10-QPeriod: Q3 FY2015

Phillips 66 Quarterly Report for Q3 Ended Sep 30, 2015

Filed October 30, 2015For Securities:PSX

Summary

Phillips 66 reported a strong third quarter in 2015, with net income attributable to the company increasing to $1.578 billion, a significant rise from $1.180 billion in the same period of the prior year. This performance was primarily driven by improved refining and marketing margins, benefiting from lower crude oil prices which outpaced the decline in gasoline prices. The company also saw an increase in equity earnings from its Chemical segment, specifically from CPChem, due to the full operational capacity of its Port Arthur facility following a 2014 fire. For the nine-month period, net income attributable to Phillips 66 was $3.577 billion, a slight decrease from $3.615 billion in the prior year, impacted by lower equity earnings from midstream affiliates like DCP Midstream and CPChem, as well as a goodwill impairment charge at DCP Midstream. However, the overall financial health remains robust, supported by solid operating cash flow and a strong liquidity position with $4.8 billion in cash and cash equivalents.

Financial Highlights

43 data points
Beta

Revenue

$25.79B

Net Income

$1.58B

6.1% Net Margin

EPS (Diluted)

$2.90

Total Assets

$49.41B

Cash & Equivalents

$4.82B

Free Cash Flow

$1.44B

Financial Statements
Beta
Revenue$25.79B
SG&A Expenses$437.00M
Operating Income$3.58B
Net Income$1.58B
EPS (Basic)$2.92
EPS (Diluted)$2.90
Shares Outstanding (Basic)540.36M
Shares Outstanding (Diluted)544.70M

Key Highlights

  • 1Net income attributable to Phillips 66 was $1.578 billion for Q3 2015, up from $1.180 billion in Q3 2014.
  • 2Earnings from continuing operations increased by 34% in Q3 2015 compared to Q3 2014, driven by improved refining and marketing margins.
  • 3The Midstream segment experienced a decrease in earnings due to lower NGL, crude oil, and natural gas prices, compounded by a goodwill impairment at DCP Midstream.
  • 4The Chemicals segment saw increased earnings in Q3 2015, primarily due to the full operational restart of CPChem's Port Arthur facility.
  • 5Phillips 66 generated $1.437 billion in cash from operating activities in Q3 2015.
  • 6The company repurchased $373 million of its common stock in Q3 2015 and authorized an additional $2 billion in share repurchases in October 2015.
  • 7Total assets were $49.4 billion as of September 30, 2015, an increase from $48.7 billion at the end of 2014.

Frequently Asked Questions

The primary drivers for the improved performance were stronger refining and marketing margins. These were boosted by a significant decline in crude oil prices that outpaced the decline in refined product prices, leading to wider crack spreads and improved profitability in the Refining and Marketing & Specialties segments.

The Midstream segment faced headwinds from lower commodity prices for NGL, crude oil, and natural gas. Additionally, a significant goodwill impairment charge at its equity affiliate, DCP Midstream, negatively impacted earnings for this segment.

Phillips 66 maintained a strong liquidity position with $4.8 billion in cash and cash equivalents and significant available capacity under its credit facilities. The company actively managed its capital through $992 million in capital expenditures and investments, $300 million in dividends, and $373 million in share repurchases during the third quarter. Furthermore, an additional $2 billion share repurchase authorization was announced, signaling confidence and a commitment to returning capital to shareholders.

The company announced a 2016 capital spending budget of $3.6 billion, with Phillips 66 Partners adding $0.3 billion, for a total of $3.9 billion. The Midstream segment's budget is focused on growth projects, while Refining's budget emphasizes reliability, safety, and environmental projects.