10-QPeriod: Q3 FY2022

Phillips 66 Quarterly Report for Q3 Ended Sep 30, 2022

Filed November 9, 2022For Securities:PSX

Summary

Phillips 66 reported a significant increase in financial performance for the nine months ended September 30, 2022, with net income attributable to Phillips 66 soaring to $9.14 billion from $44 million in the prior year period. This substantial improvement was primarily driven by a large gain recognized from the merger of DCP Midstream and Gray Oak Holdings, significantly higher refining margins due to favorable market crack spreads, and lower impairment charges compared to the prior year. The company also completed the merger with Phillips 66 Partners during this period, consolidating its operations. Liquidity remains strong with $3.7 billion in cash and cash equivalents and substantial committed credit capacity. Phillips 66 continued to return capital to shareholders through dividends and share repurchases, demonstrating a focus on shareholder value. Management is also actively pursuing a multi-year business transformation aimed at reducing costs and improving efficiency, targeting at least $800 million in run-rate cost reductions by the end of 2023.

Financial Highlights

45 data points
Beta

Revenue

$44.95B

14.0% Gross Margin

Net Income

$5.39B

12.0% Net Margin

EPS (Diluted)

$11.16

Total Assets

$77.34B

Cash & Equivalents

$3.74B

Free Cash Flow

$3.14B

Financial Statements
Beta
Revenue$44.95B
Cost of Revenue$38.65B
Gross Profit$6.31B
SG&A Expenses$617.00M
Operating Income$9.14B
Net Income$5.39B
EPS (Basic)$11.19
EPS (Diluted)$11.16
Shares Outstanding (Basic)481.39M
Shares Outstanding (Diluted)483.04M

Key Highlights

  • 1Net income attributable to Phillips 66 surged to $9.14 billion for the nine months ended September 30, 2022, a dramatic increase from $44 million in the same period of 2021.
  • 2The company recognized a substantial gain of $3.013 billion in the Midstream segment related to the merger of DCP Midstream and Gray Oak Holdings.
  • 3Refining segment performance significantly improved, with worldwide realized refining margins increasing to $21.88 per barrel for the nine months ended September 30, 2022, up from $5.68 per barrel in the prior year, driven by higher market crack spreads.
  • 4Phillips 66 completed the merger with Phillips 66 Partners on March 9, 2022, integrating its operations.
  • 5The company ended the period with a strong liquidity position, including $3.7 billion in cash and cash equivalents and $6.7 billion in available committed credit capacity.
  • 6Phillips 66 is executing a business transformation initiative targeting at least $800 million in sustainable run-rate cost reductions by the end of 2023.
  • 7The company returned capital to shareholders through $1.3 billion in dividends and $760 million in share repurchases during the first nine months of 2022.

Frequently Asked Questions

The significant increase in net income was primarily driven by a large gain of approximately $3.013 billion recognized in the Midstream segment related to the merger of DCP Midstream and Gray Oak Holdings. Additionally, improved refining margins due to higher market crack spreads and lower impairment charges compared to the prior year also contributed significantly to the improved financial results.

Phillips 66 maintains a strong liquidity position with $3.7 billion in cash and cash equivalents as of September 30, 2022. The company also has access to $6.7 billion in committed credit facilities. During the first nine months of 2022, it generated $6.1 billion in cash from operations, which was used to fund capital expenditures, repurchase shares, and pay dividends, demonstrating a balanced approach to capital allocation and shareholder returns.

Phillips 66 is undertaking a multi-year business transformation focused on enterprise-wide opportunities to improve its cost structure. The company is targeting a sustainable run-rate cost reduction of at least $800 million and lower sustaining capital of at least $200 million per year by the end of 2023. This initiative aims to enhance operational efficiency and profitability.

The merger, completed in August 2022, resulted in the consolidation of DCP Midstream Class A Segment, DCP Sand Hills, and DCP Southern Hills into Phillips 66's financial statements from August 18, 2022, onwards. This consolidation led to a significant gain recognized in the Midstream segment and increased noncontrolling interests on the consolidated income statement. The company also began reporting these entities as part of its Midstream operating segment.