PHILLIPS 66 THIRD QUARTER CONFERENCE CALL. October 28, 2016

Transcription

1 PHILLIPS 66 THIRD QUARTER CONFERENCE CALL October 28, 2016

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 NGL, crude oil, petroleum products and natural gas prices, and refining, marketing 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 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; 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. 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 3

4 OVERVIEW 3Q 2016 $556 MM EPS $1.05 Operating cash flow PSXP equity offering proceeds Capital expenditures and investments Shareholder distributions 1 $883 MM $661 MM $508 MM Net-debt-to-capital ratio 21% Annualized adjusted YTD ROCE 7% $299 MM (1) Shareholder distributions include dividends and share repurchases 4

5 ADJUSTED EARNINGS 3Q 2016 $MM 36 0 (18) Q 2016 Midstream Chemicals Refining Marketing & Specialties Corporate & Other 3Q (110) 3Q

6 MIDSTREAM 3Q 2016 Transportation volumes impacted by scheduled refinery downtime $MM NGL improved seasonal trading and storage (2) 75 DCP Midstream benefited from higher natural gas prices and self-help initiatives 39 18% increase in PSXP distributions to Phillips 66 2Q 2016 Transportation NGL DCP Midstream Q Q

7 CHEMICALS 3Q 2016 Improved ethylene chain cash margin and benzene margins $MM (5) 6 (1) Increased unplanned downtime % O&P capacity utilization 2Q 2016 Olefins & Polyolefins Specialties, Aromatics & Styrenics Other 3Q (6) 3Q

8 REFINING 3Q % crude utilization $MM 87 $117 MM pre-tax turnaround costs 152 (30) (18) (57) % clean product yield $7.23/BBL realized margin 2Q 2016 Atlantic Basin / Europe Gulf Coast Central Corridor West Coast 3Q (13) Q

9 REFINING MARGINS MARKET VS. REALIZED 3Q 2016 WORLDWIDE REFINING $/BBL (2.26) (2.94) (1.80) 7.23 Market 3:2:1 Configuration Secondary Products Feedstock Other Realized Margin Avg Market Crude: $45.68/BBL 56% Market Capture 9

10 MARKETING AND SPECIALTIES 3Q 2016 $MM 29 9 Strong global Marketing margins Continued strong gasoline demand Improved Base Oil margins and volumes 2Q 2016 Marketing & Other Specialties 3Q Q

11 CORPORATE AND OTHER 3Q 2016 $MM 2Q 2016 Net Loss Net Interest Expense Corporate Overhead & Other 3Q 2016 Net Loss (111) (110) 2 (1) 11

12 CASH FLOW YTD 2016 $B (2.0) 3.1 (1.8) (0.3) 2.3 December 31, 2015 Cash Balance* CFO (excluding working capital) Working Capital PSXP Equity Proceeds Capital Expenditures & Investments Shareholder Distributions Other September 30, 2016 Cash Balance* * Includes cash and cash equivalents 12

13 OUTLOOK 4Q 2016 Global Olefins & Polyolefins utilization Refining crude utilization Refining turnaround expenses (pre-tax) Corporate & Other costs (after-tax) Effective income tax rate Mid-80% Low-90% $170 MM - $200 MM $130 MM - $140 MM Mid-30% 13

14 PHILLIPS 66 THIRD QUARTER 2016 CONFERENCE CALL Questions and Answers

15 PHILLIPS 66 THIRD QUARTER 2016 CONFERENCE CALL Appendix

16 ESTIMATED SENSITIVITIES 2016 Annual Net Income $MM Midstream - DCP (net to Phillips 66) 10 /Gal Increase in NGL price /MMBtu Increase in Natural Gas price 2 $1/BBL Increase in WTI price 1 Chemicals - CPChem (net to Phillips 66) 1 /Lb Increase in Chain Margin (Ethylene, Polyethylene, NAO) 35 Worldwide Refining $1/BBL Increase in Gasoline Margin 230 $1/BBL Increase in Distillate Margin 200 Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators: $1/BBL Widening LLS / Maya Differential (LLS less Maya) 45 $1/BBL Widening WTI / WCS Differential (WTI less WCS) 40 $1/BBL Widening WTI / WTS Differential (WTI less WTS) 20 $1/BBL Widening LLS / Medium Sour Differential (LLS less Medium Sour) 15 $1/BBL Widening ANS / WCS Differential (ANS less WCS) /MMBtu Increase in Natural Gas price (10) Sensitivities shown above are independent and only valid within a limited price range 16

17 CAPITAL STRUCTURE Consolidated PSX Excluding PSXP 28% 27% 27% 27% 27% 28% 25% 25% 25% 25% 23% 20% 22% 21% 21% 19% 19% 17% % % Q Q Q Q Q Q 2016 Equity $B Debt $B Cash & Cash Equivalents $B Debt-to-Capital Net-Debt-to-Capital 17

18 REFINING MARGINS MARKET VS. REALIZED 3Q 2016 ATLANTIC BASIN/EUROPE $/BBL Brent: $45.85/BBL 100% Crude Capacity Utilization 38% Market Capture (2.48) (1.64) (1.42) (2.53) 5.04 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 18

19 REFINING MARGINS MARKET VS. REALIZED 3Q 2016 GULF COAST $/BBL LLS: $46.53/BBL 94% Crude Capacity Utilization 52% Market Capture (2.20) (3.50) (1.99) 5.47 Market 3:2:1 Configuration Secondary Products Feedstock Other Realized Margin Market 3:2:1 LLS / Gasoline 85 CBOB / Diesel 62 10ppm 19

20 REFINING MARGINS MARKET VS. REALIZED 3Q 2016 CENTRAL CORRIDOR $/BBL WTI: $44.88/BBL 99% Crude Capacity Utilization 77% Market Capture (1.96) 2.91 (0.88) (3.46) 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 20

21 REFINING MARGINS MARKET VS. REALIZED 3Q 2016 WEST COAST $/BBL ANS: $44.78/BBL 96% Crude Capacity Utilization 58% Market Capture (2.03) (3.28) (1.77) 9.07 Market 3:2:1 Configuration Secondary Products Feedstock Other Realized Margin Market 3:2:1 ANS Spot / Los Angeles CARBOB / Los Angeles No. 2 CARB 21

22 ADJUSTED EARNINGS 3Q 2016 VS. 3Q 2015 $MM (16) (82) 1,647 (918) (77) Q 2015 Midstream Chemicals Refining Marketing & Specialties Corporate & Other (110) 3Q Q

23 MIDSTREAM 3Q 2016 VS. 3Q 2015 $MM (14) (29) 75 3Q 2015 Transportation NGL DCP Midstream 3Q Q

24 CHEMICALS 3Q 2016 VS. 3Q 2015 $MM (96) 190 3Q 2015 Olefins & Polyolefins Specialties, Aromatics & Styrenics Other 3Q (6) 3Q

25 REFINING 3Q 2016 VS. 3Q 2015 $MM (188) 1,052 (298) (230) (202) 134 3Q 2015 Atlantic Basin / Europe Gulf Coast Central Corridor West Coast 3Q (13) Q

26 MARKETING AND SPECIALTIES 3Q 2016 VS. 3Q 2015 $MM (63) (14) Q 2015 Marketing & Other Specialties 3Q Q

27 CORPORATE AND OTHER 3Q 2016 VS. 3Q 2015 $MM 3Q 2015 Net Loss Net Interest Expense Corporate Overhead & Other 3Q 2016 Net Loss (112) (110) (7) 9 27

28 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Sep YTD 3Q 2Q Sep YTD 3Q Phillips 66 Net Income (Loss) Attributable to Phillips 66 $ 1,392 $ 511 $ 496 $ 3,577 $ 1,578 Pre-tax Adjustments: Asset dispositions (280) (30) Pension settlement expense Impairments by equity affiliates Certain tax impacts (5) - Pending claims and settlements (117) (72) Recognition of deferred logistics commitments Tax impact of adjustments * (27) (132) (30) Net Income (Loss) Attributable to Phillips 66 $ 1,415 $ 556 $ 499 $ 3,483 $ 1,647 Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars) ** $ 2.61 $ 0.96 $ 0.93 $ 6.52 $ 2.90 Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars) ** $ 2.66 $ 1.05 $ 0.94 $ 6.34 $ 3.02 * We generally tax effect taxable U.S.-based special items using a combined federal and state statutory income tax rate of approximately 38 percent. 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. 28

29 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Sep YTD 3Q 2Q Sep YTD 3Q Midstream Net Income (Loss) Attributable to Phillips 66 $ 179 $ 75 $ 39 $ 90 $ 101 Pre-tax Adjustments: Pension settlement expense Impairments by equity affiliates Asset dispositions (30) (30) Pending claims and settlements (45) Tax impact of adjustments (61) 7 Net Income (Loss) Attributable to Phillips 66 $ 154 $ 75 $ 39 $ 206 $ 91 Chemicals Net Income (Loss) Attributable to Phillips 66 $ 447 $ 101 $ 190 $ 750 $ 252 Pre-tax Adjustments: Impairments by equity affiliates Tax impact of adjustments Net Income (Loss) Attributable to Phillips 66 $ 536 $ 190 $ 190 $ 770 $

30 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Sep YTD 3Q 2Q Sep YTD 3Q Refining Net Income (Loss) Attributable to Phillips 66 $ 412 $ 177 $ 149 $ 2,145 $ 1,003 Pre-tax Adjustments: Asset dispositions (8) - Pension settlement expense Pending claims and settlements (70) (70) Recognition of deferred logistics commitments Tax impact of adjustments - 27 (27) (65) (30) Net Income (Loss) Attributable to Phillips 66 $ 372 $ 134 $ 152 $ 2,151 $ 1,052 Marketing & Specialties Net Income (Loss) Attributable to Phillips 66 $ 701 $ 267 $ 229 $ 956 $ 338 Pre-tax Adjustments: Asset dispositions (242) - Pension settlement expense Tax impact of adjustments (4) (4) Net Income (Loss) Attributable to Phillips 66 $ 701 $ 267 $ 229 $ 720 $ 344 Corporate and Other Net Income (Loss) Attributable to Phillips 66 $ (347) $ (109) $ (111) $ (364) $ (116) Pre-tax Adjustments: Pending claims and settlements (2) (2) Pension settlement expense Certain tax impacts (5) - Tax impact of adjustments (2) (3) Net Income (Loss) Attributable to Phillips 66 $ (348) $ (110) $ (111) $ (364) $ (112) 30

31 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Sep YTD 3Q 2Q Sep YTD 3Q Midstream - Transportation Net Income (Loss) Attributable to Phillips 66 $ 200 $ 63 $ 65 $ 207 $ 77 Pre-tax Adjustments: Tax impact of adjustments Net Income (Loss) Attributable to Phillips 66 $ 200 $ 63 $ 65 $ 207 $ 77 Midstream - NGL Net Income (Loss) Attributable to Phillips 66 $ (25) $ 3 $ (17) $ 48 $ 26 Pre-tax Adjustments: Pension settlement expense Tax impact of adjustments (3) (3) Net Income (Loss) Attributable to Phillips 66 $ (25) $ 3 $ (17) $ 54 $ 32 Midstream - DCP Midstream Net Income (Loss) Attributable to Phillips 66 $ 4 $ 9 $ (9) $ (165) $ (2) Pre-tax Adjustments: Impairments by equity affiliates Pending claims and settlements (45) Asset dispositions (30) (30) Tax impact of adjustments (58) 10 Net Income (Loss) Attributable to Phillips 66 $ (21) $ 9 $ (9) $ (55) $ (18) 31

32 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Sep YTD 3Q 2Q Sep YTD 3Q Refining - Atlantic Basin / Europe Net Income (Loss) Attributable to Phillips 66 $ 41 $ 5 $ 32 $ 383 $ 180 Pre-tax Adjustments: Pension settlement expense Pending claims and settlements Recognition of deferred logistics commitments Tax impact of adjustments (27) - (27) (46) (8) Net Income (Loss) Attributable to Phillips 66 $ 44 $ 5 $ 35 $ 358 $ 193 Refining - Gulf Coast Net Income (Loss) Attributable to Phillips 66 $ 103 $ 30 $ 5 $ 423 $ 269 Pre-tax Adjustments: Pension settlement expense Pending claims and settlements (70) (70) Tax impact of adjustments (10) (10) Net Income (Loss) Attributable to Phillips 66 $ 60 $ (13) $ 5 $ 439 $

33 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Sep YTD 3Q 2Q Sep YTD 3Q Refining - Central Corridor Net Income (Loss) Attributable to Phillips 66 $ 217 $ 142 $ 55 $ 771 $ 360 Pre-tax Adjustments: Pension settlement expense Pending claims and settlements Tax impact of adjustments (6) (6) Net Income (Loss) Attributable to Phillips 66 $ 217 $ 142 $ 55 $ 783 $ 372 Refining - West Coast Net Income (Loss) Attributable to Phillips 66 $ 51 $ - $ 57 $ 568 $ 194 Pre-tax Adjustments: Asset dispositions (8) - Pension settlement expense Pending claims and settlements Tax impact of adjustments (3) (6) Net Income (Loss) Attributable to Phillips 66 $ 51 $ - $ 57 $ 571 $

34 NON-GAAP RECONCILIATIONS Sep YTD 3Q 2Q Sep YTD 3Q Marketing & Specialties - Marketing & Other Net Income (Loss) Attributable to Phillips 66 $ 589 $ 228 $ 199 $ 805 $ 285 Pre-tax Adjustments: Asset dispositions (242) - Pension settlement expense Tax impact of adjustments (4) (4) Net Income (Loss) Attributable to Phillips 66 $ 589 $ 228 $ 199 $ 569 $ 291 Marketing & Specialties - Specialties Net Income (Loss) Attributable to Phillips 66 $ 112 $ 39 $ 30 $ 151 $ 53 Pre-tax Adjustments: Tax impact of adjustments Net Income (Loss) Attributable to Phillips 66 $ 112 $ 39 $ 30 $ 151 $ Millions of Dollars Except as Indicated

35 NON-GAAP RECONCILIATIONS 2016 September YTD Phillips 66 Numerator ($MM) Net Income $ 1,450 After-tax interest expense $ 162 GAAP ROCE earnings $ 1,612 Special Items $ 23 ROCE earnings $ 1,635 Denominator ($MM) GAAP average capital employed * $ 32, Annualized ROCE 7% 2016 Annualized GAAP ROCE 7% * Total equity plus total debt 35

36 NON-GAAP RECONCILIATIONS Phillips 66 Consolidated Millions of Dollars Q Phillips 66 Partners * Phillips 66 Total Debt $ 8,858 $ 1,141 $ 7,717 Total Equity $ 24,311 $ 1,373 $ 22,938 Debt-to-Capital Ratio 27% 25% Total Cash $ 2,337 $ 19 $ 2,318 Net-Debt-to-Capital Ratio 21% 19% * PSXP's third-party debt and Phillips 66's noncontrolling interest attributable to PSXP 36

37 NON-GAAP RECONCILIATIONS Millions of Dollars Q Millions of Dollars 2016 September YTD Growth Sustaining Total Growth Sustaining Total Capital expenditures and investments Midstream $ 269 $ 46 $ 315 $ 920 $ 125 $ 1,045 Refining $ 83 $ 206 $ 289 $ 252 $ 575 $ 827 Marketing & Specialties $ 12 $ 14 $ 26 $ 34 $ 29 $ 63 Corporate and Other $ 1 $ 30 $ 31 $ 3 $ 93 $ 96 Total $ 365 $ 296 $ 661 $ 1,209 $ 822 $ 2,031 37

38 NON-GAAP RECONCILIATIONS Millions of Dollars Q Effective Tax Rates Income before taxes $ 813 Special items $ 17 income before taxes $ 830 Provision for taxes $ 277 Special items $ (28) provision for taxes $ 249 GAAP effective tax rate 34% effective tax rate 30% 38