PHILLIPS 66 FOURTH QUARTER 2017 CONFERENCE CALL. February 2, 2018

Transcription

1 PHILLIPS 66 FOURTH QUARTER 2017 CONFERENCE CALL February 2, 2018

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 Billings Refinery, Billings, MT 3

4 OVERVIEW earnings $548 MM EPS $1.07 Operating cash flow Capital expenditures and investments Shareholder distributions 1 $1,931 MM $537 MM $816 MM (1) Shareholder distributions include share repurchases of $463 MM and dividends of $353 MM 4

5 ADJUSTED EARNINGS $MM 43 (32) (190) 858 (87) (13) (31) 548 3Q 2017 Earnings Midstream Chemicals Refining Marketing & Specialties Corporate & Other Noncontrolling Interests Earnings (140) Net Income (57) 5

6 MIDSTREAM Completed Merey Sweeny and Bakken Pipeline interest dropdown to PSXP $MM Transportation benefited from higher volumes 142 Record Sweeny Hub volumes 99 DCP Midstream benefited from higher commodity prices and volumes 3Q 2017 Net Income Transportation NGL and Other DCP Midstream Net Income

7 CHEMICALS 79% O&P capacity utilization $MM Cedar Bayou hurricane recovery (42) 12 (2) New ethane cracker at Cedar Bayou achieved mechanical completion SA&S improved margins and volumes 3Q 2017 Net Income Olefins & Polyolefins Specialties, Aromatics & Styrenics (8) Other Net Income 7

8 REFINING 100% crude utilization $MM (52) (5) (6) 87% clean product yield 548 (127) $8.98/BBL realized margin 358 $99 MM pre-tax turnaround costs 3Q 2017 Net Income Atlantic Basin / Europe Gulf Coast Central Corridor West Coast Net Income (26) 8

9 REFINING MARGINS MARKET VS. REALIZED WORLDWIDE REFINING $/BBL (1.44) (1.99) (2.39) 8.98 Market 3:2:1 Configuration Secondary Products Feedstock Other Realized Margin Avg Market Crude: $59.89/BBL 64% Market Capture 9

10 MARKETING AND SPECIALTIES Marketing margins impacted by rising prices $MM Seasonally lower demand 211 (76) (11) Re-imaged over 140 branded sites Lower base oil and finished lubricants margins 3Q 2017 Net Income Marketing & Other Specialties Net Income 10

11 CORPORATE AND OTHER $MM 3Q 2017 Net Loss Net Interest Expense Corporate Overhead & Other Net Loss (127) (140) 1 (14) 11

12 OVERVIEW 2017 earnings $2.3 B EPS $4.38 Operating cash flow PSXP equity proceeds Capital expenditures and investments Shareholder distributions 1 $3.6 B $1.2 B $1.8 B $3.0 B Net-debt-to-capital ratio 20% ROCE 8% (1) Shareholder distributions include share repurchases of $1.6 B and dividends of $1.4 B 12

13 CASH FLOW 2017 $B (1.8) 0.4 (3.0) December 31, 2016 Cash Balance* Operating Cash Flow PSXP Equity Proceeds Capital Expenditures & Investments Shareholder Distributions Other December 31, 2017 Cash Balance* * Includes cash and cash equivalents 13

14 OUTLOOK 1Q 2018 Global Olefins & Polyolefins utilization Refining crude utilization Refining turnaround expenses (pre-tax) Corporate & Other costs (after-tax) 2018 Refining turnaround expenses (pre-tax) Corporate & Other costs (after-tax) Depreciation and amortization Effective income tax rate Mid-90% Mid-80% $230 MM - $260 MM $160 MM - $180 MM $520 MM - $570 MM $640 MM - $680 MM $1.4 B Low-to-Mid-20% 14

15 PHILLIPS 66 FOURTH QUARTER 2017 CONFERENCE CALL Questions and Answers

16 PHILLIPS 66 FOURTH QUARTER 2017 CONFERENCE CALL Appendix

17 ESTIMATED SENSITIVITIES 2018 Midstream - DCP (net to Phillips 66) 10 /Gal Increase in NGL price 5 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) 45 Worldwide Refining Annual Net Income $MM $1/BBL Increase in Gasoline Margin 260 $1/BBL Increase in Distillate Margin 230 Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators: $1/BBL Widening WTI / WCS Differential (WTI less WCS) 50 $1/BBL Widening LLS / Maya Differential 40 $1/BBL Widening LLS / Medium Sour Differential 30 $1/BBL Widening LLS / WCS Differential 25 $1/BBL Widening WTI / WTS Differential 15 $1/BBL Widening LLS / WTI Differential 10 $1/BBL Widening ANS / WTI Differential 10 $1/BBL Widening Brent / WTI Differential 5 10 /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% 30% 30% 30% 27% 20% 24% 27% 25% 27% % 20% 25% 26% 25% 25% 26% 21% 22% 20% 18% 17% 22% % Q Q Q Q Q Q Q Q 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: $61.39/BBL 104% Crude Capacity Utilization 62% Market Capture (0.95) (0.11) (2.35) (1.70) 8.32 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: $61.05/BBL 102% Crude Capacity Utilization 57% Market Capture (1.72) (2.58) (2.75) 6.38 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: $55.35/BBL 92% Crude Capacity Utilization 81% Market Capture (1.20) (2.52) 2.66 (2.54) 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: $61.52/BBL 98% Crude Capacity Utilization 56% Market Capture (1.01) (3.46) (2.82) 7.96 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 2016 $MM 453 (16) (16) (26) (3) 83 4Q 2016 Earnings Midstream Chemicals Refining Marketing & Specialties Corporate & Other Noncontrolling Interests (140) (57) Net Income Earnings 23

24 MIDSTREAM VS. 4Q 2016 $MM Q 2016 Net Income Transportation NGL and Other DCP Midstream Net Income

25 CHEMICALS VS. 4Q 2016 $MM (10) 10 (3) Q 2016 Net Income Olefins & Polyolefins Specialties, Aromatics & Styrenics Other Net Income (8) 25

26 REFINING VS. 4Q 2016 $MM (95) 22 4Q 2016 Net Loss Atlantic Basin / Europe Gulf Coast Central Corridor West Coast Net Income (26) 26

27 MARKETING AND SPECIALTIES VS. 4Q 2016 $MM 11 (27) Q 2016 Net Income Marketing & Other Specialties Net Income

28 CORPORATE AND OTHER VS. 4Q 2016 $MM 4Q 2016 Net Loss Net Interest Expense Corporate Overhead & Other Net Loss (124) (140) (13) (3) 28

29 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Phillips 66 Net Income Attributable to Phillips 66 $ 5,106 $ 3,198 $ 823 $ 1,555 $ 163 Pre-tax Adjustments: Pending claims and settlements (60) - (36) (117) - Pension settlement expense Impairments by equity affiliates Recognition of deferred logistics commitments Gain on consolidation of business (423) Hurricane-related costs Equity affiliate ownership restructuring Railcar lease residual value deficiencies and related costs Certain tax impacts * (23) (23) - (32) (32) Tax impact of adjustments * 47 (70) (20) 4 (27) U.S. tax reform (2,735) (2,735) Other tax impacts (110) (94) Net Income Attributable to Phillips 66 $ 2,269 $ 548 $ 858 $ 1,498 $ 83 Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars) ** $ 9.85 $ 6.25 $ 1.60 $ $ 0.31 Net Income Attributable to Phillips 66 Per Share of Common Stock (dollars) ** $ 4.38 $ 1.07 $ 1.66 $ 2.82 $ 0.16 * 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. 29

30 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Midstream Net Income $ 464 $ 139 $ 117 $ 280 $ 35 Pre-tax Adjustments: Pending claims and settlements (37) (37) (45) Pension settlement expense Impairments by equity affiliates 6 Hurricane-related costs Equity affiliate ownership restructuring Tax impact of adjustments 5 (4) 12 2 (12) Other tax impacts Net Income $ 454 $ 142 $ 99 $ 289 $ 69 Chemicals Net Income $ 525 $ 27 $ 121 $ 583 $ 136 Pre-tax Adjustments: Impairments by equity affiliates Hurricane-related costs Tax impact of adjustments (93) (59) (21) Other tax impacts (12) (12) Net Income $ 671 $ 121 $ 153 $ 660 $

31 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Refining Net Income (Loss) $ 1,404 $ 371 $ 550 $ 374 $ (38) Pre-tax Adjustments: Pending claims and settlements (51) (30) (70) Pension settlement expense Gain on consolidation of business (423) Hurricane-related costs Recognition of deferred logistics commitments 30 Railcar lease residual value deficiencies and related costs Certain tax impacts (23) (23) (32) (32) Tax impact of adjustments 153 (7) 3 1 (15) Other tax impacts (66) (50) Net Income (Loss) $ 1,137 $ 358 $ 548 $ 277 $ (95) Marketing & Specialties Net Income $ 686 $ 123 $ 208 $ 891 $ 190 Pre-tax Adjustments: Pension settlement expense Hurricane-related costs 1 1 Tax impact of adjustments (4) (1) Other tax impacts (50) (50) Net Income $ 694 $ 124 $ 211 $ 841 $ 140 Corporate and Other Net Income (Loss) $ 2,169 $ 2,595 $ (147) $ (484) $ (129) Pre-tax Adjustments: Pending claims and settlements (2) Pension settlement expense 7 2 Tax impact of adjustments (14) (13) 1 U.S. tax reform (2,735) (2,735) Other tax impacts 5 5 Net (Loss) $ (545) $ (140) $ (127) $ (480) $ (124) 31

32 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Midstream - Transportation Net Income $ 376 $ 105 $ 119 $ 311 $ 70 Pre-tax Adjustments: Pending claims and settlements (37) (37) Hurricane-related costs Tax impact of adjustments 11 (2) 13 Other tax impacts (2) (2) Net Income $ 358 $ 108 $ 98 $ 309 $ 68 Midstream - NGL and Other Net Income (Loss) $ 43 $ 20 $ (3) $ 2 $ 2 Pre-tax Adjustments: Pension settlement expense Hurricane-related costs Tax impact of adjustments (6) (2) (1) Other tax impacts 5 5 Net Income $ 51 $ 20 $ - $ 7 $ 7 Midstream - DCP Midstream Net Income (Loss) $ 45 $ 14 $ 1 $ (33) $ (37) Pre-tax Adjustments: Pending claims and settlements (45) Impairments by equity affiliates 6 Equity affiliate ownership restructuring Tax impact of adjustments 2 (12) Other tax impacts Net Income (Loss) $ 45 $ 14 $ 1 $ (27) $ (6) 32

33 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Refining - Atlantic Basin / Europe Net Income $ 370 $ 142 $ 171 $ 204 $ 163 Pre-tax Adjustments: Pending claims and settlements (7) (2) Pension settlement expense Recognition of deferred logistics commitments 30 Railcar lease residual value deficiencies and related costs 5 5 Certain tax impacts (23) (23) (32) (32) Tax impact of adjustments (3) (1) (13) (2) Other tax impacts (52) (36) Net Income $ 351 $ 120 $ 172 $ 142 $ 98 Refining - Gulf Coast Net Income (Loss) $ 512 $ 64 $ 67 $ 52 $ (51) Pre-tax Adjustments: Pending claims and settlements (9) (2) (70) Pension settlement expense Gain on consolidation of business (423) Hurricane-related costs Railcar lease residual value deficiencies and related costs Tax impact of adjustments 150 (6) (4) 21 (6) Other tax impacts (10) (10) Net Income (Loss) $ 272 $ 72 $ 77 $ 9 $ (51) 33

34 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Refining - Central Corridor Net Income $ 477 $ 191 $ 197 $ 234 $ 17 Pre-tax Adjustments: Pending claims and settlements (7) (2) Pension settlement expense Railcar lease residual value deficiencies and related costs Tax impact of adjustments (2) (1) (4) (4) Other tax impacts (5) (5) Net Income $ 481 $ 192 $ 198 $ 236 $ 19 Refining - West Coast Net Income (Loss) $ 45 $ (26) $ 115 $ (116) $ (167) Pre-tax Adjustments: Pending claims and settlements (28) (24) Pension settlement expense 8 2 Railcar lease residual value deficiencies and related costs 8 8 Tax impact of adjustments 8 8 (3) (3) Other tax impacts 1 1 Net Income (Loss) $ 33 $ (26) $ 101 $ (110) $ (161) 34

35 NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated Year 4Q 3Q Year 4Q Marketing & Specialties - Marketing & Other Net Income $ 551 $ 86 $ 160 $ 747 $ 158 Pre-tax Adjustments: Pension settlement expense Hurricane-related costs 1 1 Tax impact of adjustments (4) (1) Other tax impacts (44) (44) Net Income $ 559 $ 87 $ 163 $ 703 $ 114 Marketing & Specialties - Specialties Net Income $ 135 $ 37 $ 48 $ 144 $ 32 Pre-tax Adjustments: Tax impact of adjustments Other tax impacts (6) (6) Net Income $ 135 $ 37 $ 48 $ 138 $ 26 35

36 NON-GAAP RECONCILIATIONS Millions of Dollars Q Atlantic Basin/Europe Gulf Coast Central Corridor West Coast Worldwide Realized Refining Margins Net income (loss) $ 142 $ 64 $ 191 $ (26) $ 371 Plus: Income tax expense (benefit) (29) 145 Taxes other than income taxes Depreciation, amortization and impairments Selling, general and administrative expenses Operating expenses Equity in (earnings) losses of affiliates 2 2 (166) (162) Other segment (income) expense, net (2) (1) 1 (2) Proportional share of refining gross margins contributed by equity affiliates Special Items: Certain tax impacts (23) (23) Realized refining margins $ 455 $ 485 $ 661 $ 278 $ 1,879 Total processed inputs (thousands of barrels) 54,897 76,213 21,643 34, ,489 total processed inputs (thousands of barrels)* 54,897 76,213 43,451 34, ,297 Net income (loss) (dollars per barrel)** $ 2.59 $ 0.84 $ 8.83 $ (0.75) $ 1.98 Realized refining margins (dollars per barrel)*** $ 8.32 $ 6.38 $ $ 7.96 $ 8.98 * total processed inputs include our proportional share of processed inputs of equity affiliates. ** Net income (loss) 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. 36

37 NON-GAAP RECONCILIATIONS 2017 Phillips 66 Numerator ($MM) Net Income $ 5,248 After-tax interest expense $ 285 GAAP ROCE earnings $ 5,533 After-tax special items $ (2,837) ROCE earnings $ 2,696 Denominator ($MM) GAAP average capital employed * $ 35, GAAP ROCE 15% 2017 ROCE 8% * Capital employed is total equity plus total debt 37

38 NON-GAAP RECONCILIATIONS Phillips 66 Consolidated Millions of Dollars 2017 December 31 Phillips 66 Partners * Phillips 66 Total Debt $ 10,110 $ 2,945 $ 7,165 Total Equity $ 27,428 $ 2,314 $ 25,114 Debt-to-Capital Ratio 27% 22% Total Cash & Cash Equivalents $ 3,119 $ 185 $ 2,934 Net-Debt-to-Capital Ratio 20% 14% * Phillips 66 Partners third-party debt and Phillips 66's noncontrolling interest attributable to Phillips 66 Partners 38

39 NON-GAAP RECONCILIATIONS Millions of Dollars Millions of Dollars Q Year Growth Sustaining Total Growth Sustaining Total Capital Expenditures and Investments Midstream $ 152 $ 60 $ 212 $ 597 $ 174 $ 771 Refining $ 58 $ 172 $ 230 $ 323 $ 530 $ 853 Marketing & Specialties $ 24 $ 19 $ 43 $ 62 $ 46 $ 108 Corporate and Other $ 52 $ 52 $ 100 $ 100 Total $ 234 $ 303 $ 537 $ 982 $ 850 $ 1,832 39

40 NON-GAAP RECONCILIATIONS PSX Effective Tax Rate Millions of Dollars Q Year Effective Tax Rates Income before taxes $ 654 $ 3,555 Special items $ 155 $ (149) income before taxes $ 809 $ 3,406 Provision for taxes $ (2,601) $ (1,693) Special items $ 2,805 $ 2,688 provision for taxes $ 204 $ 995 GAAP effective tax rate (398)% (48)% effective tax rate 25% 29% PSXP Run-rate EBITDA: PSXP s run-rate EBITDA is a forecast of future EBITDA, and is based on the Partnership s projections of annual EBITDA inclusive of both currently owned assets and future potential acquisitions by the Partnership. Run-rate EBITDA is included to demonstrate the historical growth of the Partnership, as well as management s intention of future growth through acquisitions and organic projects. We are unable to present a reconciliation of run-rate EBITDA to net income, which is the nearest GAAP financial measure, because certain elements of net income, including interest, depreciation and taxes, were not used in the forecasts and are therefore not available. Together, these items generally result in run-rate EBITDA being significantly greater than net income. 40