01—Abstract
Summary
Summary of the 10-K filed February 23, 2018. Cited figures are marked; the original filing is the authoritative source.
Phillips 66's 2017 10-K filing reveals a strong financial performance, largely driven by a significant provisional income tax benefit of $2.7 billiona resulting from the U.S. Tax Cuts and Jobs Act enacted in December 2017.
Excluding this one-time item, the company demonstrated operational strength across its segments, particularly in Refining, which saw improved margins compared to the previous year. The Midstream segment benefited from increased equity earnings from affiliates, including the Bakken Pipeline's commencement of operations. Strategically, Phillips 66 remains focused on operating excellence, growth through targeted capital expenditures, enhancing shareholder returns via dividends and share repurchases, and fostering a high-performing organization.
The company actively manages its portfolio, including its stake in Phillips 66 Partners, and is investing in infrastructure to support its operations and future growth, with a notable emphasis on expanding midstream assets and optimizing refining yields. Despite challenges like Hurricane Harvey's impact on chemical operations, the company maintained strong refining utilization rates and robust cash flow generation.
02—Key points
Key Highlights
- Reported earnings of $5.1 billion in 2017, boosted by a $2.7 billion provisional tax benefit from the Tax Cuts and Jobs Act.
- Achieved a worldwide refining crude oil capacity utilization rate of 95% in 2017.
- Returned significant value to shareholders through $1.6 billion in share repurchases and $1.4 billion in dividends.
- Invested $1.8 billion in capital expenditures and investments in 2017, with a 2018 budget of $2.3 billion.
- Midstream segment saw improved results, partly due to the Bakken Pipeline starting commercial operations in June 2017.
- Chemicals segment faced headwinds from Hurricane Harvey impacting operations and costs, but saw progress on its U.S. Gulf Coast Petrochemicals Project.
- Demonstrated strong liquidity with $3.1 billion in cash and cash equivalents and approximately $5.8 billion in committed credit capacity at year-end 2017.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, Phillips 66 kept $0.05.
- Revenue$102.35B100.0%
- Cost of revenue−$79.41B77.6%
- Gross profit$22.95B22.4%
- Operating costs−$17.84B17.4%
- Operating income$5.11B5.0%
- Interest, other & tax$-00.0%
- Net income$5.11B5.0%
Where FY2017 revenue went
$102.35B- Cost of revenue: $79.41B, 78% of revenue
- Other operating costs: $16.08B, 16% of revenue
- Net income: $5.11B, 5.0% of revenue
- R&D: $60.0M, 0.1% of revenue
- SG&A: $1.70B, 1.7% of revenue
Kept 5.0% as net incomeR&D $60.0M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed February 23, 2018Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $102.35B$84.28B | +21.4% |
| Cost of Revenue | $79.41B$62.47B | +27.1% |
| Gross Profit | $22.95B$21.81B | +5.2% |
| R&D Expenses | $60.00M$60.00M | 0.0% |
| SG&A Expenses | $1.70B$1.64B | +3.5% |
| Operating Income | $5.11B$1.55B | +228.4% |
| Net Income | $5.11B$1.55B | +229.6% |
| EPS (Basic) | $9.90$2.94 | +236.7% |
| EPS (Diluted) | $9.85$2.92 | +237.3% |
| Shares Outstanding (Basic) | 515.09M527.53M | −2.4% |
| Shares Outstanding (Diluted) | 518.51M530.07M | −2.2% |
05—Questions
Frequently Asked Questions
What was the main driver of Phillips 66's significantly higher earnings in 2017 compared to 2016?
The primary driver for the substantial increase in earnings was a $2.7 billion provisional income tax benefit recognized in the fourth quarter of 2017, resulting from the enactment of the U.S. Tax Cuts and Jobs Act. Beyond this one-time tax benefit, higher realized refining margins and improved equity earnings from affiliates also contributed to the stronger financial performance.
How did the company's key segments perform in 2017?
The Refining segment showed strong performance with higher realized margins. The Midstream segment benefited from improved results, including contributions from new pipeline operations and affiliate earnings. The Chemicals segment experienced negative impacts from Hurricane Harvey, leading to increased costs and downtime, although progress was made on major projects. The Marketing and Specialties segment saw lower realized margins compared to the prior year.
What are Phillips 66's strategic priorities for growth and shareholder returns?
The company's strategic priorities include maintaining operating excellence and safety, pursuing growth through targeted capital expenditures primarily in Midstream and Refining, enhancing shareholder returns via consistent dividend growth and share repurchases, and developing a high-performing workforce. Investments are focused on projects integrated with existing assets and infrastructure, aiming for high returns and optimizing the company's portfolio.
06—Continue