Phillips 66 Reports First-Quarter Earnings of $524 Million or $1.07 Per Share

Phillips 66 (NYSE: PSX), an energy manufacturing and logistics company,
announces first-quarter 2018 earnings of $524 million and adjusted
earnings of $512 million. This compares with fourth-quarter 2017
earnings of $3.2 billion and adjusted earnings of $548 million.
Fourth-quarter 2017 earnings included a $2.7 billion benefit from U.S.
tax reform.

“We had a strong start to the year," said Greg Garland, chairman and CEO
of Phillips 66. "We delivered solid earnings, operated well, advanced
strategic initiatives, and continued rewarding our shareholders with
significant distributions. Our earnings reflect the benefit of our
diversified portfolio, and we are also seeing positive, ongoing impacts
from U.S. tax reform. CPChem has fully recovered from Hurricane Harvey
and contributed strong results in the quarter, while successfully
starting up its new world-scale ethane cracker. We recently completed
yield-enhancing projects at the Bayway and Wood River refineries, and
successfully executed major turnarounds at multiple refineries.”

“Building on our strong record of rewarding our shareholders, we
distributed $3.8 billion through share repurchases and dividends during
the quarter," Garland continued. "We repurchased over 37 million of our
shares, representing a 7 percent reduction in shares outstanding during
the quarter. Since our company’s formation in 2012, we have returned
over $20 billion to shareholders through dividends, share repurchases
and share exchanges.”

Midstream first-quarter net income was $233 million, compared with $139
million in the fourth quarter of 2017. Midstream net income in the
fourth quarter of 2017 included hurricane-related costs of $3 million.

Transportation adjusted net income for the first quarter of 2018 was
$136 million, an increase of $28 million from the prior quarter. The
increase reflects lower taxes and operating costs, partially offset by
lower volumes, primarily from the impact of refinery turnarounds.

NGL and Other first-quarter adjusted net income was $73 million,
compared with $20 million in the fourth quarter of 2017. First-quarter
adjusted net income reflects improved realized margins and positive
inventory impacts.

The company’s equity investment in DCP Midstream generated adjusted net
income of $24 million in the first quarter, compared with $14 million in
the prior quarter. First-quarter adjusted net income reflected hedging
gains, lower taxes and the timing of incentive distributions. These
items were partially offset by lower volumes in the quarter.

The Chemicals segment reflects Phillips 66's equity investment in
Chevron Phillips Chemical Company LLC (CPChem). Chemicals' first-quarter
net income was $232 million, compared with $27 million in the fourth
quarter of 2017. Chemicals net income in the fourth quarter of 2017
included hurricane-related costs of $75 million and an asset impairment
of $19 million.

CPChem's O&P business contributed $224 million of adjusted net income to
the Chemicals segment in the first quarter of 2018. The $129 million
increase from the prior quarter was primarily due to improved volumes
and margins, reflecting the return to full operations at the Cedar Bayou
facility, as well as lower taxes. Global O&P utilization was 96 percent
for the quarter, up from 79 percent in the fourth quarter of 2017.

CPChem's SA&S business contributed $18 million of adjusted net income in
the first quarter of 2018, a decrease of $16 million from the prior
quarter. The decrease was due to turnaround activity.

Refining first-quarter net income was $91 million, compared with $371
million in the fourth quarter of 2017. Refining results in the first
quarter included biodiesel tax credits of $2 million. Prior-quarter net
income included favorable U.K. tax credits of $23 million, partially
offset by hurricane-related costs of $7 million and pension settlement
expense of $3 million.

Refining adjusted net income was $89 million in the first quarter of
2018, compared with $358 million in the fourth quarter of 2017. The
decrease reflects lower volumes and higher costs due to heavy turnaround
activity, partially offset by higher realized margins. Phillips 66’s
worldwide crude utilization rate was 89 percent, compared with 100
percent in the fourth quarter. Pre-tax turnaround costs for the first
quarter were $245 million, while clean product yield was 83 percent.

Marketing and Specialties (M&S) first-quarter net income was $184
million, compared with $123 million in the fourth quarter of 2017. M&S
first-quarter net income included biodiesel tax credits of $10 million.
Fourth-quarter 2017 results included pension settlement expense of $1
million.

Adjusted net income for Marketing and Other was $129 million in the
first quarter of 2018, an increase of $42 million from the prior
quarter. The increase was largely due to improved realized margins and
lower operating costs and taxes, partially offset by decreased volumes.
Refined product exports in the first quarter were 190,000 barrels per
day (BPD).

Specialties generated adjusted net income of $45 million during the
first quarter. The $8 million increase from the prior quarter was mainly
due to lower taxes.

Corporate and Other first-quarter net costs were $155 million, compared
with net income of $2.6 billion in the fourth quarter of 2017. The
results in both periods included benefits from U.S. tax reform,
primarily associated with the revaluation of net deferred tax
liabilities.

The $22 million increase in adjusted net costs in the first quarter
reflects the ongoing impact of lower U.S. tax rates on the net costs
included in Corporate and Other.

Financial Position, Liquidity and Return of Capital

During the first quarter, Phillips 66 generated $488 million in cash
from operations. Excluding working capital impacts, operating cash flow
was $1.3 billion. Additionally, the company issued $1.5 billion of
senior notes.

Phillips 66 funded $3.5 billion in share repurchases, $327 million in
dividends and $328 million of capital expenditures and investments
during the quarter. First-quarter share repurchases included the
repurchase of 35 million shares in a single transaction for $3.3
billion. The company ended the quarter with 466 million shares
outstanding.

As of March 31, 2018, cash and cash equivalents were $842 million, and
consolidated debt was $11.6 billion, including $2.9 billion at PSXP. The
company's consolidated debt-to-capital ratio and net-debt-to-capital
ratio were 32 percent and 31 percent, respectively. Excluding PSXP, the
debt-to-capital ratio was 28 percent and net-debt-to-capital ratio was
27 percent.

Strategic Update

In Midstream, Phillips 66 Partners recently announced it has received
sufficient binding commitments to proceed with construction of the Gray
Oak Pipeline system. The Gray Oak Pipeline will provide crude oil
transportation from West Texas to destinations in the Corpus Christi and
Sweeny/Freeport markets, including the Phillips 66 Sweeny Refinery. A
second binding open season is underway to determine the final scope and
capacity of the pipeline system, which could be up to 700,000 BPD.
Assuming the pipeline is fully subscribed, its capacity could ultimately
be expanded to approximately 1 million BPD of long-haul takeaway.
Phillips 66 Partners will initially own a 75 percent interest in the
pipeline system. Other third parties have an option to acquire up to
32.75 percent interest in the joint venture. If all options are
exercised, Phillips 66 Partners would own 42.25 percent. The pipeline is
expected to be placed in service by the end of 2019.

The Bayou Bridge Pipeline, in which Phillips 66 Partners holds a 40
percent interest, currently operates from the Phillips 66 Beaumont
Terminal to Lake Charles, Louisiana. Construction continues on the
segment from Lake Charles to St. James, Louisiana, and commercial
operations are expected to begin in the fourth quarter of 2018.

Phillips 66 Partners began construction of a new 25,000 BPD
isomerization unit at the Lake Charles Refinery. The unit will increase
production of higher octane gasoline blend components, with completion
anticipated by the end of 2019.

Phillips 66 is constructing 3.5 million barrels of additional crude oil
storage at the Beaumont Terminal that will bring the terminal's total
crude and products storage capacity to 14.6 million barrels. The new
capacity is anticipated to be online by the end of 2018.

DCP Midstream’s Sand Hills NGL Pipeline capacity was close to 400,000
BPD at the end of the first quarter. Further expansion of the line to
above 450,000 BPD is expected in the second half of 2018. Sand Hills is
owned two-thirds by DCP and one-third by Phillips 66 Partners.

DCP continues construction of two additional gas processing plants in
the high-growth DJ basin, each with a design capacity of 200 million
cubic feet per day. The Mewbourn 3 plant is anticipated to be completed
in the third quarter of 2018, and the O’Connor 2 plant is scheduled for
completion in mid-2019.

DCP is participating in the Gulf Coast Express Pipeline project, which
will provide an outlet for natural gas production in the Permian Basin
to markets along the Texas Gulf Coast and has a total design capacity of
approximately 2 billion cubic feet per day. DCP holds a 25 percent
equity interest in the project, which is expected to be completed in the
fourth quarter of 2019.

In Chemicals, CPChem has completed its world-scale U.S. Gulf Coast
(USGC) Petrochemicals Project. The new ethane cracker at Cedar Bayou
commenced operations in the first quarter, and reached full design rates
in April. Along with the two polyethylene units that started up in the
third quarter of 2017, the USGC project increased CPChem’s global
ethylene and polyethylene capacity by approximately one-third.

In Refining, the company is progressing yield-enhancing projects that
are expected to deliver a combined 25,000 BPD of additional clean
products by the end of this year. This includes the modernization of
fluid catalytic cracking (FCC) units at both the Bayway and Wood River
refineries that were recently completed. At the Lake Charles Refinery,
crude unit modifications to run more domestic crudes and reduce
feedstock costs were completed, with additional improvements anticipated
in the fourth quarter.

Four Phillips 66 refineries were recognized by the American Fuel and
Petrochemical Manufacturers (AFPM) for exemplary safety performance in
2017. The Bayway Refinery received the Distinguished Safety Award, which
is the highest annual safety award the industry recognizes, and the
Sweeny Refinery received the second-highest recognition, the Elite Gold
Award. The Alliance and Wood River refineries were both selected as
recipients of the Elite Silver Award, which recognizes the top five
percent of all sites for safety performance.

Investor Webcast

Later today, members of Phillips 66 executive management will host a
webcast at noon EDT to discuss the company’s first-quarter performance
and provide an update on strategic initiatives. To access the webcast
and view related presentation materials, go to www.phillips66.com/investors
and click on "Events & Presentations." For detailed supplemental
information, go to www.phillips66.com/supplemental.

About Phillips 66

Phillips 66 is a diversified energy manufacturing and logistics company.
With a portfolio of Midstream, Chemicals, Refining, and Marketing and
Specialties businesses, the company processes, transports, stores and
markets fuels and products globally. Phillips 66 Partners, the company's
master limited partnership, is integral to the portfolio. Headquartered
in Houston, the company has 14,500 employees committed to safety and
operating excellence. Phillips 66 had $52 billion of assets as of
March 31, 2018. For more information, visit www.phillips66.com
or follow us on Twitter @Phillips66Co.

^{CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR"
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995}

^{This news release 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,”
“continues,” “intends,” “will,” “would,” “objectives,” “goals,”
“projects,” “efforts,” “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 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
fluctuations in NGL, crude oil, and natural gas prices, and
petrochemical and refining 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.}

^{Use of Non-GAAP Financial Information—This news
release includes the terms adjusted earnings, adjusted earnings per
share, and adjusted net income. These are non-GAAP financial measures
that are included to help facilitate comparisons of company operating
performance across periods and with peer companies, by excluding items
that do not reflect the core operating results of our businesses in the
current period. This release includes realized refining margin, a
non-GAAP financial measure that demonstrates how well we performed
relative to benchmark industry margins. This release also includes a
debt-to-capital ratio excluding PSXP. This non-GAAP measure is provided
to differentiate the capital structure of Phillips 66 compared with that
of Phillips 66 Partners.}

^{References in the release to earnings refer to net income
attributable to Phillips 66. References to adjusted earnings refer to
earnings excluding special items, as detailed in the tables to this
release. References to net income are inclusive of noncontrolling
interests.}

^{*We generally tax effect taxable U.S.-based special items using
a combined federal and state statutory income tax rate of approximately
25 percent beginning in 2018, and approximately 38 percent for periods
prior to 2018. 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.}

^{*PSXP's third-party debt and Phillips 66's noncontrolling
interests attributable to PSXP.}

View source version on businesswire.com: https://www.businesswire.com/news/home/20180427005175/en/

News by QuoteMedia

www.quotemedia.com