PHILLIPS 66 FOURTH QUARTER 2018 CONFERENCE CALL. February 8,

Transcription

1 PHILLIPS 66 FOURTH QUARTER 2018 CONFERENCE CALL February 8,

2 CAUTIONARY STATEMENT 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, continues, intends, will, would, objectives, goals, projects, efforts, 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, and natural gas prices, and petrochemical and refining 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; the impact of adverse market conditions or other similar risks to those identified herein affecting PSXP, as well as the ability of PSXP to successfully execute its growth plans; 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 forwardlooking 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. 2

3 EXECUTING THE STRATEGY New fractionation site and Sweeny Refinery, Old Ocean, Texas 3

4 OVERVIEW 2018 $MM (unless otherwise noted) 23% earnings $ 5,550 EPS Operating cash flow 7,573 Capital expenditures and investments 2,639 Shareholder distributions 2 6,081 Net-debt-to-capital ratio ROCE 3 17% (1) Dollars per share (2) Shareholder distributions include dividends and share repurchases (3) After-tax 4

5 CASH FLOW 2018 $B (0.3) (2.6) 3.1 (6.1) 3.0 December 31, 2017 Cash Balance* CFO (excluding Working Capital) Working Capital Debt Capital Shareholder December 31, Expenditures Distributions 2018 & Investments Cash Balance* * Includes cash and cash equivalents 5

6 OVERVIEW $MM (unless otherwise noted) earnings $ 2,260 EPS Operating cash flow 4,139 Capital expenditures and investments 994 Shareholder distributions (1) Dollars per share (2) Shareholder distributions include dividends and share repurchases 6

7 ADJUSTED EARNINGS $MM (157) 1 97 (111) 2,260 1,456 3Q 2018 Earnings Midstream Chemicals Refining Marketing & Specialties Corporate & Other Income Tax Expense Noncontrolling Interests Earnings , (201) (624) (76) Pre-Tax Income (Loss) 7

8 MIDSTREAM $MM Strong Bakken Pipeline volumes Increased transportation volumes associated with strong refinery utilization rates DCP Midstream completed Sand Hills Pipeline expansion 3Q 2018 Pre-Tax Income Transportation NGL and Other DCP Midstream Pre-Tax Income 8

9 CHEMICALS $MM Continued strong cash distributions 95% O&P capacity utilization (67) 263 (35) (9) Seasonally lower sales volumes 152 O&P and SA&S impacted by higher turnaround costs 3Q 2018 Pre-Tax Income Olefins & Polyolefins Specialties, Aromatics & Styrenics Other Pre-Tax Income (22) 9

10 REFINING $MM 99% crude utilization % clean product yield $16.53/BBL realized margin 1,263 2,008 $130 MM pre-tax turnaround costs 3Q 2018 Pre-Tax Income Atlantic Basin / Europe Gulf Coast Central Corridor West Coast Pre-Tax Income ,

11 REFINING MARGINS MARKET VS. REALIZED WORLDWIDE REFINING $/BBL (0.29) Market 3:2:1 Configuration Secondary Products Feedstock Other Realized Margin Avg Market Crude: $65.50/BBL 181% Market Capture 11

12 MARKETING AND SPECIALTIES Captured strong margins in a favorable market $MM Re-imaged 466 branded sites 592 Refined products exports of 249 MBPD 385 3Q 2018 Pre-Tax Income Marketing & Other Specialties Pre-Tax Income

13 CORPORATE AND OTHER $MM 3Q 2018 Pre-Tax Loss Net Interest Expense Corporate Overhead & Other Pre-Tax Loss (223) (201)

14 OUTLOOK 1Q 2019 Global Olefins & Polyolefins utilization Refining crude utilization Refining turnaround expenses (pre-tax) Corporate & Other costs (pre-tax) 2019 Refining turnaround expenses (pre-tax) Corporate & Other costs (pre-tax) Depreciation and amortization Effective income tax rate Mid-90% Mid-80% $140 MM - $170 MM $210 MM - $240 MM $550 MM - $600 MM $850 MM - $900 MM $1.4 B Low-20% 14

15 PHILLIPS 66 FOURTH QUARTER 2018 CONFERENCE CALL Questions and Answers 15

16 PHILLIPS 66 FOURTH QUARTER 2018 CONFERENCE CALL Appendix 16

17 ESTIMATED SENSITIVITIES 2019 Annual EBITDA $MM Midstream - DCP (net to Phillips 66) 10 /Gal Increase in NGL price 6 10 /MMBtu Increase in Natural Gas price 1 $1/BBL Increase in WTI price 1 Chemicals - CPChem (net to Phillips 66) 1 /Lb Increase in Chain Margin (Ethylene, Polyethylene, NAO) 65 Worldwide Refining $1/BBL Increase in Gasoline Margin 350 $1/BBL Increase in Distillate Margin 300 Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators: $1/BBL Widening WTI / WCS Differential (WTI less WCS) 100 $1/BBL Widening LLS / WTI Differential (LLS less WTI) 70 $1/BBL Widening LLS / Maya Differential (LLS less Maya) 60 $1/BBL Widening WTI / WTS Differential (WTI less WTS) 30 $1/BBL Widening ANS / WTI Differential (ANS less WTI) /MMBtu Increase in Natural Gas price (15) Sensitivities shown above are independent and are only valid within a limited price range 17

18 CAPITAL STRUCTURE Consolidated PSX Excluding PSXP 30% 24% 27% 32% 31% 31% 31% 29% 28% 29% 26% 28% 27% 27% 26% 25% 25% 20% 23% 18% 22% 23% 17% % Q Q Q Q Q Q Q Q 2018 Equity $B Debt $B Cash & Cash Equivalents $B Debt-to-Capital Net-Debt-to-Capital 18

19 REFINING MARGINS MARKET VS. REALIZED ATLANTIC BASIN / EUROPE $/BBL Brent: $67.76/BBL 98% Crude Capacity Utilization 159% Market Capture (2.53) Market 3:2:1 Configuration Secondary Products Feedstock Other Realized Margin Market 3:2:1 Dated Brent / Gasoline 83.7 RBOB NYH / Diesel 15ppm NYH 19

20 REFINING MARGINS MARKET VS. REALIZED GULF COAST $/BBL LLS: $66.55/BBL 100% Crude Capacity Utilization 230% Market Capture (0.54) 5.14 Market 3:2:1 Configuration Secondary Products Feedstock Other Realized Margin Market 3:2:1 LLS / Gasoline 85 CBOB / Diesel 62 10ppm 20

21 REFINING MARGINS MARKET VS. REALIZED CENTRAL CORRIDOR $/BBL WTI: $59.09/BBL 106% Crude Capacity Utilization 210% Market Capture (2.37) Market 3:2:1 Configuration Secondary Products Feedstock Other Realized Margin Market 3:2:1 WTI / Gasoline Unl Sub Octane Group 3 / ULSD Group 3 21

22 REFINING MARGINS MARKET VS. REALIZED WEST COAST $/BBL ANS: $68.65/BBL 87% Crude Capacity Utilization 112% Market Capture (0.51) (2.88) Market 3:2:1 Configuration Secondary Products Feedstock Other Realized Margin Market 3:2:1 ANS / Los Angeles CARBOB / Los Angeles No. 2 CARB 22

23 ADJUSTED EARNINGS VS. 4Q 2017 $MM ,498 (420) (19) 213 2,260 (9) 548 4Q 2017 Earnings Midstream Chemicals Refining Marketing & Specialties Corporate & Other Income Tax Expense Noncontrolling Interests Earnings , (201) (624) (76) Pre-Tax Income (Loss) 23

24 MIDSTREAM VS. 4Q 2017 $MM Q 2017 Pre-Tax Income Transportation NGL and Other DCP Midstream Pre-Tax Income 24

25 CHEMICALS VS. 4Q 2017 $MM 22 (19) (12) Q 2017 Pre-Tax Income Olefins & Polyolefins Specialties, Aromatics & Styrenics Other Pre-Tax Income (22) 25

26 REFINING VS. 4Q 2017 $MM , Q 2017 Pre-Tax Income Atlantic Basin / Europe Gulf Coast Central Corridor West Coast Pre-Tax Income ,

27 MARKETING AND SPECIALTIES VS. 4Q 2017 $MM Q 2017 Pre- Tax Income Marketing & Other Specialties Pre-Tax Income

28 CORPORATE AND OTHER VS. 4Q 2017 $MM 4Q 2017 Pre-Tax Loss Net Interest Expense Corporate Overhead & Other Pre-Tax Loss (226) (201) 26 (1) 28

29 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Phillips 66 Consolidated Earnings $ 5,595 2,240 1,492 5,106 3,198 Pre-tax Adjustments: Pending claims and settlements (60) Pension settlement expense Impairments by equity affiliates Certain tax impacts (119) (4) (45) (23) (23) Gain on consolidation of business (423) Hurricane-related costs Tax impact of adjustments* (1) (12) (6) 47 (70) U.S. tax reform (49) (2,735) (2,735) Other tax impacts (70) (65) (5) Noncontrolling interests 6 (1) Earnings $ 5,550 2,260 1,456 2, Earnings Per Share of Common Stock (dollars) $ Earnings Per Share of Common Stock (dollars)** $ * We generally tax effect taxable U.S.-based special items using a combined federal and state statutory income tax rate of approximately 25 percent beginning in 2018, and approximately 38 percent for periods prior to 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

30 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Midstream Pre-Tax Income $ 1, Pre-tax Adjustments: Pending claims and settlements (37) Pension settlement expense Impairments by equity affiliates Hurricane-related costs 10 6 Pre-Tax Income $ 1, Chemicals Pre-Tax Income $ 1, Pre-tax Adjustments: Impairments by equity affiliates Hurricane-related costs Pre-Tax Income $ 1,

31 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Refining Pre-Tax Income $ 4,535 2,001 1,232 2, Pre-tax Adjustments: Pending claims and settlements (51) Gain on consolidation of business (423) Certain tax impacts (6) (4) (1) (23) (23) Pension settlement expense Hurricane-related costs Pre-Tax Income $ 4,572 2,008 1,263 1, Marketing & Specialties Pre-Tax Income $ 1, , Pre-tax Adjustments: Pension settlement expense Hurricane-related costs 1 Certain tax impacts (113) (44) Pre-Tax Income $ 1, ,

32 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Corporate and Other Pre-Tax Loss $ (853) (203) (227) (895) (226) Pre-tax Adjustments: Pending claims and settlements 28 Pension settlement expense U.S. Tax Reform (16) Pre-Tax Loss $ (863) (201) (223) (860) (226) 32

33 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Midstream - Transportation Pre-Tax Income $ Pre-tax Adjustments: Pending claims and settlements (37) Hurricane-related costs 8 5 Pre-Tax Income $ Midstream - NGL and Other Pre-Tax Income $ Pre-tax Adjustments: Pending claims and settlements Pension settlement expense Hurricane-related costs 2 1 Pre-Tax Income $ Midstream - DCP Midstream Pre-Tax Income $ Pre-tax Adjustments: Impairments by equity affiliates Pre-Tax Income $

34 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Refining - Atlantic Basin / Europe Pre-Tax Income $ Pre-tax Adjustments: Pending claims and settlements (7) Certain tax impacts (5) (4) (1) (23) (23) Pension settlement expense Pre-Tax Income $ Refining - Gulf Coast Pre-Tax Income $ 1, Pre-tax Adjustments: Pending claims and settlements (9) Gain on consolidation of business (423) Pension settlement expense Hurricane-related costs Pre-Tax Income $ 1,

35 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Refining - Central Corridor Pre-Tax Income $ 2,817 1, Pre-tax Adjustments: Pending claims and settlements (7) Pension settlement expense Pre-Tax Income $ 2,827 1, Refining - West Coast Pre-Tax Income (Loss) $ (26) 64 (55) Pre-tax Adjustments: Pending claims and settlements (28) Certain tax impacts (1) Pension settlement expense Pre-Tax Income (Loss) $ (20) 44 (55) 35

36 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Marketing & Specialties - Marketing & Other Pre-Tax Income $ 1, Pre-tax Adjustments: Certain tax impacts (113) (44) Pension settlement expense Hurricane-related costs 1 Pre-Tax Income $ 1, Marketing & Specialties - Specialties Pre-Tax Income $ Pre-tax Adjustments: Pre-Tax Income $

37 NON-GAAP RECONCILIATIONS Atlantic Basin/Europe Millions of Dollars (Except as Indicated) Q Central Gulf Coast Corridor West Coast Worldwide Realized Refining Margins Income before income taxes $ , ,001 Plus: Taxes other than income taxes Depreciation, amortization and impairments Selling, general and administrative expenses Operating expenses ,010 Equity in (earnings) losses of affiliates 3 1 (353) (349) Other segment (income) expense, net (1) (5) 2 (4) Proportional share of refining gross margins contributed by equity affiliates Special items: Certain tax impacts (4) (4) Realized refining margins $ , ,528 Total processed inputs (thousands of barrels) 53,613 76,838 27,076 32, ,481 total processed inputs (thousands of barrels)* 53,613 76,838 50,039 32, ,444 Income before income taxes (dollars per barrel)** $ Realized refining margins (dollars per barrel)*** $ * total processed inputs include our proportional share of processed inputs of an equity affiliate. ** Income before income taxes divided by total processed inputs. *** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels. As such, recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts due to rounding. 37

38 NON-GAAP RECONCILIATIONS 2018 Phillips 66 Numerator ($MM) Net Income $ 5,873 After-tax interest expense 398 GAAP ROCE earnings $ 6,271 After-tax Special items (51) ROCE earnings $ 6,220 Denominator ($MM) GAAP average capital employed* $ 37, GAAP ROCE 17% 2018 ROCE 16% * Capital employed is total equity plus total debt 38

39 NON-GAAP RECONCILIATIONS Millions of Dollars 2018 December 31 Phillips 66 Consolidated Phillips 66 Partners * Phillips 66 Total Debt $ 11,160 3,048 8,112 Total Equity 27,153 2,469 24,684 Debt-to-Capital Ratio 29% 25% Total Cash & Cash Equivalents $ 3, ,018 Net-Debt-to-Capital Ratio 23% 17% * Phillips 66 Partners third-party debt and Phillips 66's noncontrolling interest attributable to Phillips 66 Partners 39

40 NON-GAAP RECONCILIATIONS Millions of Dollars Millions of Dollars Q Year Growth Sustaining Total Growth Sustaining Total Capital Expenditures and Investments Midstream $ $ 1, ,548 Refining Marketing & Specialties Corporate and Other Total $ $ 1, ,639 40

41 NON-GAAP RECONCILIATIONS PSX Effective Tax Rate: Millions of Dollars Q Year Effective Tax Rates Income before income taxes $ 2,918 7,445 Special items 42 (19) income before income taxes $ 2,960 7,426 Income tax expense $ 602 1,572 Special items income tax expense $ 624 1,604 GAAP effective tax rate 20.6% 21.1% effective tax rate 21.1% 21.6% 41