10-QPeriod: Q3 FY2019

Phillips 66 Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 25, 2019For Securities:PSX

Summary

Phillips 66 (PSX) reported a net income of $712 million for the third quarter of 2019, a decrease from $1.49 billion in the same period last year. This decline was primarily driven by a significant $853 million impairment charge related to its investment in DCP Midstream, coupled with lower realized refining margins. Despite these headwinds, the company maintained a strong operational performance across its segments, with notable improvements in its Marketing and Specialties segment due to higher U.S. margins and sales volumes. The company generated $3.1 billion in cash from operating activities for the first nine months of 2019, utilizing these funds for capital expenditures, share repurchases, and dividends. Phillips 66 also demonstrated a commitment to returning capital to shareholders through consistent dividend payments and an active share repurchase program, including a new authorization for up to $3 billion in stock buybacks. The company's liquidity remains robust, supported by substantial committed capacity under its revolving credit facilities.

Financial Highlights

47 data points
Beta

Revenue

$27.22B

12.5% Gross Margin

Net Income

$712.00M

2.6% Net Margin

EPS (Diluted)

$1.58

Total Assets

$58.74B

Cash & Equivalents

$2.27B

Free Cash Flow

$1.66B

Financial Statements
Beta
Revenue$27.22B
Cost of Revenue$23.81B
Gross Profit$3.41B
SG&A Expenses$416.00M
Operating Income$2.34B
Net Income$712.00M
EPS (Basic)$1.58
EPS (Diluted)$1.58
Shares Outstanding (Basic)449.00M
Shares Outstanding (Diluted)451.00M

Key Highlights

  • 1Net income attributable to Phillips 66 decreased to $712 million in Q3 2019 from $1.49 billion in Q3 2018.
  • 2A significant impairment charge of $853 million was recorded for the investment in DCP Midstream, impacting overall profitability.
  • 3Refining segment income before taxes decreased due to lower realized refining margins, despite increased capacity utilization.
  • 4Marketing and Specialties segment showed improved performance with higher U.S. margins and sales volumes.
  • 5The company generated $3.1 billion in cash flow from operations for the first nine months of 2019.
  • 6Phillips 66 repurchased $439 million of its common stock in Q3 2019 and announced a new $3 billion share repurchase program.
  • 7Total debt remained stable at approximately $11.9 billion, with a debt-to-capital ratio of 31%.

Frequently Asked Questions

The primary driver for the decrease in net income was a significant impairment charge of $853 million related to Phillips 66's investment in DCP Midstream. Lower realized refining margins also contributed to the decline.

Phillips 66 generated $3.1 billion in cash from operations for the first nine months of 2019. This cash was used to fund capital expenditures ($2.6 billion), repurchase common stock ($1.2 billion), and pay dividends ($1.2 billion). The company also has substantial liquidity through its revolving credit facilities.

While the Refining segment experienced lower realized margins, capacity utilization remained strong at 97% for worldwide operations in the third quarter of 2019. The company is undertaking refinery upgrade projects to improve product yields and feedstock access, aiming to enhance future performance.

Yes, Phillips 66 has significant off-balance sheet arrangements including residual value guarantees on its headquarters facility and other leases, totaling approximately $898 million. Additionally, the company has guarantees for joint venture debt obligations, with a maximum potential exposure of approximately $135 million, and a Contingent Equity Contribution Undertaking related to Dakota Access with a potential share of $631 million.