Phillips 66 Reports Third-Quarter Earnings Of $1.6 Billion Or $2.51 Per Share

Chemicals

The Chemicals segment consists of Phillips 66’s equity investment in Chevron Phillips Chemical Company (CPChem). Chemicals third-quarter earnings were $153 million. Adjusted earnings of $275 million exclude losses associated with the early retirement of debt, impairments of fixed assets and an increase in deferred tax liabilities.

Adjusted earnings improved $82 million compared to the same quarter last year, primarily due to improved margins and lower utility costs. Stronger olefins chain margins resulted from lower ethane and propane feedstock prices. CPChem captured cost advantages in the North American and Middle East ethylene and derivative markets by achieving high utilization rates. In CPChem’s Olefins and Polyolefins segment, global utilization was 97 percent during the third quarter, consistent with performance from the same period last year.

As planned, CPChem fully repaid its outstanding fixed-rate notes by retiring the remaining $400 million of notes during the quarter. Distributions to its owners, which had been suspended during the period of debt repayment, resumed early in the fourth quarter.

Corporate and Other

Corporate and Other costs, including interest expense, repositioning costs, corporate staff compensation and benefits, and technology, were $125 million after-tax for the quarter. Adjusted for $13 million of repositioning expenses, costs were $112 million for the third quarter including $47 million of net interest expense.

Financial Position, Liquidity and Return of Capital

During the quarter Phillips 66 generated $1.9 billion in cash from operations. The company funded a $339 million capital program.

The company ended the third quarter with $4.4 billion of cash and cash equivalents and $8.0 billion of debt. The debt-to-capital ratio was 28 percent, improved from 30 percent at the end of the second quarter. The net-debt-to-capital ratio was 15 percent at quarter close.

The company realized strong returns in the third quarter with a reported year-to-date (YTD) annualized return on capital employed (ROCE) of 18 percent. R&M and Chemicals reported returns of 21 percent and 25 percent, respectively.

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