Phillips 66  (PSX - Get Report) posted first-quarter earnings of $385 million, or 72 cents per share, a 60% drop over the same period last year and 16% less than analysts expected because of weaker margins in its refining, chemicals and midstream units.

The Houston refiner's sales also dropped by 23% to $17.76 billion, 21% less than the consensus of $22.64 billion.

Phillips 66 said its adjusted earnings were $360 million, a decrease of $350 million from the last quarter.

The company's stock was fell 2.89% to $85.25 per share in premarket trading on the New York Stock Exchange.

Phillips 66 chairman and CEO Greg Garland blamed weaker margins for the company's performance but said its businesses ran well and management remains focused on operating excellence with industry-leading safety performance.

"During the quarter, we successfully completed planned turnarounds and accelerated some maintenance activities in the low margin environment," he said in the release. "We are committed to maintaining our strong balance sheet and a disciplined approach to capital allocation."

Garland said the company reinvested $750 million in the business in the quarter and distributed $687 million to shareholders, including $296 million in dividends and $391 million in stock buybacks. The company said it's returned $11.8 billion to shareholders in the form of dividends, share repurchases and share exchange since June 2012.

Billionaire Warren Buffett's Berkshire Hathaway (BRK.A - Get Report) has amassed a 14% stake in the stock since August, making it the sixth largest position in his portfolio.

Analysts at Piper Jaffray unit Simmons said income at the company's marketing and specialties and midstream segments was below their expectations while chemicals performed better than they modeled and refining was in line.

Phillips 66's refining unit had adjusted earnings of $86 million in the first quarter, down 77% from the $376 million booked in the fourth quarter, mainly because of lower worldwide gasoline and distillate margins. The company said crack spreads -- the widely followed difference between the cost of crude and refined products that determines profit margins -- were $10.64 per barrel, down 17% from the prior quarter, and the distillate crack spread was the lowest since 2010. Refining utilization was at 94%, which was consistent with the previous quarter.

The company said its midstream unit brought in adjusted earnings of $40 million, down $2 million from the fourth quarter, while its chemicals unit, which includes its stake in Chevron Phillips Chemical, or CPChem, had adjusted earnings of $156 million vs. $182 million in the previous quarter with a 93% utilization. Its marketing and specialties segment had adjusted earnings of $205 million, compared with $227 million in the fourth quarter.

Among its projects, Phillips 66 said its Sweeny Hub is almost finished with its LPG export terminal 80% complete, on time and on budget with a startup projected for the second half of the year. It's also participating in joint ventures to develop the 470,000 barrel per day Dakota Access Pipeline and Energy Transfer Crude Oil Pipeline systems with a 25% stake with Energy Transfer Partners (ETP) and Sunoco Logistics Partners  (SXL) owning the rest. Those are expected to be complete in the fourth quarter.

Phillips 66 said it's continuing to invest in its Beaumont Terminal, the largest terminal in its portfolio, and contributed 25% of the Sweeny fractionator and Clemens Caverns NGL storage facility to its master limited partnership Phillips 66 Partners (PSXP - Get Report) for $236 million. The company said Phillips 66 Partners recently started up the first segment of the Bayou Bridge Pipeline.

The company said progress on CPChem's U.S. Gulf Coast Petrochemicals Project is about 75% complete with startup expected in mid-2017. It consists of an ethane cracker and polyethylene facilities that will boost the joint venture's global ethylene and polyethylene capacity by about a third.