Phillips 66 posts rising profit as refining leads way
7/31/2015 12:00:00 AM
US downstream company Phillips 66 said its earnings rose 17% in the second quarter of 2015, driven by strong growth within the company's refining business.
Overall, Phillips 66 on Friday reported a profit of $1.01 billion, or $1.84/share, up from $863 million a year earlier, or $1.51/share. Excluding asset dispositions, litigation-related impacts and other items, per-share earnings rose to $1.83 from $1.51.
Those figures were slightly ahead of analyst expectations.
“Our refining, chemicals, and [marketing and specialties] businesses delivered a strong quarter, providing solid earnings and cash flow,” said Greg Garland, CEO of Phillips 66. "We operated well, executed major turnaround activity and progressed our capital projects. We also returned more than $600 million to shareholders through dividends and share repurchases."
Refining
For the latest quarter, Phillips 66's refining segment recorded earnings of $604 million, up from $390 million a year ago and $538 million in the 2015 first quarter.
"The increase in earnings was largely driven by improved realized gasoline margins, partially offset by reduced distillate and secondary product margins," the company said. "Distillate margins declined primarily due to a seasonal reduction in demand, while secondary product margins were down mainly due to higher crude costs.
"Market capture for the second quarter was 62%, reflecting the company's refining configuration that is more heavily weighted toward distillate production than the market indicator. Earnings were also improved by a positive change in foreign currency impacts."
Phillips 66’s worldwide refining crude utilization was 90%, and clean product yield was 84%.
Chemicals
In the chemicals business, earnings were $295 million, down from $324 million the year before but up from $203 million in the first quarter. The chemicals segment reflects Phillips 66's equity investment in Chevron Phillips Chemical (CPChem).
"During the second quarter, CPChem's olefins and polyolefins business contributed $267 million to Phillips 66's chemicals earnings," the company said. "The $84 million improvement from the prior quarter was mainly due to increased polyethylene sales volumes on strong product demand and improved O&P cash chain margins, driven by lower ethylene feedstock costs and higher polyethylene sales prices.
"CPChem's equity affiliate earnings also improved as a result of higher sales prices, as well as increased volumes due to the completion of turnaround activity in the first quarter."
Global utilization for O&P was 91% during the quarter, up from 87% in the first quarter, primarily reflecting reduced turnaround activity. Final insurance recoveries related to CPChem's 2014 Port Arthur ethylene plant outage also increased earnings in the second quarter, the company said.
CPChem's specialties, aromatics and styrenics business contributed $38 million of earnings in the second quarter, an increase of $12 million from the prior quarter. The increase was primarily due to improved margins at CPChem's SA&S equity affiliates.
Other Segments
The midstream segment for Phillips 66 posted a loss of $78 million compared with earnings of $108 million a year ago, as volume increases were offset by a claim settlement. Natural gas liquids (NGL) earnings fell slightly due to seasonally lower propane volumes, as well as lower realized margins.
In marketing and specialties, earnings jumped to $314 million from $162 million a year ago and $304 million in the first quarter.
"The [marketing] business realized strong US margins driven by favorable market conditions," Phillips 66 said.
"Second-quarter refined product exports were 143,000 bpd, up 57,000 bpd primarily due to favorable distillate export economics combined with increased refinery throughput in the Gulf Coast," the company added.
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