PSX - Earnings call transcript Q3 2017

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Phillips 66 (PSX) Q3 2017 Earnings Call October 27. 2017

Operator

Welcome to the Third Quarter 2017 Phillips 66 Earnings Conference Call. My name is Julie, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. a conduct will we question-and-answer session. Later, that note this conference recorded. being is Please will over Investor call turn Jeff I the President, to now Dietert, Vice Relations. begin. may you Jeff,

Jeff Dietert

our our Welcome Relations CFO. CEO; the operating found opening Factors Tim contains during XX SEC Call. over we with President; the Greg It Earnings turn two could using Phillips to results that materially Kevin Actual included will a statements will to during Vice Third our call section material I'll Taylor, the Greg on and call on supplemental reminder President differ we Q&A Executive session. and be cause include and as our today's actual Safe be that call remarks. presentation along in our the Conference statement. are and Chairman well Garland, Harbor of Mitchell, as XX presentation results The for filings. Investor differ Phillips forward-looking comments. can be here, to website that, Participants financial Quarter today's making With may is Slide from Garland will information.

Greg C. Garland

Okay. Welcome, joining today. thank everyone, you Jeff. us for and you. Thank

critical able businesses ensure to worked responders, and their to these products to Coast very Gulf they we by employees the and impacted safeguard our assets families, quarter, Harvey. They were was and did consumers. We're storm. this the During neighbors, to the friends, communities. Through were Hurricane help to and proud efforts by our how first caused of energy region responded challenges extraordinary things supplied

per share. were earnings adjusted million, quarter, $X.XX or third the For $XXX

XXX%. quarter. regions system. our Basin for Refining and West rate Utilization the exceeded We well operated across XX% Refining Our utilization was Atlantic Coast for

reflecting Our Gulf Coast ran XX%, hurricane impacts Sweeny. at at region

to Chemicals Midstream facilities Chemical where of back Gulf operations early on at Sweeny, assets. was several of September, In were we storm. other have shut-in assets, advance businesses, by operations many Refining, due and started full were we which downtime our including Coast the challenged facilities hurricane, mid-September. the to up extended related at to the hand, Our of In these

ran Our with issues. through the Lake Alliance and operational Charles minimal refineries storm

our employees challenges products Our out ensured crude getting were in logistical the market. and to to refineries get worked through

at Midstream we facilities and early Pasadena, took Beaumont in Additionally, operations all down terminals. the operations These Freeport September. in resumed

expected start-up most We during commitment manner. Cedar an Bayou the be units in to in executing the Baytown, operating of Our the in the safely, at to and within XX CPChem Cedar and environmentally is feet of water storm phase by most online locations end on of in reliably aftermath. November. We demonstrated Texas. X Bayou was operations significant our impact it rain various the responsible with of Chemicals inches poured We're received underway remain (X:XX) A facility. strategy. facility focused committed this

start impacts processing XXXX. up two-thirds year assets expansions we processing polyethylene Refineries. partners. DCP plans In the Bayou commissioning first XX new by by of quarter. to Also in cracker to gas the by ethylene We start quarter be in FCC return XXXX. end the the X.X half We're on EBITDA acquisition have product of to Hills modernizing This day we year. is to a increase units Bayway crude in also projects. the high-growth Express in day O'Conner new complete Phillips to progressing is which positioned DCP to of proved storage, DCP X is pipeline in return and a Earlier started Hurricane Chemicals, terminal's being increase Sand from we're completed Terminal billion storage be capabilities. capacity PSXP. rate Bakken by advancing owned by scheduled key growth XXXX. these to expected to-date the the per basins. in along to day focus and facilities projects barrels is Sand Mewbourn now million the the gas in X run the expanding expected service global Sweeny quarter and jointly Harvey, Gulf yields. include end develop XXX,XXX the be in $X.X end to in billion in Merey invest XXX,XXX constructed Hills Midstream A up at Ponca XX% its building billion natural Pipeline also well DCP to XXXX. in the made CPChem's in Refinery of first a our Together of is diesel River Texas the PSXP the DJ fourth second polyethylene DCP expand be fourth progress to on interest day. a for of Wood ethane Beaumont track $X.X to and gas contributed continues project quarter the of largest DJ, clean one-third to this is XXXX. the XXXX. begin two will link plant in Midstream, increasing export is barrels Also, is additional The X.X our In the expect basin, This both Refining, month, and markets units. Through a achieve plans approximately is to barrels barrels the We're export XXX,XXX Cedar the XXXX. City is partners pound In and up by continue to we the to of CPChem NGL quarter in barrels this capacity XXX,XXX in to day the Coast. We're and goal further to plant recovery XX barrels is one-third. adjusted pipeline capacity Gulf production Phillips scheduled expected the to transaction. Basin, a the the from XXX,XXX the service in of to In Permian Coast

strategy. allocation be our projects We fundamental is these first emphasis discipline, XXXX half expect prudent to capital returns, of in to Financial the XXXX. guidance about expenditures further to lowering We're capital billion. and $X with our an on completed

quarter, a $XXX board to During over in October, $X through company's our billion authorizations share XXXX. increases million new total approved Earlier and we program. shareholders since new repurchases. to returned the share dividends share repurchase the program $XX billion repurchase The

call to I'll that, to review financials. with the the So over turn Kevin

Kevin J. Mitchell

Thank you, Greg.

slide on overview an with start four. Let's

these had were million netted costs. or hurricane-related a $X.XX Third $XXX $XXX adjusted earnings were quarter of million million. million. which $XX excluding share. of earnings tax per was $XX items to special of loss The after largest that We items, After

shareholders Excluding consisted discretionary the was a $XXX growth This $XXX third plan of million, also projects. Distributions to $XXX capital reflected cash quarter. $XXX million in to impact $XXX million of negative the $XXX ratio in working Capital impact quarter pension for in net in quarter the the a contribution debt-to-capital of spending with the from million was the operations spent on dividends million quarter We of $XXX repurchases. a finished XX%. and million with share million.

the $XX Bakken Midstream net six offset a quarter. of adjusted five on quarter capital by driven adjusted rate by was million, quarter effective second increased employed earnings improvements results. earnings was income million, operations in Transportation-adjusted income million quarter by third was X%. from return on partially year-to-date The $XX compares by Quarter-over-quarter, Annualized segment. the tax $XXX adjusted commercial due our the quarter full lower up Refining, prior was Chemicals Slide and results. for Slide adjusted shows XX%. to increase Our pipeline.

Midstream NGL to In assets. addition, higher quarter $X export due decrease third of asset second third quarter. to non-controlling Midstream's we as prices $XX DCP volumes quarter adjusted $XX interests impact million Midstream had After due well to million adjusted of at higher was second income as decrease NGL, crude in with earnings The In on $XX fractionation were the $X million, volumes. had utilization the high $XX hurricane quarter. hedges, net on prior of from was the million integrated oil the throughput million our $X the impacts the quarter removing million, than impairments. forward of rising million due refineries from and largely

was up last was view by in costs for per $XXX market all earnings XX% the a eight $XXX resulting of downtime, as costs $XXX over a utilizations shipments due the lower barrel distillate million, and during crack. the completed increased Atlantic for $XX.XX first costs. turnaround crack slide crude hurricane-related the corridor primarily million, earnings higher margin Pre-tax utilization. and the downtime, relative the quarter. were Coast adjusted lower lower The improvement volumes for a the The adjusted consistent was XX%, from the driven the second period the crack lower Adjusted during $XX million, turnaround lower a to of for from segment product during Basin improved Chemicals barrel equity total, Clean chart and rise quarter. earnings driven on in quarter. Sweeny change Olefins crack. improved by increase Polyolefins, $XX the million, regions to adjusted The The volumes to the in increase turnaround The due unplanned drawdown second utilizations by during product quarter. compared million, a margins. low third million up of quarter. $XX.XX adjusted well $XXX the impact This increase by up In central by Adjusted turnaround consistent The offset provides the earnings. quarter, the Turning than $XXX the and million the resulted primarily from lower quarter utilization crack per with $XX XXX segment somewhat driven Refining, $XX previous inventory which was market less earnings seven, quarter. earnings the second The lower had quarter, prior earnings XX% offset Adjusted by per was was the was per the in in higher in adjusted million yield million Realized third $X.XX was decreased quarter. earnings quarter. as in In on highest and quarter earnings quarter. the in the from slide the last Billings utilization market regional $XX as the XX% margin improvement of quarter. to previous $XXX the from from timing improvement Refining in the to million was than $X million, margins quarter. pipeline million covers from due improved second by the barrel higher with The mostly resulted In barrel, $XX was volumes. Coast, primarily by from the lower margins market to mitigated Gulf clean quarter. West SA&S quarter. as market increase lower prices were adjusted refinery refinery In in and were earnings downtime million, Slide the earnings nine second capture. quarter. $XXX $XX.XX Partially higher million XX% were

for an quarter Our overall the from prior our of market per capture capture realized Market XX% in third resulting $XX.XX of barrel impacted by slightly the quarter. margin in was part configuration in down is the refineries. XX%,

to market slightly less premised barrel improved quarter. advantage was by quarter, than the more were X:X:X Losses per During and lower the oil which third barrel, the consistent $X.XX fuel from the we crude. margins due per of secondary prices products realized with distillate improved NGL $X.XX in prior and gasoline to previous Feedstock made relative than quarter crack.

and costs. inventory includes the impacts. RINs, associated reduced due mainly category quarter, with Coast per compared mainly differentials realized $X.XX $X.XX This costs barrel and RINs to product outgoing barrel clean realizations freight, in other with Gulf margins The category per by prior product higher

was million second move Marketing were in Adjusted Other, realized slide and earnings third to Specialties quarter In the to million XX. $XXX lower margins. due largely adjusted on decrease than million, $XX $X earnings lower quarter. Let's the and Marketing

balance slide billion in higher Specialties' million higher with were program to a sites. the sheet. decrease from $XXX million Corporate adjusted see compared reimage gasoline We segment the quarter. year-over-year $XXX shows year. Excel over On prior from costs the increase our of to of our $XX Paralubes on earnings tax was improvement million adjustments. net million due venture, costs adjusted the million, tax-tax prior volume We utilization. Slide continue the this $X.X the by $XX net cash and XX changing driven X% due an uplift to reimaging the sales earnings with equity to $XX Other in in cash joint quarter XX, entered The during quarter, year at had in our primarily mainly

cash $X.X by impacts, Year-to-date, working million, billion distributed decreased $X.X the due changes cash of approximately and first three $X.X Excluding results. bills. billion share Working repurchases. for We flow inventory about expenditures capital and was capital quarter million from billion. was and capital quarters to $X.X we review $XXX the investments shares funded financial billion. operations primarily about shareholders to with dividends and my concludes operational in ended XXX balance our cash This of outstanding the and

CPChem items. In Chemicals, XX%s to fourth facility. we in the global Bayou the Next downtime be to in I'll cover O&P high Cedar expect few utilization quarter a outlook continued due at the rate

utilization of Refining, and be crude rate $XXX November. We turnaround pre-tax expect of to expect million mid-XXs be the the worldwide and between be expenses $XXX million. most to end to by in the the we In units online

and Corporate December, will expect between further on costs in $XXX open $XXX questions. the Other our now for With tax. million come details will line program. we after We million provide to that, we XXXX and capital In

Operator

Thank you.

question begin go Neil answer Goldman the Mehta We Sachs, session. and will please from ahead. now

line is open. Your

Neil Mehta

team. Good morning, Thank you.

Greg C. Garland

Good morning.

Kevin J. Mitchell

morning. Good

Neil Mehta

Greg more billion of you're capital end kind to range? I here our to to you've is that to want But you're $X that in line provide assume be that should on range weeks? $X spend, XXXX the in expectations. or start on erring fact lowered with Very going a we spending it to XXXX. color the couple fair going recognizing for range Kevin. the billion given wide that think that And lower of capital

Greg C. Garland

mean, I for thanks Neil, Yes, question. the

But billion of through billion and billion said the very $X consistent wide to and been it. of couple growth share truck $X years billion of someone saying capital that's sustaining $X So been with could billion enough $X a you drive we've $X to it's capital, last repurchase.

in budget, of certainly that. capital, terms the board end high run So going early still December to capital that don't we on tell would our be the front I in what go to want of and we to I But range. we're expect on you

on share be terms the In repurchase, expect going don't range. end we we're of to low that of

Neil Mehta

end left you end then and come On Understood. mechanically talk about November Bayou, service? can targets be think online and of done quarter Understood. the for year? I chemical you Cedar the by project first terms of in what's and of just Chemicals, for said to the the can the reiterate there, you new next for to again capacity

Timothy Garth Taylor

Tim It's Hi, Neil. Taylor.

In will for that. should anticipate a we've terms the by the We're Cedar December. we getting units speak. back in would mid-November. then done utilities And cracker there's of that up polyethylene we operation mid-October. early And the It's be And we've of is unit, unit Bayou, maybe that come in manufacturing as up up a at couple critical our polyethylene which gotten first globally. in up very component X-hexene units operating back

back sure wet And by to around it's replacing essentially was that functional, kinds mid-November, those the instrumentation things. have motors, complex we really making that, that up. expect of most So of is

the to well of some motors we've Bayou. that associated as One, of And to that's ongoing that, around more switchgear But there the So the There's new be to new work story things cracker. power conjunction terms the the A as with completing two the Cedar might a mechanical electrical it with are for in that. guess, repair going lot at gone bringing on well. in And of tend on the and similar well. need as the repair work back was you facility. instruments substations that. cracker. on electrical a part cracker That's continued and

first able us that the the So that date the and completion confident to we're operation full new in progress start-up had we've the quarter. those, quarter we on been forward think pull and feed the terms on commercial puts in can hit mechanical looks we like hoped of still second on the so really of in in, that I cracker both in

the that, but of pleased operation. and back commitment, that has it terms So, been more everyone organization out unit come there made with their through have we the getting on in team done, and getting in go we as to that progress the

Neil Mehta

Tim. Thanks,

Operator

ahead. from Paul Sankey go Please Wolfe Research.

line Your open. is

Paul Sankey

Refining. in you Greg. ways Hi, many any More cheering not in positive all? Are dynamics been about it pretty at spending. up resolutely know increase you've determined I to

harder secondly, can you maybe better for argument about industry think California, the Firstly, past. wondering there I on then a potential And you Thanks. is leaving which to structurally for in you right talked any was now? might strength about see have the the

Greg C. Garland

Yes, we're clear the we demand XXXX, coming in you pretty XXXX, now refining pretty on inventory constructive think hurricanes, for seen But quarter. the turnaround more back and we've the tell so the in you, XXXX. fundamentally if with good. Paul, Certainly out first I would negative. into to season were is We're

So in is starting our XXXX, that so at around cracks terms we're mid-cycle be positive to and or better we're of pretty view I think – in environment. we're

thing across just the other say pretty would we're is portfolio. happy portfolio, with I The the

You with generating good there, but us. goes to well California get and still from good reasonably cash frustrated time positioned, what for assets, time on

about the point see – And got we've new the for of coming of so capital generation us, reduced of from with and California are on peak in XXXX then us so for cash with new off doing I us the assets terms think don't assets coming spending, near on, expenditures. flow assets really in we the pivot the hitting free coming cash I coming And things we're you'll capital kind term. think fundamentally,

I'm I think pretty XXXX. So constructive about

Paul Sankey

the kind with think caught if I you I long up you. relatively guys others wondered distillate? of guess, historic that's case. are been I still always And have

Greg C. Garland

true. that's think I So

our we look distillate we because when at it. a I lot make you how think we're portfolio, do that of configured, like

Paul Sankey

I if forgive then up did I'll a tell this just and missed Yes, way. I – follow you could you you – just it I'll just – ask different actually, what. did me address

expansions and on things was can tapped the people of with is how kind But of E&P labor. brakes issues to happening in markets and it's you the down given have ConocoPhillips the that and guys? clear CapEx scale costs with there. bit talk ongoing of U.S. temper cost understand benefits so we've that's is part Labor Thanks. relatively costs. that where say the coming have and of in One overall costs the the of budgets benefits me I the tight chemicals, not would actually that the that one it's how heard come the successfully little labor a for just down you come Could have about

Greg C. Garland

think I Well, construction a big and of yet. costs, seen not in I'm sure we've costs decrease terms

a I the think on some going brakes as of the ton E&P's up will that capacity. petrochemical Gulf But still Coast. free there's on, the U.S. tap

seen into obviously don't And so I that But plays that. think it. we've

Paul Sankey

understanding And the of because guess Is My your that I uncertainty. again. that wide cost because a got down range it's lower CapEx fair that cost of come very was could certainty.

Greg C. Garland

Yes, Paul.

on, we've upstream would that laid didn't out lot the in business. of projects of just push also kind it's we then down this by others, and a terms in and requirements. of proceed in I frac important we're returns meet couple we think of conversation the So I projects been of our some around with coming return decision. the of because on led big growth hurdle we've through around function delay things. a challenge look One And so But a the an And going there's we CapEx say, doing. you projects. on And the chosen that plan they that going big is is the has in return capital been our see to there, at what's year reduction not had as part

everyone the And $XX, it world So And then going too. $XX But that in are so a Permian. you of chasing Midstream space. tough opportunity, out lot those returns, the sees dynamic particularly looking I had Permian. think returns, a the make just of volumes look at on seems at and in those everyone's And sense. there's the to people you and the coming

Paul Sankey

Thanks, it. Have good weekend. Greg. a Got

Greg C. Garland

Paul. Thanks, too. You

Operator

America go Leggate Please Bank ahead. Lynch. Merrill of Doug with

Your line is open.

Doug Leggate

Good you. everybody. Thank morning,

Greg C. Garland

Hey, Doug.

Doug Leggate

and swings on hear wonder appetite to to I'm the cracker X. distribution, seeing like. if in might us the is when just Greg, curious it. the looks expect if update And dividend to give the thoughts Obviously you it same about I going on on both can you an forward CPChem partners we're some move

Greg C. Garland

are So on it. you I We're the project. work tell we engineering that, next mean would advancing doing I

We on XXXX for XXXX, date FID haven't appropriate that, the would late agreed the project. it's that I'm on Doug. time a guessing for But be sometime

Doug Leggate

would impact That In clear. be to the obviously at just funded words, level. So would be distributions. CPChem other that

Greg C. Garland

Correct.

Timothy Garth Taylor

it capital Doug, those ability, the projects. the credit rating. a ability They they depends the clearly, have finance And structure. great have to bit on help

think yet The that's that owners I But to is to CPChem continue, way. the capital-efficient on see opportunities U.S. the continues distributions comment well. outside so And other both other to that look distribution variable I in that for too add as most policy. the to I'd do only we want think have

a Gulf the looking And second number project. for just there's beyond a so I U.S. Coast of things cracker at that think they're

Doug Leggate

Tim. that, appreciate question, I is up, a My of follow kind Greg, guess. convoluted you. Thank of I Okay. a bit

in Gulf that on a realize export WTI, there see the was of advantage let's be Before remains. the rather, question Gulf as crude than Coast, wide more to to we sweet Brent crude, that it's debate had oil, don't something point lifted my spread. take is but pricing Coast to think, light ban I seems or from up there I whole how my structural to you what ramp But over linking to exports seemed guess crude the really seemed the pivot U.S. say. pricing of in I now, industry is, crude to a be

think from do Thanks. pricing curious crude? you just that lighter just see I'm sweet kind the your Does slate? curious. that challenged Do crude it I'll it coming washes shift you on out? change perception. Or just more I'm leave your there. of of So towards dynamics

Greg C. Garland

take I'll let it. Tim

Timothy Garth Taylor

you're as crudes more now right Doug, to we think the make and The is there to on market. much more as imports for opportunity exports. as right. the interesting about the Coast to you've WTI because pull it Brent inland well export linked Gulf What's got the it,

And so we've over we probably wider seen probably probably bottlenecks actually year. have the some infrastructure but a Brent, to WTI little than that last speak get would a wider expected alleviated,

I from Brent, terms crude mid-con WTI's that. our In versus of slate, think perspective, it certainly advantage positive in a for the that's

I coastal light your to the just or if crude. crudes to looking it use optionality on think you're regions at increases import U.S.

on So just kind I about of rebalancing the is light the crude what's think world side. optimum the

We much an to incentive economic light of change between really and heavy. haven't seen

more a to it will so take that. differential lot drive And

that, available. are about think But is been coastal that crude best the crude the competitive basis. become much the destination that different and types choices regions I So it's where for I more is really on just world think from sorting out the more

Doug Leggate

can Tim, you offer what's wide it today? keeping perspective on so TI Brent stands as a

Timothy Garth Taylor

we've into A, us, disruptions and there's that with of terms valuable. exports a and And space Cushing think U.S. areas move need of that in other from strong market. costs has I to And hurricane out really that WTI, export down disconnect, try particularly the become the more just to export really and the seen capability,

looks to should think to probably that it but time as wider get the to demand over not a up, WTI in that the that we export cost today. transportation – the range we that's be that been we're has comes in think led and that differential, about Brent, there response as bit gone it seeing structurally gets leads pull, It but the has a debottlenecked, think I So wider tighter. probably

Greg C. Garland

has So TI been Brent's weaker stronger. been but

Timothy Garth Taylor

Yeah.

Greg C. Garland

on the too. don't think $X et the I we I that's cetera, probably when formula, turnarounds, that's about of that spread. think we're think fourth I $X long-term. quarter think sustainable But And part to

markets. in you and spread under you of infrastructure, the that the normalization I think long-term XXXX into as We're some $X. get thinking still is get that something

Timothy Garth Taylor

Yeah.

Doug Leggate

you Thanks, in fellows. forward seeing look I Thanks. to December.

Greg C. Garland

care. Take Okay.

Operator

JPMorgan, please from Gresh Phil ahead. go

is line Your open.

Phil M. Gresh

Hi. Yes.

muted you challenging standpoint, on as a First with have M&A, opportunities? of organic capital do you think question that is some at what spending of opportunities it kind equally is, or you you're capital there's an go-forward from M&A this outlook of look as out about as from basis, allocation the as there talking more the perspective, returns a

Greg C. Garland

look high to still us. Valuations

think particularly if look So high yield, lot Midstream that highly cost space, have levered, capital, I you at do out that are to – of there. you the of a compete folks trying high

do in coming there's some consolidation the going space. be I So to think Midstream

plays see that you assets it's some we'll have XX at you changed value So that create to how how times, doing when out. But look at for of your hard hands the just see shareholders.

Phil M. Gresh

Sure.

Okay.

affiliates. quarter, Kevin, lower headwinds flow equity for question Second this deferred pieces taxes, some just on the from cash statement, there's moving some

those maybe half number deferred such talk high tax, about just outlook, a elaborate since your the in it especially on of could year. first and you was If on the

Kevin J. Mitchell

depreciation reflected that into which is that Phil, year lot a for service the bonus depreciation. benefit recognizing one taxes, Yeah and impact deferred year this we year of so on XX% had this of assets been the going

start-up XXXX, the we of the backed the have being that cracker XXXX. of first into quarter With recognizing off pushed in that of benefit

so And depreciation cracker. of a for in third on quarter recognized the what we had reversal was the saw you year-to-date what

expect a just depreciation as first normally XX% some that. makers it the a drops to offset bonus think XXXX placed you'll dollars XX%. of you'd And top impacts from XX%. assets drops other XX%. as depreciation, there. I reversal see so the – some the get the capital In was billion given still you'll And positive In year essentially XXXX, basis, zero It in tax profile have depreciation of deferred of the on expenditures third on tax when And then the quarter, you you of And normal from of expect service, it the couple a tailwind that standpoint. reminder, go-forward then deferred to tax and again. depreciation, quarter, degree fourth normally would is you to benefit the

So deferred future to tax expect a benefit in level some, normal resumption to of more periods. a see

Phil M. Gresh

then from And just storms some you've – on a working normalization had helpful. quarter? the year-to-date. that usage Very Okay. Is or fourth reversal something capital, that you big the in like expect pretty anything

Kevin J. Mitchell

piece inventory the And associated Yes, build. working will. has on you been year-to-date of with the drag big capital

And is would full carries the to the come But benefit see fourth because it don't that of fourth to that can the the cash back back into see in come some that expect some so I in you quarter. the as quarter. of some of Typically quarter expect quarter first in of fourth case. see the usually over

your The to just the distributions I'm around The CPChem. equity distributions, impact quarter. was other so lower affiliates from in thinking original there and question, big item, was back third

we good cracker. distributions the bringing fourth is the quarter in Cedar in and not in anything their had given on quarter, we're quarter, Bayou second So nothing new back expecting third and up, the the the that focus

the flow anticipating And down, slightly as new the year. forward with less from distributions CPChem, into would coming you you think have would with the so incremental CapEx than look XXXX, cash But we for the project.

reasonable at $XXX you've somewhere year, us. million to significant, got of CPChem the $XXX out probably WRB. bit that as – in DCP distributions million coming So a a And they're I'd $XXX to to for expect not distributions but $XXX range then little to be million million, rate,

relative equity cash to years. in earnings on bit it's this where down prior come XXXX So year been a little I the think and will statement in undistributed that

Phil M. Gresh

remarks something Yes. Colonial on did the And refining? in timing opening about Pipeline mention helpful. you for Gulf Coast very It's your

Kevin J. Mitchell

mechanism that realization, to And actual of into volumes the Yeah, works relative when was that benchmark to relative pricing in pipeline. in marker the way of I timing terms the context the price price did. of realizations go price

in So Gulf timing all see effects. the often phenomenon that's a It's we Coast. the

Phil M. Gresh

Thanks. Okay.

Operator

Paul Cheng please from ahead. Barclays, go

open. Your line is

Paul Cheng

Hey, guys.

Greg C. Garland

Good morning, Paul.

Kevin J. Mitchell

Hey, Paul.

Paul Cheng

Good big look afternoon. And on once quarter? you and cost the estimate Several opportunity you well, us may Is can quarter? first that that questions, then, the in for any of quantify is hurricane, there fourth in total cost provide? like what all the third the can – the how that

Kevin J. Mitchell

hurricane. costs broke actual out Yes, Paul. associated I the mean, is This we the with Kevin.

margin specific variances the kind you mean, a we've that I from given the get haven't and volume of utilization impact. given. can We there

Chemicals, forward two in the quarter into months activity look repair a compared of you've and the you downtime got the see in way third fourth to quarter. to so this, the we close fourth month As in quarter

of element higher. going So be to the that cost is

our double treat pre-tax, It's that share the $XX of with was could special to quarter, fourth we'll the CPChem costs It the in going be in million So be north third But that. item that. consistent of quarter. third quarter. the

on impact And Chemicals. then other volumes So that from in to is noise. element going an underlying the be basis, won't the

we high is for and And CPChem. to that kind domestic rationalize think to a one utilization. So of way it, of O&P production guided XX% about third about Cedar Bayou

of production kind third to on impact and a of you've two-thirds that XX% for of that offline utilization. got So the get you quarter,

Paul Cheng

the And, do you production? – the kind Tim, once to before of there full use? is you start-up. ramp What long we cracker How should expectation think you take

Timothy Garth Taylor

first commissioning the to of days the of at the tuned. piece shake say, that. ethane Yes, that I end down sure of Normally if and you equipment let's the the the to still any kind expectation quarter, controls on things, be all would are and really you're XX XX barring instrumentation think – make

over the design see would it should we But ramp-up if to a run you do mid-year, by you that, expect capacity. quarter. at So

Paul Cheng

Okay.

Greg C. Garland

polyethylene is I with the new would Sweeny already Paul, running. So, capacity, out just point

Timothy Garth Taylor

Yeah.

Greg C. Garland

total about think the the system. in just So balance

at we think get get running the polyethylene new at project. pretty Cedar, and be As I capacity to plan we back the that we quick, up up for plan to

Paul Cheng

Great. Tim, pushed into because Harvey is being of there any turnaround XXXX? activities

Timothy Garth Taylor

a pushed with turnarounds. our turnaround Ponca schedule. We're haven't in now. No, sticking City really We right we've, is

response So But a as Harvey. some on to that. we guidance unusual nothing gave

Paul Cheng

after to then there the do final reasonably other turn? capital there in with the the large that business. and on items is that is XXXX, questions. that than, question I large And becoming is better, the final for or special NGL, commodity any IMO market is performance you adjust to turn in internally that the market for better, really have order the in project refining all we mind? get or curious mean, disappointing even guys I'm the much two still anything financial commodity from can One the it's standpoint a say, And company that, pretty is waiting

Timothy Garth Taylor

Okay.

the I'll LPG, take So Paul.

is dear you're there's market. U.S. it's So the that's very in Propane market right, a fundamental. tight and market, and the the

just working something that I through. think we're that's

now capability rate. is the the we have done to design actually rate to do got we've what of now XXX,XXX terms month. loading the In up frac a We're XX cargos

the And right. costs and that think logistics progress for not on cost, to The work how do, we all on the you we so continue making we're improve I so sufficient. work And on side the volume products clearly to that's that. then

at we terms, think then we and the particularly of terms side pulling the in that focus piece. work go and But both we we'll commercial the contracting So make let's keep just that. let's really commercial efficiently. how away side, let's look sure the about side I cost the on market that's that say work the at run And and

pipes this quite look think and case, look well. do and out our I we to we what doing expand So are that's we NGL those. in at going We're

those supply things see that's think see. to in work on coming. we that to are through continue market to those and control. that you to exports NGL continue So can to results the And improve change I trying waiting have going extra grow, interim, to you the the you're But that

Paul Cheng

see the Tim, or how to hoping you in get guys the costs? improving is you of big the improving that are terms margins or opportunity

Timothy Garth Taylor

drive and that basis. for in probably is one $XXX $X.XX think looking us for that slightly maybe is range I short-term gallon less, realistically to on way a on improvement try is to and that maybe something think about the $X.XX, you're a million, Well, on terminal that of about

Paul Cheng

have side terms to kind in And the guys XXXX, capital you. Thank related refining on you of that? investment any mind of in IMO that the Okay.

Greg C. Garland

at a it and be I Yes, diesel that think to lot I make incent Paul, would probably the And there's cracks, of going terms of that. so us change, think know kind in but I around in to enough it's constructive it's we looked industry the don't exuberance spec of an investment.

So, facilities. and through really X.X on that, cokers, slate I so Ferndale, at in and it's anything in spec the and assets million day should can invest on the of impact we a it think they to right of just change it million are might an River, constructive. now, options. manage ship But going destroying It's Wood and then XX how barrel adjusting have How that. upside bit barrels we at And have owners in impact terms Bayway that. a the we – market, no our be impact it the little to crude a and look around plans our

describing so And I the cracks. we're IMO don't think upside terms value spec in lot just of the a change yet to of

Paul Cheng

Thank you.

Greg C. Garland

You bet.

Operator

please go Howard Weil, Scotia from ahead. Fernandez Blake

cash Blake back Fernandez discretionary line I the - Kevin, line activities? Inc. Thanks. from open. the Your Capital one good provided Folks, go contribution, wanted I for statement just up wanted could. is I if other pension (USA), that cash the in Scotia to morning. that to item is to in flow operating embedded clarify

Kevin J. Mitchell

Yes, (USA), other right. Blake, statement, it Capital Blake that's Scotia cash flow – Inc. is. It's in - the on that Fernandez

had kind of typically year, this some defer annual for it not looked that I in looks kind is payment similar time? driver. contribution XQ. guess I'm like an the sure is, you I last of a something of occurs this period basis when or Because on But that question Okay. my of was does kind that if hit

Kevin J. Mitchell

of last think of for it a one, time contributions meeting can but plan. I our sort into in do done pension I think. discussion on quarter It as third don't big as payment We it any think did what in not you a view in period out needs of we've enough; cash this as of I flow. year, was was the terms sizable our called this not even the we year big

was in but there's little be good one, this that of with of while. take we the But elements magnitude. care Blake it. a I (USA), the most Fernandez including of order still Got Capital will for the Scotia non-discretionary, it should other Inc. little think I half while. mean, of contribution, of a for something this -

sense XQ? anticipating, a thought, where looks business, shaking the in going XQ. It like have Okay. actually margins was give of in to a expand chain I the but of when kind you second And hit can downtime. to what Refining impact? my we half guess to ignorance I are the question, or any see first Or kind here down I'm and in margins similar show industry lag than Is you to the just out of lower curious due in margins a hurricane impact was year. you the were see it's there where I come currently us in of Chemicals

Timothy Garth Taylor

Just the a The fairly still real consistent. margin. market margins quick comment on in the

is in the you're the what think the seeing downtime cost extra CPChem and I cash the of terms cost. of impact

actually And so the consistent over slightly indicative the quarter, are fairly have margin for markets improved in – that. but the

in on IHS If data, roughly range the that cracking you look at $X.XX side. pound per

standpoint. that Blake just seen cost we we huge assume a Fernandez right? the with lower clarify, component just normalize facility that haven't constructive has market seen we've would to spike haven't in But online, Tim, that. Inc. the obviously I from a - polyethylene, – but And, would Capital seen as been strength it (USA), So Scotia comes

Timothy Garth Taylor

- Absolutely. All Capital Fernandez Inc. Blake right. Scotia (USA),

you. Thank Okay.

Greg C. Garland

bet. You

Operator

Please go Wells ahead. Fargo. Read Roger from

Your line open. is

Roger D. Read

Good morning. Thank Yes. you.

Greg C. Garland

Roger Hi,

Roger D. Read

at on best still too, just here up you buy follow near really right to Maybe a in – hesitant the to going want really the down Midstream just it know but modest, CapEx grow XXXX the you maybe to as want you line to guess the growth we going NGL here I I and you you're the side. term, without valuations to little in the with mentioned opportunities about really CapEx ahead XXXX you here, of specific wouldn't too don't getting if market on volumes. stays be anything for frac Midstream are build, see the XXXX looking terms think how area? continuing but in

Timothy Garth Taylor

products. for Well, around on storage at we're system on our debottleneck exports our certainly instance the to Beaumont that, on terminal continuing crude, refining looking clean at so

projects. are As we we increase system, and the at the crude think around on the smaller ways look typically options products side. to both Those

as lower what interest. On the there. still we at of we're side, lot customers and that. follow a as think is still is activity out look of piece on they a clearly opportunities period a opportunity this of well. see a I in to upstream years their I But that's But side we're are And – couple But shakes of deferred all that pipes as as the upstream, I'd decisions and of lot thing the there's out seeing commitments kind think about bigger CapEx. midstream our was that still a well that that project the the so going the from of say

And to resource. continue support we're shifting and those to rhythm that in do around system, I then our do upstream of matching the and do those what the projects more we we're And think network. so terms that integrated things

Roger D. Read

a better So the Is that take where would sound of if there? kind get infrastructure get like should an reasonable that starts to away tighter. margins environment

Timothy Garth Taylor

that think I be would – Well, two yeah, things.

mid-con today But, As the right seeing you're yes, think out seeing Greg well. now I infrastructure for of pointed out, a of competition lot that Permian. responses out the particularly and of you're as

happen. So end, producers all in you from make need to those those But commitments to the opportunity. together things come create things the

the I dynamic the most it's around where opportunities. segment that's think

we'll at standpoint, think sense. from return still and the opportunity is, that to the I see So are the question now standpoint make right returns a opportunity, continue look there that

Roger D. Read

changing slightly gears then And Thanks. CPChem. to Okay.

the this If quarter, would third presumably that. quarter I'm for �� specific this make not to then to build in you up little roll the in first half And down curious recurring? an We ran through. that just will next expect a fourth borne here, quarter of out year as in bit a how special be that as kind I going in probably part in mean, inventory I'm were that's the it's sorry, called third quarter quarter. is but treated cost going item the the they nitty-gritty, of not the be – of either to to inventories

Kevin J. Mitchell

Yes, Roger. It's Kevin.

I yes the So both. is think answer to

as of back inventory. of see So comes in you terms inventory, will rebuild everything some online

again will the quarter. although as be build. match repair we because inventory costs, the volumes did yes, quite And sales won't on the items then, treated third those will So of be the special up, the utilization in

Roger D. Read

Thank you. Great.

Operator

Markets. Brad RBC go Please Capital ahead. Heffern from

Your line is open.

Brad Heffern

a repurchases. make how of call the I any talk $X historically? as new about feel There's $X differently Hi, so repurchases cracker about billion sort comes of you income should a everyone. the on of range online Does talked that been annual billion and Greg, guess question on improve that to the equity forth. lot about you've

Greg C. Garland

long-term closer going to we're although question, to generate allocation and flow. XX-XX more Long-term, you capital. without this year the comfortable think cash we're flex so XX-XX is around how methodology, to look at as I allocate free Well, still we're it. XX-XX our we'll good But still that. probably And I think like to with when need of we'd guidance we and appropriate

Brad Heffern

your made IDRs do of Got Okay. future. the need it. you switching or how some the that peers, switch. now near obviously peers, have And you've then with to don't of I see the any more But talked anything past about your PSXP, to think in in

thoughts updated any there? So

Timothy Garth Taylor

a Well, October. did we you'll in hear successful and that very financing it think I close

we think, think I you've have that I showed right So structure. had got long-term, market. capital access capital the still it to optimal But to

the value But address deliver to topical for us you certainly something LP. think think yet. there's we place a general issue that. that seen haven't time as for a partner I how we I and optimum about that So discussion in the a But it's significant of very and a think and the terms both

about got think and as always think And structure IDRs so MLP. the you that capital your to I mind at keep in you've

Brad Heffern

it Okay. Thanks. I'll there. leave

Greg C. Garland

you. Thank

Operator

ahead. Spiro UBS go Please Dounis from Securities.

open. Your line is

Spiro M. Dounis

the question. taking for Thanks Hey.

Just to comments. prior two on up follow wanted

actually Greg, mentioned as peers times multiple valuation yesterday well. something mentioned is one that of you XX one, your First which

one-off I you being So we is hear when what these bit driving the like, now that you levels and elevated it these deals? equities, at public and done out deals equity Midstream guess trying public dislocation seems look right just between challenged maybe I'm yet to think and they're figure a just at asset MLP about wondering

Greg C. Garland

It's out little see those I there. now, feels so Permian a volumes, to to think There's going me create shake deal. at down looked XX when and to it mean We're it XX. the and I deals. out. those folks do times hard XX I just think trade they're value on we not XX those where simple. just and we'll and does frothy a It's pay right to passed times chasing to a lot to we of going pretty deals, you're

the projects. up that do and just just to cusp thinking think mergers kind start returns So you'll this space. I And step. in in acquisitions see you're do Midstream I to see we're that Midstream of the think to space, that. so is partnering about though, people going have telling of on in And not we're or going that's to people is – that first you, do what come I think

said constructive of we think I still tell Permian. to kind out still of to there's we're late pretty Sweeny. think the order an you we the months going see that's And play in frac at XX done. I'd logical We so on next, think XX early flow. the ability done additional capacity volumes call that next feel the about get to to get still good I going And – we over year, what haven't it, but we're that that or it, year in space. this that are think Midstream whether good opportunities the We

a we flux it offerings in way. challenged. type offer of think confidence it's people of And kind have can You that DCP I state producers of are want still of going lot now going good to the right to a and Tim? MLP be about about in But, XX think – assets that there. be that. you yes, if in land, the we're to through

Timothy Garth Taylor

at times Yes, multiple, XX significant you've growth. say just to that have I'd got volume

volume people that that way could we with the that. risk And some at I synergies you be could growth thinking that's when to really there's from existing partner going see deeper perspective, or So they've only got there are our But that their we that. think large look systems. is do

Spiro M. Dounis

those Yeah. No, that makes comments. sense. Appreciate

guess figure PSXP within is camp which out achieve but you again. create Or you an fit guys look staying maybe rate. at on to going the run to $X.X billion the equity as you're overhang way that you And you're in at Midstream of here, issuance that Greg, Second past I and don't target. PSXP right distance Trying other sort of on it. look going one forward with crush to sort way one, it to striking it just it one theme way, want mentioned hitting is to blow to now, it, equity of

So at is Which maybe just closer glidepath to how sort of a it? nice you're that runway. way maybe to looking

Greg C. Garland

for to at I guidance. I the we be But But like if looks portfolio quartile necessary And XXXX. at that. market think I We'll that think $X.X to to grow fast And really in value could tell run that. for we and portfolio, the with consistent. that think is XXXX, as unitholders pretty blow assets do post PSX. us top in going to. thing the we I how grow, about going think be certainly you'll have we us can build that to of assets been that the is of we the the to see the of shareholders at we've end through don't what you past the rate EBITDA We're have we emphasize billion rate think wanted want consistent

Spiro M. Dounis

color. Makes Thanks, the everyone. sense. Appreciate

Greg C. Garland

You bet.

Operator

ahead. go please Citigroup, from Khan Faisel

is open. line Your

Faisel H. Khan

Tim about saw basketball I was Good just on I in waiting thought queue, here. was team and afternoon. Phillips the as XXers I I Greg and reading Thanks. the

Greg C. Garland

maybe. tall yes, Well, enough. not We're

Faisel H. Khan

of of there. just LPG to $XXX the want Or one about $X.XX enough. on were just made a you couple sort Fair the sort comments the back you capacity? number sort number? uncontracted go side, threw that on LPG of I to Neither loading talking how am to million – out I. of of Was you the that the of

Greg C. Garland

our a product going so in those made on costs. the about Well, we've success are costs A, that. there so outside, thing it costs. logistics there's Thinking contract. the what then shipping we logistics, is: around on things think propane, the We reducing acquisition there about loading And is bought rates,

have all the But it's there's combination do then above of the your you what unit. also to the to side purchase really how work realization, of and the the way trying I and cost market. contract and that always on work think commercial on of operating drive this course focused working of we So product realizations and as you spreads keep that. a on on is then that's increase we're to the a in But

Faisel H. Khan

Okay.

whole? blended was integrated that the complex a a So on as entire like number

Greg C. Garland

and – Yes. you But target lot look I'm that see it LPG like and saying a at you a just when take the where of you is $X.XX go. going volume $XXX there. when terminal take takes at about that's to you to gallon and million, we'd we'd put look it's a work – but out to that's and, – like the

Faisel H. Khan

described then Okay. the TI. Are the just all Got right existing bottlenecks bottlenecks? you stuff I understand on you. Brent is the was the telling seeing And you're of storm, that that sort reason? now left Nate. pipeline you existing or pointing But over wide from a diffs there seeing towards of and from tropical that's bottleneck hurricane sort you some for around

Greg C. Garland

higher. Gulf, the of one find up of I a just there's tried that lot out think spot the today are on of space I to pipes that rates that the speaks for to And if pick Cushing that demand movement. think you to you would

seeing the the Memphis result pipes, market as of want with that get think, as you created well. dislocation given Brent, begin that. we're that. mean alleviate The And move to kind a of those pull Enterprise, still When export But you're sets the probably using new the strong to a will so south. connection on going with WTI I will that start some new pipe I order in to Sealy pricing it's to of Sealy,

to be. So just it's to interesting be that watch going space valuable continues time how pipeline to over

Faisel H. Khan

next I on $X.X the it runway last to the to last it close pretty financing Gotcha. to of your dropped end mean, billion by then this looks this – And like PSXP, growth and the just year. solves or

actually you the do now at So need to year to and another of all and between end deal PSXP? do next

Timothy Garth Taylor

that projects So, help billion the add to we with to capability maturing that do supplement we are that total, the and $X.X to EBITDA organic to have then both dropdowns. have

standpoint equity ATM. an think market anticipate your try you And that minimize so a need most access access the can we we we to But through value. that this from is the to I create anything where to

think a we achievable very accretive so the to at it's pretty gap LP. to compared good So small it's return back we had, and a what

Faisel H. Khan

Got last to And then again just guys' what are just number me, all of an the us end where to targets run here? X% capital and with your that to of you question the coming want you. see for especially over are that projects on the you long remind year-to-date, return employed, sort get sort the can

Kevin J. Mitchell

blended of our across across generating really would that's back see And is return we'll a Kevin. are of at portfolio been XX% capital that entire north the you where minimum, to above you – you back be as a and Well, a this think on to want our Faisel, portfolio gets you higher, see level targeting the the kind different cost there. getting of Obviously assets see as But But you're we we different historically, I of overall to XX%, if expect generating capital. level. look take we've XX% return at. to that look returns always segments reasonable range. back being

Faisel H. Khan

guys. a Thanks lot, Great.

Greg C. Garland

bet. You

Operator

Raymond ahead. from James, Jenkins Justin please go

is open. line Your

Justin S. Jenkins

Great. Thanks.

Permian, mentioned we with side that the project? update on Rodeo of Midstream in frothy Greg, on you follow any but of had, a the but most covered I area organic side. think out quick that up maybe on I what devaluation the some the

Timothy Garth Taylor

just I'll respond. one, is – project that Tim. On the Rodeo this still working. On

goes decisions we're seeing customers until, the of just I my that and it they kind deferring sort options the think think, energy comment back through to markets. producers I in

So I interest just gas just of there on think lot did well continue side. on out it's DCP develop the NGL one something we the crude as course as and side the a to both of

where can just have organic piece accretive. value maximum drive you more put can than be and certainly So it think to make an accretive it the that together I to does But thoughtful you acquisition. if think about you fit I is inorganic

Justin S. Jenkins

lot you've towards we've those anecdotes differential I issues crude from think Tim. maybe on Venezuela, in and that, then Appreciate side, quick from away apologize on any diffs issues heavier and overall Perfect. this heavier the covered maybe like real your XXXX? if And a seems quality already, shifted but But of barrels. with sourcing views

Timothy Garth Taylor

Clearly, have out OPEC agreed pretty we've quality the issues No, of Venezuela. heavy heavily the grade. cuts the on impacted

crude So differential in. you've that that heavy has the seen filled of medium light, come Canadian a light, gap. lot But

system supply. impact around look crudes shifted buy the availability our where in through which we we think so significantly But there's as still – we've any has And seen not and options for about buy. I to

that. spread. seen continue really long narrower So couple would what as as cuts the continue keep But heavy will haven't you've expect that light than on OPEC that seen we on to years past limitation a in the

Justin S. Jenkins

a it. good Have weekend, Appreciate guys. Perfect.

Greg C. Garland

You too. you. Thank

Operator

Thank you.

reached I available to turn the back over questions. for limit will now now the have call time Jeff. We

Jeff Dietert

XX. you Thank of your all and interest Phillips thank you, Julie, in for

If Rosy, C.W. call Thank you have questions, or additional you. please me.

Operator

you, gentlemen. concludes This Thank and conference. ladies today's

You may disconnect. now

Phillips 66 (PSX) 27 Oct 172017 Q3 Earnings call transcript