PSX - Earnings call transcript Q1 2018

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Operator

Welcome to the First Quarter 2018 Phillips 66 Earnings Conference Call. My name is Sharon, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note, that this conference is being recorded. the to turn President, Dietert, now Relations. Investor will call Jeff over Vice I begin. may you Jeff,

Jeff Dietert

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

Greg Garland

We operating Thanks, million, for capital. Adjusted $X.XX $X.X were the quarter you morning $XXX and cash in generated flow share. joining excluding earnings us first per billion everyone, Jeff. for Good today. or thank working

solid reflect our reform. Our impacts tax the diversified of portfolio benefit positive earnings U.S. and we've from seen

reward doing well. with well value long-term attractive strategy, generate can are We're significant solid all by shareholders achieved strategy with new our projects. to milestones shareholders to the return we complement projects returns designed distributions. for and and is this our continue strategy We've developing enhancement Our and our executing growth that employees completed our

we announced full recently be up the construction pipeline Basin the well is Partners from new cracker the Permian will Sweeney The The our midstream, open Oak will With which and we to CPChem fully and to season Refinery. provide project. reached Gulf and An of complete during our hurricane chemicals expect XX the increased In at project determine downtime petrochemicals transportation scope with operated design spending or recovered in rates could from Phillips major pipeline underway barrels from return To the this shares single pipeline and quarter through the returned destinations bought day of in market $XX billion and billion. share $XX with exchanges. efficient at million close Today was $X.X repurchases XXXX, in CPChem formation dividends, of largest a and our in completion XX% to market which in the we'll at we've to put billion, program. repurchase of the petrochemicals our energy the Cedar start-up the quarter outstanding Coast the world. our is continued at cap of back over All Since of one of most shareholders. cap is spin. time crackers share This company inception milestone venture. contributions is proceed extension the system. XX in, Bayou. repurchased will from also and Gray exchange $XX During more. our new U.S. cracker Bayou a crude we is April. our now share over the joint transaction capital it's including capacity per perspective, our shares Coast Gulf XXX,XXX ultimate billion distributions oil Cedar it caps

PSXP on-budget. XXXX. day DJ by owner primarily in commitments completion largest has and Phillips Phillips Gulf be and XX% The the will expanded to the Commercial where the it plant fully gas progress by operating for pipeline approximately XX Charles Beaumont and Gulf The day. will production could providing to is the design outlet in is capacity expected total markets XXXX X DCP interest. for Bridge. owned of which project to Partners two-thirds The an adding pipeline Partners. XXX bring of venture the total extension XX% scheduled this transports Gulf Terminal about start The in storage be pipeline the Coast holds refinery. capacity by a the contracted also DCP Permian Permian DCP to capacity Charles of from Basin crude to construction in the well ownership of to pipeline St. barrels XXX,XXX two a pipeline continues Louisiana. a Mewbourn million in natural take Texas oil Lake provide is has Coast. Coast Charles per both reactor nearly mid-XXXX. of to end feet and in state-of-the-art of or At Basin facilities storage. project Express the refineries. million Lake Beaumont recently plant and XXXX. X the unit billion barrels The of This the X.X X with day the Lake as the our is Lake along quarter high our Bayou our XX Existing per quarter modifications liquids gas expected the O'Conner the expand have pipeline investment planned backed natural operations one-third at product and James, completed showing Hills XX value be Bridge of third in and XXX,XXX to Bayou we a is fourth million crude Charles year to cubic operating increased the Beaumont end begin XXXX. to pay million which plants Basin. anticipated feet by optionality. processing is in capacity to end. Units to in to is growth subscribed joint from operating refining, fully up day with on capacity cubic Assuming barrels XX.X pipeline refinery, continues participating equity be fourth the barrels day optionality was quarter is replaced been continues run field to technology. we the projects pipeline SEC the is we and at to Terminal FCC the over At crude half are Wood the will and supply completed of closed in is gas clean high from project. Phillips The domestic is segment and customers crude more Construction we're Texas per an premise. grade unit completed second by at In further as per fully of our long-term expansion line Sand is the data complete and crudes completed barrels improves is quarter, modernization subscribed. projects pipeline on-time The Bayway The were expected River early first one expected to products system XXXX. the of of

Additional improvements planned are the fourth completed in to quarter. be

Finally, four the we're of safety by AFPM recently excellent in very honored that XXXX. were for our performance refineries recognized

our Phillips Our their received were given the safety XX culture. by for very annual is to proud people of strong of the refinery refineries Alliance which the recognized The also Safety Award Distinguished or Top safety and their Sweeney Tier commitment Bayway Woodward excellence. highest I'm industry. and safety award

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

Kevin Mitchell

to We on million first Thank with excluding special gain had were you, million. on million quarter quarter Greg. that million. netted of items million Hello, were After growth earnings $XXX Slide $XXX adjusted items, was flow Capital was per spending spent $X.XX overview special Operating the share. a $XXX X, everyone. earnings an $X.X with Starting excluding $XXX or cash working billion. projects. capital for $XX

transportation to adjusted and Quarter-over-quarter in and chemicals, improvements $XX results; earnings distributions lower were $XX prior primarily earnings benefit the with results, of other our lower due X increase up $XX by taxes mostly income and the our impact quarter. segment. $XXX in the million quarter. X the consisted share adjusted refineries. offset quarter decreased First compared in $X.X by portfolio. of quarter was of quarter Slide shareholders in lower driven certain and from by $XX fourth shows adjusted to NGL in quarter net first operating turnarounds billion was million million, for highlighting adjusted dividends. $XXX at fourth net quarter Volumes first marketing; costs. of diversified Slide million midstream The compares million our income the by was midstream due repurchases to the refining million and

Our inventory first quarter positive impacts. margins earnings and reflect realized improved

[ph] at the We continue quarter and to about XX% the cargos fractionator. export one our well month averaging a facility, utilization Sweeny at nine at run Hub this

remain was from EBITDA the adjusted Midstream However DCP in of the distributions quarter. to The The Gulf income cash has challenged. increase to quarter first taxes. improved volumes. Coast lower [ph]. incentive $XX generating Asia growing, net is steadily of timing by positive it's U.S. owners due to million financial our distributions, $XX million it's partially hedging increase and making margins and lower the previous gains had condition, was DCP offset flow

was $XXX Turning net costs $X.XX costs from for higher to to per XX%, previous of to than decrease the the return higher In increased barrel SA&S O&P the fourth excludes decreased X quarter. income with Global to the product last $XXX polyolefins, the compared adjusted $XXX impacts. and quarter. X; points. of income utilization was olefins turnaround on Chemicals per was clean margin million, joint In quarter from Both, segment our XX% barrel, fourth Slide $XXX were was net the million first a percentage Realized the income from turnaround margins quarter. million million due and increase XX% net WRB. were fourth quarter; utilization product in Clean and venture utilization quarter. crude by $XXX turnaround Adjusted up was million, $X.XX Bayou turnarounds. volumes Cedar up our XX%, Pre-tax operations. $XX XXX% full from Refining; an due million lower reflecting this yield facilities yield for for in adjusted

Basin, view our than million, with margins refinery. heavy in from to Wood higher actual net turnarounds differentials. Ponca income. offset impact The $XXX X:X:X by and covers mainly million the volumes. in adjusted income due from this margins $XX decreased at previous last central In net more million X costs increase associated Although capture quarter. X% decrease decrease Alliance the mostly was crack $XXX lower The turnaround quarter and provides million margins. driven by West change Boga adjusted to of adjusted to in completion improved a wider In specifically [ph] Bayway River the per higher the refineries. net at was turnarounds was income from adjusted Slide Coast Coast, of net crude fourth was In total, the the from quarter Canadian. turnarounds; market the million, differentials, market quarter the in from decreased $XX $XX.XX to [ph]; regional $XXX $XX to the mainly chart X income the realized oil refinery market the an adjusted decreased the down refineries. compared at $XX.XX first refining's net net The realized volumes due million Slide lower income for quarter a was the fourth income and million offset Adjusted Canadian due barrel crack on quarter the crude of Gulf first Sweeney $XX higher corridor turnaround Atlantic by due City major was quarter first realized X%, partially

XX%, an of on in the less and overall the our refineries. quarter per resulting fourth part in from premise margins barrel. of per the Our in XX% quarter capture by the up differential. from $X.XX per crack. $X.XX than products realized the WTI/WCS for improved distillate $X.XX by in is gasoline more Market per by better the margin of impacted $X.XX barrel was were first lower widening market the configuration advantage which made than previous X:X:X capture barrel market realized from $X.XX per quarter. barrel We barrel quarter secondary Losses was prior Feedstock

compared associated improvement driven differentials with by $X.XX The by RINs impacts. includes and was in category with costs. per freight, margins mainly barrel per reduced outgoing prior quarter. product realized barrel the inventory lower $X.XX other This The costs RINs, category

by million Let's income adjusted move and margins XX. due higher operating fourth this $XX was on quarter. million In million, offset net Slide realized marketing first and increase to was quarter and the specialties than $XX net costs; Adjusted volumes. other, marking was to taxes the and in improved lower income partially $XXX lower

prior increase quarter first per quarter of exported demand million strong the $X of the day taxes. an we during quarter. net income was mainly from we refined Specialties products, During to XXX,XXX export million, the lower continue adjusted barrels due $XX see to

to seasonal partners reduced in completed from million businesses lives to our by funded inventory Power costs. marketing joint integrated We the our Slide both to $X.X the and Cash balance Working Power capital flow through contributed sheet. greater capital base expenditures we working XL entered business. During We [ph] with shares over quality restructuring cash to increase tax of costs XX investments, cash an [ph] the XXX with and corporate quarter adjusted provide of Loops compared to oil the reflects the operations about The our our of venture, of billion prior quarter quarter. change builds. lower venture $XXX in with during JV the other of on $X.X The was $X.X in this capital and first base shareholders the the corporate to normal highlights quarter changes on $XXX the shares, their net the billion dividends XX and restructuring XX largely with provides $XXX customers. the million solutions million million and million Slide we excluding rates $XXX billion. million had oil XL approximately and segment manufacturing agility create repurchase cash Loops impact due $XX the On impact from in distributed ongoing outstanding. million quarter. year

billion also from of We issuance received $X.X debt. the

balance and concludes This Our ending of the was results. cash million. my financial review operational $XXX

be quarter expect we O&P rates and pre-tax guidance global utilization second a mid-XXs. line to cover for to We rate $XX and million with second million in worldwide I'll and In and the quarter increased of chemicals $XXX expect quarter associated expense outlook our corporate reflects the after-tax. In the costs in we The debt. to refining, questions. million be anticipate crude interest between a we'll Next, million. With between in the issuance first utilization the items. other in now $XXX to $XXX that, few be turnaround mid-XXs expenses come open

Operator

you And from have ISI. Instructions] with question [Operator Evercore a Doug Terreson

Doug Terreson

morning, Good we to one equity X% your impressive. that and strength financial be that's to see on congratulations having in repurchase don't of everybody quarter, able often, the pretty

as is in is seems question of be? provided still and the how AMO fuel coming lot unknowns the specifically, you the thinking likely in and about that phase my to And be of many through these of availability marine deals years. the area? along to stability also So design when that type likely think the to are XXXX how products transition guys you that market about there about are still the goes it marine field blends, challenging as market of and compatibility And the are in issues are network

So AMO XXXX. two questions on

Greg Garland

talked category, barrels We last the about -- diesel the star marker diesel do day, evolving. to yet, of the million sulfur don't detailed we know expect a we of X we into X increased significant they're bunker million still of demand. kind influx While the content have fuels, a specifications quarter

expect big be gasoline of do low also. as a time mid-year feed an tanks sulfur to stock we for support fuels that. preparing well cracker some which blending we're around bunker next expecting so for to perhaps We're Secondly, shift start it's year infrastructure attractive and the markets turnover the will and and cat

margin is distillate distilled portfolio XX% IMO positioned mention just year, well million about EBITDA. we've our barrel would I refining is -- $XXX assets change transition, high existing are that things the in last $X of very this one yield, think I that a got our for

to weigh In heavy addition, crude oil we prices. on expect fuel

barrels of total our or crude portfolio. a XX% day about about heavy of XXX,XXX have We

a dollar heavy barrel at the in barrels per XXX,XXX about day in discount every change than capacity peers, We have crude $XXX more million is coking EBITDA.

portfolio the our it So way is today. well stands positioned

Doug Terreson

it at but supply fuel of game. of expense make follow-up sounds marine would seems enhance seems mean diverting on might it a like to supply that or it and -- all vacuum the point like pool. it It that gasoline it I marine to crack around I zero surely wanted would sum just about straight that the the your also come gas somewhat fuel

So would practice industry; the is one? we before? that, seen with you that in or how you this Number something have two, disagree been employed that have done guys this number is commonly frequently meaning

Greg Garland

which a expect that This to from feed. diesel months activity Max Max as be cat is the something we more converting cracker new of well pulling gasoline of as to the summer during some

diesel gasoline support supporting I as as margins cracks. think we'll well

Operator

with Mehta from Sachs. comes question Neil Next Goldman

Neil Mehta

I below the as of year -- to the spend speak was that can and around question kind rate guided whether just timing guidance run of was is early it the First had downward certainly, well? capital I really there know you the just you've CapEx -- to just spending. annualized but factors a and to it's in

Greg Garland

with Neil, X:X. I the guidance think we're around the consistent

I this think we the we X:X knew that were going be when year. place good us first for but we still lie is guidance plan the to were in put a we little quarter and

Neil Mehta

question think part the other how beat, dynamics a quarter; NGL benefits there, other was the driver the of Second can should those and on of forward? what to about going inventory run some rate that we speak some of Midstream of big and just were you and kind

Kevin Mitchell

first forward, million About you the these the specifically LIFO from order to related reported also. I out look it magnitude our the opposite of in $XX that try think of probably reported the the we quarter. so positive you somewhere the segment $XX in quarter and direction and back it's is and what that NGL at million ought at run to things going in happened, it's go in time from in of you and can think what in with and income $XX items, associated But look that, the unusual that as happen As about million nothing rate will quarter. inventory just time

Neil Mehta

Permian That's this, is XXXX; good get guys half of two from back the perspective the years last it's on helpful. still differentials a we just Texas? on have me; their And to do question you the absence of next how pipeline major for market West over crude

Greg Garland

question. a think I it's good

about added capacity You're correct, that this a We appears XXXX. major pipeline half day early and than filling certainly pipelines that the of rapidly up it are capacity of year for anticipated. barrels was and saw last back scheduled the year, is late new next that XXX,XXX more

a the a really can barrels at $XX a haul barrels to it's not Permian a XXX you expect day. rail That's is a it's XX,XXX not day From a we at movement crude, barrels that's not need barrels designed route trip, a perspective, great frac is the truck there the barrel XXX-mile one. of rail option. facilities roughly point for or be the a are kind As day lot rail of haul and to alternative A round and facilities. sand to crude options, day, steady now trucks about it's It's Permian of going move not really that's a typical a to trucking to X-day just -- look not Coast, move so this XXX,XXX XXX,XXX although number. Gulf realistic Most from of movement, so not in practical. Basin XXX a

we new serving in Permian So capacity need are the pipeline of Basin.

when side enough natural in Houston, we East When when year, infrastructure out $X were lot MMBTU there that a additional the and gas that differential. at of a out a natural kind look was the differential talk there's production and declined coming on for well, as $X Basin Midland at think was see may crude last you well. of gas rejection; look barrel about it's relative I you to of barrel, a $X ethane prices some so [ph] price the sets have they ethane and Permian where as lower to to waha

Operator

with question Blake Scotia Next Fernandez Weil. comes from Howard

Blake Fernandez

some I'm really sustainable? more low is if rate that's trying The just that maybe for in one to driving one-off Kevin. the or just probably if quarter, First kind tax of figure seemed that's out issues housekeeping,

Kevin Mitchell

earnings certain bit the proportion and normal activity the higher than little Yes refining really low is amount Blake, reflects items U.S. part I of so relatively earnings it in the effect of portfolio; of U.S. we low a the say had, because contribution. international turnaround refining so of it would mixed in

earnings ventures Qatar in Some that of chemical accounting look equity Saudi the method that's and has the segment, accounted Middle CPChem Arabia, in -- that at CPChem those equity after-tax. as are dynamic you joint so and level the are East those

flows entities the pay that after-tax. themselves and So tax through

so the around where and the impact reducing is a other the that period rate impacts. than tax of more turn pronounced for And because effective pre-tax it's lower income overall -- example, of has

tax slightly but impact. effect You quarter of calculation. the overall is tax interest rates in that non-controlling of the it when the rate also in range portfolio effective bigger low relatively into factor has the rest have a again our We earnings a guidance effective

from So we'd as where low on tax back basis, -- all in, ongoing rate we we look where -- an be at XXs to it be effective should this to standpoint. still expect an this come

Blake Fernandez

you. I'll and level assume out Got it, quarter first billion on Greg that $X.X a buyback sustainable. in the not is of limb the thank go

our moving around forward? should of slug; think we that about we have As you any get straight thoughts the after that way do bearing big kind

Greg Garland

shares, the end buying we'll our $X I guidance the of share we've repurchases we're of to range XXXX. We we'll maybe today. in Yes, in first still stick billion the towards with be done billion given think buying but what $X of yes, lower quarter

Operator

from comes Gresh question Next JPMorgan. with Phil

Phil Gresh

like that to I the in that as guess for And to guess opportunities the question something is or at would related a flow of potentially would we balances it's with to of PSXP organic items, is way that year is should repurchase the managing thinking thinking about? quarter; I I just the cash the do think a some you PSXP question have be you'd we the how cash of not that's driver Kevin. company First -- and make obviously ending be dropdowns about them? available the on The some where parent cash necessarily cash that to balance given guess -- this

Kevin Mitchell

a was the in reason to on comments $X.X able issued couple greater of cash we of of of to function the we cost internationally reform that. billion Part with were back is, $X.X a so Berkshire previously consumed you that. we cash so a billion was was trapped so doing we the amount of it so that Phil, there in the did a do think drawdown debt; Yes buyback cash we've that. buyback, ability access and -- fair of cash, get a the and and advantage if wasn't but that to tax to to accessing that Obviously taken

to And go-forward have on means basis more overall available access utilize balances. we more is, ability that so to a the cash get -- what

far the guidance look what PSXP level. XXXX on that from EBITDA that. we're guidance in don't But In dropdown year, you as we MLP we of as typically not at our the haven't release, stated terms plans commented given around earnings or give out the we stated

long-term organic potential would at wouldn't imagine MLP a is back to those at all the provide growth from force be growth minimal we an growth be projects just in decisions from situation I are and there up underway standpoint So we'd a us a Dropdown MLP draw needs would to perspective. with funding pretty where the parent; made MLP.

Phil Gresh

second helpful, more bit very I Greg. thanks. question; guess strategic of a one That's the a for

really the in chemical cracker of sounds on-stream obviously for environment your going startup. margins, terms about it's coming the thinking well current like Just

profile the in holding at look chain margins margin there, margins still full the but out If are ethylene you strongly. pretty are challenged

the timing cracker? So second how you it about chemical and environment of might a do for think the what mean

Greg Garland

of great we've was the startup, the Well, executed. I it think of we've few had in I all last startups that first it's mean better one a

projects folks so get to it up -- cracker Dow we've is fourth the the year, and the full kudos ethane quarter market CPChem full which market the facing rates. we great that been job there fourth really margins about, particularly margin spread polyethylene, a the kind say what were of the as and are So really who look The in pretty doing element last quarter and and in similar. density you running those between you markets said, are are up high out the since care so up derivatives up that's at and to of at chain those what is polyethylene and and

into the seeing chain able markets detrimental in growth speaks North on the Asia for at the the that effect this margins there, Europe, without fundamental in to So but really for margin; a we've products demand seeing I been time, America, we're and think the demand to point good we're really move polyethylene. that specifically out petrochemicals

going got being You've you to good and on these globally. ExxonMobil all absorb and hit that getting couple two crackers later out in volumes coming able they up coming this demand the we it to with markets are in are 'XX, didn't crackers up have these coming so are -- thought year, XXXX, growth then happened spaced -- what's just happen and

Gulf supply, of from to Permian in coming we And is FID increasing of start a We're like particularly build we facility. see XXXX so that next we thinking kind we Coast U.S. place still cracker, good out the terms what NGL the cracker as probably next about but NGL for of an is on believe. that

Operator

Next [ph] question Credit Suisse. comes with from Mina

Unidentified Analyst

quick the which results on were very strong. Mitcon I a had [ph] question

you the very the in system got uptake of in those did to So your WCS I'm which actually WCS of capture? Mitcon in Mitcon understand reflected much high running intake how were you and trying

Greg Garland

million, imports XXXX million for you. XXX on thank X,XXX We or average Canadian of imported sorry,

expect that on and that we heavy. could our some we intend Canadian an the -- front. we'd And don't of XXX a net to on as for annual Canadian range of And what that was XX% -- we was -- run million updating quarterly on heavy basis but so import of on we about were basis, continue that's to the

Unidentified Analyst

million Jeff, to asked phone is to that question was; in XQ shot trying what $XXX running in actually you $XXX is get period? million ethylene also the up $XXX to on would shot cracker I'm because you income Phil my been have trying like and your net that ethylene not the 'XX I'm were were ethylene of you been reported; understand million and actually had that

Jeff Dietert

short No, had seeing think ethylene terms in and an and ethylene itself. you're plenty inventory We was ethylene. that's say of there in of just the margin I weren't ethylene industry what of available

Operator

question with Next Roger from comes Wells Fargo. Read

Roger Read

time, fourth if guess a to hit year could tough segment maybe sector has the until midstream quarter. quarter, last we more year, that one the back just now and been pretty mean I going half; first the the I

as through know, market walk much of of it this much conditions recovered restructuring project then, right just going the new kind continuing and -- oil sort sustainability is is changed, And us holding of prices is to forward, you're online at Exxon forth? how the understand of here as how you you levels. price these can So and of help increase, well coming so internal us kind oil maybe

Greg Garland

think year start of you a ago NGLs want pricing. in I to say certainly have recovered versus -- terms

impacts, First quarter the just quarter NGL the related seasonal, side lower quarter -- around us. that's third or fourth weather were particularly volumes were seasonally than but for they

those first pay to without would level We've to of have $XXX Sweeny an laid results $XXX albeit expect Hub this Hub. as performing $XXX the $XXX ARB of that's expectation Hub million and that of million annualized the that's the the the kind $XXX of out million plan You get we previously, million take kind for [ph]. the not EBITDA if year; EBITDA against you of then the in of million, quarter, analyze we you at we said

the are the at asset that at get going that these has half this do So room we of us back to we Permian and as across the think I to think that the up in year, are look next continued so certainly we've to of go pipe this year, doc NGLs been into assets coming go still around new certainly is lot year have Bridge new that so on, driving there. have [ph] a bringing on of Bayou and this. We it been see the is on, we the that improvement is Stapel out

Jeff Dietert

midstream, other reports you million quarter. it Page the Roger, supplemental $XXX midstream PSXP X, generated at of you're I aware in on and if I know our adjusted just we look about highlight; first might and EBITDA identified EBITDA in but

to our presentation million -- back We've were the EBITDA assets in $X.X about to it's about that's and talked billion billion $X $X.XX you of billion. with annualize also that got that refining material. we've $XXX of If about ties

you a keep our supplemental progress. report scorecard will that on track to give So

Roger Read

change you then And it a complete RINs -- could part bit. just lower the in -- you a little RINs, maybe helps presentation here; of out that direction mentioned

RINs expectation curious let's see is for as unfold. your reform call 'XX if it Just -- what potential we anything

Greg Garland

going we're AFPM, hopeful. are answer So there. potential management question to There work the not sure reform. going is way, lot I'd on, good in to that's just get about this a API; talking wherever Congress of I'm Washington teams

the that I it's see a hold but is broke, hope so need is don't we fix system broke, lot we'll of and view XXXX. Our to it for

the small that some seeing you're has the business optimistic something that my had in Now I RINs the exceptions get of prices. on am impact an guess the I a that than is in certainly refinery other friends impact are we'll more and lot done XXXX.

to hopeful we'll it continue we'll be continue to to there. get to we and resolution So a continue follow, work

Operator

question Raymond Next comes Justin Jenkins with James. from

Justin Jenkins

maybe fairly here? And line far that along that in here PS to guess maybe the Gray at maybe Can I'll then project? had range push Oak have down but directly ballpark get the XX the I we get sure a total of capital you to spend confidence the try. how the to projects, not midstream outset with on cost

Greg Garland

parts. two so Yes,

season an size can't the capital open really comment, up actual volumes end the the extension that is cost. we pie, and of part dictate will the First we're with actual

and at capital that expect you to and you with XX And season. XX we obviously kind in kind open that of open and more we'll encouraged cost come on us of that what tell is the season, tell the to XXX on I did this we got of be we'll would will really say then should interest wrapped would than the the the You just move going extension get started back to days I line.

ultimate execute projects capacity, of So And to we've on to place always as as then line. the we the can we're it organic that of and budget increased But want if of the decision I really said increased the as and and you we're you the reason it, given many year it you of of we think optimistic pipeline part as line on we think think we lands at the at where total shouldn't PSXP this this the that. have pipeline, the Oak PSXP is that for about look Gray increase cost want to way. that about

obviously. certainly to Oak much been to execute Phillips either PSX opportunity we've a can where Partners, place past the MLP PSXP decisions Gray as put great a we projects, our or very the XX Company, we it's that we years. to of think for these much with and at opportunity about make is that's couple and for continue can organic great we'll continue we'll I But PSXP as saying for do anyway, consistent growth what and as as So

Justin Jenkins

shifting Here returns a good maybe the as dividend mix but forward? maybe answered remember how have yield, should returns; forward? mix while or buyback growth a problem but to cash going about maybe dividend we you Phil's buyback faster I about of can in got understand dividend guess maybe versus gears And we've as I going question of think the growth on earlier low the with the we the

Greg Garland

$X program. billion if also program think of to lot that billion $X but the at room growth the first, billion now billion that $X $X execute grow -- billion $X.XX a share billion, of gives we're afford to you to a to of dividend billion think billion repurchase and $X still dividends I we Yes, $X generation of can you $X outstanding capital, to cash kind mid-cycle

projects to we're so we new and -- Company how the on don't but the to billion billion the see come reinvest just year. with mid-cycle. increases add it going point hit year we already and about or budget we'll as in fund really And to XX:XX against X:X that time changing in X:X this guidance, to at capital EBITDA this that's to guidance distributions we're be hard these of that we're sticking continue another because it's the to materially going capital the in at Certainly ourselves $X.X $X really capability think our

side be on but 'XX distribution do we the XX:XX long-term in like mix. we'll having that So

Kevin Mitchell

we've of Justin add to no secure, in growing. from terms just what said in And competitive on dividend, the and past change

grow So just the we increasing buyback because dividend, we'll year preclude this dividends continue to did the doesn't share well us as the from year. this big

Operator

Merrill question from [ph] of America Next with Bank comes Doug Lynch.

Unidentified Analyst

is it when where is if part Obviously the of may. share on back that to follow-ups mix above you Greg, the last of and couple about set XX:XX share split? you original agnostic I distribution to more dividends as of the Do dividend price to buying your you see as actually the guess. back A that substantially shares? I question policy buybacks between kind -- to or are skewing released yourself you're price What

Greg Garland

are wouldn't our of I of share No, multiples historical essentially, we of say as repurchase intrinsic well, all, value. said, we've all kind EBITDA it's out. two -- first on using And we're years and view

be got look make competitive sure have you year. we S&P to we're and Kevin's the trade need be dividend a the yields to so that going our point; every it dividend to what's buying we continue we've shares think the think When runway shares. needs think I investors to competitive, to yields what's the very that as dividend to of want long the grow and the in grow we and see or group. growing to we of dividend to As We -- XXX below secure about kind around competitors;

So buy grow parameters dividend we'll the reinvestment shares share in the we'll in. that extent between within repurchase, and grow the we're balancing but we'll always it those

Unidentified Analyst

stock part is dividend counted is when per in you the as share or other words, it growth not? So of se; share that per or dividends per dividends buy back

Greg Garland

dividends at share. per looking We're

Unidentified Analyst

All right.

is a of to you dinner my goes back more So in kind macro hosted December. it question back the Greg, and follow-up of

transitory the I for in kind that happens been still worse or XXXX? more don't more you it -- see it's you would talked changed think through about I you're something I and or system. to you I'm know short-lived of understand month IMO or work of somewhat in what not has implemented the a views expect as it your it more issues gets if not? do when just enduring happens but wondering of positioned regardless well it when

Greg Garland

Jeff if actually you'll do. going know personal This has I this to that can my -- on Yes, within it's years see own if he view jump and is competed short-lived to in I couple don't but think away. a

Operator

Capital comes with RBC question Markets. Heffern Next from Brad

Brad Heffern

most over a day crude growth a on export of was the people export now, million have a barrels in on. and Belmont since million expecting you I the wondering so guys We're U.S. front, day are X barrels

next the in on be And or million then and there is X X export line? plus place to So a place to will infrastructure in down barrels in the day million year? XXXX

Greg Garland

expanded capacity we've right, day go to number day barrels million a of We've day. from barrels X seen a XXX,XXX at of you're exports. Yes, barrels Belmont to a weeks XXX,XXX our over a

in facility in You participating well pipeline. saw Oak corpus Buckeye the we're as the associated with Gray

part be have to continue to going export the value going and expansion order we chain to capability, grow export exported. majority seeing of that's the of to to We one production of it's are is incremental the the in think

a but growing, million barrels there's think is X an don't we So immediate see we that maybe capacity number there day issue point. at today this

Brad Heffern

you the base, new XX% on? is of Kevin; that I so guidance you and new sort and is of assume if for mid-XXs that's number could clarify for what based the capacity utilization maybe that's guys that for CPChem. that case off quarter the just if whole then gave if the And that that's a

Kevin Mitchell

in operations the total standpoint. it from April, adds declared crackers it Brad, you're with that correct denominator and commercial that the into on up, capacity a so the starting

around so new So quarter; will new effective polyethylene the already the is all cracker assumptions includes the what in that units second running. new in were denominator, our reflected the units XX% be

Operator

from question Deutsche with Next Bank. Todd Ryan comes

Ryan Todd

mean right can I capitalize your mean going to we're levels. you of in that versus on is what But I sequential you you so talk What product kind relative want now think you're dynamics decrease drivers? I start the in very seeing that exports. I ship product quarter-on-quarter. domestically forward? Maybe can on it seeing see off about and in sequential are to seeing export low terms demand dropped has to seems ability of of netbacks, colonial terms that to are [ph] seeing to that like reports also exports due you

Greg Garland

XX,XXX of You're refinery had right, exports export this the particular that our about a market. day XXX,XXX barrels availability XXX,XXX down at maintenance we product diesel. product We that Alliance and barrels were quarter, day was into was that a put of gasoline the reduced barrels day a could in

We to America we expect term. to demand, struggles Latin so longer up with strong are hold see that in and capacity continued refining continuing

Ryan Todd

investment; for -- How think a Greg since the benefits; maybe brought large it of relatively get good on material it competed disagree away the you're [ph]. planning ARB of incremental not independent kind line you seen I any mean, of but refiners I your in does don't terms investments that to away the compete competed scale holding views it the NOCs ARB Is you think and at and gets do are then the the kind a of way competes the that part majors the they we've of on and up personal -- this do how that the plays from you will world gets [ph] point Asia global do most who out? away. is that? be follow-up think And IMO how that it duration of how you for

Greg Garland

big see continued Asia just swing suspect market we really big I in a discipline, think capacity, continued in don't there the make be that's refining plan I investment to you'll investments, fuel portfolio. obviously. will

just sit hard you what But end and on history coming whether three refining business we're be; industry, really that's things I away probably to to we it's to years don't you're compete long 'XX 'XX I of the plenty do this business just gets may cash four but think of for but going really margins think -- the today, $XX when and really as crack, forecast. it going of along like a the a just the we on -- and have to small good know couple that distillate is years. a I we another off we've capability or to certainly the or this the able know, that low there ago time, or one out I margins in it's got be being $X way get

Kevin Mitchell

One would not I that a add the the we we're ago. is anticipated seeing adoption pace months few scrubbers other of thing at

think fuel; going that the I adoption to and the a a the number availability of X.X [ph] are time. it's of perhaps on after that's rapid the more of be and on depending may at items changes but been of are just much scrubbers fuel the lower this implemented, hard there availability predict depend to

Greg Garland

term thing know and other too. about the terms the start relate industry; in talking of too other LNG longer to guess have shipping I the in if options high people of newbuilds range you you think end the I

working that it's come mean go. factors the I always So many on capacity, to be really, ship we'll see we're be it's balance of not does where choice the it and owners by equation, going just into refining things to going these

Operator

question comes from Next Citi. with Prasant [ph] Rao

Unidentified Analyst

something demand product this demand, different is you in growth if earlier globally a did then think know a that that that more about you clean and talked guys baseline and export discrete is and way, this few have away. and ask I specifically projects clean wanted get the competed buildable XQ, trials agree feels few to a I in IMO There a does you is increasing towards. window and something like already. yields about of and Greg I we've product But

of seen IMO shock multi-year a your that but be multi-year -- could like basis can point investment what for that? sense are on ramps? in terms of the how here; incremental that just investment, thoughts more incremental in get how aside, of not flick which to terms towards secular in growth what towards At of the an wanted we've build a impact feels I years upside what expect terms IMO So you we that several

Greg Garland

is been advantage or million $XXX way or yields crude, give the improve it's to refining year, one either access perspective a other. investing we've our in From what more take or to

of equation touched past part the to could about I the going talked in we but have higher other we're I it move fuel. haven't we think on today a and our to discussion octane think that

And to or see you fuel here year takes, the XX so years, over a that period industry invest octane will whatever I assuming the that so. higher or done a next of XX it make whatever in think XX or gets

see that. us; turnaround are I there us -- think so not for a itself as returning every what was that dollar move for PSX a and you'll will we industry can always time refiners investable solid we seems multi-million I -- ability, have and we'll would to investments projects happen for The high that an to and year, continue or the in opportunities be bottleneck create do but So say the industry forward. exchanger we think a X% whatever; replace X% I we do or for that

think creep it I general [ph] to that to will specific investments industry. want advantage So make people you then address the the we be and crude a tend in or combination of that yield to see to have

Kevin Mitchell

invest make that to There account stock projects the and way. continue buyback share it in, reduce aren't attractive accretive to and we'll

Unidentified Analyst

focus of moving of this anyway those in few the in on just majors Greg and -- wanted another get -- industry the on recoveries? on of on in and margin dynamics in petrochemical then about the the necessarily on projects so months, margins the of the terms sense lot of to more plans announcing to a cracker a sort valuations timing for there may not less book terms in for and shift potential over potential opportunities timing detail follow-up in the plans your is just and particular piece I cracker we've more a timing investments lot parts of moving that the sort second there, terms of sharpen it, that of last came how wanted And of if and plans how this for Gulf the been of or that the have impact their the and you a of seen the something; but

Greg Garland

a these largest Well, do into have past when to of high time polyethylene of that move At how between of products the and view producer an that cracker of our world's efficient CPChem we've quite market is. are decision although I capacity the projects years about agreed towards think owners a have the the NAO added it's most the I joint in CPChem the thinking we we're we level mean of also. appropriate generally the density we're geared and over manner, couple bit certainly and

in So we're factor these feedstock build thinking are into ethane decision, decisions what think LPG efficiently obviously build, you're those we to of you and about of cracker. some one where so timing thing to NGL or terms we into going that's how move supplied market; about those supply do products and it the the going

between some there do when a when of second daylight One we one that things to there's so wanted I points project kind through about decision were think in this we would thinking go Gulf timing make sure that we're the we And multiple the other cracker. Coast and when on came that out one. cracker

appropriate kind think and in getting light timing of 'XX like in having most on FID construction. to terms us in in And of so and the and up of it started 'XX; you in 'XX 'XX seems of earnest coming 'XX really

Operator

from Next Chang Barclays. Paul with question comes

Paul Chang

or level you been up; couple up. C-corp year I you may or forward flat, about years ago, -- think of be to over still that A want years level you last going so that some the keep all I of I couple past consolidate Kevin, mean is that were MLP would the debt think of at the the has talking going going number that objective the a of quick going reduce questions. forward to

we to that trying assume XX going months to cash next use further? in you of pay So portion should your Are debt? that to the the down XX flow increase a them

Kevin Mitchell

share transaction this has period the function did year reasonably over we down there large running the But anticipated $X.X you've years of that and up we'll factor been of we and couple that debt two, of distributions got of quarter and the of online, just chemicals chemicals. been that added have look you of to of strong kind a of see over billion a ahead We to Some new gone so doing. debt buybacks, potentially next with of to on $X.X I margins, margins we the to have we debt new last or the has in a as years billion out bring down got with where or ability big pay we expect some the hadn't level projects up think -- first so, debt ability got hold over has a coming consolidated assets increased that that point and be. think couple or the the think $X so the in or we a if billion they're back next you've going

Paul Chang

more want rate? current do than don't from you billion $X.X just But billion, $X to the even

Kevin Mitchell

where so; would to clearly was The act across and becomes just $X.X around able continual decisions. and mean of over it couple be so care nice added be buybacks, capital that debt, balancing investment will opportunities. years next what's relative best the it's take of the or near-term on be the to look and allocation alternative then like, incremental we I depends, It price period, sort it somewhat those so -- opportunities it cash available share it the and dependent that the what going use share on the billion of to of opportunistic, opportunities depend be trades will

Greg Garland

rating. our want think that thing a one grade to investment is hasn't that strong view we maintain I changed really

to or But said, we've rating. with today. we debt Company. strong so we're think debt we we're XX% debt I so of a have XX% a at got capacity kind ratings said around the and grade into really we'd this always the over But So look the as slightly that at capital grade proxy investment investment the of as as comes XX% And that. level used or play, comfortable strong of today, we've we today, that

Paul Chang

that the of much easy know seems understanding maybe comment, give it way. you Greg, just you my anyone; as as you as us chemical is a can

event the income if what you at off guys cracker, net new the margin, to looking today's be? to the we're is contribution going With

Greg Garland

margins an at the at Well, basis, it today's $X.X kind $X of level EBITDA billion to from kind CPChem of billion.

easy to million think EBITDA So to back of way million to us an about $XXX $XXX is that.

Paul Chang

Okay.

if from as on the is just year; incrementally -- is that So it and up hold already Sweeny to already ethylene so today's billion last margin. low there margin I you pretty have ethylene the presume? just pick is And on because that the [ph] ethylene margin margin $X.X

Greg Garland

chain a that's full No, margin.

Paul Chang

you But last year, from the have margin PE already right.

at should is So on-stream; the incrementally these yes, I'm with so cracker additional clean assume? uptake what come we looking that

Greg Garland

the startup ethylene be purchased using it that in inventoried full impact so of up. First in we're didn't all, either the year. new and of of you cracker the or last quarter right fourth being get We're really

a value annualized. increment number think the about you and I in good you the our to billion and our new probably chain the if So $X.X cracker so this system, other our is lowest is of cost we think crackers -- as about year, think want

Paul Chang

much Final one can is for by pipeline assess [indiscernible] refinery? me; into how your

Kevin Mitchell

we commercial refineries. sourcing for feedstock don't individual for Paul, individual of about talk reasons

Paul Chang

Okay. -- can one, assess? City you've refinery have Or which in some the [ph] one that I you noted tell won can which about give you that that all may us Ponca mostly Berga how the and us idea

Greg Garland

we're think Phillips and light a the medium the as whole. you as I roughly portfolio, XX XX% XX% portfolio at on look heavy, Well, XX%

Kevin Mitchell

some And imported. is of light that

Paul Chang

understand. I

or also other from cushing of light it's some probably from is [ph], some And the places. not Midland

Kevin Mitchell

Right, correct.

Operator

Thank you.

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

Jeff Dietert

in Phillips you your of Sharon. Thank thank interest And you, for all XX.

additional or you Thank If call have questions, me. you. Rosie please

Operator

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

You may now disconnect.

Phillips 66 (PSX) 27 Apr 182018 Q1 Earnings call transcript