10-QPeriod: Q1 FY2012

Phillips 66 Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 16, 2012For Securities:PSX

Summary

This 10-Q filing for Phillips 66 (PSX) covers the quarterly period ended March 31, 2012, and notably includes the company's financial activities leading up to its separation from ConocoPhillips on April 30, 2012. The financial statements are presented on a "combined" basis, reflecting the historical results of ConocoPhillips' downstream operations as if they were a standalone entity. Key financial performance indicators for the quarter show a slight decrease in net income to $636 million from $677 million in the prior year, primarily driven by a decline in the Refining and Marketing (R&M) segment, impacted by impairments and higher operating expenses. However, the Midstream and Chemicals segments demonstrated improved results, with higher gathering/processing volumes and better margins, respectively. The company also incurred significant debt financing during the quarter totaling $5.8 billion to prepare for its independence, with the proceeds held in escrow until the separation date.

Financial Highlights

35 data points
Beta

Revenue

$45.78B

Net Income

$636.00M

1.4% Net Margin

EPS (Diluted)

$1.00

Total Assets

$53.00B

Cash & Equivalents

$3.10B

Free Cash Flow

-$361.00M

Financial Statements
Beta
Revenue$45.78B
SG&A Expenses$349.00M
Net Income$636.00M
EPS (Basic)$1.01
EPS (Diluted)$1.00
Shares Outstanding (Basic)627.63M
Shares Outstanding (Diluted)634.64M

Key Highlights

  • 1Phillips 66 completed its separation from ConocoPhillips on April 30, 2012, and its stock began trading on the NYSE on May 1, 2012.
  • 2Net income for the quarter was $636 million, a decrease from $677 million in the prior year, primarily due to the Refining and Marketing (R&M) segment.
  • 3The R&M segment experienced a decline in earnings, influenced by impairments totaling $43 million and increased operating expenses.
  • 4The Midstream segment saw a 46% increase in earnings ($89 million vs. $61 million), driven by higher gathering and processing volumes.
  • 5The Chemicals segment, largely represented by its investment in CPChem, also showed improved earnings ($217 million vs. $185 million) due to higher ethylene margins.
  • 6Phillips 66 issued $5.8 billion in senior notes during March 2012 to fund its separation and independent operations, with proceeds held in escrow.
  • 7The company had a $4.0 billion revolving credit facility in place as of the separation date, under which no borrowings had been made.

Frequently Asked Questions

The 'Combined' financial statements reflect the historical results of operations, financial position, and cash flows of ConocoPhillips' downstream businesses (refining, marketing, midstream, and chemicals) as if they had been operating as a separate, standalone entity for all periods presented. This presentation is due to the recent separation of these businesses from ConocoPhillips, which was finalized on April 30, 2012.

The primary driver for the decrease in net income was the Refining and Marketing (R&M) segment. This segment's earnings were negatively impacted by impairments totaling $43 million and higher operating expenses, which more than offset improvements seen in the Midstream and Chemicals segments.

Phillips 66 issued $5.8 billion in senior notes in March 2012. While the proceeds were held in segregated escrow accounts at March 31, 2012, they were intended to provide capital for the company's operations as an independent entity post-separation. This significant debt issuance impacts the company's leverage and future interest expenses.

Equity in earnings of affiliates increased by 6% to $734 million, driven by improved performance in joint ventures such as WRB Refining LP (higher refining margins), CPChem (higher olefins and polyolefins margins), and DCP Midstream (higher gathering and processing volumes). These affiliates contribute significantly to Phillips 66's overall profitability.