Phillips 66 Partners Reports Second-Quarter Earnings

Phillips 66 Partners LP (NYSE: PSXP) announces second-quarter 2016
earnings of $67.5 million, or $0.51 per common unit. Cash from
operations was $94.6 million, distributable cash flow was $84.4 million
and adjusted earnings before interest, income taxes, depreciation and
amortization (adjusted EBITDA) were $97.3 million.

“Consistent with our commitment to strategic growth, we completed a $775
million acquisition and issued public equity this quarter,” said Greg
Garland, Phillips 66 Partners’ chairman and CEO. “We operated well
across our portfolio, and continued to increase our quarterly
distribution in line with our commitment to a five-year distribution
CAGR of 30 percent through 2018.”

On July 20, 2016, the general partner’s board of directors declared a
second-quarter 2016 cash distribution of $0.505 per common unit. This
distribution represents a 5 percent increase compared with the
first-quarter 2016 distribution of $0.481 per common unit. PSXP has
increased its distribution every quarter since its inception with a
compound annual growth rate of 37 percent.

Financial Results
				Millions of Dollars
				Q2 2016								Q1 2016
				Consolidated				Adjusted*				Consolidated			Adjusted*
Total Revenues and Other Income				$	140.4			138.8				126.2			103.3
Total Costs				66.8				66.6				61.3			47.8
*The “Adjusted” column adjusts the consolidated amounts to exclude “predecessor” results prior to the acquisition effective date.

Phillips 66 Partners’ total revenues and other income for the second
quarter of 2016 were $140 million, compared with $126 million in the
first quarter. After excluding the results of acquired businesses prior
to their acquisition dates, adjusted total revenues and other income for
the second quarter were $139 million, compared with $103 million in the
first quarter. These increases were primarily due to the March 1, 2016,
acquisition of a 25 percent interest in the Sweeny Fractionator and
associated Clemens Caverns, as well as the May 10, 2016, acquisition of
the remaining 75 percent interest in those assets along with the
Standish Pipeline. The increase also reflects higher pipeline and
terminaling volumes across the portfolio.

Total costs for the second quarter of 2016 were $67 million, compared
with $61 million in the first quarter. After excluding the results of
acquired businesses prior to their acquisition dates, adjusted total
costs were $19 million higher than the first quarter of 2016. This
increase was primarily due to the acquisitions described above, along
with higher planned maintenance activities.

Liquidity, Capital Expenditures and Investments

As of June 30, 2016, total debt outstanding was $1.3 billion. The
Partnership had $35.7 million in cash and cash equivalents and $460
million was available under its $500 million revolving credit facility.

In May 2016, Phillips 66 Partners completed the public offering of
12,650,000 common units representing limited partner interests. Net
proceeds of $656 million from the offering were utilized to repay debt
assumed as part of the May 10 acquisition.

Also in May 2016, Phillips 66 Partners initiated an “at-the-market” unit
issuance program (ATM), authorizing the continuous issuance of up to
$250 million of common units. During the second quarter, 262,858 common
units were issued under the program, generating net proceeds of $14
million. Proceeds from the ATM are used for general partnership
purposes, which may include debt repayment, future acquisitions, capital
expenditures and additions to working capital.

The Partnership’s total capital spending for the quarter was $71.0
million, which included $10.1 million attributable to businesses prior
to their acquisition date and $3.0 million of maintenance capital.
Expansion capital spending totaled $57.9 million in the second quarter,
reflecting continued investment in the Bakken joint ventures, capacity
expansion in the Sand Hills NGL pipeline joint venture and ongoing
development of the Clemens Caverns.

Acquisition Details

On May 10, 2016, Phillips 66 Partners acquired the remaining 75 percent
interest in the Sweeny Fractionator and Clemens Caverns, along with the
Standish product pipeline, for total consideration of $775 million.

The acquired assets include:

• Sweeny Fractionator. A newly constructed 100,000 barrels per
  day NGL fractionator located within Phillips 66's Sweeny refinery
  complex in Old Ocean, Texas.
• Clemens Caverns. A newly constructed underground salt dome NGL
  storage facility located near Brazoria, Texas.
• Standish Pipeline. A 92-mile refined petroleum product pipeline
  extending from Phillips 66’s refinery in Ponca City, Oklahoma, to our
  terminal in Wichita, Kansas.

Phillips 66 Partners previously entered into 10-year fractionation and
storage agreements with Phillips 66 associated with the Sweeny
Fractionator and Clemens Caverns that include minimum volume commitments.

Strategic Update

On July 25, 2016, Phillips 66 Partners announced an agreement to
increase its equity investment in Explorer Pipeline Company (Explorer)
by 2.5 percent. The acquisition will bring the Partnership’s total
interest in Explorer to approximately 22 percent. The additional
ownership is expected to be immediately accretive to unitholders and
funded with cash and borrowings under the Partnership’s revolving credit
facility.

The Partnership continues to make progress on its organic growth
projects. The Bayou Bridge Pipeline, LLC joint venture, in which the
Partnership holds a 40 percent interest, began operations on the segment
of its pipeline from Nederland, Texas, to Lake Charles, Louisiana, in
April. Development continues on the section from Lake Charles to St.
James, Louisiana, with commercial operations for this segment expected
to begin in the second half of 2017.

The Sacagawea Pipeline is expected to start up in the third quarter of
2016. The pipeline, located in the Bakken region in North Dakota, is
being developed through a 50 percent-owned joint venture. The Sacagawea
Pipeline is 88 percent-owned by the pipeline joint venture.

Investor Webcast

Members of Phillips 66 Partners’ executive management will host a
webcast today at 2 p.m. EDT to discuss the Partnership’s second-quarter
performance. To listen to the conference call and view related
presentation materials, go to www.phillips66partners.com/events.
For detailed supplemental information, go to www.phillips66partners.com/reports.

About Phillips 66 Partners

Headquartered in Houston, Phillips 66 Partners is a growth-oriented
master limited partnership formed by Phillips 66 to own, operate,
develop and acquire primarily fee-based crude oil, refined petroleum
product and natural gas liquids pipelines and terminals and other
transportation and midstream assets. For more information, visit www.phillips66partners.com.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This news release includes forward-looking statements. 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 Partners (including
our joint venture operations) are based on management’s expectations,
estimates and projections about the Partnership, its interests and the
energy industry in general on the date this news release 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 the
continued ability of Phillips 66 to satisfy its obligations under our
commercial and other agreements; the volume of crude oil, refined
petroleum products and NGL we or our joint ventures transport,
fractionate, terminal and store; the tariff rates with respect to
volumes that we transport through our regulated assets, which rates are
subject to review and possible adjustment by federal and state
regulators; fluctuations in the prices for crude oil, refined petroleum
products and NGL; liabilities associated with the risks and operational
hazards inherent in transporting, fractionating, terminaling and storing
crude oil, refined petroleum products and NGL; potential liability from
litigation or for remedial actions, including removal and reclamation
obligations under environmental regulations; and other economic,
business, competitive and/or regulatory factors affecting Phillips 66
Partners’ businesses generally as set forth in our filings with the
Securities and Exchange Commission. Phillips 66 Partners 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.

Use of Non-GAAP Financial Information—This news release
includes the terms “EBITDA,” “adjusted EBITDA,” and “distributable cash
flow.” These are non-GAAP financial measures. EBITDA and adjusted EBITDA
are included to help facilitate comparisons of operating performance of
the Partnership with other companies in our industry. EBITDA and
distributable cash flow help facilitate an assessment of our ability to
generate sufficient cash flow to make distributions to our partners. We
believe that the presentation of EBITDA, adjusted EBITDA and
distributable cash flow provides useful information to investors in
assessing our financial condition and results of operations. The GAAP
performance measure most directly comparable to EBITDA and adjusted
EBITDA is net income. The GAAP liquidity measure most comparable to
EBITDA and distributable cash flow is net cash provided by operating
activities. These non-GAAP financial measures should not be considered
as alternatives to GAAP net income or net cash provided by operating
activities. They have important limitations as analytical tools because
they exclude some but not all items that affect net income and net cash
provided by operating activities. They should not be considered in
isolation or as substitutes for analysis of our results as reported
under GAAP. Additionally, because EBITDA, adjusted EBITDA and
distributable cash flow may be defined differently by other companies in
our industry, our definition of EBITDA, adjusted EBITDA and
distributable cash flow may not be comparable to similarly titled
measures of other companies, thereby diminishing their utility.

References in the release to earnings refer to net income
attributable to the Partnership. References to EBITDA refer to earnings
before interest, income taxes, depreciation and amortization.

Results of Operations (Unaudited)
Summarized Financial Statement Information
				Millions of Dollars Except as Indicated
				Q2 2016					Q1 2016*
Selected Income Statement Data
Total revenues and other income				$	140.4				126.2
Net income				73.2					64.7
Net income attributable to the Partnership				67.5					52.3
Adjusted EBITDA				97.3					73.8
Distributable cash flow				84.4					64.1
Net Income Attributable to the Partnership Per Limited Partner Unit—Basic and Diluted (Dollars)
Common units				$	0.51				0.44
Selected Balance Sheet Data
Cash and cash equivalents				$	35.7				20.1
Equity investments				1,007.8					967.1
Total assets				2,772.7					2,700.8
Total debt				1,343.1					2,046.6
Total Equity
Equity held by public
Common units				$	1,483.7				808.5
Equity held by Phillips 66
Common units				465.0					301.5
General partner				(605.1		)			(646.8	)
Noncontrolling interests				—					120.2
Accumulated other comprehensive loss				(0.8		)			(0.8	)
Total Equity				$	1,342.8				582.6
* Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

Statement of Income
				Millions of Dollars
				Q2 2016					Q1 2016*
Revenues
Operating revenues—related parties				$	108.1				99.2
Operating revenues—third parties				2.1					2.0
Equity in earnings of affiliates				29.9					24.8
Other income				0.3					0.2
Total revenues and other income				$	140.4				126.2
Costs and Expenses
Operating and maintenance expenses				27.9					23.0
Depreciation				14.5					13.9
General and administrative expenses				7.8					9.0
Taxes other than income taxes				5.6					5.5
Interest and debt expense				11.0					9.9
Total costs and expenses				$	66.8				61.3
Income before income taxes				73.6					64.9
Provision for income taxes				0.4					0.2
Net Income				$	73.2				64.7
Less: Net income attributable to Predecessors				5.7					12.4
Net income attributable to the Partnership				$	67.5				52.3
* Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

Selected Operating Data
				Thousands of Barrels Daily
				Q2 2016					Q1 2016
Pipeline, Terminal and Storage Volumes
Pipelines(1)
Pipeline throughput volumes
Wholly-Owned Pipelines
Crude oil				287					281
Refined products*				622					570
Total				909					851
Select Joint Venture Pipelines(2)
Natural gas liquids				346					306
Terminals
Terminaling throughput and storage volumes(3)
Crude oil(4)				559					502
Refined products				450					427
Total				1,009					929
* Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.
(1) Represents the sum of volumes transported through each separately tariffed pipeline system.
(2) Total post-acquisition pipeline system throughput volumes for the Sand Hills and Southern Hills pipelines (100 percent basis) per day for each period presented.
(3) Terminaling throughput and storage volumes include leased capacity converted to a MBD-equivalent based on capacity divided by days in the period.
(4) Crude oil terminals include Bayway and Ferndale rail rack volumes.
				Dollars per Barrel
				Q2 2016					Q1 2016
Revenue
Average pipeline revenue†*				$	0.49				0.50
Average terminaling and storage revenue				0.38					0.40
† Excludes average pipeline revenue per barrel from equity affiliates.
* Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

Capital Expenditures and Investments
				Millions of Dollars
				Q2 2016					Q1 2016
Partnership Capital Expenditures and Investments
Expansion				$	57.9				31.6
Maintenance				3.0					1.2
Total Partnership				$	60.9				32.8
Predecessors*				10.1					12.4
Total Consolidated				$	71.0				45.2
*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.

Cash Distributions
				Millions of Dollars
				Q2 2016				Q1 2016
Cash Distributions*
Common units—public				$	18.7			11.6
Common units—Phillips 66				30.4				28.3
General partner—Phillips 66				20.7				15.7
Total				$	69.8			55.6
*Cash distributions declared attributable to the indicated periods.
Cash Distribution Per Unit (Dollars)				$	0.5050			0.4810
Coverage Ratio*				1.21x				1.15x
*Calculated as distributable cash flow divided by total cash distributions. Used to indicate the Partnership’s ability to pay cash distributions from current earnings.

Reconciliation of Adjusted EBITDA and Distributable Cash Flow
to Net Income
				Millions of Dollars
				Q2 2016					Q1 2016*
Reconciliation to Net Income
Net Income				$	73.2				64.7
Plus:
Depreciation				14.5					13.9
Net interest expense				10.9					9.7
Provision for income taxes				0.4					0.2
EBITDA				$	99.0				88.5
Distributions in excess of equity earnings				2.2					4.1
Expenses indemnified or prefunded by Phillips 66				3.9					0.1
Transaction costs associated with acquisitions				0.7					1.0
EBITDA attributable to Predecessors				(8.5		)			(19.9	)
Adjusted EBITDA				$	97.3				73.8
Plus:
Deferred revenue impacts**				1.3					1.4
Less:
Net interest				10.9					9.9
Income taxes paid				0.3					—
Maintenance capital expenditures				3.0					1.2
Distributable Cash Flow				$	84.4				64.1
*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.
**Difference between cash receipts and revenue recognition.

Reconciliation of Distributable Cash Flow to Net Cash Provided
by Operating Activities
				Millions of Dollars
				Q2 2016					Q1 2016*
Reconciliation to Net Cash Provided by Operating Activities
Net Cash Provided by Operating Activities				$	94.6				71.4
Plus:
Net interest expense				10.9					9.7
Provision for income taxes				0.4					0.2
Changes in working capital				(1.8		)			14.4
Undistributed equity earnings				1.7					(0.6	)
Accrued environmental costs				0.1					—
Other**				(6.9		)			(6.6	)
EBITDA				$	99.0				88.5
Distributions in excess of equity earnings				2.2					4.1
Expenses indemnified or prefunded by Phillips 66				3.9					0.1
Transaction costs associated with acquisitions				0.7					1.0
EBITDA attributable to Predecessors				(8.5		)			(19.9	)
Adjusted EBITDA				$	97.3				73.8
Plus:
Deferred revenue impacts†				1.3					1.4
Less:
Net interest				10.9					9.9
Income taxes paid				0.3					—
Maintenance capital expenditures				3.0					1.2
Distributable Cash Flow				$	84.4				64.1
* Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control.
**Primarily deferred revenue.
† Difference between cash receipts and revenue recognition.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160729005179/en/

Source: Business Wire
(July 29, 2016 - 7:00 AM EDT)

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