Phillips 66 Delivers Strong 4Q 2023 Results, Advances Strategic Priorities
Fourth Quarter
-- Fourth-quarter earnings of $1.3 billion or $2.86 per share; adjusted
earnings of $1.4 billion or $3.09 per share
-- $2.2 billion of operating cash flow
-- $1.6 billion returned to shareholders through dividends and share
repurchases
-- Strong Refining operations at 92% utilization and 107% market capture
-- Record NGL fractionation volumes and LPG export volumes
Full-Year 2023
-- Earnings of $7.0 billion or $15.48 per share; adjusted earnings of $7.2
billion or $15.81 per share
-- $7.0 billion of operating cash flow, $8.8 billion excluding working
capital
-- $5.9 billion returned to shareholders through dividends and share
repurchases
-- Quarterly dividend increased 8% to $1.05 per common share
-- $1.2 billion in run-rate business transformation savings
-- Strong Refining operations with four consecutive quarters above
industry-average crude utilization
-- Advancing Midstream NGL wellhead-to-market strategy; acquired all
outstanding DCP Midstream, LP public common units
HOUSTON--(BUSINESS WIRE)--January 31, 2024--
Phillips 66 (NYSE: PSX), a leading diversified and integrated downstream energy company, announced fourth-quarter earnings of $1.3 billion, compared with earnings of $2.1 billion in the third quarter. Excluding special items of $102 million, the company had adjusted earnings of $1.4 billion in the fourth quarter, compared with third-quarter adjusted earnings of $2.1 billion. In addition, the company provided an update on progress toward its strategic priorities.
“In the fourth quarter, our team’s operating and commercial excellence allowed us to capture value across our diversified and integrated portfolio and deliver strong earnings,” said Mark Lashier, president and CEO of Phillips 66.
“In Refining, we increased market capture and continued to deliver above industry average crude utilization. In Midstream, our NGL wellhead-to-market business continues to exceed our expectations, achieving strong results and record volumes in the quarter.
“As we look forward, we will continue to execute our strategic priorities to deliver significant shareholder value. During 2023, we distributed well over 50% of our operating cash flow to shareholders through dividends and share repurchases. We have distributed $8.3 billion to shareholders since July 2022, on pace to achieve our $13 billion to $15 billion target by year-end 2024.”
“The Board is pleased with the company’s results, which reflect management’s progress on our strategic priorities and our collective commitment to deliver shareholder value today and in the future,” stated Glenn Tilton, Lead Independent Director.
Midstream
Millions of Dollars
---------------------------------------------
Pre-Tax Income Adjusted Pre-Tax Income
------------------ -------------------------
Q4 2023 Q3 2023 Q4 2023 Q3 2023
--------- ------- ------------ -----------
Transportation $ 334 386 334 285
NGL and Other 425 335 423 293
NOVONIX (3) (9) (3) (9)
--------------- ----- ------- ------------ -----------
Midstream $ 756 712 754 569
=============== ===== ======= ============ ===========
Midstream fourth-quarter 2023 pre-tax income was $756 million, compared with $712 million in the third quarter of 2023. Results in the fourth quarter included a $2 million tax benefit. The third quarter included a gain of $101 million on the sale of an investment and a gain of $46 million from a change in inventory method for an acquired business, partially offset by $4 million of restructuring costs.
Transportation fourth-quarter adjusted pre-tax income was $334 million, compared with adjusted pre-tax income of $285 million in the third quarter. The increase mainly reflects recognition of deferred revenue related to throughput and deficiency agreements.
NGL and Other adjusted pre-tax income was $423 million in the fourth quarter, compared with adjusted pre-tax income of $293 million in the third quarter. The increase was primarily due to higher margins and volumes at the Sweeny Hub, as well as lower operating costs.
In the fourth quarter, the fair value of the company’s investment in NOVONIX, Ltd. decreased by $3 million, compared with a $9 million decrease in the third quarter.
Chemicals
Millions of Dollars
---------------------------------------------
Pre-Tax Income Adjusted Pre-Tax Income
------------------ -------------------------
Q4 2023 Q3 2023 Q4 2023 Q3 2023
---------- --------- ------- ------------ -----------
Chemicals $ 106 104 106 104
---------- ----- ------- ------------ -----------
The Chemicals segment reflects Phillips 66’s equity investment in Chevron Phillips Chemical Company LLC (CPChem). Chemicals fourth-quarter 2023 reported and adjusted pre-tax income was $106 million, in line with third quarter 2023 pre-tax income of $104 million.
Global olefins and polyolefins utilization was 94% for the quarter.
Refining
Millions of Dollars
---------------------------------------------
Pre-Tax Income Adjusted Pre-Tax Income
------------------ -------------------------
Q4 2023 Q3 2023 Q4 2023 Q3 2023
--------- --------- ------- ------------ -----------
Refining $ 814 1,710 797 1,740
--------- ----- ------- ------------ -----------
Refining fourth-quarter 2023 reported pre-tax income was $814 million, compared with pre-tax income of $1.7 billion in the third quarter of 2023. Results in the fourth quarter included a $17 million tax benefit. Results in the third quarter included a $30 million legal accrual.
Adjusted pre-tax income for Refining was $797 million in the fourth quarter, compared with adjusted pre-tax income of $1.7 billion in the third quarter. The decrease was primarily due to lower realized margins, which decreased from $18.96 per barrel in the third quarter to $14.41 per barrel in the fourth quarter. Realized margins declined primarily due to lower market crack spreads, partially offset by inventory hedge impacts, higher Gulf Coast clean product realizations and strong commercial results. The composite RIN adjusted market crack spread decreased 53% from $28.64 per barrel in the third quarter to $13.41 per barrel in the fourth quarter.
Refining pre-tax turnaround expense for the fourth quarter was $100 million, including $14 million related to the Rodeo renewables facility. Crude utilization rate was 92% and clean product yield was 87%. Market capture increased from 66% to 107%.
Marketing and Specialties
Millions of Dollars
---------------------------------------------
Pre-Tax Income Adjusted Pre-Tax Income
------------------ -------------------------
Q4 2023 Q3 2023 Q4 2023 Q3 2023
-------------------------- --------- ------- ------------ -----------
Marketing and Specialties $ 432 633 432 633
-------------------------- ----- ------- ------------ -----------
Marketing and Specialties fourth-quarter 2023 reported and adjusted pre-tax income was $432 million, compared with $633 million in the third quarter of 2023, mainly due to seasonally lower domestic wholesale fuel margins.
Corporate and Other
Millions of Dollars
-------------------------------------------
Pre-Tax Loss Adjusted Pre-Tax Loss
------------------ -----------------------
Q4 2023 Q3 2023 Q4 2023 Q3 2023
-------------------- --------- ------- ----------- ----------
Corporate and Other $ (347) (346) (297) (295)
-------------------- ----- ------- ----------- ----------
Corporate and Other fourth-quarter 2023 pre-tax costs were $347 million, compared with pre-tax costs of $346 million in the third quarter of 2023. Results in the fourth and third quarter included restructuring costs of $50 million and $51 million, respectively.
Adjusted pre-tax costs were $297 million in the fourth quarter, in line with adjusted third-quarter pre-tax costs of $295 million.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $2.2 billion in cash from operations in the fourth quarter of 2023.
During the fourth quarter, Phillips 66 funded $634 million of capital expenditures and investments, $1.2 billion of share repurchases and $457 million in dividends. The company ended the quarter with 430 million shares outstanding.
As of Dec. 31, 2023, the company had $3.3 billion of cash and cash equivalents and $6.4 billion of committed capacity available under credit facilities. The company’s consolidated debt-to-capital ratio was 38% and its net debt-to-capital ratio was 34%.
Strategic Priorities and Business Update
Phillips 66 is executing its strategic priorities to increase mid-cycle adjusted EBITDA by $4 billion to $14 billion by 2025 and grow shareholder distributions.
The company achieved $1.2 billion in run-rate cost and sustaining capital savings as of Dec. 31, 2023, through business transformation. The company is targeting $1.4 billion run-rate savings by the end of 2024.