Phillips 66 · NYSE:PSX
Phillips 66 — Q1 2015 Earnings Presentation
62 slides from Phillips 66's earnings presentation, Jul 1, 2015
Slide 1: Investor Update First Quarter 2015
Investor Update First Quarter 2015
Slide 2: Execution
Execution Investor Update First Quarter 2015 NYSE: PSX www.phillips66.com
Slide 3: Cautionary Statement
Cautionary Statement 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. Wo
Slide 4: Phillips 66
Phillips 66 Diversified portfolio of leading downstream businesses Resilient cash flow through the commodity cycle Disciplined capital allocation Chemicals and Midstream growth Share repurchases and dividends Financial flexibility Freeport LPG Terminal 4
Slide 5: Phillips 66 Financial Highlights
Phillips 66 Financial Highlights Segment Adjusted EBITDA 1Q 2015 3.0 $B Adjusted EBITDA $1.8 B 2.0 Capital expenditures $1.1 B 1.0 Distributions $0.7 B 0.0 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Average Cash from PSXP $1.3 B 2013 2014 2015 M&S Chemicals Midstream Refining See appendix for footnotes. 5
Slide 6: Operating Excellence
Operating Excellence Total Recordable Rates Refining Environmental Metrics Incidents per 200,000 Hours Worked Industry Average ’08 ’10 ’12 ’14 880 450 430 300 Phillips 66 CPChem DCP 2008 2010 2012 2014 Operating Costs and SG&A Refining Capacity Utilization $B % Midstream Growth 0.3 93% 90% 93% 94% 6
Slide 7: Energy Landscape
Energy Landscape Historical and Forward Crude Oil Prices $/bbl Markets seeking balance 120 Brent WTI Global economic boost from 90 lower energy prices should stimulate demand 60 Reduced E&P investment slows 30 U.S. infrastructure growth 0 2009 2011 2013 2015 2017 Source: Bloomberg 7
Slide 8: Segment Strategy
Segment Strategy Midstream: Growth Chemicals: Growth Refining: Marketing and Enhance Returns Specialties: Selective Growth Execute Sweeny hub Grow CPChem organically Optimize crude slate Expand European retail Grow integrated Advance olefins and Expand export capability marketing Transportation syst
Slide 9: Midstream
Midstream 2014 EBITDA 2018E EBITDA NGL NGL fractionation capacity growing to 200 MBD Fractionator One start up 3Q 2015 LPG export facility start up 4Q 2016 Transportation Beaumont crude/products hub Bakken to Patoka/Beaumont pipelines Fee Based Market Based DCP EBITDA excluded. See appendix for addi
Slide 10: Midstream EBITDA Growth
Midstream EBITDA Growth $B PSXP ~ 2.3 PSX Growth and in-flight projects 1.1 2018E 0.7 ~ 1.2 2018E and in-flight 0.3 projects 0.4 1Q 2015 Refining Logistics Frac-1/ Transportation & Run-Rate EBITDA Run-Rate Annual EBITDA LPG Export Terminal Other NGL Growth DCP EBITDA excluded. See appendix for addit
Slide 11: Phillips 66 Partners Growth
Phillips 66 Partners Growth $B Fee-based business model 8 - 10 1.1 Dropdown Proceeds Growing cash flows Distributions 30% distribution CAGR through 2018 0.3 1.8 Funding Midstream growth 1Q 2015 2018E 1Q 2015 2018E Run-Rate Annual Cumulative Cash to PSX EBITDA since IPO See appendix for footnotes. 11
Slide 12: DCP Midstream
DCP Midstream Major U.S. midstream business Largest NGL producer Largest natural gas processing company Third largest NGL pipeline operator Footprint of strategically integrated assets Growing gathering and processing business 12
Slide 13: Chemicals Environment
Chemicals Environment Global Ethylene Production $/MT Cost Supply Curve 900 W. Europe Narrowing spread of ethane/LPG Naphtha 800 feedstocks 700 Asia Naphtha 600 M.E. LPG/ W. Europe Naphtha LPG Record 2014 ethane chain margins, 500 N.A. Asia Naphtha LPG expect good chain margins to 400 Rest of World
Slide 14: CPChem
CPChem Phillips 66 Chemicals Adjusted ROCE Leading petrochemical company 35% Feedstock advantaged 30% 10.5 B Lb/yr worldwide ethylene capacity 25% Strong global aromatics position 20% USGC Petrochemicals project on track 15% $6 B estimated capital spend 40% complete, start-up 2Q 2017 10% 3.3 B Lb/yr
Slide 15: Refining
Refining 2.2 MMBD Global Refining Capacity Optimizing crude slate Improving yields Central Expanding export capability Atlantic Corridor West Coast Basin/Europe 492 MBD 360 MBD 588 MBD Managing costs Gulf Coast Heavy Light/ 738 MBD Medium Enhancing portfolio Worldwide 15
Slide 16: Marketing and Specialties
Marketing and Specialties Adjusted EBITDA High-returning businesses 1.5 $B U.S. Marketing Avg. $1.2 B Wholesale network ~8,600 branded sites 1.0 International Marketing Low-cost, high-volume business 0.5 ~1,520 sites Specialties Finished lubricants 0.0 Base oil joint venture 2009 2010 2011 2012 2013
Slide 17: EBITDA Growth
EBITDA Growth Segment Adjusted EBITDA $B More than 30% EBITDA growth 8.4 Cash flows less volatile by 2018E 6.4 2018E portfolio shift to higher-value businesses 20% Midstream 25% Chemicals 40% Refining 2009-2014 Avg. 2018E 15% Marketing & Specialties Refining Midstream Chemicals M&S Corporate not inc
Slide 18: Financial Strategy
Financial Strategy 2014E – 2016E Ensuring financial flexibility Investment grade credit rating Adequate liquidity Funding transformational growth Cash from operations Distributions Reinvestment Dropdowns to PSXP Returning capital to shareholders Dividend growth Ongoing share repurchases 18
Slide 19: 2015 Capital Budget
2015 Capital Budget $3.4 B Growth capital Sweeny Fractionator One LPG Export Terminal Bakken to Patoka/Beaumont pipelines Beaumont Terminal expansion $0.2 B for PSXP projects PSX Sustaining Refining Returns M&S Growth Midstream Growth $1.2 B Sustaining capital PSXP Growth 19
Slide 20: Distributions
Distributions Share Count and Capital Returned Dividend Growth Quarterly ¢/share $6.6 B 56 624 MM 590 MM 542 MM 20 3Q 4Q 1Q 3Q 4Q 2Q 2012 2013 2015 2012 2013 2015 $1.7 B remaining authorized share repurchases 180% dividend growth See appendix for footnotes. 20
Slide 21: Creating Value
Creating Value Enterprise Value Uniquely positioned portfolio Disciplined capital allocation More than 30% EBITDA growth Multiple expansion Commitment to distributions 2014 2018E Strong balance sheet Midstream PSXP Chemicals M&S Refining 21
Slide 22: Institutional Investors Contact
Institutional Investors Contact Kevin Mitchell InvestorRelations@p66.com Vice President, Investor Relations 832-765-2297 Rosy Zuklic Manager, Investor Relations
Slide 23: Investor Update (Phillips 66 Partners)
Investor Update May 2015 NYSE: PSXP www.phillips66partners.com
Slide 24: Cautionary Statement
Cautionary Statement This presentation contains forward-looking statements as defined under the federal securities laws, including projections, plans and objectives. Although Phillips 66 Partners believes that expectations reflected in such forward-looking statements are reasonable, no assurance can
Slide 25: Phillips 66 Partners Ownership Structure
Phillips 66 Partners Ownership Structure (NYSE: PSX) 100% ownership interest PSXP Public Phillips 66 Partners GP LLC Unitholders 69% limited partner (PSXP General Partner) interest General Partner Units IDRs 29% limited partner interest 2% general partner interest (NYSE: PSXP) Operating Subsidiaries
Slide 26: Phillips 66 Partners
Phillips 66 Partners Strong alignment with Phillips 66 Highly integrated assets Stable and predictable cash flows Significant growth potential Financial flexibility Pecan Grove Marine Dock 26
Slide 27: Phillips 66 Partners Financial Highlights
Phillips 66 Partners Financial Highlights 0.40 Distribution / LP Unit ($) 1Q 2015 0.35 Distributable cash flow $41.9 MM 0.30 Adjusted EBITDA $46.6 MM 0.25 0.3700 Public equity issuance $396 MM 0.3400 0.3168 0.20 0.3017 0.2743 Public debt issuance $1.1 B 0.2125* 0.2248 0.15 (MQD) Acquired interest in
Slide 28: Q1 2015 Acquisition
Q1 2015 Acquisition Drop down assets 33.3% interest in Sand Hills NGL pipeline 33.3% interest in Southern Hills NGL pipeline 19.5% interest in Explorer refined products pipeline $1.1 B acquisition Asset-level 2015E EBITDA of $115 million Implied 9.5x purchase multiple on assets’ 2015E EBITDA Assets
Slide 29: $275 MM In Announced Organic Growth
$275 MM In Announced Organic Growth Cross-Channel • Capital cost: $22 MM Connector Pipeline • Increases access to export docks for shippers in Houston Ship Channel • Expected completion in 3Q 2015 • Capital cost: $50 MM Eagle Ford Crude • Connects Eagle Ford crude oil production to third-party pipel
Slide 30: Highly Integrated Assets
Highly Integrated Assets Palermo Rail Terminal and Paradigm Mountrail expected to be operational Q4 2015. 30
Slide 31: Fee-based, Long-term contracts provide stability
Fee-based, Long-term contracts provide stability Asset Initial Term (years) Maximum Term with Options (years) Clifton Ridge to Lake Charles 10 20 Sweeny to Pasadena 10 20 Pipelines Hartford Connector 23 * 23 Gold Line 10 15 Sand Hills 15 15 Southern Hills 15 15 Explorer Various Various Clifton Ridge
Slide 32: Adjusted EBITDA and DCF
Adjusted EBITDA and DCF Adjusted EBITDA ($MM) Distributable Cash Flow ($MM) 46.6 41.9 42.6 37.2 37.6 34.3 33.4 35.0 * 23.3 * 21.5 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 * Values for Q3 2013 pro-rated from July 26, 2013 to September 30, 2013. 32
Slide 33: Balanced Debt Maturity Profile
Balanced Debt Maturity Profile 10-year notes $1.1 B debt issuance February 2015 3.605% coupon 5-Year $300 MM notes $500 MM 10-Year $500 MM notes 30-Year $300 MM notes 5-year notes 30-year notes 2.646% coupon 4.68% coupon $300 MM $300 MM Average cost of 3.64% BBB (stable) / Baa3 (stable) 2020 2025 20
Slide 34: Financial Flexibility
Financial Flexibility Investment grade credit rating Target 3.5x debt / EBITDA 30% distribution CAGR through 2018 Target 1.1x annual coverage ratio Support Phillips 66 Midstream growth 34
Slide 35: Total Return Since IPO
Total Return Since IPO 180% Closed 2nd PSXP 162% acquisition - 160% Alerian MLP Index 9% $340 MM 140% Closed 1st 120% acquisition - $700 MM 100% 80% Closed 3rd IPO acquisition - 60% $1.1 B 40% 20% 0% -20% Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 Source: Bloomberg
Slide 36: Institutional Investors Contact
Institutional Investors Contact Rosy Zuklic - Investor Relations Rosy.Zuklic@p66.com 832-765-2297 William Steen - Investor Relations William.Steen@p66.com 832-765-2297
Slide 37: Footnotes
Footnotes Slide 5 PSXP is a consolidated subsidiary of PSX. Accordingly, quarterly cash distributions paid from PSXP to PSX, and consideration paid by PSXP to PSX in a dropdown transaction, both eliminate in consolidation and do not impact PSX’s consolidated cash balance. PSX’s consolidated cash bal
Slide 38: Footnotes
Footnotes Slide 11 See footnote to slide 4 for information on the elimination in consolidation of transactions between PSXP and Phillips 66 Slide 14 Growth capital reflects 100% CPChem growth capital. Growth EBITDA (& start-up year) includes: 1-hexene (2014), 10th Sweeny furnace (2014), NAO expansio
Slide 39: Capital Structure
Capital Structure Fully consolidated Excluding PSXP 28% 28% 29% 26% 20- 30% 22% 22% 22.4 22.0 22.6 22.0 21.6 21.8 8.7 8.9 8.7 7.8 6.2 5.4 5.2 5.4 6.2 5.0 5.2 5.3 2013 2014 1Q 2015 2013 2014 1Q 2015 Equity $B Debt $B Cash & Cash Equivalents $B Debt to Capital 39
Slide 40: Free Cash Flow
Free Cash Flow Midstream Chemicals $B $B 0.2 0.3 0.8 0.9 0.7 0.5 CFO (excl. WC) Sustaining Capex Free Cash Flow CFO (excl. WC) Sustaining Capex Free Cash Flow Refining Marketing & Specialties $B $B 0.9 0.1 2.5 0.7 0.6 1.6 CFO (excl. WC) Sustaining Capex Free Cash Flow CFO (excl. WC) Sustaining Capex
Slide 41: 2014 Adjusted ROCE
2014 Adjusted ROCE 40% M&S 30% Chemicals 32% 20% 27% P66 Total Midstream Refining 14% 10% 13% 12% Corporate 0% -5% -10% 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Average Capital Employed ($B) 41
Slide 42: 2014 Adjusted CROCE
2014 Adjusted CROCE 40% M&S 30% Chemicals 36% Refining P66 Total 20% 27% Midstream 17% 10% 17% 15% Corporate 0% -2% -10% 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 Average Capital Employed ($B) CROCE defined as Adjusted Net Income plus Depreciation and Amortization divided by Average Capital Employe
Slide 43: Adjusted EBITDA
Adjusted EBITDA $B 10 8 Avg. $6.4 B 6 4 2 0 2009 2010 2011 2012 2013 2014 2018E -2 Refining Midstream Chemicals M&S Corporate Average is 2009 through 2014. 43
Slide 44: Chemicals – CPChem
Chemicals – CPChem Adjusted EBITDA $B 4.2 3.4 3.4 2.5 1.9 1.1 2009 2010 2011 2012 2013 2014 Reflects 100% CPChem. 44
Slide 45: Midstream – DCP
Midstream – DCP Adjusted EBITDA $B 1.4 1.2 1.0 0.9 1.0 0.8 2009 2010 2011 2012 2013 2014 Reflects 100% DCP Midstream. 45
Slide 46: 2015 Sensitivities – Phillips 66
2015 Sensitivities – Phillips 66 Net Income Midstream $MM 10¢/Gal Increase in NGL price 30 $1/MMBtu Increase in Natural Gas price 25 $10/BBL Increase in WTI price 15 Chemicals 1¢/Lb Increase in Chain Margin (Ethylene, Polyethylene, NAO) 35 Worldwide Refining (assuming 91% refining utilization) For a
Slide 47: Phillips 66 Capital Program
Phillips 66 Capital Program Millions of Dollars 2015 Budget Sustaining Growth Total Capital Expenditures and Investments Consolidated Midstream(1) Transportation 148 1,084 1,232 NGL 19 1,912 1,931 167 2,996 3,163 Chemicals - - - Refining(2) 813 299 1,112 Marketing and Specialties 78 92 170 Corporate
Slide 48: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Year ending February 29 2016 Reconciliation of PSXP Estimated EBITDA to Estimated Net Income* Estimated net income $ 82 Plus: Depreciation 20 Interest expense 4 Income taxes 9 Estimated EBITDA $ 115 *Amounts reflect the sum of EBITDA and net income foreca
Slide 49: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2009 2010 2011 2012 2013 2014 Phillips 66 Chemicals Segment ROCE Numerator Net Income $ 228 486 716 823 987 1,137 After-tax interest expense - - - - - - GAAP ROCE earnings 228 486 716 823 987 1,137 Special Items - - - 157 - 72 Adjusted ROCE earnings $ 228
Slide 50: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Millions of Dollars 2009-2014 2009-2014 Marketing & Specialties Adjusted EBITDA Reconciliation 2009 2010 2011 2012 2013 2014 Average Marketing & Specialties Adjusted EBITDA Reconciliation 2009 2010 2011 2012 2013 2014 Average U.S. Marketing Specialties U.
Slide 51: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2009-2014 Adjusted EBITDA by Segment Reconciliation 2009 2010 2011 2012 2013 2014 Average Midstream Midstream net income attributable to Phillips 66 $ 384 384 2,147 52 469 507 657 Plus: Net income attributable to noncontrolling interests 3 5 5 7 17 35 12
Slide 52: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2009-2014 Adjusted EBITDA by Segment Reconciliation 2009 2010 2011 2012 2013 2014 Average Refining Refining net income (loss) attributable to Phillips 66 $ (556) (661) 1,369 3,091 1,747 1,771 1,127 Plus: Provision for income taxes (296) (121) 808 1,998 1,
Slide 53: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2009-2014 Adjusted EBITDA by Segment Reconciliation 2009 2010 2011 2012 2013 2014 Average Marketing and Specialties Marketing and Specialties net income attributable to Phillips 66 $ 541 655 692 544 894 1,034 727 Plus: Provision for income taxes 457 398 4
Slide 54: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2009-2014 Adjusted EBITDA by Segment Reconciliation 2009 2010 2011 2012 2013 2014 Average Phillips 66 Phillips 66 net income attributable to Phillips 66 $ 476 735 4,775 4,124 3,726 4,762 3,100 Less: Income from discontinued operations 19 30 43 48 61 706 1
Slide 55: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Low High 100% CPChem Incremental Project Earnings Projections Estimated incremental net income $ 1,000 1,313 Plus: Estimated income taxes 20 27 Estimated net interest expense - - Estimated depreciation 280 260 Estimated EBITDA $ 1,300 1,600 Millions of Do
Slide 56: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2014 Marketing & Phillips 66 Midstream Chemicals Refining Specialties Corporate Phillips 66 ROCE Numerator Net Income $ 4,797 541 1,137 1,771 1,034 (393) After-tax interest expense 173 - - - - 173 GAAP ROCE earnings 4,970 541 1,137 1,771 1,034 (220) Speci
Slide 57: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Average 2009-2014 Marketing & Midstream Chemicals Refining Specialties FCF Yield Numerator Cash From Operations GAAP $ 559 230 2,615 563 Less: Change in Non-Cash Working Cap. (13) (0) 152 (127) Cash From Operations (excluding WC) 572 230 2,463 690 Less: P
Slide 58: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2009 2010 2011 2012 2013 2014 100% CPChem Net Income $ 615 1,388 1,970 2,403 2,743 3,288 Plus: Income taxes 26 42 57 67 71 86 Net interest expense 58 63 18 8 (3) (2) Depreciation and amortization 285 255 258 265 278 296 EBITDA $ 984 1,748 2,303 2,743 3,08
Slide 59: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2013 2014 2015 Adjusted EBITDA by Segment Reconciliation 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Average Midstream Midstream net income $ 114 92 152 128 194 117 124 107 78 123 Plus: Provision for income taxes 63 49 87 65 108 63 70 68 38 68 Depreciation and amortizatio
Slide 60: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2013 2014 2015 Adjusted EBITDA by Segment Reconciliation 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Average Refining Refining net income $ 904 455 (30) 418 306 390 558 517 538 451 Plus: Provision for income taxes 467 280 22 266 202 257 301 (64) 226 217 Depreciation and a
Slide 61: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2013 2014 2015 Adjusted EBITDA by Segment Reconciliation 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q Average Corporate Corporate net income (loss) $ (95) (126) (113) (97) (81) (121) (91) (100) (126) (106) Plus: Provision for income taxes (80) (60) (43) (80) (78) (61) (58)
Slide 62: Adjusted EBITDA and Distributable Cash Flow Reconciliation to Net Income
Adjusted EBITDA and Distributable Cash Flow Reconciliation to Net Income $ MM 1Q 2015 4Q 2014 3Q 2014 2Q 2014 1Q 2014 Net Income $ 35.4 $ 36.3 $ 30.0 $ 30.9 $ 27.2 Plus: Depreciation 5.1 4.5 4.2 3.9 3.6 Net interest expense 5.8 2.1 1.4 1.3 0.4 Amortization of deferred rentals 0.1 0.1 0.1 0.1 0.1 Pro