01—Abstract
Summary
Summary of the 10-K filed February 21, 2020. Cited figures are marked; the original filing is the authoritative source.
Phillips 66 (PSX) reported a decrease in earnings for 2019 compared to 2018, primarily due to lower refining and marketing margins, and an impairment charge related to its investment in DCP Midstream.
Despite this, the company maintained a strong operational performance, with its refining segment achieving a high utilization rate of 94%a. Phillips 66 continues to execute its strategic priorities focused on operating excellence, disciplined capital allocation for growth in midstream and chemicals, enhancing refining returns, and returning value to shareholders through dividends and share repurchases.
The company is actively investing in midstream infrastructure, including pipelines and fractionation capacity, and its chemicals segment, through its joint venture CPChem, is progressing on significant petrochemical projects in the U.S. Gulf Coast and Qatar. Phillips 66 remains committed to shareholder returns, having increased its dividend for the seventh consecutive year and continuing its share repurchase program, signaling confidence in its financial stability and operational capabilities.
02—Key points
Key Highlights
- Earnings decreased by 45% in 2019 to $3.1 billion, primarily due to lower refining and marketing margins and an $853 million impairment on the DCP Midstream investment.
- The Midstream segment saw improved results from Transportation and NGL businesses, but overall pre-tax income decreased due to the DCP Midstream impairment.
- The Refining segment's pre-tax income significantly decreased in 2019, driven by lower realized refining margins, particularly due to narrowing heavy crude differentials.
- The Chemicals segment's pre-tax income declined due to lower polyethylene margins and inventory write-downs at CPChem.
- Phillips 66's Marketing and Specialties segment experienced a decrease in pre-tax income, mainly due to lower marketing fuel margins.
- The company generated $4.8 billion in cash from operating activities and returned $4.9 billion to shareholders through capital expenditures ($3.9 billion), share repurchases ($1.7 billion), and dividends ($1.6 billion).
- Significant capital expenditures were directed towards midstream growth projects, including pipeline expansions and fractionation capacity, and towards refining projects aimed at improving yields and reliability.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Phillips 66 kept $0.03.
- Revenue$107.29B100.0%
- Cost of revenue−$95.53B89.0%
- Gross profit$11.76B11.0%
- Operating costs−$8.69B8.1%
- Operating income$3.08B2.9%
- Interest, other & tax$-00.0%
- Net income$3.08B2.9%
Where FY2019 revenue went
$107.29B- Cost of revenue: $95.53B, 89% of revenue
- Net income: $3.08B, 2.9% of revenue
- R&D: $54.0M, 0.1% of revenue
- SG&A: $1.68B, 1.6% of revenue
- Other operating costs: $6.95B, 6.5% of revenue
Kept 2.9% as net incomeNet income $3.08B · 2.9%R&D $54.0M · 0.1%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 21, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $107.29B$111.46B | −3.7% |
| Cost of Revenue | $95.53B$97.93B | −2.5% |
| Gross Profit | $11.76B$13.53B | −13.1% |
| R&D Expenses | $54.00M$55.00M | −1.8% |
| SG&A Expenses | $1.68B$1.68B | +0.2% |
| Operating Income | $3.08B$5.59B | −45.0% |
| Interest Expense | $504.00M$493.00M | +2.2% |
| Net Income | $3.08B$5.59B | −45.0% |
| EPS (Basic) | $6.80$11.87 | −42.7% |
| EPS (Diluted) | $6.77$11.80 | −42.6% |
| Shares Outstanding (Basic) | 451.36M470.71M | −4.1% |
| Shares Outstanding (Diluted) | 453.89M474.05M | −4.3% |
05—Questions
Frequently Asked Questions
What was the primary driver for the decrease in earnings in 2019?
The primary drivers for the decrease in earnings in 2019 were lower realized refining and marketing margins across its segments, compounded by an $853 million pre-tax impairment charge related to its investment in DCP Midstream.
How is Phillips 66 managing its capital allocation and shareholder returns?
Phillips 66 is focusing its capital allocation on growth opportunities in its Midstream and Chemicals segments. The company is committed to returning value to shareholders through consistent dividend increases and share repurchases, demonstrating confidence in its operational cash flow generation.
What are the key strategic initiatives Phillips 66 is pursuing?
Phillips 66's strategic priorities include maintaining operating excellence with a strong focus on safety and environmental stewardship, investing in growth projects within the Midstream and Chemicals segments, enhancing returns in the Refining segment through optimization and yield improvements, and delivering shareholder value via dividends and share repurchases.
What is the outlook for the Midstream segment?
The Midstream segment is expected to benefit from continued investments in logistics infrastructure, including pipelines and fractionation facilities. While the DCP Midstream impairment impacted 2019 results, the Transportation and NGL businesses showed improved performance, driven by higher volumes and equity earnings from completed projects.
06—Continue