10-QPeriod: Q2 FY2013

Phillips 66 Quarterly Report for Q2 Ended Jun 30, 2013

Filed August 1, 2013For Securities:PSX

Summary

Phillips 66 reported a net income of $958 million for the second quarter of 2013, a decrease from $1,181 million in the same period of the prior year. This decline was primarily attributed to lower refining margins and a reduced feedstock advantage, partially offset by decreased impairments in the Midstream segment. For the first six months of 2013, net income increased to $2,365 million from $1,817 million in the prior year, driven by improved refining and marketing margins and lower impairments. The company generated $968 million in cash from operating activities during the second quarter and $3,181 million for the six-month period. Significant cash uses included capital expenditures, share repurchases ($546 million in Q2 and $928 million year-to-date), and debt prepayment ($500 million). Key strategic developments include the formation and successful IPO of Phillips 66 Partners LP in July 2013, which raised approximately $405 million in net proceeds and will be consolidated by Phillips 66. The company also amended its revolving credit agreement to increase borrowing capacity to $4.5 billion.

Financial Highlights

42 data points
Beta

Revenue

$43.19B

Net Income

$958.00M

2.2% Net Margin

EPS (Diluted)

$1.53

Total Assets

$49.93B

Cash & Equivalents

$4.22B

Free Cash Flow

$954.00M

Financial Statements
Beta
Revenue$43.19B
SG&A Expenses$368.00M
Operating Income$2.34B
Net Income$958.00M
EPS (Basic)$1.55
EPS (Diluted)$1.53
Shares Outstanding (Basic)619.14M
Shares Outstanding (Diluted)624.91M

Key Highlights

  • 1Net income for Q2 2013 was $958 million, down from $1,181 million in Q2 2012, primarily due to lower refining margins.
  • 2Six-month net income increased to $2,365 million from $1,817 million in the prior year, driven by improved segment performance and lower impairments.
  • 3Generated $968 million in operating cash flow in Q2 2013, with $3,181 million year-to-date.
  • 4Significant share repurchases totaling $546 million in Q2 and $928 million year-to-date, funded by available cash.
  • 5Completed the initial public offering of Phillips 66 Partners LP in July 2013, raising approximately $405 million.
  • 6Amended revolving credit agreement, increasing borrowing capacity to $4.5 billion, demonstrating strong liquidity.
  • 7Refining segment earnings decreased significantly year-over-year in Q2 due to lower margins, while Marketing and Specialties showed strong growth.

Frequently Asked Questions

The primary driver for the decrease in net income was lower refining margins, particularly in the Central Corridor and Gulf Coast regions, as well as a reduced feedstock advantage. This was partially offset by lower impairments in the Midstream segment.

The company generated substantial cash from operations ($968 million in Q2 2013). This cash, along with its credit facilities, was used to fund capital expenditures, significant share repurchases ($546 million), debt prepayment ($500 million), and dividends. The company also maintained strong liquidity with $4.2 billion in cash and cash equivalents and $5.0 billion in available credit facilities.

The formation and successful Initial Public Offering (IPO) of Phillips 66 Partners LP in July 2013 is significant as it raised approximately $405 million in net proceeds for general partnership purposes, including future acquisitions and capital expenditures. Phillips 66 retains a controlling interest and will consolidate the partnership, potentially providing a new avenue for growth and value creation.

Impairments in the first six months of 2013 were $25 million, primarily related to exiting a composite graphite business. This is a significant decrease compared to $318 million in impairments during the same period of 2012, which included a substantial charge related to the Rockies Express Pipeline LLC. The absence of a large gain from the sale of the Trainer Refinery in the prior year also impacted year-over-year comparisons for net gain on dispositions.