Phillips 66 · NYSE:PSX
Phillips 66 — Q3 2014 Earnings Presentation
39 slides from Phillips 66's earnings presentation, Dec 18, 2014
Slide 1: Investor Update Third Quarter 2014
Investing Building Growing Investor Update Third Quarter 2014
Slide 2: 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 3: Corporate Strategy
Corporate Strategy Operating excellence Enterprise Value Growth Refining Returns Midstream Distributions M&S Chemicals High-performing organization 2013 2018 3
Slide 4: Operating Excellence
Operating Excellence Total Recordable Rates Refining Environmental Metrics Incidents per 200,000 Hours Worked Industry Average ’09 ’10 ’11 ’12 ’13 Phillips 66 CPChem DCP 2007 2009 2011 2013 See appendix for footnotes. 4
Slide 5: Macro Environment - U.S. Production - Midstream
Macro Environment U.S. Production - Midstream Growth U.S. Crude Oil Production U.S. NGL Production U.S. Dry Natural Gas MMBD MMBD Production BCFD 11 Upper Range of Production 5 80 Lower Range of Production 4 70 9 3 60 7 2 50 5 1 40 2011 2015 2019 2011 2015 2019 2011 2015 2019 Source: Industry consul
Slide 6: Energy Landscape
Energy Landscape North American oil and gas production growth Energy infrastructure expansion Global demand growth Regulatory environment Major project execution 6
Slide 7: Capital Program
Capital Program 2014E Total Capital Program $5.8 B $3.9 B 2014E Phillips 66 capital $2.7 B 2014E initial Phillips 66 capital DCP $1.2 B increase for Phillips 66 capital $0.9 B acquisitions: CPChem Beaumont Terminal Spectrum Corporation Sweeny Cogen WRB Explorer Pipeline ownership increase $0.3 B org
Slide 8: Midstream
Midstream NGL Midstream and Refining Logistics EBITDA $B Pipelines and fractionation Export terminals Transportation Crude and product pipelines ~2.3 Terminals and storage Rail, marine and trucks DCP Midstream 0.5 Gathering and processing 2013 Refining NGL Transportation 2018E Pipelines and fraction
Slide 9: NGL – Gulf Coast
NGL – Gulf Coast Sweeny Fractionator One – 100 MBD Storage caverns – 8 MMBbls LPG export terminal – 150 MBD Mont Belvieu pipeline – 200 MBD Sweeny Fractionator Two – 110 MBD 9
Slide 10: Transportation – Midcontinent
Transportation – Midcontinent 3,600+ miles of pipeline Over 20 crude and products terminals Crude gathering infrastructure Increased ownership in Explorer Pipeline 10
Slide 11: Transportation – West and East Coast
Transportation – West and East Coast 11
Slide 12: Transportation – Gulf Coast
Transportation – Gulf Coast Beaumont Terminal optionality Integration with Refining Access to Eagle Ford and Permian Basin Increase export capability 12
Slide 13: Phillips 66 Partners
Phillips 66 Partners Enterprise Value $B Increases PSX value ~5.4 PSX sponsorship provides: Public Strong portfolio of existing assets PSX 0.9 Ownership Pipeline of organic growth PSX Multiple PSXP LP Multiple Low cost of capital ~7 (consensus) ~37x (actual) See appendix for footnotes. 13
Slide 14: DCP Midstream
DCP Midstream 2013 NGL Processing Capex Production Capacity 2014E-2016E MBD BCFD $B Permian ~130 1.4 1.0 - 1.5 South ~130 3.2 .50 - 1.0 North ~ 40 0.9 1.0 - 1.5 Midcon ~120 2.0 .75 - 1.0 Logistics N/A N/A .75 - 1.0 EBITDA NGL Production $B MBD 1.3 1.6 1.1 402 500 525 2012 2014E 2016E 2012 2014E 2016
Slide 15: Chemicals – CPChem Portfolio
Chemicals – CPChem Portfolio 50/50 JV with Chevron 11 joint ventures 2 research facilities Sales into 139 countries Total Net Capacity 2013 Income Before Taxes from Continuing 2013 Operations SA&S SA&S Int’l O&P O&P U.S. 15
Slide 16: Chemicals – CPChem Growth Plans
Chemicals – CPChem Growth Plans 2013 2014 2015 2016 2017 1-Hexene Unit 250 kMTA Self-funded capital program Sweeny Ethylene 90 kMTA $6.5 – 7 B growth spending USGC Petrochemicals 1,500 kMTA (ethylene) 1,000 kMTA (polyethylene) 36% U.S. O&P capacity growth NAO Expansion ~100 kMTA Figures are 100% CPC
Slide 17: Chemicals – CPChem
Chemicals – CPChem Adjusted EBITDA Leading returns $B Market leader 3.4 3.4 3.2 Largest global HDPE producer 2nd largest global alpha olefins producer 4th largest N.A. ethylene producer Estimated new project EBITDA 2012 2013 3Q YTD 2014 $1.3 – 1.6 B/year 2017+ Figures reflect 100% CPChem. 17
Slide 18: Refining
Refining 15 refineries worldwide – 2.2 MMBD crude capacity ROCE Improvement Constant Crack Spreads 14% Ireland 10% United Kingdom 5-Yr Avg Adv Yields & Costs 2018E Malaysia Germany Crude Exports See appendix for footnotes. 18
Slide 19: Marketing and Specialties
Marketing and Specialties Adjusted EBITDA U.S. Marketing 2009 – 2014 Q3 YTD Ensures Refining pull-through International Marketing Retail in Europe U.S. Int’l Marketing Marketing Specialties Finished lubricants Specialties Base oil joint venture Needle and anode coke 19
Slide 20: Disciplined Capital Allocation
Disciplined Capital Allocation 2014E – 2016E Investment Sustain operations Fund capacity growth Generate competitive returns Distributions Distributions Reinvestment Double-digit dividend growth rate Repurchase shares Capital Structure Maintain financial flexibility Target debt-to-capital 20 – 30% 2
Slide 21: Capacity to Execute
Capacity to Execute Additional Sources: Share Repurchases Cash on hand Range of mid-cycle CFO Growth Debt capacity Capital MLP drop-downs Sustaining Capital Asset sales Dividends New project cash flows See appendix for footnotes 21
Slide 22: Returns
Returns 2014 Adjusted ROCE ROCE Chemicals 30% M&S 29% 20% 27% P66 Total Midstream 14% Refining 10% 12% 14% Corporate 0% -6% -10% $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 Average Capital Employed ($B) See appendix for footnotes. 22
Slide 23: Distributions
Distributions Phillips 66 Common Stock Dividend Growth MM shares ¢/share 11.00 7.75 (54) (17) 6.25 5.00 50 625 554 20 April Share PSPI September Q3 2012 Q4 2012 Q1 2013 Q4 2013 Q2 2014 Q2 2014 2012 Repurchases Exchange 2014 Net of Issuances 150% growth vs. 69% peer average See appendix for footnotes
Slide 24: Delivering on Commitments
Delivering on Commitments Growth $4.2 B 2014E growth capital program Beaumont Terminal and Spectrum acquisitions Grow Phillips 66 Partners Returns 95% advantaged crude slate in 3Q 2014 Record export volumes Distributions 28% dividend increase $2 B additional share repurchases See appendix for footno
Slide 25: Compelling Investment
Compelling Investment 180% PSX +151% Shareholder returns 140% Unique portfolio 100% EBITDA growth S&P 100 +46% 60% Disciplined capital allocation 20% Multiple expansion May-12 Oct-12 Mar-13 Aug-13 Jan-14 Jun-14 Oct-14 -20% See appendix for footnotes. 25
Slide 26: Institutional Investors Contact
Appendix Institutional Investors Contact Rosy Zuklic Manager, Investor Relations Rosy.Zuklic@p66.com 832-765-2297
Slide 27: Footnotes
Footnotes Slide 4 Injury statistics do not include major projects. Industry Averages are from: Phillips 66 – American Fuel & Petrochemical Manufacturers (AFPM) refining data, CPChem – American Chemistry Council (ACC), DCP – Gas Processors Association (GPA). Slide 7 “Sustaining” capital shown in char
Slide 28: Footnotes
Footnotes Slide 21 Mid-cycle cash from operations is estimated based on a 10-year history normalized for Phillips 66’s current operations and structure. Slide 22 Data reflects 3Q 2014 YTD Annualized Adjusted Return on Capital Employed (ROCE). Slide 23 Peer average includes DOW, MPC, TSO and VLO. Sli
Slide 29: 2014 Sensitivities
2014 Sensitivities 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
Slide 30: Capital Program
Capital Program Millions of Dollars 2014 Budget Growth Sustaining Total Capital Expenditures and Investments* Consolidated Midstream Transportation 806 150 956 NGL 1,262 5 1,267 2,068 155 2,223 Chemicals - - - Refining 264 751 1,015 Marketing and Specialties 413 74 487 Corporate 15 116 131 2,760 1,0
Slide 31: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Year Ended December 31 2013 Transportation and NGL Net income attributable to Phillips 66 $ 259 Plus: Net income attributable to noncontrolling interests 17 Income taxes 142 Depreciation and amortization 88 EBITDA* $ 506 *Includes noncontrolling interests
Slide 32: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars First Year Sweeny Fractionator One and Two, and Freeport Export Facility Estimated net income $ 370 Plus: Estimated income taxes 230 Estimated net interest expense 10 Estimated depreciation and amortization 190 Estimated EBITDA $ 800 32
Slide 33: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Years Ended December 31 2014E Phillips 66 Partners LP Net income $ 119.0 - 124.0 Plus: Depreciation 15.0 Net interest expense 5.4 Amortization of deferred rentals 0.4 Provision for income taxes 0.4 EBITDA $ 140.2 - 145.2 33
Slide 34: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Years Ended December 31 2012 2014E 2016E 100% DCP Midstream Net income attributable to members' interest $ 486 510 555 Plus: Net income attributable to noncontrolling interests 97 135 255 Income taxes 2 10 10 Net interest expense 193 315 345 Depreciation
Slide 35: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 2012 2013 3Q YTD 2014 100% CPChem Net income $ 2,403 2,743 2,492 Plus: Income taxes 67 71 71 Net interest expense 8 (3) (2) Depreciation and amortization 356 278 212 EBITDA $ 2,834 3,089 2,773 Adjustments (pre-tax): Proportional share of equity affiliates
Slide 36: 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 36
Slide 37: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Average 2009 - 2013 Refining - ROCE Numerator Average 2009 - 2013 net income $ 998 After-tax interest expense - GAAP ROCE earnings 998 Special Items 452 Adjusted ROCE earnings $ 1,450 Denominator GAAP average capital employed* $ 13,940 Adjusted ROCE (perc
Slide 38: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars January 1, 2009 - September 30, 2014 U.S. International Marketing Marketing Specialties Net income $ 1,518 1,226 1,249 Plus: Provision for income taxes 954 590 750 Net interest expense (119) - 3 Depreciation and amortization 149 548 45 EBITDA $ 2,502 2,36
Slide 39: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Nine Months Ended September 30, 2014 Marketing & Phillips 66 Midstream Chemicals Refining Specialties Corporate ROCE Numerator Net Income $ 3,639 435 870 1,254 667 (293) After-tax interest expense 126 - - - - 126 GAAP ROCE earnings 3,765 435 870 1,254 667