10-KPeriod: FY2017

Phillips 66 Annual Report, Year Ended Dec 31, 2017

Filed February 23, 2018For Securities:PSX

Summary

Phillips 66's 2017 10-K filing reveals a strong financial performance, largely driven by a significant provisional income tax benefit of $2.7 billion 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.

Financial Highlights

50 data points
Beta

Revenue

$102.35B

22.4% Gross Margin

Net Income

$5.11B

5.0% Net Margin

EPS (Diluted)

$9.85

Total Assets

$54.37B

Cash & Equivalents

$3.12B

Free Cash Flow

$3.65B

Financial Statements
Beta
Revenue$102.35B
Cost of Revenue$79.41B
Gross Profit$22.95B
R&D Expenses$60.00M
SG&A Expenses$1.70B
Operating Income$5.11B
Net Income$5.11B
EPS (Basic)$9.90
EPS (Diluted)$9.85
Shares Outstanding (Basic)515.09M
Shares Outstanding (Diluted)518.51M

Key Highlights

  • 1Reported earnings of $5.1 billion in 2017, boosted by a $2.7 billion provisional tax benefit from the Tax Cuts and Jobs Act.
  • 2Achieved a worldwide refining crude oil capacity utilization rate of 95% in 2017.
  • 3Returned significant value to shareholders through $1.6 billion in share repurchases and $1.4 billion in dividends.
  • 4Invested $1.8 billion in capital expenditures and investments in 2017, with a 2018 budget of $2.3 billion.
  • 5Midstream segment saw improved results, partly due to the Bakken Pipeline starting commercial operations in June 2017.
  • 6Chemicals segment faced headwinds from Hurricane Harvey impacting operations and costs, but saw progress on its U.S. Gulf Coast Petrochemicals Project.
  • 7Demonstrated strong liquidity with $3.1 billion in cash and cash equivalents and approximately $5.8 billion in committed credit capacity at year-end 2017.

Frequently Asked Questions

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.

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.

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.