Phillips 66 · NYSE:PSX
Phillips 66 — Investor Presentation (February 2018)
61 slides from Phillips 66's investor presentation, Feb 13, 2018
Slide 1: Investor Update
Investor Update February 2018 NYSE: PSX www.phillips66.com Lake Charles Refinery
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 CPChem USGC Petrochemicals Project Phillips 66 Partners Bakken Pipeline Beaumont Terminal Sweeny Hub Returns Refinery yield and feedstock flexibility projects U.S. marketing reimaging Distributions 30% dividend CAGR since September 2012 $10.4 B
Slide 5: Operating Excellence
Operating Excellence Total Recordable Rates Refining Environmental Metrics (Incidents per 200,000 Hours Worked) (No. of events) Industry Average ’13 ’14 ’15 ’16 ’17 317 302 279 264 240 Phillips 66 CPChem DCP Midstream 2013 2014 2015 2016 2017 Operating Costs and SG&A Refining Capacity Utilization ($
Slide 6: Environmental, Social, Governance
Environmental, Social, Governance Extensive ESG engagement Industry Safety Metrics (Incidents per 200,000 Hours Worked) 6 Board engaged in setting company ESG strategy 4 2 Record low reportable environmental events 0 Agricul., Food All Construction Prof. Petroleum Petchem. Phillips 66 Investing in f
Slide 7: U.S. Crude Oil and Gas Plant NGL Production
U.S. Crude Oil and Gas Plant NGL Production Source: I.H.S., April 2017 6
Slide 8: Midstream Macro Environment
Midstream Macro Environment U.S. Crude Oil Export Volume (MMBD) U.S. Clean Product Exports (MMBD) 1.0 2.5 2.0 1.5 0.5 1.0 0.5 0.0 0.0 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 U.S. LPG Export Volume (MMBD) Phillips 66 Export Capacity (MMBD) 1.2 1.5 Thousands Propane Butane 1.0 0.6
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 Year-End Run-Rate Adjusted EBITDA ($B) Platform for growth 1.8 – 2.0 Focus on NGL value chain Expand crude and products 0.6 PSX export capability PSX PSXP 2018E year-end run-rate PSXP PSXP 1.0 1.1 adjusted EBITDA $1.1 B Assets Online Growth Market Total See appendix for footno
Slide 13: Phillips 66 Partners
Phillips 66 Partners Distribution Growth (cents/unit) Funding Midstream growth Organic growth opportunities Sand Hills Pipeline expansions (TX) Bayou Bridge Pipeline extension (LA) Lake Charles Isomerization Unit (LA) 67.8 64.6 61.5 55.8 58.6 31% distribution CAGR 2013-2017 45.8 48.1 50.5 53.1 40.0
Slide 14: DCP Midstream
DCP Midstream DJ Basin Well positioned in low-cost supply basins 0.9 Bcf/d processing capacity Strong growth projects around existing footprint Sand Hills NGL Pipeline expansions to 365 MBD in 1Q 2018, 450 MBD in 2H 2018 Permian Mid-continent 1.3 Bcf/d 1.8 Bcf/d DJ Basin gathering and processing inf
Slide 15: Feedstock Advantaged Chemicals Portfolio
Feedstock Advantaged Chemicals Portfolio Worldwide U.S. Gulf Net Ethylene Coast Capacity: 4,810 kMTA U.S. Net Ethylene Capacity: 3,685 kMTA Middle East Net Ethylene Saudi Qatar Arabia Capacity: 1,125 kMTA 14
Slide 16: Chemicals Outlook
Chemicals Outlook 2018E Average Ethylene Production Cost Curve Middle East ethane and North ($/Ton) America NGLs remain positioned at Asia Coal the low end of the cost curve 1,000 M.E. Naphtha Ethylene demand growth outpacing W. Europe Asia LPG N.A. Naphtha LPG W. global GDP 500 N.A. LPG M.E. LPG As
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 Mechanical completion 4Q 2017 Commissioning 1Q 2018 Long-term mid-cycle EBITDA ~ $1.2-1.4 B Additional projects in future years Cash flow improvement expected
Slide 18: Enhancing Returns in Refining and Marketing
Enhancing Returns in Refining and Marketing 17
Slide 19: Refining
Refining Improving returns PSX Global Clean Product Yield Billings heavy crude project (2Q 2017) Ponca City yield flexibility (4Q 2017) 85.5% 84.6% 84.1% 84.4% 84.6% Wood River FCC modernization (2Q 2018) 2013 2014 2015 2016 2017 Bayway FCC modernization (2Q 2018) Lake Charles crude flexibility (2H
Slide 20: Marketing and Specialties
Marketing and Specialties Stable, high-return businesses Marketing Enhancing U.S. fuels brands 3% volume uplift at reimaged sites Adding 25-30 European sites per year Expanding brand licensing Providing ratable refinery off-take Specialties Increasing value through integration, optimization, and pro
Slide 21: Capital Structure
Capital Structure Equity and Debt Investment-grade credit ratings 27.4 PSX – BBB+ / A3 22.4 23.9 23.7 30% 22.0 27% 27% PSXP – BBB / Baa3 28% 22% 26% 25% 22% 21% 10.1 10.1 Nearly $9 B of total liquidity 8.6 8.9 6.1 ~3.5x Debt/EBITDA target at PSXP 2013 2014 2015 2016 2017 PSX Equity $B PSX Debt $B PS
Slide 22: Capital Allocation
Capital Allocation Maintain financial strength, strong 2015 – 2017 investment-grade credit rating Fund sustaining capital expenditures Distributions Pay a growing, secure and competitive Reinvestment dividend 60% reinvestment and 40% shareholder distributions See appendix for footnotes. 21
Slide 23: Capital Expenditures
Capital Expenditures Consolidated Capital Expenditures ($B) 2018E Consolidated – $2.3 B 5.8 Phillips 66 2018E – $1.7 B 3.8 $0.8 B Growth 2.8 $0.9 B Sustaining 2.3 1.8 1.8 Phillips 66 Partners 2018E – $0.6 B 2013 2014 2015 2016 2017 2018E PSX PSXP 2015 consolidated capital expenditures of $5.8 billio
Slide 24: Distributions
Distributions Important source of shareholder value Annual Dividend ($/share) Growing, secure, and competitive 2.73 dividend 1.89 2.18 2.45 1.33 30% CAGR with seven increases since May 2012 2013 2014 2015 2016 2017 Cumulative Distributions ($B) Committed to share repurchases 16.4 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 from projects coming online 2017-2018 ~ $1.5 Shifted from heavy-investment period to increasing net cash generation Continued investment in higher- valued businesses generating strong returns
Slide 26: Delivering Shareholder Returns
Delivering Shareholder Returns Total Shareholder Return Integrated portfolio PSX +262% 300% Disciplined capital allocation Peers +178% 260% S&P 100 +123% 220% Returns focused 180% 140% Value-added growth 100% 60% Strong balance sheet 20% -20% Compelling investment May-12 May-13 May-14 May-15 May-16
Slide 27: Investor Update (Phillips 66 Partners)
Investor Update February 2018 NYSE: PSXP www.phillips66partners.com
Slide 28: Phillips 66 Partners Ownership Structure
Phillips 66 Partners Ownership Structure (NYSE: PSX) 100% ownership interest PSXP Public Common Phillips 66 Partners GP LLC Unitholders 55% limited partner (PSXP General Partner) interest General Partner Units IDRs 43% limited partner interest 2% general partner interest (NYSE: PSXP) Operating Subsi
Slide 29: Phillips 66 Partners
Phillips 66 Partners Strong alignment with Phillips 66 Highly integrated assets Stable and predictable cash flows Strong growth potential Financial flexibility Sweeny Fractionator, Sweeny, TX Pecan Grove Marine Dock 28
Slide 30: Phillips 66 Partners
Phillips 66 Partners Pecan Grove Marine Dock 29
Slide 31: Distribution Growth
Distribution Growth Distribution / LP Unit (cents) 64.60 67.80 58.60 61.50 53.10 55.80 48.10 50.50 42.80 45.80 37.00 40.00 30.17 31.68 34.00 27.43 21.25 22.48 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 20
Slide 32: Financial Growth
Financial Growth Adjusted EBITDA ($MM) Annual performance highlights since 2014 754 58% growth in Earnings 471 75% growth in Adjusted EBITDA 285 141 65% growth in Distributable Cash Flow 33 2013 2014 2015 2016 2017 Earnings ($MM) Distributable Cash Flow ($MM) 572 461 380 301 194 228 116 128 29 30 20
Slide 33: Phillips 66 Partners Capital Expenditures
Phillips 66 Partners Capital Expenditures PSXP Capital Expenditures ($MM) 2018E Capex of $595 MM $510 MM Growth Bayou Bridge Pipeline Sand Hills Pipeline 595 461 Lake Charles Isomerization Unit 352 Sacagewea Gas Pipeline 205 4 66 $85 MM Sustaining 2013 2014 2015 2016 2017 2018E See appendix for foot
Slide 34: $510 MM 2018 Organic Growth Plan
$510 MM 2018 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 $2.9 B Total Debt as of December 31, 2017 Senior Notes Maturity Profile ($MM) $2.9 B Senior Notes, weighted average cost of 3.97%: 5-Year $300 MM notes, 2.646% coupon 10-Year $500 MM notes, 3.605% coupon 10-Year $500 MM notes, 3.550% coupon 625 10-Year $500 MM notes, 3.750% coupon
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 +164% 300% Closed $70 MM Closed $1.3 B Alerian MLP Index -15% 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 Freeport LPG Export Terminal
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 Tar Stripper Retirement Gas oil hydrotreater expansion 100% lease crude purchases Wood River ULSD expansion FCC mode
Slide 42: Western Gulf
Western Gulf Creating a World-Class Energy Complex Midstream Sweeny Fractionator (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 Increas
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) ULSD project Alliance ULSD project Marketin
Slide 44: West Coast
West Coast Enhancing Returns Refining, Marketing & Specialties San Francisco Yield improvements Reduce Coker Operating Pressure Renewable diesel project Los Angeles Renewable diesel project Marketing & Specialties Grow branded and unbranded fuels volumes Enhance 76 brand Increase high-margin exports
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 2012–2017 Average Midstream ($B) Chemicals ($B) PSXP Contributions 1.0 (0.3) (0.2) 1.7 1.0 0.8 0.9 Adjusted CFO & PSXP Sustaining Capex Available Cash Flow Adjusted CFO Sustaining Capex Adjusted FCF Contributions Refining ($B) Marketing & Specialties ($B) (0.8) (0.1) 2.7 0.9
Slide 47: 2012–2017 Average Adjusted ROCE
2012–2017 Average Adjusted ROCE 30% M&S Chemicals 27% 15% 20% Refining PSX Total 12% 13% Midstream 7% Corporate 0% (8%) -15% 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32 Average Capital Employed ($B) 46
Slide 48: Phillips 66 Debt and Liquidity
Phillips 66 Debt and Liquidity Debt Maturity Profile Liquidity ($B) ($B) 5.0 7.9 5.0 4.0 2.9 2.0 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 December 3
Slide 49: 2018 Sensitivities
2018 Sensitivities Sensitivities shown above are independent and are only valid within a limited price range. 48
Slide 50: Phillips 66 Outlook
Phillips 66 Outlook 1Q 2018 Global Olefins & Polyolefins utilization Mid-90% Refining crude utilization Mid-80% Refining turnaround expenses (pre-tax) $230 MM - $260 MM Corporate & other costs (after-tax) $160 MM - $180 MM 2018 Refining turnaround expenses (pre-tax) $520 MM - $570 MM Corporate & Oth
Slide 51: 2018 Capital Budget
2018 Capital Budget Millions of Dollars Sustaining Growth Capital Capital Capital Program Midstream Phillips 66 133 490 623 Phillips 66 Partners 85 510 595 218 1,000 1,218 Chemicals - - - Refining 541 286 827 Marketing and Specialties 65 75 140 Corporate and Other 116 - 116 Phillips 66 Consolidated
Slide 52: Footnotes
Footnotes Slide 3 Total share repurchases and exchanges include the PSPI share exchange in 2014. Dividend CAGR calculated from initial dividend of $0.20 per share in 3Q 2012 to last increase of $0.70 per share in 2Q 2017. Slide 4 Industry averages are from: Phillips 66 – American Fuel & Petrochemica
Slide 53: Footnotes
Footnotes Slide 11 Run-rate adjusted EBITDA for PSXP assets online represents the estimated run-rate view as of December 31, 2017. Run-rate adjusted EBITDA for PSX assets online represents the sum of (i) forecasted year-end 2018 EBITDA of other Midstream assets currently online and (ii) an estimate
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. Dividend CAGR calculated from initial dividend of $0.20 per share in 3Q 2012 to last increase of $0.70 per share in 2Q 2017. 2014 sha
Slide 55: Footnotes
Footnotes Slide 32 Capital expenditures attributable to the Partnership. Excludes predecessor capital spending 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. 54
Slide 56: Footnotes
Footnotes 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 YTD 2017 is as of September 30, 2017, or the nine-month period ended September 30, 2017, as applicable; except as otherwise noted. Forecasted and Es
Slide 57: Non-GAAP Reconciliation (slide 4)
Non-GAAP Reconciliation (slide 4) Millions of Dollars 2013 2014 2015 2016 2017 Production and operating expenses $ 4,206 $ 4,435 $ 4,294 $ 4,275 $ 4,699 Selling, general and administrative expenses 1,478 1,663 1,670 1,638 1,695 5,684 6,098 5,964 5,913 6,394 Plus: Sentinel operating expenses* 81 90 8
Slide 58: Non-GAAP Reconciliations (Slide 45)
Non-GAAP Reconciliations (Slide 45) Millions of Dollars Average 2012 - 2017 Marketing & FCF Reconcilition Midstream Chemicals Refining Specialties Cash From Operations GAAP 886 355 2,604 908 Less: Change in Non-Cash Working Cap. (3) - 119 (52) Cash From Operations (excluding WC) 883 355 2,723 855 Le
Slide 59: 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 2013 2014 2015 2016 2017 Reconciliation to Net Income Attributable to the Partnership Net income attributable to the Partnership 29 116 194 301 461 Plus: Net income attributable to Predecesso
Slide 60: 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 2013 2014 2015 2016 2017 Reconciliation to Net Cash Provided by Operating Activities Net cash provided by operating activities 199 296 392 492 724 Plus: Net interest expense — 5 34 5
Slide 61: Non-GAAP Reconciliations (Slide 46)
Non-GAAP Reconciliations (Slide 46) Millions of Dollars Average 2012-2017 Phillips 66** Midstream Chemicals Refining M&S Corporate Phillips 66 ROCE Numerator Net Income $ 3,974 317 836 1,824 873 (12) After-tax interest expense 203 - - - - 203 GAAP ROCE earnings 4,177 317 836 1,824 873 191 Special It