Phillips 66 · NYSE:PSX
Phillips 66 — Investor Presentation (September 2015)
63 slides from Phillips 66's investor presentation, September 2015
Slide 1: Investor Update September 2015
Investor Update September 2015
Slide 2: Cautionary Statement
Cautionary CAUTIONARYStatement 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
Slide 3: Strategy
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 Returns invest
Slide 4: Operating Excellence
Operating Excellence Total Recordable Rates Refining Environmental Metrics (Incidents per 200,000 Hours Worked) Industry Average 1H ’12 ’13 ’14 ’15 430 317 300 154 Phillips 66 CPChem DCP 2012 2013 2014 1H 2015 Operating Costs and SG&A Refining Capacity Utilization ($B) (%) Growth Planned Maintenance
Slide 5: Global Energy Landscape
Global Energy Landscape Global Oil Supply and Demand (MMBD) Abundant supply 97 95 Demand exceeding expectations 93 91 89 Energy efficiency increasing 87 85 2010 2011 2012 2013 2014 2015E Source: International Energy Agency Global Oil Supply Global Oil Demand 4
Slide 6: U.S. Energy Landscape
U.S. Energy Landscape U.S. Liquids Production (MMBD) Production remains resilient 15 12 Pace of infrastructure investment 9 contingent on production growth 6 Stronger fuels demand 3 0 2010 2012 2014 2016 2018 Crude & Condensate NGL Source: EIA Annual Energy Outlook 2015 5
Slide 7: U.S. Downstream Advantage
U.S. Downstream Advantage U.S. Advantage 20 Refiners and chemical Current manufacturers remain advantaged Historical 15 Low feedstock costs 10 Low energy costs Scale and complexity 5 MLP structure supports midstream 0 Ethane Cracker Natural Gas, Brent - WTI, investment Margin, cpp $/MMBtu $/bbl See
Slide 8: Value of Integration
Value of Integration EV/EBITDA Multiples Creating value across downstream Accelerating growth Leveraging existing portfolio Allocating capital efficiently Expanding multiple 5.4x 6.7x 7.1x 14.5x Refining PSX Chemicals Midstream See appendix for footnotes. Peers Peers Peers 7
Slide 9: Midcontinent
Midcontinent Integrated Growth Midstream $280 MM EBITDA growth Palermo rail terminal/Sacagawea pipeline (PSXP) Dakota Access/ETCO crude pipelines Refining, Marketing & Specialties $430 MM EBITDA growth Ponca City Yield improvement project Tight oil processing flexibility 100% lease crude purchases W
Slide 10: Western Gulf
Western Gulf Creating a World-Class Energy Complex Midstream $750 MM EBITDA growth Sweeny Fractionator One Freeport LPG export terminal Cross-channel connector (PSXP) Eagle Ford crude pipeline Sweeny Fractionator Two Refining, Marketing & Specialties $70 MM EBITDA growth Sweeny FCC yield improvement
Slide 11: Eastern Gulf
Eastern Gulf Refining Logistics and Midstream Growth Midstream $200 MM EBITDA growth Beaumont terminal expansion: +7 MMBbls Bayou Bridge pipeline Alliance clean products dock Refining, Marketing & Specialties $150 MM EBITDA growth Lake Charles FCC yield improvement Increase feedstock advantage Allia
Slide 12: West Coast
West Coast Enhancing Returns Midstream $60 MM EBITDA growth Completed Ferndale rail rack 4Q 2014 (PSXP) Los Angeles waterborne crude tank Santa Maria rail rack Refining, Marketing & Specialties $60 MM EBITDA growth San Francisco Hydrocracker debottleneck Yield improvements Los Angeles FCC energy red
Slide 13: Atlantic Basin
Atlantic Basin Enhancing Returns Midstream $50 MM EBITDA growth Completed Bayway rail rack 3Q 2014 (PSXP) Bayway LPG loading facility Refining, Marketing & Specialties $200 MM EBITDA growth Bayway FCC reactor modernization Yield improvements Marketing & Specialties Grow JET and COOP brands in Europe
Slide 14: Midstream
Midstream EBITDA 2015 2016 2017 2018 ($B) Sweeny Midstream Hub 2.3 Phase 1 0.4 EBITDA Beaumont Terminal Expansion 1.2 Remaining at PSX 0.9 Bakken Expansion (PSXP) EBITDA 0.7 1.1 in Bayou Bridge Pipeline PSXP 0.3 Eagle Ford Crude Pipeline PSXP 2Q PSX Projects Planned 2018E 2015 Run- Operating Under R
Slide 15: PSXP Value to PSX
PSXP Value to PSX Cumulative Cash from PSXP PSX Equity Value of PSXP ($B) Distributions ($B) Fee-based assets 15 15 Cumulative Dropdown Proceeds Growth opportunities Cumulative Organic 10 Distributions 10 Drop downs Selective acquisitions 5 5 Funds Midstream growth 0 0 2013 2014 1H 2018E 2013 2014 2
Slide 16: DCP Midstream
DCP Midstream $550 MM 2015 growth capital $500 MM EBITDA growth by 2018 Placing current projects into service in 2015 Keathley Canyon National Helium Plant expansion Zia II Plant and Gathering Lucerne 2 Plant and Gathering Sand Hills Laterals DJ Basin Grand Parkway New plant G&P plant Increasing fee
Slide 17: Chemicals
Chemicals June 2015 YTD Average Ethylene Production Cost Curve ($/ton) Petrochemical demand driven 900 Asia Import by global GDP growth price ~$1,200/ton Self-funded capital program W. Europe Naphtha 800 700 600 China Coal Cost-advantaged feedstocks CPChem $6.5 – 7 B growth Asia LPG Asia spending Na
Slide 18: CPChem Projects Update
CPChem Projects Update $1.5 B EBITDA growth by 2018 Completed 1-hexene project and 10th Sweeny furnace in 2014 NAO expansion 100 kMTA at Cedar Bayou, TX Completed 2Q 2015 USGC Petrochemicals 1,500 kMTA (ethylene) at Cedar Bayou, TX 1,000 kMTA (polyethylene) at Old Ocean, TX Planned start-up mid-2017
Slide 19: Refining
Refining Enhancing Returns 2009 – 2014 Average Annual Free Cash Flow ($B) Significant free cash flow generation 0.9 2.5 High-return projects creating 1.6 sustainable earnings increases CFO Sustaining Capex FCF EBITDA growth: $850 MM Return on Capital Employed Increasing ROCE 4% by 2018 (ROCE) Expans
Slide 20: Marketing & Specialties
Marketing & Specialties High-returning businesses $250 MM EBITDA growth by 2018 25% ROCE U.S. Marketing Wholesale model Enhancing fuels brands Volume growth International Marketing Retail / wholesale model Adding 100+ sites Specialties Grow Lubricants earnings and international portfolio See appendi
Slide 21: Phillips 66 Available Cash Flow
Phillips 66 Available Cash Flow Annual Available Cash Flow ($B) Diversified cash generation 2.4 Funding transformational growth Growing distributions 1.0 1.5 6.6 Financial flexibility 3.7 2.7 Strong free cash flow yield CFO Sustaining FCF PSX Growth Est. PSXP 2018E Capex Contributions Available Cash
Slide 22: Capital Allocation
Capital Allocation 2014 – 2016E Ensuring financial flexibility Investment grade credit rating Strong balance sheet Funding growth Cash from operations Distributions Reinvestment PSXP proceeds Returning capital to shareholders Dividend growth Ongoing share repurchases 21
Slide 23: Capital Budget
Capital Budget $2 - 3 B Growth capital Legacy, scalable Midstream assets Fee-based assets suitable for PSXP dropdown Quick payout Refining projects $1 B Sustaining capital Maintaining safe, reliable assets 22
Slide 24: Distributions
Distributions Dividend Growth Share Count and Capital Returned (Quarterly ¢/share) $7.0 B 624 MM 56 590 MM 538 MM 20 3Q2012 4Q2013 2Q2015 3Q2012 4Q2013 2Q2015 See appendix for footnotes. 23
Slide 25: Delivering Value
Delivering Value Adjusted Constant Margin EBITDA ($B) 45% EBITDA growth 9.3 Growing Midstream and Chemicals 6.4 Enhancing returns in Refining Realizing benefits of reinvestment 2009 - 2014 Midstream Chemicals Refining M&S 2018E avg Growth Growth Returns Growth Refining Midstream Chemicals M&S See ap
Slide 26: Compelling Investment
Compelling Investment 180% PSX +158% Shareholder returns 140% Unique portfolio 100% S&P 100 +44% EBITDA growth 60% 20% Disciplined capital allocation -20% Multiple expansion May-12 Nov-12 May-13 Nov-13 May-14 Nov-14 May-15 25
Slide 27: Institutional Investors Contact
Institutional Investors Contact Kevin Mitchell InvestorRelations@p66.com Vice President, Investor Relations 832-765-2297 C.W. Mallon Manager, Investor Relations
Slide 28: Investor Update (Phillips 66 Partners)
Investor Update September 2015 NYSE: PSXP www.phillips66partners.com
Slide 29: 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 30: 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 31: 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 30
Slide 32: Phillips 66 Partners Financial Highlights
Phillips 66 Partners Financial Highlights 0.45 Distribution / LP Unit ($) 2Q 2015 0.40 Distributable cash flow $47.8 MM 0.35 0.30 Adjusted EBITDA $57.0 MM 0.25 0.40 0.37 0.34 0.20 0.3017 0.3168 Acquired interest in three pipeline 0.2743 0.2125* 0.2248 assets in Q1 2015 0.15 (MQD) 0.10 3Q 2013 4Q 201
Slide 33: 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 34: $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 4Q 2015 • Capital cost: $50 MM Eagle Ford Crude • Connects Eagle Ford crude oil production to third-party pipel
Slide 35: Highly Integrated Assets
Highly Integrated Assets Palermo Rail Terminal expected to be operational Q4 2015. 34
Slide 36: Fee-based, Long-term contracts provide stability
Fee-based, Long-term contracts provide stability Asset Initial Term (years) Maximum Term with Options (years) Clifton Ridge to Lake Charles 10 20 Sweeny to Pasadena 10 20 Pipelines Hartford Connector 23 * 23 Gold Line 10 15 Sand Hills 15 15 Southern Hills 15 15 Explorer Various Various Clifton Ridge
Slide 37: Adjusted EBITDA and DCF
Adjusted EBITDA and DCF Adjusted EBITDA ($MM) Distributable Cash Flow ($MM) 57.0 49.0 47.8 43.7 41.9 37.6 37.2 35.9 34.3 33.4 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 36
Slide 38: 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 39: 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 38
Slide 40: Total Return Since IPO
Total Return Since IPO 250% Closed 2nd PSXP 172% acquisition - 230% Alerian MLP Index -10% $340 MM 210% 190% Closed 1st 170% acquisition - 150% $700 MM 130% 110% Closed 3rd IPO acquisition - 90% $1.1 B 70% 50% 30% 10% -10% -30% Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Ma
Slide 41: Institutional Investors Contact
Institutional Investors Contact Kevin Mitchell - Investor Relations Kevin.Mitchell@p66.com 832-765-2297 C.W. Mallon - Investor Relations C.W.Mallon@p66.com 832-765-2297
Slide 42: Appendix
Appendix
Slide 43: Segment Strategy
Segment Strategy Marketing and Refining: Midstream: Growth Chemicals: Growth Specialties: Enhance Returns Selective Growth Execute Sweeny hub Grow CPChem organically Optimize crude slate Expand European retail Grow integrated Advance olefins and Expand export capability marketing Transportation syst
Slide 44: Free Cash Flow
Free Cash Flow 2013 – 1H 2015 Average Midstream ($B) Chemicals ($B) PSXP Drop 0.3 0.2 Proceeds 0.7 1.2 1.0 1.3 0.9 CFO & Drop Proceeds Sustaining Capex Available Cash Flow CFO Sustaining Capex FCF Refining ($B) Marketing & Specialties ($B) 0.9 2.7 0.1 1.8 1.0 0.9 CFO Sustaining Capex FCF CFO Sustain
Slide 45: 1H 2015 Adjusted ROCE
1H 2015 Adjusted ROCE 40% 30% M&S Chemicals 25% Refining P66 Total 20% 21% 13% 10% 16% Midstream 5% Corporate 0% -7% -10% 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Average Capital Employed ($B) 44
Slide 46: Capital Structure
Capital Structure 29% 26% 20- 30% 22% 22.0 21.6 22.4 8.7 7.9 6.2 5.0 5.2 5.0 2013 2014 1H 2015 Equity $B Debt $B Cash & Cash Equivalents $B Debt to Capital Excludes PSXP. 45
Slide 47: 2015 Sensitivities – Phillips 66
2015 Sensitivities – Phillips 66 Annual Net Income $MM Midstream - DCP (net to Phillips 66) 10¢/Gal Increase in NGL price 30 $1/MMBtu Increase in Natural Gas price 25 $10/BBL Increase in WTI price 15 Chemicals - CPChem (net to Phillips 66) 1¢/Lb Increase in Chain Margin (Ethylene, Polyethylene, NAO)
Slide 48: 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 49: 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). Growth component of operating costs is est
Slide 50: Footnotes
Footnotes Slide 8 Average of company EV (daily EV 1/1/2015 – 8/31/2015) and 2016 consensus EBITDA as of 8/31/2015. Refining Peers is average of: DK, HFC, MPC, PBF, TSO, VLO, WNR Chemicals Peers is average of: CE, DOW, EMN, HUN, LYB, WLK Midstream Peers is average of: EPD, ETE, OKE, TRGP Source: Bloo
Slide 51: Footnotes
Footnotes Slide 15 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, except to the extent PSXP
Slide 52: Footnotes
Footnotes Slide 19 EBITDA growth is 2018 estimated run-rate EBITDA of projects completed second-half 2014 or later. CFO excludes working capital. WRB free cash flow calculated at the enterprise level. 2015E ROCE includes project and operational improvements since 2014 on a constant margin basis. Fut
Slide 53: Footnotes
Footnotes Slide 24 Capital returned includes the 2014 PSPI share exchange and excludes dividend payments. Slide 25 Corporate not included in bars on chart, but included in totals. Midstream EBITDA excludes EBITDA attributable to Phillips 66 noncontrolling interests. EBITDA growth is 2018 estimated r
Slide 54: Non-GAAP Reconciliations
Non-GAAP Reconciliations Forecasted EBITDA Forecasted EBITDA estimates were primarily derived on an EBITDA-only basis (revenue and cost projections). Accordingly, all the elements required for forecasted net income, including income taxes, interest expense, and depreciation and amortization, are not
Slide 55: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Average 2009-2014 Refining Free Cash Flow Numerator Cash From Operations GAAP $ 2,615 Less: Change in Non-Cash Working Cap. 152 Cash From Operations (excluding WC) 2,463 Less: P66 Equity affiliate cash from ops 584 Add: Equity look through cash from ops 5
Slide 56: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Average 2009-2014 Marketing & Refining Specialties ROCE Numerator Net Income 1,127 727 After-tax interest expense 0 0 GAAP ROCE earnings 1,127 727 Special Items 344 (34) Adjusted ROCE earnings 1,471 693 Denominator GAAP average capital employed* 13,377 2,
Slide 57: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Average 2009-2014 Phillips 66 Free Cash Flow Numerator Cash From Operations GAAP $ 3,650 Less: Change in Non-Cash Working Cap. (128) Cash From Operations (excluding WC) $ 3,737 Total Capex GAAP $ 3,773 Less: Growth Capex 2,788 Sustaining Capex $ 985 Free
Slide 58: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Average 2009 - 2014 Marketing & Midstream Chemicals Refining Specialties Corporate Phillips 66 Adjusted EBITDA by Segment Reconciliation Net income attributable to Phillips 66 $ 657 729 1,127 727 (292) 3,100 Less: Income from discontinued operations - - -
Slide 59: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Average 2013-1H 2015 Marketing & Midstream Chemicals Refining Specialties FCF Yield Numerator Cash From Operations GAAP $ 750 597 2,557 1,177 Less: Change in Non-Cash Working Cap. 12 - (330) 168 Cash From Operations (excluding WC) 738 597 2,887 1,009 Less
Slide 60: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars 1H 2015 Marketing & Phillips 66 Midstream Chemicals Refining Specialties Corporate ROCE Numerator Net Income $ 2,022 16 498 1,142 618 (252) After-tax interest expense 107 - - - - 107 GAAP ROCE earnings 2,129 16 498 1,142 618 (145) Special Items (162) 126
Slide 61: Non-GAAP Reconciliations
Non-GAAP Reconciliations Millions of Dollars Adjusted Phillips 66 Phillips 66 Phillips 66 Partners Consolidated 2013 Total Debt 6,155 - 6,155 Total Equity 21,983 409 22,392 Debt-to-capital ratio 22% 22% 2014 Total Debt 8,666 18 8,684 Total Equity 21,622 415 22,037 Debt-to-capital ratio 29% 28% 1H 20
Slide 62: 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 63: Adjusted EBITDA and Distributable Cash Flow Reconciliation to Net Income
Adjusted EBITDA and Distributable Cash Flow Reconciliation to Net Income $ MM 2Q 2015 1Q 2015 4Q 2014 3Q 2014 2Q 2014 Net Income $ 42.0 $ 35.4 $ 36.3 $ 30.0 $ 30.9 Plus: Depreciation 5.3 5.1 4.5 4.2 3.9 Net interest expense 9.5 5.8 2.1 1.4 1.3 Amortization of deferred rentals 0.1 0.1 0.1 0.1 0.1 Pro