.
- Phillips 66 (PSX) ended with a net debt to capital ratio higher than its target level, indicating a need for further debt reduction.
Q & A Highlights
Q: How is Phillips 66's Midstream transformation progressing, and what are the growth strategies?
A: Mark Lashier, CEO, explained that the Midstream business is evolving significantly, focusing on both organic and inorganic growth. The company has consolidated assets to enhance its well head to Market strategy, with acquisitions like Pinnacle and Epic being key examples. Donald Baldridge, EVP of Midstream & Chemicals, added that the Midstream platform can grow organically at a mid-single digits rate annually, with a focus on return-enhancing opportunities within a $2 billion annual capital program.
Q: What is Phillips 66's approach to capital structure as Midstream becomes a larger part of the business?
A: Kevin Mitchell, CFO, stated that the company aims for a sub-30% net debt to capital ratio, with a focus on maintaining a strong balance sheet. The Midstream and Marketing segments provide stable earnings, allowing for a less than three times net debt level. The refining business is seen as upside potential, with a focus on enhancing returns on capital employed.
Q: Are there plans for further asset dispositions, and what is the status of the European retail system?
A: Mark Lashier, CEO, mentioned that while no new disposal targets have been set, the company continues to evaluate its portfolio for value creation opportunities. Discussions are ongoing regarding the retail assets in Austria and Germany, with a focus on unlocking trapped capital for strategic priorities.
Q: How does Phillips 66 view the potential for separating the Midstream business?
A: Mark Lashier, CEO, indicated that while the company recognizes the embedded value in Midstream, it believes more shareholder value can be created by keeping it integrated with refining and petrochemical businesses. Kevin Mitchell, CFO, added that while creating a separate vehicle is an option, the current focus is on enhancing integration value and investor disclosures.
Q: What is the outlook for the Refining business, and are there opportunities for improvement?
A: Richard Harbison, SVP of Refining, highlighted the organization's strong reliability and market capture improvements, with record clean product yields and cost reductions. The company is focused on continuous improvement, targeting $5 billion in mid-cycle EBITDA, with ongoing efforts to enhance reliability and product yields.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
