Core Viewpoint - Phillips 66 (PSX) is expected to report a significant decline in fourth-quarter earnings for 2024, with estimates suggesting a 94.5% drop compared to the previous year, primarily due to challenges in refining margins and fluctuating crude oil prices [3][4]. Group 1: Earnings Performance - In the last reported quarter, PSX's earnings were $2.04 per share, surpassing the Zacks Consensus Estimate of $1.63, attributed to cost reductions and achieving Midstream synergy targets [2]. - PSX has beaten the Zacks Consensus Estimate in three of the last four quarters, with an average surprise of 14.29% [3]. - The Zacks Consensus Estimate for fourth-quarter earnings per share is $0.17, reflecting a significant decline from the previous year's figure [3]. Group 2: Revenue Expectations - The Zacks Consensus Estimate for revenues in the fourth quarter is $32.25 billion, indicating a 16.8% decrease from the year-ago reported figure [4]. Group 3: Market Conditions - Demand for gasoline in the U.S. remained resilient during the fourth quarter, which may have helped stabilize performance despite global challenges such as regional supply imbalances [5]. - A decline in refining margins is evident, with EIA data showing softer gasoline and distillate crack spreads, which could negatively impact PSX's refining business [6]. - The average spot price for West Texas Intermediate crude was $71.99 per barrel in October 2024, down from $85.64 in the same period of 2023, which may affect revenues across PSX's diverse portfolio [7]. Group 4: Margin Pressures - Volatility in natural gas prices could have squeezed margins, particularly if the company faced higher energy costs without sufficient pricing power in the downstream market [8]. - Adjusted pre-tax income from the refining business is predicted to decline nearly 95% year over year in the fourth quarter [8]. Group 5: Earnings Outlook - The current model does not indicate an earnings beat for PSX, with an Earnings ESP of -95.22% and a Zacks Rank of 3 [9].

Company Performance - Phillips 66's stock closed at $121.86, reflecting a -0.62% change from the previous trading day, underperforming the S&P 500's daily loss of 0.29% [1] - Over the past month, shares of Phillips 66 gained 9.29%, outperforming the Oils-Energy sector, which saw a loss of 1.71%, and the S&P 500, which gained 2.52% [1] Upcoming Earnings - The company's earnings report is scheduled for January 31, 2025, with an anticipated EPS of $0.17, representing a 94.5% decline compared to the same quarter last year [2] - Revenue is projected at $32.25 billion, reflecting a 16.75% decrease from the equivalent quarter last year [2] Analyst Estimates - Recent changes to analyst estimates for Phillips 66 indicate shifting short-term business dynamics, with positive alterations suggesting analyst optimism regarding the company's profitability [3] - The Zacks Consensus EPS estimate has decreased by 12.99% over the past month, and Phillips 66 currently holds a Zacks Rank of 3 (Hold) [5] Valuation Metrics - Phillips 66 is trading at a Forward P/E ratio of 15.64, which is below the industry average Forward P/E of 16.98 [6] - The company has a PEG ratio of 3.91, compared to the average PEG ratio of 2.93 for the Oil and Gas - Refining and Marketing industry [7] Industry Context - The Oil and Gas - Refining and Marketing industry is part of the Oils-Energy sector and holds a Zacks Industry Rank of 68, placing it in the top 28% of over 250 industries [8]

Industry and Investment Strategy - The analyst leverages professional expertise in the nuclear power and energy industries to evaluate long-term investment opportunities in equities and rental real estate properties [1] - The focus is on income-producing equities and real estate for cash flow and long-term appreciation [1] - Articles aim to present the underlying fundamentals and long-term potential of each equity or business [1] Market Timing and Cyclical Opportunities - The bottom of a cyclical business cycle presents an opportune time for long-term investors to accumulate a company's stock [4] - This period allows investors to capture underlying value that is not yet appreciated by the market [4]

Capital Budget Overview - Phillips 66 has announced a 2025 capital budget of $2.1 billion, focusing on sustaining capital and growth investments, with $998 million for sustaining capital and $1.1 billion for growth initiatives [1] - The total capital program, including joint venture investments, is projected to reach $3 billion, indicating a commitment to strategic growth and operational optimization [12] Refining Division Investments - The company has allocated $822 million to its Refining division, with $414 million for sustaining capital and $408 million for growth capital aimed at enhancing refining competitiveness through high-return, low-capital projects [2] Midstream Segment Investments - A significant portion of the capital budget, $975 million, is dedicated to the Midstream segment, with $429 million for sustaining projects and $546 million for growth projects, focusing on increasing gas processing capacity [6] Joint Ventures and Capital Spending - Phillips 66's share of capital spending by joint ventures, including Chevron Phillips Chemical Company and WRB Refining LP, is expected to total $877 million, with CPChem's growth capital supporting the construction of petrochemical facilities [3] Corporate and Other Allocations - The Corporate and Other capital allocation will prioritize information technology projects to enhance internal capabilities [7] Strategic Focus and Leadership - Mark Lashier, chairman and CEO, emphasized the company's focus on capital discipline and alignment of investments with strategic priorities to deliver shareholder value [10] Marketing and Renewable Fuels Investments - Continued investments in the branded network and further investments at the Rodeo Renewable Energy Complex for renewable diesel and sustainable aviation fuel production are planned [11]

Core Viewpoint - Phillips 66 is strategically divesting non-core assets to enhance financial health and maintain stable investor returns amid fluctuating refining margins [1][4]. Group 1: Asset Divestiture - Phillips 66 plans to sell its 25% stake in the Gulf Coast Express pipeline for $865 million, contributing to its goal of exceeding $3 billion in non-core asset divestitures [1]. - The company has already raised $2.7 billion through the sale of fuel terminals, pipelines, and its stake in a Swiss retail joint venture [2]. Group 2: Financial Management - Despite declining refining profits, Phillips 66 is committed to cost-cutting measures, expecting costs to decrease from $1.07 billion in 2024 to $822 million in 2025 [3]. - For 2025, overall expenditures are projected at $2.1 billion, slightly below the $2.2 billion forecast for 2024, reflecting a prudent approach to managing fluctuating refining margins [3]. Group 3: Market Outlook - U.S. refining margins are expected to stabilize in 2025 due to increased industrial demand and refinery closures, including Phillips 66's Los Angeles facility [4]. - The divestiture and cost optimization efforts align with the company's strategy to sustain shareholder value in a dynamic market environment [4].

Core Viewpoint - Phillips 66 has effectively returned value to shareholders since its spinoff from ConocoPhillips in 2012, distributing $43 billion in cash, exceeding 200% of its initial market capitalization [1] Group 1: Cash Flow and Business Model - Phillips 66 operates a diversified business model that includes downstream services, midstream facilities, chemicals, and renewable fuels, allowing for higher returns and lower volatility compared to peers [2] - The company has focused on expanding non-refining operations, aiming to grow annual earnings capacity by $4 billion to $14 billion by 2025, which is expected to increase cash flow from operations by over 50% from $7 billion to over $10 billion [3] Group 2: Shareholder Returns - The company set a target of $13 billion to $15 billion in cumulative cash distributions to shareholders by the end of 2023, which would bring total distributions since 2012 to $43 billion at the low end [4] - Phillips 66 has consistently increased its dividend since 2012, achieving a 16% compound annual growth rate, including a 10% increase earlier this year, and has repurchased 34% of its outstanding shares [5] Group 3: Future Outlook - In 2025, Phillips 66 expects to achieve $14 billion in earnings and over $10 billion in cash flow from operations, with plans to reinvest approximately $2.1 billion into sustaining and growing operations [6][7] - The company anticipates generating more free cash flow in 2024 due to a slightly reduced capital budget and has exceeded its $3 billion target for non-core asset sales, enhancing its balance sheet [8] - With rising cash flow and a strengthened balance sheet, Phillips 66 is positioned to return over $5 billion in cash to shareholders in 2024, aiming to distribute more than 50% of its cash flow from operations [9] Group 4: Investment Appeal - The strategy of diversifying and investing in downstream operations has resulted in significant earnings growth and reduced cash flow volatility, making Phillips 66 an attractive option for investors seeking lower-risk exposure in the energy sector [11]

Core Viewpoint - Phillips 66 has partnered with NextEra Energy to establish a solar facility that will power its Rodeo refinery, significantly enhancing its renewable energy capabilities and reducing carbon emissions [1][3]. Group 1: Overview of the Solar Facility - The new solar facility will have a power generation capacity of 30.2 megawatts (MW) and is expected to be operational by January 2025, gradually increasing its capacity during the first quarter [2]. - The facility will be constructed on 88 acres of land owned by Phillips 66 and will feature over 70,000 solar modules, producing approximately 60,000 megawatt-hours (MWh) of electricity annually [2]. Group 2: Renewable Energy Impact on Refinery Operations - The solar facility is projected to reduce the Rodeo refinery's grid power demand by nearly 50%, decreasing its reliance on external power sources [3]. - It is anticipated that the facility will help cut carbon dioxide emissions by approximately 33,000 metric tons per year starting in the January quarter of 2025 [3]. Group 3: Transition to Renewable Fuels - Earlier this year, Phillips 66 converted its Rodeo refinery into a renewable fuels facility, ceasing crude oil processing and focusing on producing renewable diesel and sustainable aviation fuels (SAF) [4]. - The facility has reached full production capacity, generating nearly 50,000 barrels of renewable diesel and SAF per day [4].

Core Viewpoint - Phillips 66 reported mixed results in its Q3 2024 earnings, with adjusted earnings per share beating estimates but total revenues declining year-over-year. The company faces challenges in its refining segment due to lower realized margins, while other segments showed improvement in earnings [2][3]. Financial Performance - Adjusted earnings for Q3 2024 were $2.04 per share, exceeding the Zacks Consensus Estimate of $1.63, but down from $4.63 in the same quarter last year [2]. - Total revenues for the quarter were $36.4 billion, surpassing the Zacks Consensus Estimate of $32 billion, but down from $40.3 billion year-over-year [2]. Segmental Results - **Midstream**: Adjusted pre-tax earnings increased to $672 million from $581 million year-over-year, driven by higher export margins [4]. - **Chemicals**: Adjusted pre-tax earnings rose to $342 million from $104 million in the prior-year quarter, attributed to increased margins and lower costs [5]. - **Refining**: Reported an adjusted pre-tax loss of $67 million, a significant decline from earnings of $1.74 billion in the year-ago quarter, primarily due to lower realized margins [6]. - **Marketing & Specialties**: Pre-tax earnings decreased to $583 million from $605 million year-over-year, with U.S. marketing fuel margins declining [8]. - **Renewable Fuels**: Adjusted pre-tax loss widened to $116 million from earnings of $22 million in the prior-year quarter, mainly due to lower realized margins [9]. Costs and Expenses - Total costs and expenses decreased to $35.75 billion from $37.51 billion in the year-ago period, indicating effective cost management [10]. Financial Condition - The company generated $1.13 billion in net cash from operations, down from $2.69 billion a year ago. Capital expenditures totaled $358 million, and dividends paid were $477 million [11]. - As of September 30, 2024, cash and cash equivalents stood at $1.6 billion, with total debt at $19.9 billion, resulting in a debt-to-capitalization ratio of 39.6% [11]. Market Outlook - Estimates for Phillips 66 have trended downward, with a consensus estimate shift of -34.05% [12][13]. - The company holds a Zacks Rank 3 (Hold), indicating expectations for an in-line return in the coming months [15]. Industry Comparison - Phillips 66 is part of the Zacks Oil and Gas - Refining and Marketing industry, where competitor Valero Energy reported a revenue decline of 14.4% year-over-year [16].

PHILLIPS 66 THIRD-QUARTER CONFERENCE CALL OCTOBER 29, 2024 Bayway Refinery LINDEN, NJ Cautionary Statement This news release contains forward-looking statements within the meaning of the federal securities laws relating to Phillips 66's operations, strategy and performance. Words such as "anticipated," "estimated," "expected," "planned," "scheduled," "targeted," "believe," "continue," "intend," "will," "would," "objective," "goal," "project," "efforts," "strategies" and similar expressions that convey the p ...

Financial Data and Key Metrics Changes - Earnings for Q3 2024 were reported at $346 million, with adjusted earnings of $859 million or $2.04 per share, reflecting a decrease of $125 million compared to the prior quarter [18] - Operating cash flow generated was $1.1 billion, with $1.3 billion returned to shareholders [18] - Cost reductions of approximately $700 million were realized through the first nine months of the year, including $200 million in logistics spend [16][17] Business Line Data and Key Metrics Changes - Midstream adjusted EBITDA increased to $3.7 billion from $2.1 billion three years ago, exceeding 2024 guidance despite weaker natural gas and NGL prices [12] - Chemicals results improved due to higher polyethylene chain margins and lower costs, while refining results decreased primarily due to weaker crack spreads [20] - Marketing and specialties saw higher results due to seasonally stronger margins, while renewable fuels experienced a decrease in realized margins [22] Market Data and Key Metrics Changes - The Central Corridor operation reported a $65 million increase quarter-over-quarter, attributed to higher margins and favorable inventory hedges [58] - The West Coast refining market faced challenges with a capture rate falling to 63%, driven by weaker market cracks and feedstock advantages [66] Company Strategy and Development Direction - The company is focused on ongoing portfolio optimization, with asset dispositions expected to exceed the $3 billion target, using proceeds for shareholder returns and debt reduction [7] - Plans to cease operations at the Los Angeles refinery by Q4 2025 were announced, influenced by declining crude production and market dynamics [13][14] - The company aims to achieve a mid-cycle earnings capacity of $14 billion by the end of 2025, with a focus on enhancing refining profitability through small capital projects [81][85] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging refining market and emphasized a long-term analysis behind the decision to idle the Los Angeles refinery [26][28] - The outlook for chemicals remains positive, with expectations of continued demand growth and improved margins [44] - Management expressed confidence in achieving a stronger balance sheet and cash return objectives despite current market pressures [78] Other Important Information - The company achieved its $1.4 billion business transformation cost reduction target ahead of schedule, reflecting a permanent shift in operations [8] - The Rodeo Renewable Energy Complex produced 44,000 barrels per day of renewable fuels during Q3 [22] Q&A Session Summary Question: Decision to shutter the Los Angeles refinery - Management stated that the decision was based on long-term market pressures and regulatory changes, not a knee-jerk reaction [26][28] Question: Outlook for the balance sheet - Management expects to finish the year with a stronger cash or net debt position, aided by asset dispositions [30][32] Question: Impact of inflation on cost reductions - Management highlighted that while inflation has been a headwind, they expect lesser pressures going forward [38] Question: Refining earnings outlook - Management acknowledged ongoing efforts to enhance refining profitability and capture value from the market [48][49] Question: Renewable diesel margins outlook - Management anticipates strengthening margins due to lower feedstock prices and market dynamics [56] Question: Performance in the Central Corridor - Management attributed strong performance to higher margins and favorable inventory hedges [59] Question: Cash return strategy - Management reiterated a commitment to returning 50% or more of operating cash flow to shareholders [96][100]