Phillips 66 · NYSE:PSX
Phillips 66 — Investor Presentation (April 2012)
36 slides from Phillips 66's investor presentation, April 2012
Slide 1: Investor Update
Investor Update Greg Garland April 2012
Slide 2: Cautionary Statement
Cautionary Statement The following presentation includes forward-looking statements. These statements relate to future events, such as anticipated revenues, earnings, business strategies, competitive position or other aspects of our operations or operating results. Actual outcomes and results may di
Slide 3: Phillips 66 – The Advantaged Downstream Energy Company
Phillips 66 – The Advantaged Downstream Energy Company Industry-leading Adjusted Earnings $B 4 Midstream Refining & Marketing Chemicals Chemicals R&M 3 Total Midstream Financial strength 2 Earnings growth Returns enhancement 1 Shareholder distributions 0 2009 2010 2011 3
Slide 4: Improving Returns and Earnings
Improving Returns and Earnings R&M ROCE Midstream ROCE 12% Adjusted Earnings 30% $0.2 B - 2009 - $0.2 B 20% $1.2 B - 2010 - $0.3 B 18% 5% 1% $2.7 B - 2011 - $0.4 B 2009 2010 2011 2009 2010 2011 Chemicals ROCE Phillips 66 ROCE 28% Adjusted Earnings 14% 21% $0.2 B - 2009 - $0.5 B $0.5 B - 2010 - $1.8
Slide 5: Optimizing Portfolio
Optimizing Portfolio Refining Capacity Chemicals Capacity Midstream Capacity MM Bbls crude oil/day B pounds/yr DCP BCF/D 16% reduction 8% increase 6% increase 2.7 31 7.2 29 6.8 2.2 2009 2011 2009 2011 2009 2011 3-Yr ROCE 6% 3-Yr ROCE 20% 3-Yr ROCE 23% Shifting portfolio to higher-r
Slide 6: High-Performing Businesses
High-Performing Businesses R&M Chemicals Midstream 2011 ROCE (%) 2011 ROCE (%) 2011 ROCE (%) MPC 27 CPChem 25 DCP 19 Midstream XOM 19 XOM Chem 22 MWE 14 TSO 18 LYB 20 PSX 12 14 OKE WLK 20 VLO 12 DOW 11 11 CVX 11 EPD R&M: Net Income adjusted for special items / Assets – Liabilities. XOM R&M ROCE as d
Slide 7: Operating Excellence
Operating Excellence Total Recordable Rates Refining Reliability Incidents per 200,000 hours worked Global utilization rate 92% 1.9 90% 88% 2011 2009 2010 1.3 1.1 0.4 0.3 0.3 0.4 0.4 0.4 Industry R&M Chemicals Midstream 2009 2010 2011 R&M SO2 Emissions R&M Hydrocarbon Spills Thousand tons / ye
Slide 8: Benefits of Spin
Benefits of Spin Exploitation of opportunities at existing facilities Cash flow available to fund growth, returns and distributions Management focus Improving capital allocation Margin expansion Reducing operating costs Greater disclosure of asset performance and financial results Focus on value cre
Slide 9: Key Initiatives
Key Initiatives Creating differential shareholder value Continuously improving operating excellence Enhancing financial strength and flexibility Allocating cash flow well / returning excess cash to shareholders Growing Chemicals capacity Expanding Midstream business Streamlining, simplifying and red
Slide 10: External Environment – Market Assumptions
External Environment – Market Assumptions U.S. shale gas and oil Supply U.S. NGLs Growth Canadian oil sands Ethanol and biofuels Non-OECD energy demand Expanding Distillate outpacing gasoline demand Demand U.S. NGL demand Renewables mandates Relentless Product specifications Regulatory Stricter pipe
Slide 11: North American Supply Growth
North American Supply Growth U.S. Lower 48 Onshore Oil Production NGL Production (ex. Refining) 5 MMBD 5,000 MBD 4 +52% Woodford 3 Granite Wash 3,750 Niobrara Bakken 2 Avalon 1 Marcellus 2,500 0 Eagle Ford 2009 2011 2013 2015 2017 2019 Barnett U.S. and Canada Natural Gas Supply 1,250 U.S. Base NGL 1
Slide 12: Selected Refining Margins and Differentials
Selected Refining Margins and Differentials Global 3-2-1 ($/BBL) Ethylene Cash Margin ($/Ton) 30 External Range 800 25 600 Ethane Derived 20 15 400 10 200 Naphtha Derived 5 0 0 (200) 2009 2010 2011 2012 2013 2009 2010 2011 2012 2013 Brent / WTI Differential ($/BBL) Henry Hub ($/MMBTU) External 6 20
Slide 13: The Advantaged Downstream Energy Company
The Advantaged Downstream Energy Company Phillips 66 value proposition High-performing businesses Opportunities for growth and returns enhancement Advantaged portfolio Breadth of investment opportunities with attractive returns Superior risk-return profile Strong balance sheet allows investments thr
Slide 14: Strong Portfolio
Strong Portfolio R&M Midstream Chemicals 15 refineries (11 in US) 50/50 JV with Spectra - DCP 50/50 JV with Chevron - CPChem Nelson complexity of 11 Large U.S. gatherer & processor NA’s largest producer of HDPE 2.2 MMBPD refining capacity Large U.S. NGL producer NA’s 4th largest et
Slide 15: Refining Assets
Refining Assets Western / Pacific Central Corridor Gulf Coast Atlantic Basin / Europe Throughput Capacity United States FD Ireland BI 588 439 WG HU BW 2,231 SF MBD United 471 WR Kingdom LA BG PC 733 LC AL SW Germany Distillate Capacity Mi Malaysia 285 200 ME 1,015 MBD 175 355 Capacity is net PSX. 15
Slide 16: Marketing and Specialty Businesses
Marketing and Specialty Businesses U.S. Marketing Ensures refinery off take Highly integrated with refining assets European Marketing Highest market efficiency Strong ROCE Lubricants Large finished lubes supplier Co-located with refineries Flow Improver High-return business Strong market share Avera
Slide 17: Chemicals
Chemicals 50/50 JV with Chevron – CPChem CPChem Net Capacity > 30 B Lbs / Year Global portfolio Specialties, 80% of capacity in U.S. Aromatics Olefins / and Polyolefins Styrenics Advantaged feedstock position 70-80% of U.S. capacity is ethane-based Proprietary technology drives competitive advantage
Slide 18: Midstream
Midstream 50/50 JV with Spectra – DCP Large U.S. NGL producer Wattenburg Wood River Large gatherer and processor Powder River Conway Blue Line Shocker Assets overlay shale plays Chisholm Ponca Growing MLP – DPM City Borger Phillips 66 Midstream Skelly Belvieu Southern Hills U.S. fractionation positi
Slide 19: Differentiated Portfolio
Differentiated Portfolio Capital employed of $24 B at year-end 2011 Refining represents ~40% of 2009-2011 adjusted earnings 2011 Capital Employed 2009 – 2011 Adjusted Earnings 5% 14% 11% 40% 54% 22% 30% Refining 24% Marketing & Specialties Chemicals Midstream Corporate and Other excluded from Capita
Slide 20: Strategic Priorities
Strategic Priorities Enhance return on capital Portfolio optimization Margin improvement Deliver profitable growth Chemicals expansion Midstream growth Specialties and transportation Grow shareholder distributions Regular dividends Share repurchases 20
Slide 21: Enhance Return on Capital
Enhance Return on Capital Optimize portfolio Shift capital employed to higher Capital Expenditures $B returning assets / segments PSX CPChem* DCP* 2.5 Continuous high-grade of portfolio Midstream 2.0 Improve margins 1.5 Capture advantaged feedstock 1.0 Grow clean product yield 0.5 Increase access to
Slide 22: Optimize Portfolio
Optimize Portfolio Shifting Capital Employed Increase investment in higher- returning businesses 5% 10% 11% 25% Midstream Rationalize low-returning 20% refining assets Chemicals 25% 84% Disciplined portfolio management process 70% 50% R&M 2011 Mid-Term Long-Term Improving capital efficiency through
Slide 23: Capture Advantaged Feedstock Opportunities
Capture Advantaged Feedstock Opportunities Shale oil to Phillips 66 refineries 100 MBD – Current shale oil Crude Advantage (%) processed 460 MBD – Total shale oil processing capability Brent/LLS/ 38.3% 46.5% HLS/ANS Billings advantaged crude project Enables 100% heavy sour crude Heavy / 31.7% Acid s
Slide 24: Increase Exports
Increase Exports Increased exports in 2011 Canadian Oil sands Additional planned export Bakken capability increases Coastal refineries Niobrara Granitewash Phillips 66 Exports (MBD) Bone Spring Actuals Capability U.S. Product Exports Eagle Ford Increasing Product Volumes 220 U.S. Product 155 Decreas
Slide 25: Cost Initiatives
Cost Initiatives Controllable Costs $B Target $200 MM cost reduction Eliminate spin-related dis-synergies Drive unit operating costs lower 3.7 3.9 3.9 Potential procurement savings 2009 2010 2011 Controllable Costs do not include market impacts or time-related costs such as turnarounds. 25
Slide 26: Deliver Profitable Growth
Deliver Profitable Growth Chemicals Olefins and polyolefins Derivatives Midstream NGL logistics Gathering and Processing capacity Refining & Marketing Specialties and transportation Limited opportunities for profitable capacity growth 26
Slide 27: Chemicals Growth
Chemicals Growth Growth in the Middle East Saudi Arabia: S-Chem and Saudi Polymers Company ventures Qatar: Q-Chem I and Q-Chem II ventures Pursuing additional opportunities Growth in the U.S. 2014 start-up of Cedar Bayou 1-hexene plant Gulf Coast $5 B ethane cracker and ethylene derivative complex N
Slide 28: Midstream Growth – DCP Opportunities
Midstream Growth – DCP Opportunities ~$4 B of growth projects in LaSalle Plant execution Online 2011 – 2014 Conway >$2 B of additional opportunities Online 2012 – 2014 Adding >500 MBD NGL logistics Southern capacity Hills Pipeline Increasing gathering and processing capability Sand Hills Optimizing
Slide 29: Returns Improvement
Returns Improvement 2009-2011 Long-Term ROCE 8% ROCE 15%+ 15+% 2009-2011 R&M Margin Chemicals Midstream Portfolio Long-Term ROCE Opportunities Growth Growth Initiatives ROCE Return-enhancing growth 29
Slide 30: Shareholder Distributions
Shareholder Distributions Dividends Share repurchases Initial quarterly dividend of Cash available after funding $0.20 / share dividend growth and sustaining capital Expect annual increases Uses of excess cash Affordable – Growth capital – 2013 expected dividend – Debt reduction cost of ~$500 MM – S
Slide 31: Financial Strength and Flexibility
Financial Strength and Flexibility Strong investment grade – BBB/Baa1 Good liquidity with extended maturity profile Initial debt outstanding of $8 B Weighted average interest cost of 3.5% pre-tax 20-30% debt to total capitalization ratio target Reduce debt Increase cash balance Fund capital and dist
Slide 32: Compelling Investment Opportunity
Compelling Investment Opportunity History of building high-performing businesses Industry-leading R&M, Midstream and Chemicals segments Focus on increasing ROCE and earnings growth Balance sheet strength and financial flexibility Growth through disciplined investments Chemicals expansion built aroun
Slide 33: Appendix
PHILLIPS Investor Update Appendix
Slide 34: PSX Non GAAP Reconciliations
PSX Non GAAP Reconciliations $ Millions $ Millions 2011 2010 2009 2011 2010 2009 1 Adjustments Earnings $ 4,775 735 476 R&M Less Adjustments Gain (loss) on asset sales 1,629 116 32 Gain (loss) on asset sales 1,545 116 120 Impairments (314) (8) (116) Impairments (318) (1,118) (116) Cancelled projects
Slide 35: PSX Non GAAP Reconciliations
PSX Non GAAP Reconciliations PSX - ROCE Chemicals - ROCE 2011 2010 2009 2011 2010 2009 Numerator ($MM) Numerator ($MM) Net income 4,780 740 479 Net income 716 486 228 After-tax interest expense 11 1 1 After-tax interest expense - - - GAAP ROCE earnings 4,791 741 480 GAAP ROCE earnings 716 486 228 No
Slide 36: PSX Non GAAP Reconciliations
PSX Non GAAP Reconciliations $ Millions Three 2011 2010 2009 Year Average 1 Marketing, Specialties and Other Earnings 2,200 566 420 1,062 Less Adjustments Gain (loss) on asset sales 1,629 116 32 592 Impairments - (8) (116) (41) Pending claims and settlements - 35 - 12 Total Adjustments 1,629 143 (84