Phillips 66 · NYSE:PSX
Phillips 66 — Investor Presentation (November 2017)
60 slides from Phillips 66's investor presentation, November 2017
Slide 1: Investor Update
Investor Update November 2017 NYSE: PSX www.phillips66.com
Slide 2: Cautionary Statement
Cautionary Statement This presentation contains certain forward-looking statements. 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 t
Slide 3: Diversified Downstream Company
Diversified Downstream Company Marketing & Midstream Chemicals Refining Specialties Integrated Midstream 50% Interest in CPChem Diversified Refining Portfolio Stable, High-return Network Businesses Location Advantaged Investing in Quick Payout Pursue Organic and M&A Chemicals Portfolio Projects Enha
Slide 4: Executing Strategy
Executing Strategy Leading Operating Excellence Growth Sweeny Hub Bakken Pipeline Beaumont Terminal Phillips 66 Partners CPChem USGC Petrochemical Project Returns Refinery yield flexibility projects U.S. marketing reimaging Distributions 30% dividend CAGR since September 2012 $9.9 B in total share r
Slide 5: Operating Excellence
Operating Excellence Total Recordable Rates Refining Environmental Metrics (Incidents per 200,000 Hours Worked) (No. of events) Industry Average 3Q YTD ’13 ’14 ’15 ’16 ’17 317 302 278 264 172 Phillips 66 CPChem DCP Midstream 2013 2014 2015 2016 3Q YTD 2017 Operating Costs and SG&A Refining Capacity
Slide 6: Environmental, Social, Governance
Environmental, Social, Governance Industry Safety Metrics Robust enterprise-wide ESG issue management (Incidents per 200,000 Hours Worked) $6 B invested in environmental projects and sustaining capital since 2012 6 of 11 refining AFPM 2016 safety awards received by Phillips 66 Employment opportuniti
Slide 7: U.S. Crude Oil and Gas Plant NGL Production
U.S. Crude Oil and Gas Plant NGL Production Source: I.H.S. 6
Slide 8: Midstream Macro Environment
Midstream Macro Environment U.S. Crude Oil Export Volume (MMBD) U.S. Clean Product Exports (MMBD) 2.5 Maximum 3.0 Maximum Demonstrated Exports Demonstrated Exports 2.5 2.0 2.0 1.5 1.5 1.0 1.0 0.5 0.5 0.0 0.0 2012 2013 2014 2015 2016 1H 2017 2012 2013 2014 2015 2016 1H 2017 U.S. LPG Export Volume (MM
Slide 9: Chemicals Macro Environment
Chemicals Macro Environment U.S. Ethane Demand Global PE Capacity and Demand (MMBD) (MMTA) 2.5 Exports 150 Capacity Base Ethane Petchem & Price-sensitive Demand 2.0 Flexible Feedstock 100 1.5 1.0 50 0.5 0.0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2
Slide 10: Refining Macro Environment
Refining Macro Environment Global Clean Product Demand (MMBD) Global clean product demand 70 Diesel expected to grow Jet Gasoline 60 50 Global utilization rates expected in low-80s, with U.S. refining in low-90s 40 30 Strong U.S. utilization due to cost and 20 reliability advantages, and growing exp
Slide 11: Integrated Midstream Network
Integrated Midstream Network 10
Slide 12: Midstream
Midstream 2018E Annual Run-Rate Adjusted EBITDA Platform for long-term growth ($B) 1.8 – 2.0 Focus on growing NGL value chain PSX 0.6 Expand crude and products PSX export capability PSXP PSXP 1.0 1.1 PSXP 2018E year-end run-rate EBITDA $1.1 B Assets Online Growth Market Total See appendix for footno
Slide 13: Phillips 66 Partners
Phillips 66 Partners Distribution Growth Funding Midstream growth (cents/unit) Organic growth opportunities Sand Hills pipeline expansions (TX) STACK JV expansion (OK) Bayou Bridge pipeline extension (LA) 64.6 61.5 58.6 55.8 Lake Charles isomerization unit (LA) 45.8 48.1 50.5 53.1 42.8 40.0 37.0 34.
Slide 14: DCP Midstream
DCP Midstream Well positioned in low-cost supply basins DJ Basin 0.9 Bcf/d processing Strong growth projects around existing capacity footprint Sand Hills NGL pipeline expansions to 365 MBD in Permian Mid-continent 4Q 2017, 450 MBD in 2H 2018 1.3 Bcf/d 1.8 Bcf/d processing processing DJ Basin gather
Slide 15: Feedstock Advantaged Chemicals Portfolio
Feedstock Advantaged Chemicals Portfolio U.S. Gulf Coast Worldwide Net Ethylene Capacity: 4,770 kMTA U.S. Net Ethylene Capacity: 3,645 kMTA Middle East Net Ethylene Saudi Qatar Arabia Capacity: 1,125 kMTA 14
Slide 16: Chemicals Outlook
Chemicals Outlook 2017E Average Ethylene Production Cost Curve Middle East ethane and North ($/Ton) America NGLs remain positioned at the low end of the cost curve Global ethylene demand growing at ~1.5x GDP Expect demand growth to rapidly absorb new capacity additions Source: I.H.S., October 2017.
Slide 17: CPChem
CPChem USGC Petrochemicals Project 1,000 kMTA polyethylene at Old Ocean, TX Started operations 3Q 2017 1,500 kMTA ethylene at Cedar Bayou, TX Commissioning expected 1Q 2018 Long-term mid-cycle EBITDA ~ $1.2-1.4 B Focus on project completion and start-up Cash flow improvement expected in 2018 Additio
Slide 18: Enhancing Returns in Refining and Marketing
Enhancing Returns in Refining and Marketing 17
Slide 19: Refining
Refining PSX Global Clean Product Yield Improving returns Billings heavy crude project 84.6% 84.6% 85.1% Ponca City yield flexibility 84.1% 84.4% Wood River FCC modernization 2013 2014 2015 2016 3Q YTD 2017 Bayway FCC modernization U.S. Refining Capacity Utilization ~ 40 other low-cost, high-return
Slide 20: Marketing and Specialties
Marketing and Specialties Stable, high-return businesses Marketing Enhancing U.S. fuels brands 3% volume uplift at rebranded sites Adding 25-30 European sites per year Expanding brand licensing Providing ratable refinery off-take Specialties Increasing value through integration, optimization, and pr
Slide 21: Capital Structure
Capital Structure Equity and Debt Investment-grade credit ratings 23.9 23.7 24.0 22.4 PSX – BBB+ / A3 22.0 30% 30% 27% PSXP – BBB / Baa3 28% 26% 22% 26% 25% 21% 10.1 10.2 8.6 8.9 Over $7 B of available liquidity 6.1 ~3.5x Debt/EBITDA target at PSXP 2013 2014 2015 2016 3Q 2017 PSX Equity $B PSX Debt
Slide 22: Capital Allocation
Capital Allocation 2018E Sources and Uses of Cash Maintain financial strength, ($B) investment-grade credit rating ~1.0 ~1.0 Fund sustaining capital expenditures 1.4 1.0- Pay a growing, secure and 2.0 4.4 4.4 competitive dividend 3.4 1.0- 2.0 Target long-term 60% reinvestment and 40% shareholder dis
Slide 23: Capital Expenditures
Capital Expenditures 2017E Consolidated – ~$2.0 B Consolidated Capital Expenditures ($B) 5.8 Phillips 66 2017E – ~$1.6 B $0.6 B Growth 3.8 $1.0 B Sustaining 2.8 ~2.0 1.8 Phillips 66 Partners 2017E – $0.4 B 2018E Consolidated – $2-3 B 2013 2014 2015 2016 2017E PSX PSXP 2015 consolidated capital expen
Slide 24: Distributions
Distributions Important source of shareholder value Annual Dividend ($/share) Growing, secure and competitive dividends 2.18 2.45 2.73 1.89 1.33 30% CAGR with seven increases since May 2012 2013 2014 2015 2016 2017 Cumulative Distributions ($B) Committed to share repurchases 15.6 13.4 11.1 Repurchas
Slide 25: Creating Value
Creating Value Mid-Cycle Incremental Run-Rate Adjusted EBITDA ~ $1.5 B long-term expected ($B) EBITDA growth for projects coming online 2017-2018 ~ $1.5 Moving from heavy-investment period to increasing net cash generation Continued investment in higher- valued businesses generating Midstream Chemic
Slide 26: Delivering Shareholder Returns
Delivering Shareholder Returns Total Shareholder Return Integrated portfolio PSX +223% 260% Disciplined capital allocation Peers +138% 220% S&P 100 +103% 180% Returns focused 140% Value-added growth 100% 60% Strong balance sheet 20% -20% Compelling investment May-12 May-13 May-14 May-15 May-16 May-1
Slide 27: Investor Update (Phillips 66 Partners)
Investor Update November 2017 NYSE: PSXP www.phillips66partners.com
Slide 28: Phillips 66 Partners Ownership Structure
Phillips 66 Partners Ownership Structure (NYSE: PSX) 100% ownership interest PSXP Public Phillips 66 Partners GP LLC Unitholders 55% limited partner (PSXP General Partner) interest General Partner Units IDRs 43% limited partner interest 2% general partner interest (NYSE: PSXP) Operating Subsidiaries
Slide 29: Phillips 66 Partners
Phillips 66 Partners Strong alignment with Phillips 66 Highly integrated assets Stable and predictable cash flows Strong growth potential Financial flexibility Pecan Grove Marine Dock 28
Slide 30: Phillips 66 Partners
Phillips 66 Partners Pecan Grove Marine Dock 29
Slide 31: Distribution Growth
Distribution Growth Distribution / LP Unit (cents) 61.50 64.60 55.80 58.60 50.50 53.10 45.80 48.10 40.00 42.80 34.00 37.00 30.17 31.68 27.43 21.25 22.48 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 Coverage 1.
Slide 32: Financial Performance
Financial Performance Adjusted EBITDA ($MM) 161 170 168 155 111 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 Distributable Cash Flow ($MM) 140 136 130 124 102 3Q 2016 4Q 2016 1Q 2017 2Q 2017 3Q 2017 Adjusted EBITDA and Distributable Cash Flow shown are attributable to PSXP. 31
Slide 33: Phillips 66 Partners Capital Expenditures
Phillips 66 Partners Capital Expenditures 2017E Capex of $437 MM PSXP Capital Expenditures ($MM) $381 MM Growth Bayou Bridge Pipeline Sand Hills Pipeline STACK Pipeline JV 461 437 River Parish NGL System 205 4 66 $56 MM Sustaining 2013 2014 2015 2016 2017E 32
Slide 34: $381 MM 2017 Organic Growth Plan
$381 MM 2017 Organic Growth Plan Bayou Bridge Pipeline Transports crude from Nederland, TX to Lake Charles, LA, and eventually to St. James, LA Increases crude supply options for Louisiana refineries Nederland to Lake Charles leg began operations in April 2016 Development continues for segment from
Slide 35: PSXP Debt Profile
PSXP Debt Profile $2.9 B Total Debt as of October 31, 2017 Senior Notes Maturity Profile ($MM) $2.9 B Senior Notes: 5-Year $300 MM notes, 2.646% coupon 10-Year $500 MM notes, 3.605% coupon 10-Year $500 MM notes, 3.550% coupon 10-Year $500 MM notes, 3.750% coupon 625 30-Year $450 MM notes, 4.680% cou
Slide 36: Financial Flexibility
Financial Flexibility Investment-grade credit rating Financial targets: 30% distribution CAGR 2013-2018 3.5x debt / EBITDA 1.1x annual coverage ratio Support Phillips 66 Midstream growth 35
Slide 37: Total Return Since IPO
Total Return Since IPO PSXP +151% 300% Closed $70 MM Closed $1.3 B Alerian MLP Index -23% acquisition acquisition Closed $2.4 B 250% acquisition Closed $775 MM 200% Closed $700 MM acquisition acquisition 150% 100% Closed $340 MM Closed $1.0 B acquisition acquisition Closed $236 MM IPO acquisition 50
Slide 38: Appendix
Appendix
Slide 39: Corporate Strategy
Corporate Strategy Operating Committed to safety, reliability and environmental stewardship while Excellence protecting shareholder value Reshaping our portfolio by capturing growth opportunities in Midstream Growth and Chemicals Enhancing returns by maximizing earnings from existing assets and Retu
Slide 40: Value Chain
Value Chain GLOBAL MARKETS CRUDE OIL Broduct Pipelines, Terminals and Marine Refineries Marketing Petrochemicals WELLHEAD NGL and Natural Gas . _—, Fractionation LPG Export Gathering Pipelines and Storage and Marketing LIQUIDS AND b. and NATURAL GAS pocosing 39
Slide 41: Midcontinent
Midcontinent Integrated Growth Midstream Palermo rail terminal/Sacagawea pipeline (PSXP) Bakken Pipeline (PSXP) Refining, Marketing & Specialties Ponca City Yield improvement projects Tight oil processing flexibility 100% lease crude purchases Wood River Dilbit capacity increase ULSD expansion FCC m
Slide 42: Western Gulf
Western Gulf Creating a World-Class Energy Complex Midstream Sweeny Fractionator One (PSXP) Freeport LPG Export Terminal Refining, Marketing & Specialties Sweeny Strategic asset integration FCC optimization Marketing & Specialties Grow unbranded fuels volumes Focus on high-quality branded assets Inc
Slide 43: Eastern Gulf
Eastern Gulf Refining Logistics and Midstream Growth Midstream Beaumont Terminal expansion Bayou Bridge Pipeline (PSXP) River Parish NGL System (PSXP) Refining, Marketing & Specialties Lake Charles Increase feedstock advantage New Isomerization unit (PSXP) Alliance Increase light crude runs Marketin
Slide 44: West Coast
West Coast Enhancing Returns Midstream Los Angeles waterborne crude tank Refining, Marketing & Specialties San Francisco Yield improvements Los Angeles FCC energy reduction Marketing & Specialties Grow branded and unbranded fuels volumes Enhance 76 brand Increase high-margin exports Grow export lubr
Slide 45: Atlantic Basin
Atlantic Basin Enhancing Returns Refining, Marketing & Specialties Bayway FCC modernization Yield improvements Marketing & Specialties Grow JET and COOP brands in Europe Increase unbranded volumes in the U.K. and U.S. Expand brand licensing in the U.S. 44
Slide 46: Adjusted Free Cash Flow
Adjusted Free Cash Flow 2012–1H 2017 Average Midstream ($B) Chemicals ($B) PSXP (0.3) (0.2) Contributions 0.8 1.4 1.0 0.8 0.9 Adjusted CFO & PSXP Sustaining Capex Available Cash Flow Adjusted CFO Sustaining Capex Adjusted FCF Contributions Refining ($B) Marketing & Specialties ($B) (0.8) (0.1) 2.7 0
Slide 47: 2009–3Q 2017 Average Adjusted ROCE
2009–3Q 2017 Average Adjusted ROCE 30% M&S Chemicals 22% 15% 20% PSX Total Refining Midstream 11% 9% 8% Corporate 0% (11%) -15% 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Average Capital Employed ($B) 46
Slide 48: Phillips 66 Debt and Liquidity
Phillips 66 Debt and Liquidity Debt Maturity Profile Liquidity ($B) ($B) 4.8 6.3 5.0 4.0 1.4 1.5 0.5 0.3 0.3 2019 2020 2021 2022-30 2031-50 Cash Undrawn Revolving Total Bonds Revolving Credit Facility Term Loans Credit Facility Committed Liquidity Debt maturity profile and liquidity as of September
Slide 49: 2017 Sensitivities
2017 Sensitivities Annual Net Income $MM Midstream - DCP (net to Phillips 66) 10¢/Gal Increase in NGL price 5 10¢/MMBtu Increase in Natural Gas price 1 $1/BBL Increase in WTI price 1 Chemicals - CPChem (net to Phillips 66) 1¢/Lb Increase in Chain Margin (Ethylene, Polyethylene, NAO) 35 Worldwide Ref
Slide 50: Phillips 66 Outlook
Phillips 66 Outlook 4Q 2017 Global Olefins & Polyolefins utilization High-70% Refining crude utilization Mid-90% Refining turnaround expenses (pre-tax) $100 MM - $130 MM Corporate & other costs (after-tax) $125 MM - $140 MM 2017 Refining turnaround expenses (pre-tax) $625 MM - $675 MM Corporate & Ot
Slide 51: Footnotes
Footnotes Slide 3 Total share repurchases and exchanges include the PSPI share exchange in 2014. Slide 4 Industry averages are from: Phillips 66 – American Fuel & Petrochemical Manufacturers (AFPM) refining data, Chevron Phillips Chemical Company LLC (CPChem) – American Chemistry Council (ACC), DCP
Slide 52: Footnotes
Footnotes Slide 11 Run-rate adjusted EBITDA for PSXP assets online represents the estimated run-rate view as of October 31, 2017. Run-rate adjusted EBITDA for PSX assets online represents the sum of (i) forecasted EBITDA of other Midstream assets currently online and (ii) an estimate of the run-rate
Slide 53: Footnotes
Footnotes Slide 21 Consensus CFO is calculated as analysts’ consensus net income plus consensus depreciation and amortization. Source: Nasdaq, as of October 31, 2017. The analysts’ consensus estimates are not forecast or projected by Phillips 66, and Phillips 66 has not been involved in preparation
Slide 54: Footnotes
Footnotes Slide 23 Annual dividend reflects sum of declared quarterly dividends. 2017 reflects one quarterly dividend of $0.63 and three quarterly dividends of $0.70. 2014 share repurchases/exchanges include the PSPI share exchange. Slide 24 Chart reflects estimated mid-cycle run-rate adjusted EBITD
Slide 55: Footnotes
Footnotes Slide 36 $2.4 B transaction closed as of October 6, 2017, includes $625 MM non-recourse Bakken JV debt and $100 MM of Merey Sweeny, LP (MSLP) debt. 1H 2017 1H 2017 is as of June 30, 2017, or the six-month period ended June 30, 2017, as applicable; except as otherwise noted. 3Q YTD 2017 3Q
Slide 56: Non-GAAP Reconciliation (slide 4)
Non-GAAP Reconciliation (slide 4) Millions of Dollars 2013 2014 2015 2016 3Q 2017 YTD Production and operating expenses $ 4,206 $ 4,435 $ 4,294 $ 4,275 $ 3,541 Selling, general and administrative expenses 1,478 1,663 1,670 1,638 1,258 5,684 6,098 5,964 5,913 4,800 Plus: Sentinel operating expenses*
Slide 57: PSXP Adjusted EBITDA and DCF Reconciliation to Operating Cash Flow
PSXP Adjusted EBITDA and Distributable Cash Flow Reconciliation to Operating Cash Flow (Slide 31) Millions of Dollars 3Q 2016* 4Q 2016 1Q 2017 2Q 2017 3Q 2017 PSXP Reconciliation to Net Cash Provided by Operating Activities Net cash provided by operating activities 128 121 139 131 152 Plus: Net inte
Slide 58: PSXP Adjusted EBITDA and DCF Reconciliation to Net Income
PSXP Adjusted EBITDA and Distributable Cash Flow Reconciliation to Net Income (Slide 31) Millions of Dollars 3Q 2016* 4Q 2016 1Q 2017 2Q 2017 3Q 2017 PSXP Reconciliation to Net Income Net income 112 102 97 103 99 Plus: Depreciation 25 25 26 26 30 Net interest expense 10 21 24 24 23 Provision for inc
Slide 59: Non-GAAP Reconciliations (Slide 45)
Non-GAAP Reconciliations (Slide 45) Millions of Dollars Average 2012 - 1H 2017 Marketing & FCF Reconcilition Midstream Chemicals Refining Specialties Cash From Operations GAAP 858 402 2,464 1,083 Less: Change in Non-Cash Working Cap. 7 - 278 (217) Cash From Operations (excluding WC) 865 402 2,742 86
Slide 60: Non-GAAP Reconciliations (Slide 46)
Non-GAAP Reconciliations (Slide 46) Millions of Dollars Average 2009-3Q 2017 Phillips 66** Midstream Chemicals Refining M&S Corporate Phillips 66 ROCE Numerator Net Income $ 3,039 536 734 1,225 800 (361) After-tax interest expense 132 - - - - 132 GAAP ROCE earnings 3,171 536 734 1,225 800 (229) Spec