Apr 28, 2017 - 1Q 2017 Adjusted Earnings. 84% crude utilization. 85% clean product yield. $8.55/BBL realized margin. $29
PHILLIPS 66 FIRST QUARTER 2017 CONFERENCE CALL April 28, 2017
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
EXECUTING THE STRATEGY
Beaumont Terminal, Beaumont, TX
3
OVERVIEW 1Q 2017 Adjusted earnings
$294 MM
Adjusted EPS
$0.56
Operating cash flow excluding working capital
$748 MM
Capital expenditures and investments
$470 MM
Shareholder distributions1
$611 MM
Net-debt-to-capital ratio
27%
Annualized adjusted YTD ROCE
5%
(1) Shareholder distributions include dividends and share repurchases
4
ADJUSTED EARNINGS 1Q 2017 $MM 1
93
(4) 77 294
44
83 4Q 2016 Adjusted Earnings
Midstream
Chemicals
Refining
Marketing & Specialties
Corporate & Other
77
201
(2)
141
(123)
1Q 2017 Adjusted Earnings
1Q 2017 Adjusted Earnings 5
MIDSTREAM 1Q 2017 23
$MM Seasonally lower maintenance costs in Transportation
9
12 77
First full quarter of Freeport LPG Export Terminal operations
Highest earnings since 3Q 2014 at DCP Midstream
33
4Q 2016 Adjusted Earnings
Transportation
NGL
DCP Midstream
56
4
17
1Q 2017 Adjusted Earnings
1Q 2017 Adjusted Earnings
6
CHEMICALS 1Q 2017 $MM Higher O&P chain cash margin and benzene margin
21 56
0
201
Strong polyethylene demand 124
89% O&P capacity utilization 4Q 2016 Adjusted Earnings
Olefins & Polyolefins
Specialties, Aromatics & Styrenics
Other
161
45
(5)
1Q 2017 Adjusted Earnings
1Q 2017 Adjusted Earnings 7
REFINING 1Q 2017 $MM
84% crude utilization 80
85% clean product yield
(95)
(148)
$8.55/BBL realized margin
$299 MM pre-tax turnaround costs
118
(2)
43
4Q 2016 Adjusted Earnings
Atlantic Basin / Europe
Gulf Coast
Central Corridor
West Coast
(50)
67
62
(81)
1Q 2017 Adjusted Earnings
1Q 2017 Adjusted Earnings 8
REFINING MARGINS – MARKET VS. REALIZED 1Q 2017 WORLDWIDE REFINING $/BBL
1.58
(1.94)
(0.67)
(2.66)
12.24
8.55
Market 3:2:1
Configuration
Secondary Products
Avg Market Crude: $53.24/BBL
Feedstock
Other
Realized Margin
70% Market Capture 9
MARKETING AND SPECIALTIES 1Q 2017 $MM Improved global Marketing margins
10 (9)
Lower seasonal demand 141
140
Excel Paralubes major turnaround 4Q 2016 Adjusted Earnings
Marketing & Other
Specialties
124
17
1Q 2017 Adjusted Earnings
1Q 2017 Adjusted Earnings
10
CORPORATE AND OTHER 1Q 2017 $MM 4Q 2016 Adjusted Net Loss
Net Interest Expense
Corporate Overhead & Other
(119)
1Q 2017 Adjusted Net Loss
(123)
6
(10)
11
CASH FLOW 1Q 2017 $B 0.7
(1.3)
0.5
(0.5)
2.7
(0.6)
December 31, 2016 Cash Balance*
CFO (excluding working capital)
Working Capital
Capital Expenditures & Investments
* Includes cash and cash equivalents. March 31 balance excludes $0.1 B of restricted cash.
Shareholder Distributions
1.5
Other
March 31, 2017 Cash Balance*
12
OUTLOOK 2Q 2017 Global Olefins & Polyolefins utilization
Mid-90%
Refining crude utilization
Mid-90%
Refining turnaround expenses (pre-tax)
$130 MM - $160 MM
Corporate & Other costs (after-tax)
$125 MM - $140 MM
13
PHILLIPS 66 FIRST QUARTER 2017 CONFERENCE CALL Questions and Answers
PHILLIPS 66 FIRST QUARTER 2017 CONFERENCE CALL Appendix
ESTIMATED SENSITIVITIES 2017 Annual Net Income $MM 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)
35
Worldwide Refining $1/BBL Increase in Gasoline Margin
215
$1/BBL Increase in Distillate Margin
190
Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators: $1/BBL Widening WTI / WCS Differential (WTI less WCS)
40
$1/BBL Widening LLS / Maya Differential (LLS less Maya)
35
$1/BBL Widening LLS / Medium Sour Differential (LLS less Medium Sour)
20
$1/BBL Widening WTI / WTS Differential (WTI less WTS) $1/BBL Widening LLS / WTI Differential (LLS less WTI) $1/BBL Widening ANS / Medium Sour Differential (ANS less Medium Sour)
10 10 10
$1/BBL Widening ANS / WCS Differential (ANS less WCS) 10¢/MMBtu Increase in Natural Gas price Sensitivities shown above are independent and are only valid within a limited price range
5 (10) 16
CAPITAL STRUCTURE 2014 – 2017 Consolidated PSX
Excluding PSXP 30%
30% 28%
27%
28%
27%
26%
26%
25% 24%
22% 20%
18%
17% 13%
23. 9
22. 0
14%
23. 7
23. 1
23. 7
10. 2
10. 1 8. 9
8. 6 5.2
2014
8. 6 3.1
2015
Equity $B
2.7
2016
Debt $B
22. 4
22. 4
21. 6
5.2
3.0
1.5
1Q 2017
Cash & Cash Equivalents $B
2014
2015
Debt-to-Capital
7. 9
7. 7
7. 8
2.7
2016
1.5
1Q 2017
Net-Debt-to-Capital 17
REFINING MARGINS – MARKET VS. REALIZED 1Q 2017 ATLANTIC BASIN / EUROPE $/BBL Brent: $53.78/BBL
70% Crude Capacity Utilization
59% Market Capture
(1.38)
0.28
(1.54) 10.62
(1.69) 6.29
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
REFINING MARGINS – MARKET VS. REALIZED 1Q 2017 GULF COAST $/BBL LLS: $53.51/BBL
90% Crude Capacity Utilization
2.07
(2.21) 10.69
75% Market Capture
0.35
(2.87)
8.03
Market 3:2:1
Configuration
Secondary Products
Feedstock
Other
Realized Margin
Market 3:2:1 – LLS / Gasoline 85 CBOB / Diesel 62 10ppm 19
REFINING MARGINS – MARKET VS. REALIZED 1Q 2017 CENTRAL CORRIDOR $/BBL WTI: $51.83/BBL
95% Crude Capacity Utilization
80% Market Capture
3.52 (1.36) (1.75) (3.05) 13.18 10.54
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 20
REFINING MARGINS – MARKET VS. REALIZED 1Q 2017 WEST COAST $/BBL ANS: $53.83/BBL
78% Crude Capacity Utilization
60% Market Capture
1.83
(2.38) (3.22)
(2.75)
16.47
9.95
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
ADJUSTED EARNINGS 1Q 2017 VS. 1Q 2016 $MM 45
37 (88)
4 (64)
360 294
1Q 2016 Adjusted Earnings
Midstream
Chemicals
Refining
Marketing & Specialties
Corporate & Other
77
201
(2)
141
(123)
1Q 2017 Adjusted Earnings
1Q 2017 Adjusted Earnings
22
MIDSTREAM 1Q 2017 VS. 1Q 2016 $MM 38
15
77
40
(16)
1Q 2016 Adjusted Earnings
Transportation
NGL
DCP Midstream
56
4
17
1Q 2017 Adjusted Earnings
1Q 2017 Adjusted Earnings 23
CHEMICALS 1Q 2017 VS. 1Q 2016 $MM
29
0
16
201
156
1Q 2016 Adjusted Earnings
Olefins & Polyolefins
161
Specialties, Aromatics & Styrenics
45
Other
1Q 2017 Adjusted Earnings
(5)
1Q 2017 Adjusted Earnings 24
REFINING 1Q 2017 VS. 1Q 2016 $MM
42
86
(54)
1Q 2016 Adjusted Earnings
(1)
Atlantic Basin / Europe
Gulf Coast
(50)
67
Central Corridor
62
1Q 2017 Adjusted Earnings
(75)
(2)
West Coast
1Q 2017 Adjusted Earnings
(81) 25
MARKETING AND SPECIALTIES 1Q 2017 VS. 1Q 2016 $MM
(38) (26) 205 141
1Q 2016 Adjusted Earnings
Marketing & Other
Specialties
124
17
1Q 2017 Adjusted Earnings
1Q 2017 Adjusted Earnings
26
CORPORATE AND OTHER 1Q 2017 VS. 1Q 2016 $MM 1Q 2016 Adjusted Net Loss
Net Interest Expense
Corporate Overhead & Other
1Q 2017 Adjusted Net Loss
(123)
(127)
15 (11)
27
NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated 2016 4Q
2017 1Q
1Q
Phillips 66 Net Income (Loss) Attributable to Phillips 66
$
535
$
163
$
385
Pre-tax Adjustments: Impairments by equity affiliates
33
-
Pending claims and settlements
-
-
(45)
Equity affiliate ownership restructuring
-
33
-
Railcar lease residual value deficiencies and related costs
-
40
-
-
-
(32)
-
Gain on consolidation of business
(423)
Certain tax impacts *
-
Tax impact of adjustments **
149
Other tax impacts
-
6
(27)
14
(94)
-
Adjusted Net Income (Loss) Attributable to Phillips 66
$
294
$
83
$
360
Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars) ***
$
1.02
$
0.31
$
0.72
Adjusted Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars) ***
$
0.56
$
0.16
$
0.67
Pre-tax impact only. Tax-only adjusting items included in "other tax impacts”. 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
NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated 2017 1Q Midstream Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Pending claims and settlements Impairments by equity affiliates Equity affiliate ownership restructuring Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66 Chemicals Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Impairments by equity affiliates Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66
2016 4Q
$
77
1Q
$
(1) $
65
$
77
$
33 (12) 13 33 $
$
181
$
136
$
156
$
33 (13) 201
$
(12) 124 $
156
(45) 6 14 40
29
NON-GAAP RECONCILIATIONS 2017 1Q Refining Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Railcar lease residual value deficiencies and related costs Certain tax impacts Gain on consolidation of business Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66 Marketing & Specialties Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66 Corporate and Other Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66
$
259
Millions of Dollars Except as Indicated 2016 4Q
1Q
$
(38) $
86
$
(423) 162 (2)
$
40 (32) (15) (50) (95) $
86
$
141
$
190
$
205
$
141
$
(50) 140 $
205
$
(123)
$
(124) $
(127)
$
(123)
$
5 (119) $
(127)
30
NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated 2017 1Q Midstream - Transportation Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66 Midstream - NGL Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66 Midstream - DCP Midstream Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Pending claims and settlements Impairments by equity affiliates Equity affiliate ownership restructuring Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66
2016 4Q
$
56
$
56
$
4
$
1Q 46
$
72
$
(2) 44 $
72
$
(10) $
(11)
-
(11)
-
$
4
$
5 (5) $
$
17
$
(37) $
$
17
$
33 (12) 10 (6) $
4 (45) 6 14 (21)
31
NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated 2016 4Q
2017 1Q Refining - Atlantic Basin / Europe Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Railcar lease residual value deficiencies and related costs Certain tax impacts Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66 Refining - Gulf Coast Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Gain on consolidation of business Railcar lease residual value deficiencies and related costs Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66
$
(50)
$
(50)
$
328
$
(423) 162 67
$
163
1Q
$
4 -
$
5 (32) (2) (36) 98 $
$
(51) $
68
$
16 (6) (10) (51) $
68
4
32
NON-GAAP RECONCILIATIONS
Millions of Dollars Except as Indicated 2016 4Q
2017 1Q Refining - Central Corridor Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Railcar lease residual value deficiencies and related costs Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66 Refining - West Coast Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Railcar lease residual value deficiencies and related costs Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66
$
62
1Q
$
17
$
20
$
62
$
11 (4) (5) 19 $
20
$
(81)
$
(167) $
$
(81)
$
8 (3) 1 (161) $
(6) (6)
33
NON-GAAP RECONCILIATIONS Millions of Dollars Except as Indicated 2016 4Q
2017 1Q Marketing & Specialties - Marketing & Other Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66 Marketing & Specialties - Specialties Net Income (Loss) Attributable to Phillips 66 Pre-tax Adjustments: Tax impact of adjustments Other tax impacts Adjusted Net Income (Loss) Attributable to Phillips 66
$
124
1Q
$
158
$
162
$
124
$
(44) 114 $
162
$
17
$
$
17
32
$
43
(6) 26 $
43
$
34
NON-GAAP RECONCILIATIONS 2017 March YTD
Phillips 66
Numerator ($MM) Net Income After-tax interest expense GAAP ROCE earnings After-tax special items Adjusted ROCE earnings
$ $ $ $ $
Denominator ($MM) GAAP average capital employed *
$
2017 Annualized GAAP ROCE 2017 Annualized Adjusted ROCE
563 68 631 (241) 390
33,899 7% 5%
* Capital employed is total equity plus total debt
35
NON-GAAP RECONCILIATIONS Millions of Dollars 2017 1Q Phillips 66 Consolidated
Phillips 66 Partners *
Adjusted Phillips 66
Total Debt Total Equity Debt-to-Capital Ratio
$ $
10,210 23,725 30%
$ $
2,359 1,331
$ $
7,851 22,394 26%
Total Cash & Cash Equivalents Net-Debt-to-Capital Ratio
$
1,513 27%
$
1
$
1,512 22%
* PSXP's third-party debt and Phillips 66's noncontrolling interest attributable to PSXP
36
NON-GAAP RECONCILIATIONS
Growth Capital expenditures and investments Midstream Refining Marketing & Specialties Corporate and Other Total
$ $ $ $ $
Millions of Dollars 2017 1Q Sustaining
148 111 8 267
$ $ $ $ $
34 148 7 14 203
$ $ $ $ $
Total 182 259 15 14 470
37
NON-GAAP RECONCILIATIONS Millions of Dollars 2017 1Q Effective Tax Rates Income before taxes Special items Adjusted income before taxes
$ $ $
797 (390) 407
Provision for taxes Special items Adjusted provision for taxes
$ $ $
234 (149) 85
GAAP effective tax rate
29%
Adjusted effective tax rate
21%
38