Phillips 66 · NYSE:PSX
Phillips 66 — Investor Presentation (February 2019)
69 slides from Phillips 66's investor presentation, Feb 8, 2019
Slide 1: Investor Update
Lake Charles Refinery FEBRUARY 2019 INVESTOR UPDATE phillips66.com | NYSE: PSX 1
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 MIDSTREAM CHEMICALS REFINING MARKETING AND SPECIALTIES Integrated Midstream 50% Interest in CPChem Complex Integrated Stable, High-Return Network Refining System Location Advantaged Businesses Pursue Organic and M&A Chemicals Portfolio Investing in Quick Opportunities
Slide 4: Corporate Strategy
CORPORATE STRATEGY OPERATING GROWTH RETURNS EXCELLENCE Committed to safety, reliability Reshaping our portfolio by Enhancing returns by and environmental capturing growth maximizing earnings from stewardship while protecting opportunities in Midstream existing assets and investing shareholder value
Slide 5: Demonstrated Strategy Execution; 2017–2018 Highlights
DEMONSTRATED STRATEGY EXECUTION; 2017 – 2018 HIGHLIGHTS OPERATING EXCELLENCE Industry leading safety Top-tier refining utilization GROWTH $1.5+ B adjusted mid-cycle EBITDA from growth projects 31% increase in CPChem ethylene and polyethylene capacity 450 MBD growth in crude oil and NGL net pipeline
Slide 6: Operating Excellence
OPERATING EXCELLENCE TOTAL RECORDABLE RATES REFINING TIER 1 PROCESS SAFETY EVENT RATE Incidents per 200,000 Hours Worked Phillips 66 CPChem DCP Midstream 1.15 1.03 0.08 0.08 Industry Average .86 0.02 0.02 0.02 .79 14 15 16 17 18 .74 .76 .66 .66 .58 REFINING CRUDE CAPACITY UTILIZATION .54 .43 .41 .45
Slide 7: Environmental, Social, Governance
ENVIRONMENTAL, SOCIAL, GOVERNANCE INDUSTRY SAFETY METRICS Board engaged in setting company ESG strategy Incidents per 200,000 hours worked 6 Independent lead director 4 Extensive ESG engagement 2 Industry leading safety performance 0 Agricul., Food All Construction Prof. Petroleum Petchem. Phillips
Slide 8: Energy Landscape
E N E R G Y L AN D S C AP E US OIL AND NGL PRODUCTION US OIL, NGL, CLEAN PRODUCT EXPORTS MMBD MMBD 30 10 20 5 10 0 0 12 13 14 15 16 17 18 19 20 21 22 23 12 13 14 15 16 17 18 19 20 21 22 23 Crude NGL Crude NGL Clean Products CRUDE DIFFERENTIALS TO WTI 2018E Average Ethylene Production Cost Curve $/bb
Slide 9: Midstream
Beaumont Terminal M I D S T R E AM phillips66.com | NYSE: PSX
Slide 10: Integrated Midstream Network
INTEGRATED MIDSTREAM NETWORK phillips66.com | NYSE: PSX 10
Slide 11: Midstream Portfolio
MIDSTREAM PORTFOLIO TRANSPORTATION NGL AND OTHER DCP MIDSTREAM 21,000 miles of U.S. pipeline systems 200,000+ BD fractionation capacity 49 natural gas processing facilities 39 product terminals 200,000 BD LPG export capacity 6.7 BCFD net natural gas processing capacity 20 crude oil terminals 125,000
Slide 12: Midstream
MIDSTREAM Integrated with Refining, Marketing and Chemicals ADJUSTED EBITDA $B 1.9 Capital projects delivering EBITDA growth 1.3 1.2 PSXP integral to Midstream strategy 1.0 1.0 Crude and NGL pipelines from key shale basins to the Gulf Coast Export capability from strategic Gulf Coast terminals 14 15
Slide 13: Midstream Growth Projects
M I D S T R E AM G R O W T H P R O J E C T S Gray Oak Pipeline Sweeny fractionators Clemens Caverns Beaumont Terminal South Texas Gateway Terminal Bakken Pipeline Sand Hills Pipeline Bayou Bridge Pipeline Lake Charles products pipeline Lake Charles isom unit phillips66.com | NYSE: PSX 13
Slide 14: Midstream Organic Growth
M I D S T R E AM O R G AN I C G R O W T H COMPLETION GROSS CAPITAL OWNERSHIP PSX PROJECT DATE CAPACITY ($MM) (%) Beaumont Terminal expansion phase III 4Q 2018 1.3 MMB 40 100 Beaumont Terminal expansion phase IV 1Q 2020 2.2 MMB 80 100 Sweeny fractionators 2 and 3 4Q 2020 2 x 150 MBD 1,320 100 COMPLET
Slide 15: Sweeny Hub Expansion
S W E E N Y H U B E X P AN S I O N $1.5 B capital expansion 2 x 150 MBD NGL fractionators 6 MM bbls expansion of PSXP’s NGL storage capacity Y-grade NGL feedstock supply agreements with firm volume commitments secured LPGs marketed via Freeport LPG Terminal New assets leverage and enhance existing i
Slide 16: Projects Under Development
PROJECTS UNDER DEVELOPMENT Pipelines in open season Gray Oak Pipeline (PSXP) West Texas to Texas Gulf Coast Open season for new capacity beyond 900,000 BD Liberty Pipeline (PSX) Rockies and Bakken production areas to Corpus Christi ~ 350,000 BD Red Oak Pipeline (PSX) Cushing to Corpus Christi, Houst
Slide 17: Phillips 66 Partners
PHILLIPS 66 PARTNERS Premier MLP with strong portfolio of organic growth projects ADJUSTED EBITDA $MM Strong alignment with Phillips 66 1,137 Highly integrated assets 754 Stable and predictable cash flows 471 Delivered highest distribution growth in industry since IPO 285 141 Strong ROCE 14 15 16 17
Slide 18: DCP Midstream
D C P M I D S T R E AM Integrated midstream business with competitive DJ Basin 1.0 BCFD footprint and geographic diversity processing capacity One of the largest U.S. gas processors and NGL producers Mid-Continent 1.8 BCFD Balanced portfolio comprised of 50% Logistics & processing Marketing and 50%
Slide 19: Chemicals
Lake Charles Refinery Cedar Bayou Ethane Cracker C H E M I C AL S phillips66.com | NYSE: PSX
Slide 20: Feedstock Advantaged Chemicals Portfolio
FEEDSTOCK ADVANTAGED CHEMICALS PORTFOLIO U.S. Gulf Coast U.S. Worldwide Net Ethylene Net Ethylene Capacity: Capacity: 5,410 kMTA 6,535 kMTA Middle East Saudi Qatar Net Ethylene Arabia Capacity: 1,125 kMTA phillips66.com | NYSE: PSX 20 As of January 1, 2019
Slide 21: CPChem Portfolio
CPCHEM PORTFOLIO Olefins and Polyolefins 11,370 kMTA North America capacity 2,510 kMTA Middle East capacity Specialties, Aromatics and Styrenics 2,255 kMTA North America capacity 1,050 kMTA Middle East capacity 16 North American and 5 Middle East facilities #1 global high-density polyethylene produc
Slide 22: Chemicals
CHEMICALS CPChem has a leading position in olefins and polyolefins with ADJUSTED EBITDA a feedstock advantaged portfolio $B Operating excellence focus Strong free cash flow generation 2.1 1.7 1.6 USGC petrochemical assets operating above design capacity 1.3 1.3 Developing second USGC project for inc
Slide 23: Refining and Marketing
Bayway Refinery R E F I N I N G AN D M AR K E T I N G phillips66.com | NYSE: PSX
Slide 24: Enhancing Returns in Refining and Marketing
ENHANCING RETURNS IN REFINING AND MARKETING Central Corridor 515 MBD West Coast Atlantic 364 MBD Basin/Europe 537 MBD Gulf Coast 24 phillips66.com | NYSE: PSX As of January 1, 2019 764 MBD
Slide 25: Refining and Marketing Portfolio
REFINING AND MARKETING PORTFOLIO Refining 13 refineries in U.S. and Europe In all 5 U.S. PADDs 2,180 MBD crude capacity 35% heavy, 35% medium, 30% light crude Marketing 9,000+ global sites, including 5,600 wholesale outlets ~2,600 reimaged sites Sweeny Refinery Sweeny, TX phillips66.com | NYSE: PSX
Slide 26: Refining
REFINING Complex, integrated refining system focused on safe and ADJUSTED EBITDA $B reliable operations Infrastructure network enables strong market capture; access to advantaged inland crude feedstocks 5.7 Cost and capital discipline; robust free cash flow 4.8 3.4 2.7 Investing in high-return capit
Slide 27: Refining Portfolio Competitiveness
REFINING PORTFOLIO COMPETITIVENESS Industry leading coking capacity and heavy crude processing DISTILLATE PRODUCTION capability % TOTAL THROUGHPUT Largest purchaser of advantaged Canadian crude oils High distillate yield 38.2% 37.9% 37.0% 34.0% 32.0% Low yield of high sulfur fuel oil PSX VLO HFC MPC
Slide 28: Renewable Fuels
RENEWABLE FUELS Project at Humber Refinery to process used cooking oil 6 MBD; start-up in 2020 Long-term supply and offtake agreement with Ryze Renewables for two renewable diesel production facilities PSX will supply agriculture oils and animal fat feedstocks and market 11 MBD renewable diesel in W
Slide 29: Marketing and Specialties
MARKETING AND SPECIALTIES High-return, low capital intensity business; optimize ADJUSTED EBITDA $B placement of Refining production $1.4B Average Enhancing US fuels brands; growing and reimage European sites 1.4 1.5 1.6 1.4 1.2 Pursuing renewable fuels opportunities Lubricants increasing value throu
Slide 30: Marketing: Enhancing the Brands
MARKETING: ENHANCING THE BRANDS U.S. Reimaged ~2,600 sites since program inception in 2015 and plan to reimage 1,800 sites in 2019 Industry leading technology; 5,000+ sites implementing mobile pay Europe Proven low-cost high-volume model built on brand image, reputation, and customer focus Re-imagin
Slide 31: Earnings and Capital Structure
EARNINGS AND CAPITAL STRUCTURE ADJUSTED EBITDA EQUITY AND DEBT $B 28% 27% 30% 29% 27% 28% 25% 26% 25% 10.1 22% 7.9 8.6 27.4 27.2 5.9 4.7 23.9 23.7 22.0 14 15 16 17 18 10.1 10.1 11.2 ADJUSTED RETURN ON CAPITAL EMPLOYED 8.6 8.9 % AFTER-TAX 14 15 16 17 18 PSX Equity $B PSX Debt $B 14 14 16 PSX Noncontr
Slide 32: Capital Allocation
CAPITAL ALLOCATION Disciplined capital allocation SOURCES AND USES OF CASH $B Fund sustaining capital to maintain asset integrity ~1 ~1.5 Committed to a secure, competitive and growing dividend 6.5 5.5 ~2 Investing in growth projects with attractive returns Intrinsic value approach to share repurcha
Slide 33: Distributions
DISTRIBUTIONS ANNUAL DIVIDEND $/share Creates shareholder value 2.73 3.10 2.18 2.45 Secure, competitive, and growing dividend 1.89 14% increase in 2Q18 to $0.80 per quarter 14 15 16 17 18 27% CAGR with eight increases since May 2012 TOTAL DISTRIBUTIONS $B Committed to share repurchases 6.1 4.7 Repur
Slide 34: Capital Expenditures
C AP I T AL E X P E N D I T U R E S 2019E Consolidated - $2.9 B CAPITAL EXPENDITURES AND INVESTMENTS $B Phillips 66 2019E - $2.3 B $1.4 B Growth $0.9 B Sustaining 5.8 Phillips 66 Partners 2019E - $0.6 B Major JV’s (CPChem, DCP and WRB) are self-funded 3.8 2019E CONSOLIDATED CAPITAL PROGRAM 2.8 2.9 $
Slide 35: Financial Flexibility
F I N AN C I AL F L E X I B I L I T Y SOURCES AND USES OF CASH $B ~1 Maintain financial strength, strong investment- ~1.5 grade credit rating 6.5 5.5 ~2 Pay secure, competitive, and growing dividend 1-2 CFO Sust. FCF Dividends Growth Capex Share 60% reinvestment and 40% shareholder Consensus Capex R
Slide 36: Executing Strategy
EXECUTING STRATEGY OPERATING EXCELLENCE Safe and reliable operations TOTAL SHAREHOLDER RETURN Technology driven cost efficiencies 340% GROWTH Pipelines from key shale basins to Gulf Coast PSX +247% 300% Crude export capability Peers +143% 260% NGL value chain – transportation, fractionation and expo
Slide 37: Investor Update
Lake Charles Refinery FEBRUARY 2019 INVESTOR R E F I N I N G AN D M AR K E T I N G UPDATE phillips66.com | NYSE: phillips66partners.com PSX PSXP I NYSE:
Slide 38: Phillips 66 Partners Ownership Structure
P H I L L I P S 6 6 P AR T N E R S O W N E R S H I P S T R U C T U R E 100% ownership interest Phillips 66 Partners GP LLC PSXP Public (PSXP General Partner) 54% limited Common General Partner Units partner interest Unitholders IDRs 2% general 44% limited partner partner interest interest (NYSE: PSX
Slide 39: Phillips 66 Partners
PHILLIPS 66 PARTNERS Premier MLP with strong portfolio of organic growth projects Strong alignment with Phillips 66 Highly integrated assets Maintaining stable and predictable cash flows Delivered highest distribution growth in industry since IPO Scale and financial strength enable further organic g
Slide 40: Phillips 66 Partners
PHILLIPS 66 PARTNERS phillips66.com | NYSE: phillips66partners.com PSX PSXP I NYSE: 40
Slide 41: 2018 Highlights
2018 HIGHLIGHTS Operated safely and reliably ADJUSTED EBITDA ($MM) Reached $1.1 B run-rate EBITDA target ahead of schedule 1,137 Achieved 30% LP distribution CAGR goal 754 Focused on organic growth 471 285 Sanctioned Gray Oak Pipeline project 141 Completed Sand Hills Pipeline expansion 14 15 16 17 1
Slide 42: Distribution Growth
DISTRIBUTION GROWTH DISTRIBUTION / COMMON LP UNIT (CENTS) 79.2 83.5 71.4 75.2 64.6 67.8 58.6 61.5 53.1 55.8 45.8 48.1 50.5 40.0 42.8 34.0 37.0 27.4 30.2 31.7 22.5 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18 Coverage Ratio 1.10 1.10 1.44 1.
Slide 43: PSXP Organic Growth
P S X P O R G AN I C G R O W T H COMPLETION GROSS CAPITAL OWNERSHIP PSXP PROJECT DATE CAPACITY ($MM) (%) Sand Hills Pipeline expansion 4Q 2018 68 MBD1 450 33.3 Bayou Bridge Pipeline (segments I and II) 1Q 2019 480 MBD 750 40 Lake Charles products pipeline 2Q 2019 50 MBD 25 100 Lake Charles isomeriza
Slide 44: Gray Oak Pipeline
GRAY OAK PIPELINE Crude oil pipeline from West Texas to Corpus Christi and Sweeny/Freeport markets Expected in service by end of 2019 900 MBD capacity 42.25% PSXP ownership Operated by Phillips 66 phillips66.com | NYSE: phillips66partners.com PSX PSXP I NYSE: 44
Slide 45: Financial Flexibility
FINANCIAL FLEXIBILITY Investment-grade credit rating BBB (S&P), Baa3 (Moody’s) Fund 2019 capital program with cash, debt, and selective use of ATM 3.5x debt / EBITDA long term target $750 MM revolving credit facility $826 MM 2018 free cash flow1 phillips66.com | NYSE: phillips66partners.com PSX PSXP
Slide 46: PSXP Debt Profile
PSXP DEBT PROFILE SENIOR NOTES MATURITY PROFILE $B PSXP Revolving Credit Facility PSXP Bonds 0.8 0.6 0.5 0.5 0.5 0.5 0.3 2018 2020 2022 2024 2026 2028 2030 2032 2034 2036 2038 2040 2042 2044 2046 SENIOR NOTES $MM $3 B Total Debt as of December 31, 2018 YEAR DUE PRINCIPAL COUPON PSXP 2020 $300 2.646%
Slide 47: Total Return Since IPO
TOTAL RETURN SINCE IPO 300% PSXP +162% Closed $1.3 B acquisition Alerian MLP Index (21%) 250% Closed $70 MM acquisition Closed $2.4 B Closed $775 MM acquisition Closed $700 MM acquisition 200% acquisition 150% 100% Closed $340 MM acquisition Closed $1.0 B Closed $236 MM IPO acquisition acquisition 5
Slide 48: Appendix
Lake Charles FreeportRefinery Clipper AP P E N D I X phillips66.com | NYSE: PSX
Slide 49: 2019 Sensitivities
2019 SENSITIVITIES Annual EBITDA ($MM) Midstream - DCP (net to Phillips 66) 10 ¢/Gal Increase in NGL price 6 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) 65 Worldwide Re
Slide 50: Value Chain
VALUE CHAIN phillips66.com | NYSE: PSX 50
Slide 51: West Coast
WEST COAST phillips66.com | NYSE: PSX 51
Slide 52: Gulf Coast
GULF COAST phillips66.com | NYSE: PSX 52
Slide 53: Midcontinent
MIDCONTINENT phillips66.com | NYSE: PSX 53
Slide 54: Atlantic Basin
ATLANTIC BASIN phillips66.com | NYSE: PSX 54
Slide 55: Consolidated Debt and Liquidity
C O N S O L I D AT E D D E B T AN D L I Q U I D I T Y SENIOR NOTES MATURITY PROFILE $B PSX Senior Notes PSXP Senior Notes PSX Term Loan PSXP Revolving Credit Facility PSX Revolving Credit Facility 5.0 0.8 0.8 2.0 0.5 1.5 1.7 0.8 1.0 0.5 0.5 0.5 0.5 0.6 2018 2020 2022 2024 2026 2028 2030 2032 2034 20
Slide 56: Phillips 66 Outlook
PHILLIPS 66 OUTLOOK 1Q 2019 Global Olefins & Polyolefins utilization Mid-90% Refining crude utilization Mid-80% Refining turnaround expenses (pre-tax) $140 MM - $170 MM Corporate & other costs (pre-tax) $210 MM - $240 MM 2019 Refining turnaround expenses (pre-tax) $550 MM - $600 MM Corporate & Other
Slide 57: 2019 Capital Budget
2019 CAPITAL BUDGET Millions of Dollars Sustaining Growth Capital Capital Capital Program Adjusted Capital Program Midstream* $ 185 847 1,032 Chemicals - - - Refining 512 411 923 Marketing and Specialties 64 97 161 Corporate and Other 177 - 177 Phillips 66* 938 1,355 2,293 Phillips 66 Partners** 78
Slide 58: Coking Capacity
Coking Capacity 2,701 TOTAL U.S. COKING CAPACITY MBD 350 328 304 281 177 176 175 150 146 131 90 65 54 51 41 39 36 36 29 21 18 6 5,034 TOTAL GLOBAL COKING CAPACITY MBD 485 423 328 304 281 263 263 198 191 177 155 150 146 125 115 109 92 90 84 79 72 65 61 56 54 51 50 43 41 40 39 39 37 36 36 36 33 30 29
Slide 59: Footnotes
FOOTNOTES Slide 5 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 $0.80 per share in 2Q 2018. $1.5 B reflects estimated mid-cycle run-rate adjusted EBITDA contributions fro
Slide 60: Footnotes
FOOTNOTES Slide 32 Consensus cash from operations based on average of 2019 and 2020 consensus as of 1/23/2019. PSXP 2019 Adjusted Capital Budget excludes $303 MM of growth capital expected to be cash funded by noncontrolling interests and reflects JV-level financing to fund a portion of the Gray Oak
Slide 61: Footnotes
FOOTNOTES 18 18 is as of December 31, 2018, or the twelve-month period ended December 31, 2018, as applicable; except as otherwise noted. Forecasted and Estimated EBITDA and Maps We are unable to present reconciliations of various forecasted and estimated EBITDA included in this presentation, becaus
Slide 62: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N ( S L I D E 1 2 ) Millions of Dollars 2014 2015 2016 2017 2018 Reconciliation of Midstream Pre-Tax Income to Adjusted EBITDA Midstream pre-tax income $ 851 147 402 638 1,181 Plus: Interest revenue — — — (1) — Depreciation and amortization 91 127 215 299 320
Slide 63: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N ( S L I D E S 1 7 a n d 4 1 ) Millions of Dollars 2014 2015 2016 2017 2018 Reconciliation to Net Income Attributable to the Partnership Net income attributable to the Partnership $ 116 194 301 461 796 Plus: Net income attributable to Predecessors 129 112 10
Slide 64: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N ( S L I D E S 1 7 a n d 4 1 ) Millions of Dollars 2014 2015 2016 2017 2018 Reconciliation to Net Cash Provided by Operating Activities Net Cash Provided by Operating Activities $ 296 392 492 724 892 Plus: Net interest expense 5 34 52 99 114 Income tax expen
Slide 65: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N ( S L I D E 2 2 ) Millions of Dollars 2014 2015 2016 2017 2018 Reconciliation of Chemicals Pre-Tax Income to Adjusted EBITDA Chemicals pre-tax income $ 1,632 1,315 839 716 1,025 Plus: None — — — — — Chemicals EBITDA 1,632 1,315 839 716 1,025 Special Item Ad
Slide 66: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N ( S L I D E 2 6 ) Millions of Dollars 2014 2015 2016 2017 2018 Reconciliation of Refining Pre-Tax Income to Adjusted EBITDA Refining pre-tax income $ 2,467 3,659 436 2,076 4,535 Plus: Depreciation and amortization 704 738 769 821 840 Refining EBITDA 3,171 4
Slide 67: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N ( S L I D E 2 9 ) Millions of Dollars 2014 2015 2016 2017 2018 Reconciliation of Marketing and Specialties Pre-Tax Income to Adjusted EBITDA Marketing and Specialties pre-tax income $ 1,475 1,652 1,261 1,020 1,557 Plus: Interest revenue — (2) — — — Deprecia
Slide 68: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N ( S L I D E 3 1 ) Millions of Dollars 2014 2015 2016 2017 2018 Reconciliation of Phillips 66 Pre-Tax Income to Adjusted EBITDA Phillips 66 pre-tax income $ 5,745 6,044 2,191 3,555 7,445 Plus: Net interest expense 246 283 321 407 459 Depreciation and amortiz
Slide 69: Non-GAAP Reconciliation
N O N - G A A P R E C O N C I L I AT I O N ( S L I D E 3 1 ) Millions of Dollars 2014 2015 2016 2017 2018 Phillips 66 ROCE Numerator Net income $ 4,797 4,280 1,644 5,248 5,873 After-tax interest expense 173 201 220 285 398 GAAP ROCE earnings 4,970 4,481 1,864 5,533 6,271 Special items (980) (34) (57