10-QPeriod: Q1 FY2014

Phillips 66 Quarterly Report for Q1 Ended Mar 31, 2014

Filed May 1, 2014For Securities:PSX

Summary

Phillips 66 (PSX) reported a net income of $1,572 million for the first quarter of 2014, a significant increase from $1,407 million in the same period of 2013. This growth was largely driven by a non-cash gain of $696 million from the Phillips Specialty Products Inc. (PSPI) share exchange completed in February 2014. Despite this gain, the company's core refining operations experienced lower realized margins due to decreased market crack spreads and narrowing crude differentials, impacting profitability in that segment. The company generated $1,398 million in cash from operating activities, a decrease from $2,213 million in the prior year, reflecting lower refining margins and reduced distributions from equity affiliates. PSX actively returned capital to shareholders, repurchasing $640 million of its common stock and paying $229 million in dividends. The company ended the quarter with a strong liquidity position, holding $5.3 billion in cash and cash equivalents and having $5.4 billion in available capacity under its credit facilities.

Financial Highlights

41 data points
Beta

Revenue

$40.28B

Net Income

$1.57B

3.9% Net Margin

EPS (Diluted)

$2.67

Total Assets

$50.85B

Cash & Equivalents

$5.33B

Free Cash Flow

$1.40B

Financial Statements
Beta
Revenue$40.28B
SG&A Expenses$402.00M
Operating Income$866.00M
Net Income$1.57B
EPS (Basic)$2.69
EPS (Diluted)$2.67
Shares Outstanding (Basic)584.05M
Shares Outstanding (Diluted)589.58M

Key Highlights

  • 1Net income increased by 12% to $1,572 million, primarily due to a $696 million non-cash gain from the PSPI share exchange.
  • 2Operating cash flow decreased by 37% to $1,398 million, driven by lower refining margins and equity affiliate distributions.
  • 3The Refining segment's profitability was significantly impacted by lower crack spreads and narrower crude differentials, leading to a 66% decrease in segment net income.
  • 4The Midstream segment showed strong performance, with net income increasing by 69% to $188 million, driven by higher transportation, DCP Midstream, and NGL business earnings.
  • 5Phillips 66 returned $869 million to shareholders through $640 million in share repurchases and $229 million in dividends paid.
  • 6The company maintained a strong liquidity position with $5.3 billion in cash and cash equivalents and $5.4 billion in available credit facilities.
  • 7Inventories significantly increased from $3,354 million at the end of 2013 to $5,908 million by March 31, 2014.

Frequently Asked Questions

The primary driver of the increase in net income to $1,572 million was a significant non-cash gain of $696 million recognized from the completion of the Phillips Specialty Products Inc. (PSPI) share exchange in February 2014. This gain largely offset lower operating results in other segments, particularly Refining.

Operating cash flow decreased from $2,213 million in the first quarter of 2013 to $1,398 million in the first quarter of 2014. This reduction was primarily attributed to lower realized refining margins and reduced distributions from equity affiliates.

The Refining segment experienced a substantial decline in net income (down 66%) due to lower realized refining margins, which were impacted by decreased market crack spreads and narrowing crude differentials. The segment also faced higher maintenance and utility costs. This suggests continued margin pressure and operational challenges for the segment in the near term.

Phillips 66 maintained a strong liquidity position with $5.3 billion in cash and cash equivalents and significant access to credit facilities. The company actively returned capital to shareholders through share repurchases ($640 million) and dividends ($229 million). Capital expenditures were focused on Midstream, Refining, and Marketing & Specialties segments, with significant investments in projects like the Sweeny Fractionator I and emission reduction initiatives in Refining.