Phillips 66 Reports Fourth-Quarter 2020 Financial Results
01/29/2021 - 07:00 AM
Phillips 66 (NYSE: PSX), a diversified energy manufacturing and logistics company, announces a fourth-quarter 2020 loss of $539 million , compared with a loss of $799 million in the third quarter of 2020. Excluding special items of $32 million , the company had an adjusted loss of $507 million in the fourth quarter, compared with a third-quarter adjusted loss of $1 million .
“2020 was a year of unprecedented challenges,” said Greg Garland, chairman and CEO of Phillips 66. “We took early, decisive steps to reduce costs and capital spending, secure additional liquidity and suspend share repurchases. These actions, combined with cash flow generation from our diversified portfolio, provided us with financial flexibility to maintain our strong investment grade credit ratings and sustain the dividend. We are focused on the health and safety of our employees, their families and our communities as we deliver products that are essential to the global economy.
“During the year, we reached major Midstream growth project milestones. We completed the Gray Oak Pipeline, our largest pipeline project to date. Gray Oak connects to the South Texas Gateway Terminal, which began crude oil export operations across two new docks. At the Sweeny Hub, we finished the Phase 2 expansion, adding two fractionators and storage capacity at Clemens Caverns. At Beaumont, the fourth dock began operations, and 2.2 million barrels of crude oil storage were placed into service.
“CPChem polyethylene sales volumes set a new record in 2020, meeting global consumer demand, including for food packaging and medical supplies. In Refining, we announced the Rodeo Renewed project to meet the growing demand for renewable energy. Marketing and Specialties reported one of its strongest financial performances.
“In 2020, our employees delivered exceptional operating performance, achieving record results in personal safety, process safety and environmental performance. We also advanced our digital transformation efforts, fostered innovation across our company and implemented new technologies, including digital systems for work processes and artificial intelligence to predict maintenance requirements and optimize processing unit performance.
“Looking ahead, we are optimistic about the impact of the COVID-19 vaccines on the economic recovery, as well as opportunities for value creation across our portfolio, including investments in a lower-carbon future. We remain committed to disciplined capital allocation and a strong balance sheet.”
Midstream
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax Income
Q4 2020
Q3 2020
Q4 2020
Q3 2020
Transportation
$
97
(3)
196
202
NGL and Other
85
99
86
102
DCP Midstream
41
50
41
50
Midstream
$
223
146
323
354
Midstream fourth-quarter pre-tax income was $223 million , compared with $146 million in the third quarter. Midstream results in the fourth quarter included $96 million of impairments related to Phillips 66 Partners’ investments in two crude oil logistics joint ventures, as well as $3 million of hurricane-related costs and $1 million of pension settlement expense. Third-quarter results included a $120 million impairment of pipeline and terminal assets related to the planned conversion of the San Francisco Refinery to a renewable fuels facility, an $84 million impairment related to the cancellation of the Red Oak Pipeline project, $3 million of pension settlement expense and $1 million of hurricane-related costs.
Transportation fourth-quarter adjusted pre-tax income of $196 million was $6 million lower than the third quarter. The decrease was primarily due to lower pipeline and terminal volumes, driven by decreased refinery utilization, partially offset by higher equity earnings from improved Bakken Pipeline volumes.
NGL and Other adjusted pre-tax income was $86 million in the fourth quarter, compared with $102 million in the third quarter. The decrease was mainly due to lower equity earnings, as well as reduced propane and butane trading results, partially offset by higher fractionation volumes, reflecting the ramp-up of Sweeny Fracs 2 and 3.
The company’s equity investment in DCP Midstream, LLC generated fourth-quarter adjusted pre-tax income of $41 million , a $9 million decrease from the prior quarter, mainly reflecting lower Sand Hills Pipeline equity earnings and timing of maintenance costs.
Chemicals
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax Income
Q4 2020
Q3 2020
Q4 2020
Q3 2020
Olefins and Polyolefins
$
204
241
216
148
Specialties, Aromatics and Styrenics
15
11
13
5
Other
(26)
(21)
(26)
(21)
Chemicals
$
193
231
203
132
The Chemicals segment reflects Phillips 66’s equity investment in Chevron Phillips Chemical Company LLC (CPChem). Chemicals’ fourth-quarter 2020 pre-tax income was $193 million , compared with $231 million in the third quarter of 2020. Chemicals results in the fourth quarter included reductions to equity earnings of $21 million for pension settlement expense and $1 million of hurricane-related costs, partially offset by a $12 million benefit from lower-of-cost-or-market inventory adjustments. Third-quarter results included a $101 million benefit to equity earnings from lower-of-cost-or-market inventory adjustments, partially offset by $2 million of hurricane-related costs.
CPChem’s Olefins and Polyolefins (O&P) business contributed $216 million of adjusted pre-tax income in the fourth quarter of 2020, compared with $148 million in the third quarter. The $68 million increase was primarily due to higher polyethylene margins, partially offset by higher turnaround and maintenance costs. Global O&P utilization was 101% for the quarter.
CPChem’s Specialties, Aromatics and Styrenics (SA&S) business contributed fourth-quarter adjusted pre-tax income of $13 million , compared with $5 million in the third quarter. The increase primarily reflects higher earnings from international equity affiliates due to improved margins.
Refining
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q4 2020
Q3 2020
Q4 2020
Q3 2020
Refining
$
(1,113)
(1,903)
(1,094)
(970)
Refining had a fourth-quarter pre-tax loss of $1.1 billion , compared with a pre-tax loss of $1.9 billion in the third quarter. Refining results in the fourth quarter included $22 million of hurricane-related costs and $3 million of pension settlement expense, partially offset by $6 million of favorable U.K. R&D credits. Third-quarter results included a $910 million impairment related to the planned conversion of the San Francisco Refinery to a renewable fuels facility, $12 million of pension settlement expense and $11 million of hurricane-related costs.
Refining had an adjusted pre-tax loss of $1.1 billion in the fourth quarter of 2020, compared with an adjusted pre-tax loss of $970 million in the third quarter of 2020. Both periods reflect the continued impact of challenging market conditions. The decreased results in the fourth quarter were largely driven by higher turnaround and maintenance activity.
Pre-tax turnaround costs for the fourth quarter were $76 million , compared with third-quarter costs of $41 million . Phillips 66’s worldwide crude utilization rate was 69% in the fourth quarter, down from 77% in the third quarter. Clean product yield was 86% in the fourth quarter.
Marketing and Specialties
Millions of Dollars
Pre-Tax Income
Adjusted Pre-Tax Income
Q4 2020
Q3 2020
Q4 2020
Q3 2020
Marketing and Other
$
180
365
181
366
Specialties
52
50
40
51
Marketing and Specialties
$
232
415
221
417
Marketing and Specialties (M&S) fourth-quarter pre-tax income was $232 million , compared with $415 million in the third quarter of 2020. M&S results in the fourth quarter included a $14 million benefit to equity earnings from a lower-of-cost-or-market inventory adjustment, partially offset by $2 million of hurricane-related costs and $1 million of pension settlement expense. Third-quarter results included hurricane-related costs of $1 million and pension settlement expense of $1 million .
Adjusted pre-tax income for Marketing and Other was $181 million in the fourth quarter of 2020, a decrease of $185 million from the third quarter of 2020. The decrease was due to lower realized margins, largely reflecting the impact of rising prices during the quarter, as well as reduced volumes, driven by COVID-19-related demand impacts. Refined product exports in the fourth quarter were 103,000 barrels per day (BPD).
Specialties generated fourth-quarter adjusted pre-tax income of $40 million , down from $51 million in the third quarter, largely due to lower finished lubricant margins.
Corporate and Other
Millions of Dollars
Pre-Tax Loss
Adjusted Pre-Tax Loss
Q4 2020
Q3 2020
Q4 2020
Q3 2020
Corporate and Other
$
(226)
(239)
(235)
(213)
Corporate and Other fourth-quarter pre-tax costs were $226 million , compared with pre-tax costs of $239 million in the third quarter. Pre-tax costs in the fourth quarter included a $9 million gain on an asset sale. Third-quarter pre-tax costs included a $25 million asset impairment and $1 million of pension settlement expense.
The $22 million increase in Corporate and Other adjusted pre-tax costs in the fourth quarter was mainly driven by lower capitalized interest and higher employee-related expenses.
Financial Position, Liquidity and Return of Capital
Phillips 66 generated $639 million in cash from operations during the fourth quarter, including $400 million of cash distributions from equity affiliates. Excluding working capital impacts, operating cash flow was $236 million . The company issued $1.75 billion of senior notes and repaid $500 million of its term loan in the quarter.
During the quarter, Phillips 66 funded $506 million of capital expenditures and investments and $393 million in dividends.
As of Dec. 31, 2020, Phillips 66 had $7.8 billion of liquidity, reflecting $2.5 billion of cash and cash equivalents and approximately $5.3 billion of total committed capacity under revolving credit facilities. Consolidated debt was $15.9 billion at Dec. 31, 2020, including $3.9 billion at Phillips 66 Partners (PSXP). The company’s consolidated debt-to-capital ratio was 42% and its net debt-to-capital ratio was 38% . Excluding PSXP, the debt-to-capital ratio was 39% and the net debt-to-capital ratio was 33% .
Strategic Update
Phillips 66 completed two new 150,000 BPD fractionators at its Sweeny Hub, bringing the site’s total fractionation capacity to 400,000 BPD. Frac 2 commenced commercial operations in September, and Frac 3 started operations in October. Phillips 66 plans to resume construction of the fourth fractionator in the second half of 2021. Upon completion of Frac 4, the Sweeny Hub will have 550,000 BPD of fractionation capacity. The fractionators are supported by long-term customer commitments.
At the South Texas Gateway Terminal, which is being constructed by Buckeye Partners, L.P., the second dock commenced crude oil export operations in the fourth quarter. Upon completion in the first quarter of 2021, the marine export terminal will have storage capacity of 8.6 million barrels and up to 800,000 BPD of dock throughput capacity. Phillips 66 Partners owns a 25% interest in the terminal.
Phillips 66 Partners continued construction of the C2G Pipeline, a 16 inch ethane pipeline that will connect its Clemens Caverns storage facility to petrochemical facilities in Gregory, Texas, near Corpus Christi, Texas. The project is backed by long-term commitments and is expected to be completed in mid-2021.
At Beaumont Terminal, the company completed the addition of a new 200,000 BPD dock in the fourth quarter, bringing the terminal’s total dock capacity to 800,000 BPD. The terminal has total crude and product storage capacity of 16.8 million barrels.
In Chemicals, CPChem and Qatar Petroleum are jointly pursuing development of petrochemical facilities on the U.S. Gulf Coast and in Ras Laffan, Qatar. CPChem is closely monitoring economic developments and has deferred final investment decision for its U.S. Gulf Coast project until 2022.
CPChem is advancing optimization and debottleneck opportunities. This includes recently approved projects at its Cedar Bayou facility in Baytown, Texas, that will increase capacity of ethylene and polyethylene. In addition, CPChem is pursuing expansion of its normal alpha olefins production.
In October, CPChem announced its first U.S. commercial-scale production of circular polyethylene from recycled mixed-waste plastics at its Cedar Bayou facility and received International Sustainability and Carbon Certification PLUS (ISCC PLUS) certification for this location in November. CPChem is using advanced recycling technology to convert plastic waste to valuable liquids that can become new petrochemicals. CPChem’s circular polyethylene matches the performance and safety specifications of traditional polymers.
In Refining, Phillips 66 is advancing its plans at the San Francisco Refinery in Rodeo, California, to meet the growing demand for renewable fuels. The company will complete its diesel hydrotreater conversion in mid-2021, which will produce 8,000 BPD (120 million gallons per year) of renewable diesel. Upon expected completion of the full conversion in early 2024, the facility will have over 50,000 BPD (800 million gallons per year) of renewable fuel production capacity. The conversion is expected to reduce the plant’s greenhouse gas emissions by 50% and help California meet its low-carbon objectives.
In Marketing, 106 retail sites in the Central region were acquired in January through a joint venture. This will enable long-term placement of Phillips 66 refinery production and extend participation in the retail value chain.
Recently, Phillips 66 announced the formation of an Emerging Energy organization. This group is charged with establishing a lower-carbon business platform that delivers attractive returns. It will focus on opportunities within our portfolio, such as Rodeo Renewed, as well as commercializing emerging energy technologies for a sustainable future. Combined with the company’s research and innovation efforts, the Emerging Energy organization uniquely positions Phillips 66 to develop and deploy technologies and products to support a lower-carbon future.
In collaboration with Georgia Institute of Technology, Phillips 66 received a U.S. Department of Energy grant for improving the costs, performance and reliability of an electrolysis technology that has the potential to convert carbon dioxide to clean fuels.
A field demonstration of a proprietary Phillips 66 solid oxide fuel technology was installed at a Phillips 66 facility to provide power generation for pipeline integrity.
Investor Webcast
Later today, members of Phillips 66 executive management will host a webcast at noon EST to discuss the company’s fourth-quarter performance and provide an update on strategic initiatives. To access the webcast and view related presentation materials, go to www.phillips66.com/investors www.phillips66.com/supplemental .
Earnings (Loss)
Millions of Dollars
2020
2019
Q4
Q3
Year
Q4
Year
Midstream
$
223
146
(9
)
405
684
Chemicals
193
231
635
150
879
Refining
(1,113
)
(1,903
)
(6,155
)
345
1,986
Marketing and Specialties
232
415
1,446
377
1,433
Corporate and Other
(226
)
(239
)
(881
)
(211
)
(804
)
Pre-Tax Income (Loss)
(691
)
(1,350
)
(4,964
)
1,066
4,178
Less: Income tax expense (benefit)
(197
)
(624
)
(1,250
)
256
801
Less: Noncontrolling interests
45
73
261
74
301
Phillips 66
$
(539
)
(799
)
(3,975
)
736
3,076
Adjusted Earnings (Loss)
PSX Rankings
#1564 Ranked by Stock Gains
PSX Stock Data
Industry
Petroleum Refineries
Sector
Manufacturing
Tags
Energy Minerals, Oil Refining/Marketing, Manufacturing, Petroleum Refineries
Country
US
City
Houston
About PSX
safety. honor. commitment. we are phillips 66, and we manufacture energy products you use every day. we refine and market petroleum products, such as gasoline, diesel, jet fuel and lubricants; gather and process natural gas and natural gas liquids (ngl) for powering businesses, heating homes, cooking and electricity; and manufacture petrochemicals, polymers and plastics found in cars, electronics, and other everyday goods. through financial strength and safe, reliable operations, we are delivering on a business strategy to enhance returns, grow the company, increase distributions to shareholders and build a highperforming team. we are phillips 66, and with our partners and suppliers, we create jobs. we have 14,000 colleagues in america and around the world. together we’re building a company founded on safety, honor and commitment. safety. we protect each other, our environment, and our communities. honor. we stand behind our word, and you can count on us to do the right
