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TRANSCRIPT
PHILLIPS 66 FOURTH QUARTER CONFERENCE CALL January 29, 2014
This presentation contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Words and
phrases such as “is anticipated,” “is estimated,” “is expected,” “is planned,” “is scheduled,” “is targeted,” “believes,” “intends,” “objectives,” “projects,”
“strategies” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a
statement is not forward-looking. Forward-looking statements relating to Phillips 66’s operations (including joint venture operations) are based on
management’s expectations, estimates and projections about the company, its interests and the energy industry in general on the date this
presentation was prepared. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that
are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking
statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include
fluctuations in crude oil, NGL, and natural gas prices, and refining and petrochemical margins; unexpected changes in costs for constructing,
modifying or operating our facilities; unexpected difficulties in manufacturing, refining or transporting our products; lack of, or disruptions in,
adequate and reliable transportation for our crude oil, natural gas, NGL, and refined products; potential liability from litigation or for remedial actions,
including removal and reclamation obligations, under environmental regulations; limited access to capital or significantly higher cost of capital
related to illiquidity or uncertainty in the domestic or international financial markets; and other economic, business, competitive and/or regulatory
factors affecting Phillips 66’s businesses generally as set forth in our filings with the Securities and Exchange Commission. Phillips 66 is under no
obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information,
future events or otherwise.
CAUTIONARY STATEMENT
2
3
EXECUTING STRATEGY
4
COMPANY OVERVIEW 4Q 2013
Adjusted Earnings:
Adjusted EPS:
Operating cash flow*:
Dividends paid:
Common shares repurchased:
2013 ROCE:
$808 MM
$1.34
$1,257 MM
$232 MM
$644 MM
14%
* Excluding working capital changes & net cash provided by discontinued operating activities
521
808 (27) (1)
452
(153)
16
3Q 2013
Adjusted
Earnings
Midstream Chemicals Refining Marketing
& Specialties
Corporate
& Other
4Q 2013
Adjusted
Earnings
4Q 2013 Adjusted Earnings
$MM
121 (97) 450 261 73
COMPANY ADJUSTED EARNINGS 4Q 2013 VS. 3Q 2013
5
6
MIDSTREAM OVERVIEW 4Q 2013
Transportation: Stable throughput volumes & fees
DCP Midstream: Lower equity gains & volumes
NGL Operations & Other: Higher margins & inventory impacts
2013 ROCE: 15%
148
121
(4)
(50)
27
3Q 2013
Adjusted
Earnings
Transportation DCP
Midstream
NGL Operations
& Other
4Q 2013
Adjusted
Earnings
$MM
MIDSTREAM ADJUSTED EARNINGS 4Q 2013 VS. 3Q 2013
7
8
CHEMICALS OVERVIEW 4Q 2013
Olefins & Polyolefins: 95% utilization
Specialties, Aromatics & Styrenics: Benzene turnaround
2013 ROCE: 26%
262 261
23
(24)0
3Q 2013
Adjusted
Earnings
Olefins &
Polyolefins
Specialties,
Aromatics &
Styrenics
Corporate
& Other
4Q 2013
Adjusted
Earnings
$MM
CHEMICALS ADJUSTED EARNINGS 4Q 2013 VS. 3Q 2013
9
10
REFINING OVERVIEW 4Q 2013
Realized refining margin: $10.75/BBL
Worldwide market capture: 112%
Refining crude utilization: 92%
Clean product yield: 84%
Advantaged U.S. crude slate: 94%
2013 ROCE: 13%
Worldwide market capture: 112%
(2)
450
267
(185)
259
136
(25)
3Q 2013
Adjusted
Earnings
Gulf Coast Central
Corridor
Western /
Pacific
Atlantic
Basin /
Europe
Other
Refining
4Q 2013
Adjusted
Earnings
$MM
REFINING ADJUSTED EARNINGS 4Q 2013 VS. 3Q 2013
11
9.62 10.75
0.30
(5.54)
4.60
1.77
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
WORLDWIDE REFINING $/BBL
REFINING MARGINS – MARKET VS. REALIZED 4Q 2013
12
Avg. Market Crude: $103.10/BBL 92% Crude Capacity Utilization 112% Market Capture
16% 18% 18%
7%10% 12%
27%27% 24%
2%
7%14%
6%
2011 2012 2013
19% 18% 16% 17%
12% 12% 12% 13%
23% 24% 24%25%
14% 14% 14%15%
24%
Q1 Q2 Q3 Q4
REFINING U.S. ADVANTAGED CRUDE SLATE 2011 – 2013
13
2013 by QUARTER
* Includes Shale Oil, Rocky Mountain Sweet (Casper, Wyoming), Mississippian Lime
(Oklahoma) and Granite Wash (Texas Panhandle)
Other Light/Medium
Tight Oil*
Other Heavy
Canadian Heavy
WTI Based
Total 68% 68% 66% 94% 52% 62% 74% Total
2011 to 2013
Other Light/Medium
Tight Oil*
Other Heavy
Canadian Heavy
WTI Based
14
MARKETING AND SPECIALTIES OVERVIEW 4Q 2013
Worldwide marketing margin: 2.8 cpg
Specialties: Lower volumes
2013 ROCE: 27%
226
73
(145)(8)
3Q 2013
Adjusted
Earnings
Marketing
& Other
Specialties 4Q 2013
Adjusted
Earnings
$MM
MARKETING AND SPECIALTIES ADJUSTED EARNINGS 4Q 2013 VS. 3Q 2013
15
(113)(97)
1
26
(11)
3Q 2013
Adjusted
Net Loss
Net Interest
Expense
Corporate
Overhead Other
4Q 2013
Adjusted
Net Loss
$MM
CORPORATE AND OTHER ADJUSTED NET LOSS 4Q 2013 VS. 3Q 2013
16
5.9 5.4
1.3
(0.4)(0.6) (0.2)
(0.6)
September 30
Cash
Balance*
CFO
(excluding
working
capital)
Working
Capital
Capital
Expenditures
& Investments
Dividends Share
Repurchases
December 31
Cash
Balance*
$B
COMPANY CASH FLOW 4Q 2013
17
* Includes cash and cash equivalents. $0.4 B of the balance relates to cash and cash equivalents held by Phillips 66 Partners LP
19.0 20.6 20.8 21.4 21.7 22.0 22.4
8.0 8.0 7.0 7.0 6.5 6.2 6.2
30%28%
25% 25%23%
22% 22%
2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013 3Q 2013 4Q 2013
Equity $B Debt $B Debt to Capital
20% - 30%
CAPITAL STRUCTURE 2Q 2012 – 4Q 2013
18
19
3.5 3.8 5.4
6.0
(1.8) (0.8)
(2.2)
(1.0)
0.1
1.2 0.4
Ending
Cash
2012
Cash From
Operations
Capital
Program
Dividends Share
Repurchases
Debt Other Ending Cash
(excl. Asset
Sales & PSXP)
Asset
Sales
PSXP
IPO Net
Proceeds
Ending
Cash
2013
$B
SOURCES AND USES OF CASH 2013
$MM
COMPANY ADJUSTED EARNINGS 2013
20
3,643
469
986
1,838
781
(431)
Midstream Chemicals Refining Marketing
& Specialties
Corporate
& Other
2013 Adjusted
Earnings
21
OUTLOOK
PHILLIPS 66 FOURTH QUARTER 2013 CONFERENCE CALL
Questions and Answers
PHILLIPS 66 FOURTH QUARTER 2013 CONFERENCE CALL
Appendix
SENSITIVITIES 2014
24
Sensitivities shown above are independent and are only valid within a limited price range
Net Income $MM
Midstream
1¢/Gal Increase in NGL price 4
10¢/MMBtu Increase in Natural Gas price 2
$1/BBL Increase in WTI price 2
Chemicals
1¢/Lb Increase in Olefins Chain Margin (Ethylene, Polyethylene, NAO) 35
Worldwide Refining (assuming 94% refining utilization)
$1/BBL Increase in Refining Margin 440
$1/BBL Widening LLS / Maya Differential (LLS less Maya) 50
$1/BBL Widening WTI / WCS Differential (WTI less WCS) 40
$1/BBL Widening WTI / WTS Differential (WTI less WTS) 15
$1/BBL Widening LLS / WCS Differential (LLS less WCS) 10
$1/BBL Widening ANS / WCS Differential (ANS less WCS) 10
$0.10/MMBtu Increase in Natural Gas price (10)
Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators:
7.42
5.12
0.48
(2.39)
(1.96)
1.57
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
ATLANTIC BASIN / EUROPE $/BBL
REFINING MARGINS – MARKET VS. REALIZED 4Q 2013
25
Market 3:2:1 – Dated Brent / Gasoline 83.7 RBOB NYH / Diesel 15ppm NYH
Brent: $109.27/BBL 82% Crude Capacity Utilization 69% Market Capture
9.09 9.84
0.40
(6.37)
2.88
3.84
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
GULF COAST $/BBL
REFINING MARGINS – MARKET VS. REALIZED 4Q 2013
26
Market 3:2:1 – LLS / Gasoline 85 CBOB / Diesel 61 8ppm
LLS: $100.94/BBL 93% Crude Capacity Utilization 108% Market Capture
10.66
18.50
0.27
(6.27)
10.39
3.45
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
CENTRAL CORRIDOR $/BBL
REFINING MARGINS – MARKET VS. REALIZED 4Q 2013
27
Market 3:2:1 – WTI / Gasoline Unl 87 Group 3 / ULSD Group 3
WTI: $97.38/BBL 100% Crude Capacity Utilization 174% Market Capture
12.34
9.51
(0.24)
(6.83)
6.63
(2.39)
Market
3:2:1
Configuration Secondary
Products
Feedstock Other Realized
Margin
WESTERN / PACIFIC $/BBL
REFINING MARGINS – MARKET VS. REALIZED 4Q 2013
28
Market 3:2:1 – ANS Spot / Los Angeles CARBOB / Los Angeles No. 2 CARB
ANS: $104.67/BBL 95% Crude Capacity Utilization 77% Market Capture
1,298
808
50 15
(510) (40) (5)
4Q 2012
Adjusted
Earnings
Midstream Chemicals Refining Marketing
& Specialties
Corporate
& Other
4Q 2013
Adjusted
Earnings
4Q 2013 Adjusted Earnings
$MM
121 (97) 450 261 73
COMPANY ADJUSTED EARNINGS 4Q 2013 VS. 4Q 2012
29
71
121
36
(1)
15
4Q 2012
Adjusted
Earnings
Transportation DCP
Midstream
NGL Operations
& Other
4Q 2013
Adjusted
Earnings
$MM
MIDSTREAM ADJUSTED EARNINGS 4Q 2013 VS. 4Q 2012
30
246 261
26
(26)
15
4Q 2012
Adjusted
Earnings
Olefins &
Polyolefins
Specialties,
Aromatics &
Styrenics
Corporate
& Other
4Q 2013
Adjusted
Earnings
$MM
CHEMICALS ADJUSTED EARNINGS 4Q 2013 VS. 4Q 2012
31
960
450
(285)
34
(132) (35)(92)
4Q 2012
Adjusted
Earnings
Atlantic
Basin /
Europe
Gulf
Coast
Central
Corridor
Western /
Pacific
Other
Refining
4Q 2013
Adjusted
Earnings
$MM
REFINING ADJUSTED EARNINGS 4Q 2013 VS. 4Q 2012
32
113
73
(33) (7)
4Q 2012
Adjusted
Earnings
Marketing
& Other
Specialties 4Q 2013
Adjusted
Earnings
$MM
MARKETING AND SPECIALTIES ADJUSTED EARNINGS 4Q 2013 VS. 4Q 2012
33
(92) (97)
(6)
7
(6)
4Q 2012
Adjusted
Net Loss
Net Interest
Expense
Corporate
Overhead Other
4Q 2013
Adjusted
Net Loss
$MM
CORPORATE AND OTHER ADJUSTED NET LOSS 4Q 2013 VS. 4Q 2012
34
35
NON-GAAP RECONCILIATIONS
Year 4Q 3Q Year 4Q
Phillips 66
Net Income (Loss) Attributable to Phillips 66 3,726$ 826$ 535$ 4,124$ 708$
Adjustments:
Net (gain) loss on asset sales (23) - - (106) -
Impairments - - - 979 580
Exit of business line 34 - - - -
Tax law impacts (17) - - - -
Pending claims and settlements (16) - - 34 (23)
Premium on early debt retirement - - - 89 -
Repositioning costs - - - 55 12
Repositioning tax impacts - - - 177 -
Hurricane-related costs - - - 35 35
Discontinued Operations (61) (18) (14) (48) (14)
Adjusted Net Income (Loss) Attributable to Phillips 66 3,643$ 808$ 521$ 5,339$ 1,298$
Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars)* 6.02$ 1.37$ 0.87$ 6.48$ 1.11$
Adjusted Net Income (Loss) Attributable to Phillips 66 Per Share of Common Stock (dollars)* 5.89$ 1.34$ 0.85$ 8.38$ 2.04$
* Assumes the dilutive securities outstanding at April 30, 2012 were also outstanding for each of the periods prior to the separation
2013
Millions of Dollars
Except as Indicated
2012
36
NON-GAAP RECONCILIATIONS
Year 4Q 3Q Year 4Q
Midstream
Net Income (Loss) Attributable to Phillips 66 469$ 121$ 148$ 53$ 92$
Adjustments:
Impairments - - - 330 -
Pending claims and settlements - - - (23) (23)
Hurricane-related costs - - - 2 2
Adjusted Net Income (Loss) Attributable to Phillips 66 469$ 121$ 148$ 362$ 71$
Chemicals
Net Income (loss) Attributable to Phillips 66 986$ 261$ 262$ 823$ 246$
Adjustments:
Impairments - - - 27 -
Premium on early debt retirement - - - 89 -
Repositioning tax impacts - - - 41 -
Adjusted Net Income (Loss) Attributable to Phillips 66 986$ 261$ 262$ 980$ 246$
2013
Millions of Dollars
Except as Indicated
2012
37
NON-GAAP RECONCILIATIONS
Year 4Q 3Q Year 4Q
Refining
Net Income (Loss) Attributable to Phillips 66 1,851$ 450$ (2)$ 3,217$ 363$
Adjustments:
Net (gain) loss on asset sales - - - (104) -
Impairments - - - 606 564
Tax law impacts (13) - - - -
Pending claims and settlements - - - 19 -
Repositioning tax impacts - - - 73 -
Hurricane-related costs - - - 33 33
Adjusted Net Income (Loss) Attributable to Phillips 66 1,838$ 450$ (2)$ 3,844$ 960$
Marketing & Specialties
Net Income (Loss) Attributable to Phillips 66 790$ 73$ 226$ 417$ 113$
Adjustments:
Net (gain) loss on asset sales (23) - - (2) -
Pending claims and settlements (16) - - 38 -
Exit of business line 34 - - - -
Tax law impacts (4) - - - -
Repositioning tax impacts - - - 63 -
Adjusted Net Income (Loss) Attributable to Phillips 66 781$ 73$ 226$ 516$ 113$
Millions of Dollars
Except as Indicated
20122013
38 * Total equity plus total debt
NON-GAAP RECONCILIATIONS
2013 Phillips 66 Midstream Chemicals RefiningMarketing
& Specialties
Numerator ($MM)
Net Income 3,743 486 986 1,851 790
After-tax interest expense 178 - - - -
GAAP ROCE earnings 3,921 486 986 1,851 790
Special Items (83) - - (13) (9)
Adjusted ROCE earnings 3,838 486 986 1,838 781
Denominator ($MM)
GAAP average capital employed* 28,163 3,158 3,823 14,252 2,882
Discontinued Operations (191)
Adjusted average capital employed 27,972 3,158 3,823 14,252 2,882
2013 Adjusted ROCE 14% 15% 26% 13% 27%
2013 GAAP ROCE 14% 15% 26% 13% 27%
39
NON-GAAP RECONCILIATIONS
Millions of
Dollars
2013
4Q
Cash Flows from Operating Activities
Net Cash provided by continuing operating activities, excluding working capital 1,257$
Working capital adjustments
Decrease (increase) in accounts and notes receivable (54)
Decrease (increase) in inventories 1,391
Decrease (increase) in prepaid expenses and other current assets 110
Increase (decrease) in accounts payable (1,657)
Increase (decrease) in taxes and other accruals (182)
Net cash provided by continuing operating activities 865
Net cash provided by discontinued operations 32
Net Cash Provided by Operating Activities 897$