10-QPeriod: Q2 FY2014

Phillips 66 Quarterly Report for Q2 Ended Jun 30, 2014

Filed July 31, 2014For Securities:PSX

Summary

Phillips 66 reported a net income of $863 million for the second quarter of 2014, a decrease from $958 million in the same period of the prior year. This decline was primarily attributed to lower realized refining margins due to decreased market crack spreads, partially offset by widening crude differentials. The Marketing and Specialties (M&S) segment also experienced lower margins, contributing to the overall decrease. For the first six months of 2014, net income increased to $2,435 million from $2,365 million in the prior year, largely due to a significant non-cash gain of $696 million from the PSPI share exchange and improved Chemical segment margins, which helped offset lower refining and M&S margins. Cash flow from operations remained robust, with $2,228 million generated in the first six months of 2014, although this was lower than the $3,181 million generated in the same period of 2013. The company utilized cash for capital expenditures, share repurchases, and dividends, ending the quarter with $5.0 billion in cash and cash equivalents. Management highlighted strategic acquisitions and an increased dividend, signaling confidence in future performance and commitment to returning value to shareholders. The company also noted a change in its operating segment structure for internal reporting, with prior periods recast for comparability.

Financial Highlights

41 data points
Beta

Revenue

$45.55B

Net Income

$863.00M

1.9% Net Margin

EPS (Diluted)

$1.51

Total Assets

$50.82B

Cash & Equivalents

$4.96B

Free Cash Flow

$830.00M

Financial Statements
Beta
Revenue$45.55B
SG&A Expenses$412.00M
Operating Income$1.73B
Net Income$863.00M
EPS (Basic)$1.52
EPS (Diluted)$1.51
Shares Outstanding (Basic)565.80M
Shares Outstanding (Diluted)571.28M

Key Highlights

  • 1Phillips 66 reported second-quarter 2014 net income of $863 million, down from $958 million in Q2 2013, primarily due to lower refining margins.
  • 2For the first six months of 2014, net income rose to $2,435 million from $2,365 million in H1 2013, boosted by a $696 million non-cash gain from the PSPI share exchange.
  • 3Cash flow from operating activities for the first six months of 2014 was $2,228 million, a decrease from $3,181 million in the comparable period of 2013.
  • 4The company utilized significant cash for share repurchases ($1,256 million in H1 2014) and dividends ($510 million in H1 2014), alongside capital expenditures ($1,133 million in H1 2014).
  • 5Total assets grew to $50.8 billion at June 30, 2014, from $49.8 billion at December 31, 2013, with an increase in inventories and property, plant, and equipment.
  • 6The company declared a quarterly dividend of $0.50 per share and indicated forecasts for annual double-digit dividend rate increases in 2015 and 2016.
  • 7Phillips 66 completed the acquisition of Spectrum Corporation and is proceeding with the acquisition of a storage terminal near Beaumont, Texas, demonstrating a focus on growth and strategic expansion.

Frequently Asked Questions

Phillips 66 reported a net income of $863 million for the second quarter of 2014, which is a decrease compared to $958 million reported for the same period in 2013. The decrease was primarily driven by lower realized refining margins due to decreased market crack spreads, partially offset by widening crude differentials, and lower margins in the Marketing and Specialties segment.

For the first six months of 2014, Phillips 66 generated $2,228 million in cash from operations. This is a decrease compared to the $3,181 million generated in the first six months of 2013. The decrease was attributed to lower realized refining and marketing margins and reduced distributions from equity affiliates, partly offset by increased distributions from WRB.

During this period, Phillips 66 completed the acquisition of Spectrum Corporation, a specialty lubricants business. They also announced an agreement to acquire a storage terminal near Beaumont, Texas, expected to close in Q3 2014. The company also increased its quarterly dividend to $0.50 per share and forecast double-digit dividend growth for the next two years. Furthermore, the company authorized an additional $2 billion in share repurchases and completed a significant share exchange related to its flow improvers business (PSPI), recognizing a large non-cash gain.

The Midstream segment saw earnings increase by 20% year-over-year, driven by higher transportation and NGL business performance. The Chemicals segment experienced significant earnings growth of 79% due to improved margins and volumes. However, the Refining segment's earnings decreased by 14% due to lower refining margins, and the Marketing and Specialties segment's earnings fell by 53% due to compressed margins. Corporate and Other expenses remained relatively stable.