phillips 66 fourth quarter 2018 conference call · phillips 66 fourth quarter 2018 conference call...

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FOURTH QUARTER 2018 CONFERENCE CALLFebruary 8, 2019

PHILLIPS 66

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CAUTIONARY STATEMENT

This presentation contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, andSection 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Words andphrases such as “is anticipated,” “is estimated,” “is expected,” “is planned,” “is scheduled,” “is targeted,” “believes,” “continues,” “intends,” “will,”“would,” “objectives,” “goals,” “projects,” “efforts,” “strategies” and similar expressions are used to identify such forward-looking statements. However,the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to Phillips 66’s operations(including joint venture operations) are based on management’s expectations, estimates and projections about the company, its interests and theenergy industry in general on the date this presentation was prepared. These statements are not guarantees of future performance and involvecertain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what isexpressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those describedin the forward-looking statements include fluctuations in NGL, crude oil, and natural gas prices, and petrochemical and refining margins; unexpectedchanges in costs for constructing, modifying or operating our facilities; unexpected difficulties in manufacturing, refining or transporting our products;lack of, or disruptions in, adequate and reliable transportation for our NGL, crude oil, natural gas, and refined products; potential liability fromlitigation or for remedial actions, including removal and reclamation obligations under environmental regulations; limited access to capital orsignificantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; the impact of adverse marketconditions or other similar risks to those identified herein affecting PSXP, as well as the ability of PSXP to successfully execute its growth plans; andother economic, business, competitive and/or regulatory factors affecting Phillips 66’s businesses generally as set forth in our filings with theSecurities and Exchange Commission. Phillips 66 is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.

This presentation includes non-GAAP financial measures. You can find the reconciliations to comparable GAAP financial measures at the end ofthe presentation materials or in the “Investors” section of our website.

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EXECUTING THE STRATEGY

New fractionation site and Sweeny Refinery, Old Ocean, Texas

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OVERVIEW2018

(1) Dollars per share(2) Shareholder distributions include dividends and share repurchases(3) After-tax

$MM (unless otherwise noted)

Adjusted earnings $ 5,550

Adjusted EPS1 11.71

Operating cash flow 7,573

Capital expenditures and investments 2,639

Shareholder distributions2 6,081

Net-debt-to-capital ratio

ROCE3

23%

17%

5

$B

CASH FLOW2018

3.1

7.9

(0.3)

1.0

(2.6)

(6.1)3.0

December 31,2017Cash

Balance*

CFO(excludingWorkingCapital)

WorkingCapital

CapitalExpenditures

& Investments

ShareholderDistributions

Debt December 31,2018Cash

Balance** Includes cash and cash equivalents

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OVERVIEW4Q 2018

(1) Dollars per share(2) Shareholder distributions include dividends and share repurchases

$MM (unless otherwise noted)

Adjusted earnings $ 2,260

Adjusted EPS1 4.87

Operating cash flow 4,139

Capital expenditures and investments 994

Shareholder distributions2 864

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ADJUSTED EARNINGS4Q 2018$MM

3Q 2018AdjustedEarnings

Midstream Chemicals Refining Marketing& Specialties

Corporate& Other

NoncontrollingInterests


4Q 2018 Adjusted Pre-Tax Income (Loss)

409 152 2,008 592 (201) (624) (76)

Income TaxExpense

1,456

97

(111)

745207 22

(157)

1

2,260

8

312

2548

24

409

MIDSTREAM4Q 2018

$MM

Increased transportation volumesassociated with strong refineryutilization rates

3Q 2018Adjusted

Pre-Tax Income

Transportation NGL and Other DCPMidstream

4Q 2018Adjusted

Pre-Tax Income

4Q 2018

Strong Bakken Pipeline volumes

234 122 53

DCP Midstream completed SandHills Pipeline expansion

9

263

(67)

(35) (9)

152

CHEMICALS4Q 2018

$MM

3Q 2018Adjusted

Pre-Tax Income

Olefins &Polyolefins

Specialties,Aromatics &

Styrenics

Other 4Q 2018Adjusted

Pre-Tax Income

Seasonally lower sales volumes

158 16 (22)

95% O&P capacity utilization

Continued strong cashdistributions

4Q 2018

O&P and SA&S impacted byhigher turnaround costs

10

1,263

85247

342 71

2,008

REFINING4Q 2018

3Q 2018Adjusted

Pre-Tax Income

AtlanticBasin /Europe

Gulf Coast

CentralCorridor

West Coast

4Q 2018Adjusted

Pre-Tax Income

301 468 1,188 51

99% crude utilization

86% clean product yield

$16.53/BBL realized margin

$130 MM pre-tax turnaround costs

$MM

4Q 2018

11

REFINING MARGINS – MARKET VS. REALIZED4Q 2018WORLDWIDE REFINING $/BBL

Market3:2:1

Configuration SecondaryProducts

Feedstock Other RealizedMargin

Avg Market Crude: $65.50/BBL 181% Market Capture

9.11

0.35

(0.29)

3.79

3.57

16.53

12

385

205 2

592

MARKETING AND SPECIALTIES4Q 2018

Captured strong margins in afavorable market

Refined products exports of249 MBPD

3Q 2018Adjusted

Pre-Tax Income

Marketing& Other

Specialties 4Q 2018Adjusted

Pre-Tax Income

528 64

Re-imaged 466 branded sites

$MM

4Q 2018

13

$MM

(223)

913

(201)

CORPORATE AND OTHER4Q 2018

4Q 2018Adjusted

Pre-Tax Loss

Net InterestExpense

CorporateOverhead& Other

3Q 2018Adjusted

Pre-Tax Loss

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OUTLOOK

1Q 2019Global Olefins & Polyolefins utilization

Refining crude utilization

Refining turnaround expenses (pre-tax)

Corporate & Other costs (pre-tax)

Mid-90%Mid-80%

$140 MM - $170 MM

$210 MM - $240 MM

2019Refining turnaround expenses (pre-tax)

Corporate & Other costs (pre-tax)

Depreciation and amortization

Effective income tax rate

$550 MM - $600 MM

$850 MM - $900 MM

$1.4 B

Low-20%

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PHILLIPS 66FOURTH QUARTER 2018CONFERENCE CALLQuestions and Answers

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Appendix

PHILLIPS 66FOURTH QUARTER 2018CONFERENCE CALL

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ESTIMATED SENSITIVITIES2019

Sensitivities shown above are independent and are only valid within a limited price range

Annual EBITDA $MMMidstream - DCP (net to Phillips 66)10¢/Gal Increase in NGL price 610¢/MMBtu Increase in Natural Gas price 1$1/BBL Increase in WTI price 1

Chemicals - CPChem (net to Phillips 66)1¢/Lb Increase in Chain Margin (Ethylene, Polyethylene, NAO) 65

Worldwide Refining$1/BBL Increase in Gasoline Margin 350$1/BBL Increase in Distillate Margin 300

Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators:$1/BBL Widening WTI / WCS Differential (WTI less WCS) 100$1/BBL Widening LLS / WTI Differential (LLS less WTI) 70$1/BBL Widening LLS / Maya Differential (LLS less Maya) 60$1/BBL Widening WTI / WTS Differential (WTI less WTS) 30$1/BBL Widening ANS / WTI Differential (ANS less WTI) 2510¢/MMBtu Increase in Natural Gas price (15)

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CAPITAL STRUCTURE2016 – 2018

Excluding PSXP

Equity $B Debt $B Cash & Cash Equivalents $B Debt-to-Capital Net-Debt-to-Capital

Consolidated PSX

2016 2017 1Q2018

2Q2018

3Q2018

4Q2018

23.7

27.424.3 25.0 25.8 27.2

10.1 10.111.6 11.4 11.3 11.2

2.7 3.10.8

1.90.9 3.0

30%

27%

32%31% 31%

29%

24%

20%

31%

28%

29%

23%

2016 2017 1Q2018

2Q2018

3Q2018

4Q2018

22.425.1

22.0 22.6 23.4 24.7

7.7 7.28.7 8.4 8.4 8.1

2.7 2.90.7

1.70.8 3.0

26%

22%

28%27%

26%25%

18%

14%

27%

23%

25%

17%

19

7.26

1.48

3.39

(2.53)

1.94

11.54

REFINING MARGINS – MARKET VS. REALIZED4Q 2018ATLANTIC BASIN / EUROPE $/BBL

Market3:2:1



Brent: $67.76/BBL Crude Capacity Utilization 159% Market Capture98%

Market 3:2:1 – Dated Brent / Gasoline 83.7 RBOB NYH / Diesel 15ppm NYH

20

5.14

0.59

(0.54)

3.29

3.36

11.84

REFINING MARGINS – MARKET VS. REALIZED4Q 2018GULF COAST $/BBLLLS: $66.55/BBL Crude Capacity Utilization 230% Market Capture

Market3:2:1



Market 3:2:1 – LLS / Gasoline 85 CBOB / Diesel 62 10ppm

100%

21

14.57

0.21

(2.37)

11.26

6.93

30.60

REFINING MARGINS – MARKET VS. REALIZED4Q 2018CENTRAL CORRIDOR $/BBL

Market3:2:1



WTI: $59.09/BBL Crude Capacity Utilization 210% Market Capture106%

Market 3:2:1 – WTI / Gasoline Unl Sub Octane Group 3 / ULSD Group 3

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REFINING MARGINS – MARKET VS. REALIZED4Q 2018WEST COAST $/BBL

12.66

(0.51)

(2.88)

3.481.43

14.18

Market3:2:1



ANS: $68.65/BBL Crude Capacity Utilization 112% Market Capture87%

Market 3:2:1 – ANS / Los Angeles CARBOB / Los Angeles No. 2 CARB

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ADJUSTED EARNINGS4Q 2018 VS. 4Q 2017

548

213

(9)

1,498

424 25

(420) (19)

2,260

409 152 2,008 592 (201) (624) (76)

$MM


Midstream Chemicals Refining Marketing& Specialties

Corporate& Other

NoncontrollingInterests


4Q 2018 Adjusted Pre-Tax Income (Loss)

Income TaxExpense

24

MIDSTREAM4Q 2018 VS. 4Q 2017

4Q 2017Adjusted

Pre-Tax Income

Transportation NGL and Other DCPMidstream

4Q 2018Adjusted

Pre-Tax Income

4Q 2018

196

82

10427

409

234 122 53

$MM

25

161

22

(19)(12)

152

CHEMICALS4Q 2018 VS. 4Q 2017

4Q 2017Adjusted

Pre-Tax Income

Olefins &Polyolefins

Specialties,Aromatics& Styrenics

Other 4Q 2018Adjusted

Pre-Tax Income

158 16 (22)

$MM

4Q 2018

26

REFINING4Q 2018 VS. 4Q 2017

4Q 2017Adjusted

Pre-Tax Income

AtlanticBasin /Europe

GulfCoast

CentralCorridor

West Coast 4Q 2018Adjusted

Pre-Tax Income

510

144

361

887106

2,008

301 468 1,188 51

$MM

4Q 2018

27

MARKETING AND SPECIALTIES4Q 2018 VS. 4Q 2017

168

417 7

592

4Q 2018Adjusted

Pre-Tax Income

4Q 2017Adjusted Pre-Tax Income

528 64

Marketing& Other

Specialties

$MM

4Q 2018

28

(226)

(1)

26

(201)

CORPORATE AND OTHER4Q 2018 VS. 4Q 2017$MM

4Q 2018Adjusted

Pre-Tax Loss

Net InterestExpense

CorporateOverhead& Other

4Q 2017Adjusted

Pre-Tax Loss

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* We generally tax effect taxable U.S.-based special items using a combined federal and state statutory income tax rate of approximately 25 percent beginning in 2018, and approximately 38 percent for periods prior to2018. Taxable special items attributable to foreign locations likewise use a local statutory income tax rate. Nontaxable events reflect zero income tax. These events include, but are not limited to, most goodwillimpairments, transactions legislatively exempt from income tax, transactions related to entities for which we have made an assertion that the undistributed earnings are permanently reinvested, or transactionsoccurring in jurisdictions with a valuation allowance.

** Weighted-average diluted shares outstanding and income allocated to participating securities, if applicable, in the adjusted earnings per share calculation are the same as those used in the GAAP diluted earnings pershare calculation.

Millions of DollarsExcept as Indicated

2018 2017Year 4Q 3Q Year 4Q

Phillips 66Consolidated Earnings $ 5,595 2,240 1,492 5,106 3,198Pre-tax Adjustments: Pending claims and settlements 21 — 21 (60) — Pension settlement expense 67 18 49 83 7 Impairments by equity affiliates 28 28 — 64 31 Certain tax impacts (119) (4) (45) (23) (23) Gain on consolidation of business — — — (423) — Hurricane-related costs — — — 210 140Tax impact of adjustments* (1) (12) (6) 47 (70)U.S. tax reform 23 55 (49) (2,735) (2,735)Other tax impacts (70) (65) (5) — —Noncontrolling interests 6 — (1) — —Adjusted Earnings $ 5,550 2,260 1,456 2,269 548

Earnings Per Share of Common Stock (dollars) $ 11.80 4.82 3.18 9.85 6.25

Adjusted Earnings Per Share of Common Stock (dollars)** $ 11.71 4.87 3.10 4.38 1.07

NON-GAAP RECONCILIATIONS

30



MidstreamPre-Tax Income $ 1,181 379 284 638 189Pre-tax Adjustments: Pending claims and settlements 21 — 21 (37) — Pension settlement expense 9 2 7 12 1 Impairments by equity affiliates 28 28 — — — Hurricane-related costs — — — 10 6Adjusted Pre-Tax Income $ 1,239 409 312 623 196

ChemicalsPre-Tax Income $ 1,025 152 263 716 8

Pre-tax Adjustments: Impairments by equity affiliates — — — 64 31 Hurricane-related costs — — — 175 122Adjusted Pre-Tax Income $ 1,025 152 263 955 161


31



RefiningPre-Tax Income $ 4,535 2,001 1,232 2,076 516Pre-tax Adjustments: Pending claims and settlements — — — (51) — Gain on consolidation of business — — — (423) — Certain tax impacts (6) (4) (1) (23) (23) Pension settlement expense 43 11 32 53 5 Hurricane-related costs — — — 24 12Adjusted Pre-Tax Income $ 4,572 2,008 1,263 1,656 510

Marketing & SpecialtiesPre-Tax Income $ 1,557 589 423 1,020 167Pre-tax Adjustments: Pension settlement expense 9 3 6 11 1 Hurricane-related costs — — — 1 — Certain tax impacts (113) — (44) — —Adjusted Pre-Tax Income $ 1,453 592 385 1,032 168


32



Corporate and OtherPre-Tax Loss $ (853) (203) (227) (895) (226)Pre-tax Adjustments: Pending claims and settlements — — — 28 — Pension settlement expense 6 2 4 7 — U.S. Tax Reform (16) — — — —Adjusted Pre-Tax Loss $ (863) (201) (223) (860) (226)


33



Midstream - TransportationPre-Tax Income $ 770 234 209 530 147Pre-tax Adjustments: Pending claims and settlements — — — (37) — Hurricane-related costs — — — 8 5Adjusted Pre-Tax Income $ 770 234 209 501 152

Midstream - NGL and OtherPre-Tax Income $ 305 120 46 32 16Pre-tax Adjustments: Pending claims and settlements 21 — 21 — — Pension settlement expense 9 2 7 12 1 Hurricane-related costs — — — 2 1Adjusted Pre-Tax Income $ 335 122 74 46 18

Midstream - DCP MidstreamPre-Tax Income $ 106 25 29 76 26Pre-tax Adjustments: Impairments by equity affiliates 28 28 — — —Adjusted Pre-Tax Income $ 134 53 29 76 26


34

Millions of Dollars

Except as Indicated

2018 2017

Year 4Q 3Q Year 4Q

Refining - Atlantic Basin / Europe

Pre-Tax Income $ 567 302 209 448 179

Pre-tax Adjustments:

Pending claims and settlements — — — (7) —

Certain tax impacts (5) (4) (1) (23) (23)

Pension settlement expense 11 3 8 14 1

Adjusted Pre-Tax Income $ 573 301 216 432 157

Refining - Gulf Coast

Pre-Tax Income $ 1,040 464 210 809 93



Gain on consolidation of business — — — (423) —


Hurricane-related costs — — — 24 12

Adjusted Pre-Tax Income $ 1,055 468 221 419 107


35

Millions of Dollars

Except as Indicated

2018 2017

Year 4Q 3Q Year 4Q

Refining - Central Corridor

Pre-Tax Income $ 2,817 1,185 839 755 299




Adjusted Pre-Tax Income $ 2,827 1,188 846 761 301

Refining - West Coast

Pre-Tax Income (Loss) $ 111 50 (26) 64 (55)



Certain tax impacts (1) — — — —

Pension settlement expense 7 1 6 8 —

Adjusted Pre-Tax Income (Loss) $ 117 51 (20) 44 (55)


36

Millions of Dollars

Except as Indicated

2018 2017

Year 4Q 3Q Year 4Q

Marketing & Specialties - Marketing & Other

Pre-Tax Income $ 1,306 525 361 808 110


Certain tax impacts (113) — (44) — —


Hurricane-related costs — — — 1 —

Adjusted Pre-Tax Income $ 1,202 528 323 820 111

Marketing & Specialties - Specialties

Pre-Tax Income $ 251 64 62 212 57


Adjusted Pre-Tax Income $ 251 64 62 212 57


37

* Adjusted total processed inputs include our proportional share of processed inputs of an equity affiliate.** Income before income taxes divided by total processed inputs.*** Realized refining margins per barrel, as presented, are calculated using the underlying realized refining margin amounts, in dollars, divided by adjusted total processed inputs, in barrels. As such,

recalculated per barrel amounts using the rounded margins and barrels presented may differ from the presented per barrel amounts due to rounding.

Millions of Dollars (Except as Indicated)20184Q

AtlanticBasin/Europe Gulf Coast

CentralCorridor West Coast Worldwide

Realized Refining MarginsIncome before income taxes $ 302 464 1,185 50 2,001Plus:Taxes other than income taxes 13 17 12 24 66Depreciation, amortization and impairments 49 69 34 59 211Selling, general and administrative expenses 19 21 13 16 69Operating expenses 223 337 132 318 1,010Equity in (earnings) losses of affiliates 3 1 (353) — (349)Other segment (income) expense, net (1) — (5) 2 (4)Proportional share of refining gross margins contributed by equity affiliates 14 — 514 — 528Special items:Certain tax impacts (4) — — — (4)Realized refining margins $ 618 909 1,532 469 3,528

Total processed inputs (thousands of barrels) 53,613 76,838 27,076 32,954 190,481Adjusted total processed inputs (thousands of barrels)* 53,613 76,838 50,039 32,954 213,444

Income before income taxes (dollars per barrel)** $ 5.63 6.04 43.77 1.52 10.50Realized refining margins (dollars per barrel)*** $ 11.54 11.84 30.60 14.18 16.53


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* Capital employed is total equity plus total debt

2018 Phillips 66Numerator ($MM)Net Income $ 5,873After-tax interest expense 398GAAP ROCE earnings $ 6,271After-tax Special items (51)Adjusted ROCE earnings $ 6,220

Denominator ($MM)GAAP average capital employed* $ 37,925

2018 GAAP ROCE 17%2018 Adjusted ROCE 16%


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* Phillips 66 Partners’ third-party debt and Phillips 66's noncontrolling interest attributable to Phillips 66 Partners

Millions of Dollars2018

December 31

Phillips 66Consolidated

Phillips 66Partners *

AdjustedPhillips 66

Total Debt $ 11,160 3,048 8,112 Total Equity 27,153 2,469 24,684Debt-to-Capital Ratio 29% 25%

Total Cash & Cash Equivalents $ 3,019 1 3,018Net-Debt-to-Capital Ratio 23% 17%


40

Millions of Dollars Millions of Dollars

2018 2018

4Q Year

Growth Sustaining Total Growth Sustaining Total

Capital Expenditures and Investments

Midstream $ 510 60 570 $ 1,360 188 1,548

Refining 102 199 301 267 559 826

Marketing & Specialties 34 26 60 71 54 125

Corporate and Other 2 61 63 6 134 140

Total $ 648 346 994 $ 1,704 935 2,639


41

PSX Effective Tax Rate: Millions of Dollars

20184Q Year

Effective Tax Rates Income before income taxes $ 2,918 7,445 Special items 42 (19) Adjusted income before income taxes $ 2,960 7,426

Income tax expense $ 602 1,572 Special items 22 32 Adjusted income tax expense $ 624 1,604

GAAP effective tax rate 20.6% 21.1%

Adjusted effective tax rate 21.1% 21.6%


phillips 66 fourth quarter 2018 conference call · phillips 66 fourth quarter 2018 conference call...

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