PHILLIPS CREDIT SUISSE ENERGY SUMMIT Greg Garland, Chairman and CEO February 12, 2014

Transcription

1 PHILLIPS CREDIT SUISSE ENERGY SUMMIT Greg Garland, Chairman and CEO February 12, 2014

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, intends, objectives, projects, 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 crude oil, NGL, and natural gas prices, and refining and petrochemical 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 crude oil, natural gas, NGL, 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; 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 forward-looking statements, whether as a result of new information, future events or otherwise. 2

3 STRATEGY Operating excellence Growth Returns Distributions High-performing organization 3

4 OPERATING EXCELLENCE 2.5 Total Recordable Rates (Incidents per 200,000 Hours Worked) 250 U.S. Refining Emissions (Lb/MBbl) (SOx, NOx, and Particulate Matter) Phillips 66 CPChem DCP Industry Average See appendix for footnotes. 4

5 SEGMENT STRATEGY Midstream: Growth Build on integrated Transportation system Utilize Phillips 66 Partners LP as a growth vehicle Expand DCP Grow NGL Operations Chemicals: Growth Grow CPChem Advance olefins and polyolefins projects Capitalize on domestic feedstock advantage Refining: Enhance returns Process more advantaged crudes Expand export capability Increase yields Decrease costs Optimize portfolio Marketing & Specialties: Selective growth Expand European Retail Marketing Grow Lubricants Ensure refinery pull-through Gulf Coast Fractionator, Mont Belvieu, Texas. 5

6 HIGH-PERFORMING BUSINESSES Midstream ROCE Chemicals ROCE Refining and M&S ROCE PSX 15% PSX 26% PSX 17% OKE 8% LYB 23% MPC 15% EPD 7% WLK 21% CVX 8% XOM Chem 19% VLO 8% KMP 6% DOW 9% TSO 6% 2013 Sept Annualized ROCE See appendix for footnotes. 6

7 MIDSTREAM MACRO ENVIRONMENT 6 5 U.S. NGL Production (MMBD) History Forecast Growing domestic NGL production is reshaping U.S. midstream business 4 Wide range of consultant forecasts Infrastructure needed to move new production to market centers EIA Consultant A Consultant B Consultant C Consultant D Consultant E Consultant F 7

8 CHEMICALS MACRO ENVIRONMENT 3,000 U.S. Ethane Production and Demand (MBD) 2013 Ethylene Production Cost Curve ($/ton) History Forecast High Production 1,500 2,500 2,000 Low Production 1,000 Western Europe 1,500 1,000 Projected New Cracker Capacity by 2018 Other Formosa LyondellBasell Sasol ExxonMobil CPChem Dow 2013 average Production 500 Demand U.S. Ethane ME Ethane U.S. Average SE Asia NE Asia Cumulative Ethylene Capacity (MM tons) See appendix for footnotes. 8

9 REFINING MACRO ENVIRONMENT WTI - LLS (Nominal $/bbl) LLS - Brent (Nominal $/bbl) Maya - LLS (Nominal $/bbl) avg: $-10.04/bbl avg: $1.18/bbl avg: $-11.25/bbl Q09 1Q10 1Q11 1Q12 1Q Q09 1Q10 1Q11 1Q12 1Q Q09 1Q10 1Q11 1Q12 1Q13 9

10 REFINING MACRO ENVIRONMENT U.S. tight oil and Canadian production are displacing imports Total U.S. Waterborne Crude Imports (MMBD) Heavy Sweet Heavy Sour Light/Medium Sweet Light/Medium Sour 10 Most grades of U.S. waterborne imports have diminished Expect trend to continue See appendix for footnotes. 10

11 MIDSTREAM GROWTH Build on integrated Transportation system Utilize Phillips 66 Partners LP as a growth vehicle Expand DCP Grow NGL Operations MLP. Pecan Grove Crude Terminal, Carlyss, LA. 11

12 TRANSPORTATION Crude rail cars Jones Act ships Unit train crude unloading facility projects Clean products export facility projects Terminal butane blending Re-commission idle pipelines New refinery storage Jones Act tanker delivering Eagle Ford crude. 12

13 PHILLIPS 66 PARTNERS LP Strategic relationship with PSX Stable and predictable cash flows Significant growth potential Low cost capital source Financial flexibility 13

14 DCP MIDSTREAM Gathering and Processing NGL Pipelines Goliad Gas Plant 200 MMCFD Sand Hills 720 miles, MBD Granite Wash Gathering System Expansion 140 MMCFD National Helium Gas Plant 600 MMCFD Rawhide Gas Plant 75 MMCFD Southern Hills 800 miles, 175 MBD Front Range 435 miles, MBD O Connor Gas Plant MMCFD Figures shown are 100% DCP. DCP Legacy New/Growth G&P Plant Under construction/development Expansion/Restart Texas Express 580 miles, MBD 14

15 NGL OPERATIONS Sand Hills and Southern Hills startup Butane and butylene storage hub Sweeny fractionator and pipelines Freeport export terminal and de-ethanizer Clemens salt dome storage Sand Hills Pipeline. Metering station. Mont Belvieu, Texas. 15

16 NGL Ops and Transportation DCP MIDSTREAM GROWTH 2012 G&P in Execution New pipelines G&P Expansions Sand Hills and Southern Hills pipelines Capital Program ($B) Rail Cars 0.5 Rail Offloading Facilities Butane and Butylene Storage Hub Sweeny fractionator, storage, and pipelines E Transportation NGL Operations DCP Midstream Freeport export terminal and de-ethanizer See appendix for footnotes. 16

17 CHEMICALS GROWTH Grow CPChem Advance olefins and polyolefins projects Capitalize on domestic feedstock advantage 17

18 CHEMICALS FEEDSTOCK ADVANTAGE Portfolio concentrated in advantaged feedstock regions 25 Worldwide Ethylene Capacity (Billion Lbs) U.S. 100% light feedstock based 20 Other M.E. region Leading Middle East position 15 N.A. light feedstock First mover on U.S. expansions 10 5 See appendix for footnotes. Other category is predominantly heavy feedstock capacity. N.A. light feedstock is predominantly ethane, propane, and butane. - CPC CPC '17 DOW XOM LYB WLK 18

19 CHEMICALS ADVANCING OLEFINS AND POLYOLEFINS PROJECTS 1-Hexene Unit Sweeny Ethylene Furnace NAO Expansion US Gulf Coast Petrochemicals Project Capacity increase 25% from 2013 to 2017 Estimated project spending $ B Additional EBITDA $ B per year CPChem. Mesaieed, Qatar Estimated capex and EBITDA figures are 100% CPChem. Estimated EBITDA based on 2012 IHS industry margins. 19

20 CHEMICALS EXECUTING GROWTH Hexene Unit 250 kmta Capital Program ($B) Sweeny Ethylene Furnace 90 kmta 0.8 USGC Petrochemicals 1,500 kmta (ethylene), 1,000 kmta (polyethylene) 0.4 NAO Expansion ~130 kmta E See appendix for footnotes. 20

21 REFINING ENHANCE RETURNS Process more advantaged crudes Expand export capability Increase yields Decrease costs Optimize portfolio San Francisco Refinery, Rodeo Facility. San Francisco, California. 21

22 REFINING DIVERSIFIED PORTFOLIO Western / Pacific 440 MBD Central Region 475 MBD Gulf Coast 733 MBD Atlantic Basin / Europe 588 MBD FD Ireland BI WG HU SF BW United Kingdom WR LA BG PC Germany MI ME Malaysia SW LC AL Refinery system runs ~50% Sweet - 50% Sour crudes; ~65% Light/Medium - 35% Heavy crudes See appendix for footnotes. 22

23 REFINING ADVANTAGED CRUDE U.S. Refining (MBD) Brent Other Light/Medium Heavy Canadian WTI/WTS Current 3+ Years See appendix for footnotes. 23

24 REFINING ENHANCE RETURNS Increase product placement optionality Domestic Exports (MBD) West Capture global demand growth 285 West Maintain high utilization rates West Gulf 180 Gulf Gulf 100 Distillate Distillate East Gasoline Gasoline East East Actual Capacity Actual Capacity Capacity Years 24

25 REFINING ENHANCE RETURNS Adjusted ROCE (%) Capital Program ($B) 30% % % 0% E Refining WRB See appendix for footnotes. 25

26 MARKETING AND SPECIALTIES SELECTIVE GROWTH Expand European Retail Marketing Grow Lubricants Ensure refinery pull-through Berlin, Germany 26

27 FINANCIAL SUMMARY Disciplined capital allocation Enhanced financial flexibility Growing shareholder distributions Adjusted EBITDA and ROCE ($B) Midstream Chemicals Marketing & Specialties Refining Corporate ROCE 6% 2% % % %

28 CAPITAL STRUCTURE 30% 28% 25% 25% 23% 22% 22% 20% - 30% Q Q Q Q Q Q Q 2013 Equity $B Debt $B Debt to Capital 28

29 TOTAL CAPITAL PROGRAM $B Midstream Refining Marketing & Specialties Corporate DCP CPChem WRB E E E Phillips 66 Consolidated Selected Joint Ventures Total See appendix for footnotes. 29

30 SHAREHOLDER DISTRIBUTIONS Regular dividends Secure 4.0 Distributions ($B) Growing Competitive Share repurchase Immediate EPS growth Dividends Share Repurchases Below intrinsic value Announced $5 B in buybacks 0.0 3Q 12 4Q 12 1Q 13 2Q 13 3Q 13 4Q 13 Total $3.7 B capital returned to shareholders 30

31 A PROMISING FUTURE Operating excellence Growth Returns Distributions High-performing organization 31

32 Save the date: 2014 Phillips 66 Analyst meeting April 10, 2014 New York, NY DCP Duke Energy Gas Plant, Colorado INSTITUTIONAL INVESTORS CONTACT Rosy Zuklic Manager, Investor Relations

33 FOOTNOTES Slide 4 Injury statistics do not include major projects. Industry Averages are from: Phillips 66 American Fuels and Petrochemical Manufacturers (AFPM) refining data, CPChem American Chemistry Council (ACC), DCP Gas Processors Association (GPA). U.S. Refining emissions exclude Trainer. Values are calculated as pounds of SOx, NOx, and particulate matter per thousand barrels of clean product produced. WRB is included at 50%. Slide 6 To facilitate peer comparison, PSX s Refining and Marketing & Specialties segments were combined for the Downstream ROCE calculation and recast to exclude impacts of PSPI. Downstream ROCE for MPC, VLO and TSO are total company. Downstream ROCE for CVX estimated based on Downstream excluding Chemicals. XOM Chem refers to Exxon Mobil s Chemicals segment. Slide 8 US Ethane Supply/Demand Imbalance Source: Historical: EIA; Forecast: P66 internal analysis 2013 Ethylene Production Cost Curve Source: HIS Slide 10 Source: ClipperData Crude definitions: Light >32API, Medium API, Heavy <24 API. Sweet <0.5 sulfur, Sour >=0.5 sulfur 33

34 FOOTNOTES Slide 16 DCP Midstream capital program includes equity share of DCP Midstream capital NGL Ops includes acquisition costs for one-third interest of Sand Hills and Southern Hills Pipelines totaling approximately $0.5 B. This amount was also included in DCP Midstream's capital spending, primarily in Slide 18 Source: ICIS, 10-K filings, and external press releases Slide 20 Project capacities are gross capacity. Chemicals capital program denotes equity share of CPChem capital. Slide 22 Sour is defined as sulfur > 0.54wt% Heavy is defined as API < 24 Slide 23 U.S. advantaged crude percentages are on an equity basis. Light and medium Canadian crude are in the WTI/WTS category. Slide 25 Capital program denotes equity share of WRB capital as well as non-cash capital leases. Slide 29 Total capital program includes non-cash capital leases and our net share of certain equity affiliate investments. 34

35 2014 SENSITIVITIES Net Income $MM Midstream 1 /Gal Increase in NGL price 4 10 /MMBtu Increase in Natural Gas price 2 $1/BBL Increase in WTI price 2 Chemicals 1 /Lb Increase in Olefins Chain Margin (Ethylene, Polyethylene, NAO) 35 Worldwide Refining (assuming 94% refining utilization) $1/BBL Increase in Refining Margin 440 Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators: $1/BBL Widening LLS / Maya Differential (LLS less Maya) 50 $1/BBL Widening WTI / WCS Differential (WTI less WCS) 40 $1/BBL Widening WTI / WTS Differential (WTI less WTS) 15 $1/BBL Widening LLS / WCS Differential (LLS less WCS) 10 $1/BBL Widening ANS / WCS Differential (ANS less WCS) 10 $0.10/MMBtu Increase in Natural Gas price (10) Sensitivities shown above are independent and are only valid within a limited price range 35

36 NON-GAAP RECONCILIATIONS ADJUSTED EARNINGS SLIDE 6 Millions of Dollars Year Year Year Year Year Midstream Earnings (loss) $ 469 $ 53 $ 2,149 $ 386 $ 386 Adjustments: Net (gain) loss on asset sales - - (1,618) - (19) Impairments Pending claims and settlements - (23) Gain on share issuance by equity affiliate (88) Hurricane-related costs Adjusted earnings $ 469 $ 362 $ 535 $ 386 $ 358 Chemicals Earnings (loss) $ 986 $ 823 $ 716 $ 486 $ 228 Adjustments: Impairments Premium on early debt retirement Repositioning tax impacts Adjusted earnings $ 986 $ 980 $ 716 $ 486 $

37 NON-GAAP RECONCILIATIONS ADJUSTED EARNINGS SLIDE 6 Millions of Dollars Year Year Year Year Year Refining Earnings (loss) $ 1,851 $ 3,217 $ 1,529 $ (545) $ (536) Adjustments: Net (gain) loss on asset sales - (104) Impairments ,110 - Canceled projects Severance accruals Tax law impacts (13) Pending claims and settlements Repositioning tax impacts Hurricane-related costs Adjusted earnings $ 1,838 $ 3,844 $ 1,982 $ 622 $ (511) Marketing & Specialties Earnings (loss) $ 790 $ 417 $ 530 $ 537 $ 519 Adjustments: Net (gain) loss on asset sales (23) (2) (23) (116) (13) Impairments Pending claims and settlements (16) 38 - (35) - Exit of business line Tax law impacts (4) Repositioning tax impacts Adjusted earnings $ 781 $ 516 $ 507 $ 394 $

38 NON-GAAP RECONCILIATIONS 2013 ROCE SLIDE 7 Refining and Midstream Chemicals September 30, 2013 YTD M&S Numerator ($MM) Net Income $ 358 $ 725 $ 2,118 After-tax interest expense GAAP ROCE earnings ,118 Special Items - - (22) Adjusted ROCE earnings $ 358 $ 725 $ 2,096 Denominator ($MM) GAAP average capital employed* $ 3,182 $ 3,731 $ 16,678 Annual Adjusted ROCE 15% 26% 17% Annual GAAP ROCE 15% 26% 17% * Total equity plus total debt 38

39 NON-GAAP RECONCILIATIONS CPCHEM EBITDA SLIDE 20 Incremental Project Earnings Projections EBITDA Reconcilation to Net Income - $MM Estimated incremental net income (CPChem View) Low High Estimated incremental net income 1,000 1,313 Estimated depreciation Estimated interest - - Estimated taxes Estimated incremental EBITDA 1,300 1,600 39

40 NON-GAAP RECONCILIATIONS REFINING ROCE SLIDE 26 Millions of Dollars Except as Indicated Year Year Year Year Refining - ROCE Numerator Net Income $ 1,851 $ 3,217 $ 1,529 $ (545) After-tax interest expense GAAP ROCE earnings 1,851 3,217 1,529 (545) Special Items (13) ,167 Adjusted ROCE earnings $ 1,838 $ 3,844 $ 1,982 $ 622 Denominator GAAP average capital employed* $ 14,252 $ 14,331 $ 15,160 $ 16,829 Annual Adjusted ROCE 13% 27% 13% 4% Annual GAAP ROCE 13% 22% 10% -3% * Total equity plus total debt 40

41 NON-GAAP RECONCILIATIONS ROCE SLIDE 28 Millions of Dollars Except as Indicated Year Year Year Year Year Phillips 66 - ROCE Numerator Net Income $ 3,743 $ 4,131 $ 4,780 $ 740 $ 479 After-tax interest expense GAAP ROCE earnings 3,921 4,291 4, Special Items (83) 1,215 (1,227) Adjusted ROCE earnings $ 3,838 $ 5,506 $ 3,564 $ 1,735 $ 482 Denominator GAAP average capital employed* $ 28,163 $ 25,732 $ 25,064 $ 26,906 $ 26,417 Discontinued Operations (191) $ (176) $ (163) $ (168) $ (173) Adjusted average capital employed* $ 27,972 $ 25,556 $ 24,901 $ 26,738 $ 26,244 Annual Adjusted ROCE 14% 22% 14% 6% 2% Annual GAAP ROCE 14% 17% 19% 3% 2% * Total equity plus total debt 41

42 NON-GAAP RECONCILIATIONS ADJUSTED EBITDA SLIDE 28 Millions of Dollars Year Year Year Year Year Phillips 66 Net Income $ 3,743 $ 4,131 $ 4,780 $ 740 $ 479 Less: Income from discontinued operations Plus: Income taxes 1,844 2,473 1, Net interest expense (16) (41) (44) Depreciation and amortization EBITDA from continuing operations $ 6,731 $ 7,693 $ 7,445 $ 2,105 $ 1,646 Adjustments (pre-tax): Net (gain) loss on asset sales (40) (189) (1,636) (234) (37) Gain on share issuance by equity affiliate (135) Impairments - 1, , Canceled projects Severance accruals Exit of business line Tax law impacts (28) Pending claims and settlements (25) 56 - (56) 39 Premium on early debt retirement Repositioning costs Hurricane-related costs Adjusted EBITDA $ 6,692 $ 9,042 $ 6,383 $ 3,461 $ 1,642 42

43 NON-GAAP RECONCILIATIONS ADJUSTED EBITDA SLIDE 28 Millions of Dollars Year Year Year Year Year Midstream Net Income $ 486 $ 60 $ 2,154 $ 391 $ 389 Income taxes Net interest expense Depreciation and amortization EBITDA $ 839 $ 172 $ 2,690 $ 651 $ 693 Adjustments (pre-tax): Net (gain) loss on asset sales - - (1,830) - (15) Impairments Pending claims and settlements - (37) Gain on share issuance by equity affiliate (135) Hurricane-related costs Adjusted EBITDA $ 839 $ 660 $ 866 $ 651 $

44 NON-GAAP RECONCILIATIONS ADJUSTED EBITDA SLIDE 28 Millions of Dollars Year Year Year Year Year Chemicals Net Income $ 986 $ 823 $ 716 $ 486 $ 228 Income taxes EBITDA $ 1,361 $ 1,189 $ 968 $ 680 $ 295 Adjustments (pre-tax): Impairments Premium on early debt retirement Adjusted EBITDA $ 1,361 $ 1,376 $ 968 $ 680 $

45 NON-GAAP RECONCILIATIONS ADJUSTED EBITDA SLIDE 28 Millions of Dollars Year Year Year Year Year Refining Net Income $ 1,851 $ 3,217 $ 1,529 $ (545) $ (536) Income taxes 1,091 2, (56) (286) Net interest expense - - (1) (2) (1) Depreciation and amortization EBITDA $ 3,627 $ 5,939 $ 3,094 $ 56 $ (182) Adjustments (pre-tax): Net (gain) loss on asset sales - (185) Impairments ,500 - Canceled projects Severance accruals Tax law impacts (22) Pending claims and settlements Hurricane-related costs Adjusted EBITDA $ 3,605 $ 6,445 $ 3,896 $ 1,690 $ (143) 45

46 NON-GAAP RECONCILIATIONS ADJUSTED EBITDA SLIDE 28 Millions of Dollars Year Year Year Year Year Marketing & Specialities Net Income $ 790 $ 417 $ 530 $ 537 $ 519 Income taxes Net interest expense - - (32) (40) (44) Depreciation and amortization EBITDA $ 1,269 $ 814 $ 962 $ 969 $ 1,053 Adjustments (pre-tax): Net (gain) loss on asset sales (40) (4) (40) (234) (22) Impairments Pending claims and settlements (25) 62 - (56) - Exit of business line Tax law impacts (6) Adjusted EBITDA $ 1,252 $ 872 $ 922 $ 691 $ 1,090 46

47 NON-GAAP RECONCILIATIONS ADJUSTED EBITDA SLIDE 28 Millions of Dollars Year Year Year Year Year Corporate Net Income $ (431) $ (434) $ (192) $ (159) $ (140) Income taxes (263) (239) (97) (93) (75) Net interest expense Depreciation and amortization EBITDA $ (365) $ (421) $ (269) $ (251) $ (213) Adjustments (pre-tax): Impairments Repositioning costs Adjusted EBITDA $ (365) $ (311) $ (269) $ (251) $ (213) 47

48 NON-GAAP RECONCILIATIONS SWEENY FRAC AND EXPORT EBITDA Sweeny Fractionator & Export Facility Millions of Dollars First Year Estimated net income $ 190 Estimated income taxes 117 Estimated net interest expense 5 Estimated depreciation and amortization 118 Estimated EBITDA $

49 NON-GAAP RECONCILIATIONS CPCHEM EBITDA CPChem Millions of Dollars 2012 Year Net Income $ 2,403 Income taxes 67 Net interest expense 9 Depreciation and amortization 356 CPChem EBITDA $ 2,835 Adjustments* 252 Adjusted CPChem EBITDA $ 3,087 * Primarily related to premium on early debt retirement 49