10-QPeriod: Q1 FY2022

Phillips 66 Quarterly Report for Q1 Ended Mar 31, 2022

Filed April 29, 2022For Securities:PSX

Summary

Phillips 66 reported a strong rebound in the first quarter of 2022, achieving net income attributable to the company of $582 million, a significant improvement from a net loss of $654 million in the prior year's quarter. This turnaround was driven by recovering global demand for refined petroleum products, easing pandemic restrictions, and wider market crack spreads, partly fueled by geopolitical events. The company's diverse segments, particularly Refining and Marketing & Specialties, benefited from higher product prices and improved margins. The Midstream segment also saw positive contributions, while the Chemicals segment reported increased equity earnings. Significant strategic moves, including the completion of the merger with Phillips 66 Partners LP, are expected to streamline operations and enhance shareholder value. Despite ongoing economic uncertainties, Phillips 66 generated substantial operating cash flow and maintained a strong liquidity position.

Financial Highlights

45 data points
Beta

Revenue

$36.18B

7.4% Gross Margin

Net Income

$582.00M

1.6% Net Margin

EPS (Diluted)

$1.29

Total Assets

$60.64B

Cash & Equivalents

$3.33B

Free Cash Flow

$1.14B

Financial Statements
Beta
Revenue$36.18B
Cost of Revenue$33.49B
Gross Profit$2.68B
SG&A Expenses$433.00M
Operating Income$582.00M
Net Income$582.00M
EPS (Basic)$1.29
EPS (Diluted)$1.29
Shares Outstanding (Basic)449.30M
Shares Outstanding (Diluted)450.01M

Key Highlights

  • 1Reported net income attributable to Phillips 66 of $582 million for Q1 2022, a significant turnaround from a net loss of $654 million in Q1 2021.
  • 2Total revenues increased by 67% to $36,179 million in Q1 2022 compared to $21,627 million in Q1 2021, driven by higher prices for refined petroleum products, crude oil, and NGLs, as well as increased sales volumes.
  • 3The Refining segment's income before taxes surged to $123 million from a loss of $1,040 million in the prior year, aided by wider market crack spreads and increased capacity utilization.
  • 4Completed the merger with Phillips 66 Partners LP on March 9, 2022, making it a wholly owned subsidiary and aiming for operational efficiencies.
  • 5Generated $1.1 billion in cash from operating activities in Q1 2022, a substantial increase from $271 million in Q1 2021, supporting capital expenditures and dividend payments.
  • 6The company announced plans to resume its share repurchase program in the second quarter of 2022, demonstrating confidence in its financial position.
  • 7The company is progressing a multi-year business transformation aimed at achieving sustainable cost reductions of at least $700 million per year by the end of the transformation period.

Frequently Asked Questions

The primary driver for the significant improvement in net income was the recovery in global demand for refined petroleum products due to the easing of pandemic restrictions and the widening of market crack spreads, influenced by global events. This led to improved refining margins and increased sales volumes across the company's segments.

The merger with Phillips 66 Partners LP, completed on March 9, 2022, resulted in Phillips 66 Partners becoming a wholly owned subsidiary. This integration is expected to streamline operations and enhance value. Financial statements reflect the consolidation of Phillips 66 Partners' results from the merger date forward. The common units of Phillips 66 Partners are no longer publicly traded.

Phillips 66 generated strong operating cash flow in Q1 2022 and ended the quarter with $3.3 billion in cash and equivalents. The company is prioritizing capital discipline, funding capital expenditures, and paying dividends. They also announced plans to resume share repurchases in Q2 2022 and continue to prioritize debt reductions. Management remains mindful of global economic uncertainties related to the pandemic and geopolitical events.

Phillips 66 is subject to various legal proceedings and environmental liabilities inherent in its industry. While the company accrues for probable losses and believes it is remote that future costs will materially adversely impact its financial statements, estimates related to environmental remediation, tax, and legal matters are sensitive to future changes. The company is also involved in litigation concerning the Dakota Access pipeline, with potential contingent equity contributions. However, the company states that current accruals are considered adequate and no material adverse effect is expected individually or in aggregate.