Phillips 66 Q3 2024 Earnings Call Highlights

Phillips 66 (NYSE:PSX) showcased a robust financial performance in its Third Quarter 2024 earnings call, despite the refining market's challenges. The company has been proactive in returning capital to shareholders, having returned $12.5 billion since July 2022, nearing its target of $13 billion to $15 billion.

A significant sale of its Swiss retail joint venture interest and strategic acquisitions have strengthened the Midstream segment's earnings. Adjusted earnings stood at $859 million, with an operating cash flow of $1.1 billion. Phillips 66 also plans to shut down its Los Angeles refinery by Q4 2025 due to local crude production declines and regulatory pressures.

Key Takeaways

• Phillips 66 has returned $12.5 billion to shareholders since July 2022.
• A 49% interest in a Swiss retail joint venture was sold for approximately $1.24 billion.
• Adjusted EBITDA for the Midstream segment rose to $3.7 billion.
• The Los Angeles refinery is set to cease operations by Q4 2025.
• Adjusted earnings for Q3 2024 were $859 million, with operating cash flow at $1.1 billion.
• The company reduced refining costs by $1 per barrel and achieved a $1.4 billion business transformation cost reduction target.

Company Outlook

• Refining turnaround expenses are projected between $485 million and $495 million for the year.
• The company is on track to achieve $3 billion in asset sales.
• Mid-cycle earnings capacity is projected at $14 billion by 2025.
• A commitment to return 50% or more of operating cash flow to shareholders is set for 2025.

Bearish Highlights

• The West Coast market faced challenges with significant margin declines.
• Costs associated with the Rodeo crude operation wind-down are being managed.

Bullish Highlights

• The Chemicals segment is operating at high rates, and the marketing segment saw improved margins.
• Renewable diesel margins are expected to strengthen due to lower feedstock prices and reduced competition.
• The Central Corridor operation reported a $65 million increase in earnings.

Misses

• Global distillate demand has decreased by 1.5% year-to-date.

Q&A Highlights

• The company primarily hedges with WTI crude oil.
• Demand for LPGs at Freeport remains strong.
• Global gasoline demand is up 1%, with a notable 4% increase in Europe.
• Discussed production dynamics of Renewable Diesel (RD) and Sustainable Aviation Fuel (SAF).

Phillips 66 continues to navigate the refining market's challenges while maintaining a strong financial stance and focusing on strategic growth and operational efficiency. With a clear plan for asset sales, cost reductions, and shareholder returns, the company is poised to adapt to market conditions and capitalize on future opportunities.

InvestingPro Insights

Phillips 66's financial performance is evidenced by key metrics from InvestingPro, with a market capitalization of $51.21 billion and a P/E ratio of 10.4, appearing attractive compared to the broader market. The company has consistently raised dividends for 11 consecutive years. Its current dividend yield stands at 3.73%, with a growth rate of 9.52% over the last twelve months. Revenue for the last twelve months through Q3 2024 was $147.76 billion, with a gross profit of $14.71 billion. Further detailed insights can be found on the InvestingPro platform for comprehensive performance analysis.