Phillips 66 (NYSE: PSX) announces fourth-quarter earnings of $708 million and adjusted earnings of $1.3 billion. This compares with earnings of $2.0 billion and adjusted earnings of $379 million during the fourth quarter of 2011. “Strong realized refining and chemicals margins improved our earnings during the quarter,” said Greg Garland, Phillips 66 chairman and chief executive officer. “Our $1 billion debt reduction strengthens our financial flexibility and resulted in a 25 percent debt-to-capital ratio at the end of the year. We were pleased to return more than $400 million in capital to shareholders in the quarter while also funding new investments including the Sand Hills and Southern Hills pipeline projects. We also announced our intent to contribute a portion of our transportation assets to form a master limited partnership, which we expect will highlight the value of our logistics and infrastructure assets, and serve as an efficient vehicle for funding growth investments.” “The company’s solid financial performance in 2012 was underpinned by safe, reliable and efficient operations. Our differentiated portfolio allowed us to capture a number of market opportunities across the value chain resulting in significant cash generation and shareholder value creation,” Garland added. Refining and Marketing (R&M) R&M fourth-quarter earnings were $497 million, which included a $564 million impairment of the company’s equity investment in the Melaka Refinery. Within R&M, Refining recorded earnings of $319 million, and Marketing, Specialties and Other generated $178 million. R&M adjusted earnings were $1,096 million, an increase of $927 million from the same period last year. Refining’s adjusted earnings were $916 million, significantly higher than a year ago, largely as a result of improved refining margins. The company benefitted from improved feedstock advantage with stronger Gulf Coast and Canadian crude differentials, as well as higher gasoline and distillate market spreads. During the quarter, 67 percent of the company’s U.S. crude slate was considered advantaged, up from 57 percent in the fourth quarter of 2011. Phillips 66 processed 135,000 barrels per day of shale crude in the fourth quarter, representing a 97 percent increase over the same period last year. Clean product yield for the fourth quarter was 83 percent, with a distillate yield of 40 percent. Compared with the fourth quarter of 2011, export volumes increased by 5 percent to approximately 140,000 barrels per day as a result of stronger international markets.