PSX - Earnings call transcript Q2 2018

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Operator

Welcome to the Second Quarter 2018 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. 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

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

Greg Garland

Jeff. and Good morning, for you us Thanks, thank today. Okay. joining everyone,

margins. billion, business Refining its Adjusted delivered cash and Our earnings and operated ran per quarters had best utilization $X.XX strong and strong were capacity earnings has diversified one capturing well of – $X.X or share. flows. the XXX% at

A competitive our favorable heavy during total We brings is fundamental industry-leading system is to and by and operations share has XXXX. rewarded highest which differentials. year coking growing capacity, through from strategy. which which crude Refining secure, million the continued dividend to billion. $X.X the Our for shareholders cash dividends our We $X.X distributions our returning quarter, us $XXX billion to repurchases, allowed generated the from of since benefit

quarter, growth dividend since a the annual During we compound rate XX%, increased the in XX% resulting XXXX. second

returns. We’re our growth opportunities enhance and capture on executing to long-term strategy

construction XX open venture be transportation the projects, is Total Phillips Gray Phillips will building billion. Oak XXX,XXX day and the major Gray day moving Eagle NGL completed Ford anticipated with to pipeline. Clemens the and $X barrels the destinations, at pipeline pipeline Sweeny equity is of shipper initial cost expandable for Permian oil At for to capacity XXXX. approximately Our million have The million in reservation expected shippers. Midstream of forward Oak end expansion including crude expansion the the approximately and of two barrels Phillips of for project barrels fractionators Texas per season walk-up Partners Coast an X two by we’re of service Sweeny will growth in recently XX this organization per commitment owner storage our Hub. Partners Oak capacity XXX,XXX X Oak joint be is Gray to be barrels project. largest adding will per from day, the the and Caverns. based Gray Refinery. per Sweeny, Partners of provide Gulf XXX,XXX barrels to day upon in the XX to

XXXX. storage We with and capacity fractionators. of supply to DCP parties, agreements hub late million have The access in to including XX have day fractionation barrels in is multiple barrels Midstream place a the XXX,XXX the will of expansion completed new when

plays. growth production robust fundamentals, other We Permian NGL expect in chain shale the value and including continued

and million fuel the product day the barrels. placed Beaumont hub into Gulf X.X fractionation crude Our located Texas we local petrochemicals of service, Freeport of Coast. the LPG and total with XXX,XXX exceed capacity. includes recently is rates. export and storage on to markets our capacity hub capacity Terminal, access design export a terminal terminals storage barrels bringing to fully strategically crude and to Both our NGL Sweeny and barrels Sweeny fractionator XX.X million continue At contracted storage The

terminal’s million increase tanks construction, will that to capacity under XX.X crude barrels are of by Additional oil the the the year. end

continued in Gulf to our continues is DCP the and capitalize exports, expect Pipeline Sand result growing production this Hills from meet Midstream on the higher Permian growth production domestic to expand Terminal Beaumont will crude Coast We the growth. the well-positioned in its demand in Basin. to NGL

this pipeline’s XXX,XXX barrels quarter, XXX,XXX further barrels second to capacity per the end During DCP day growth the day, increased of with to year. per by the

X products, are has of be in expected project, Our project natural Midstream supplied cubic completed feet XXXX. facilities, pipeline of At This performing and we value one-third start to two-thirds XXXX. DCP second refineries. as clean technology. as the at petrochemical We’ve new Coast plant in day anticipated Permian X% transport River gas Gulf petrochemicals Refinery earnings rates. growth Partners. of Bayway CPChem FCC Refining, will by higher plant quarter Sweeny increase has XX% the per projects higher-valued Basin, strong is the we’ve which in by the of operations of upgraded Phillips the which markets. the complete Ethane FCC our Sand will pipeline in approved optimization of units from contributed X its during Gulf that octane and Completion interest reactor the state-of-the-art fourth O’Connor is XXXX Also, quarter. solid products. the mid-XXXX. in modernization original FCC Hills. third quarter Sweeny expected and to the yielding up X.X In demonstrated production by both Pipeline X DCP’s a Coast are new Wood capacity, design fractionators at which higher assets, pounds high-growth will Gulf project as of anticipated cracker well year DJ above This the with Coast per DCP to gas owned XX In The is In basin, an in Express billion gasoline. and is has billion is quarter Chemicals, the Mewbourn processing

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

Kevin Mitchell

an morning. with Slide billion. Good Greg. earnings Starting $X.X second X, overview were on you, Thank quarter

$X.XX adjusted We were $X.X that earnings netted of billion, items $XX special special excluding million. a per or items, have share. gain to After

tax second adjusted equity $XXX growth impacts. the The of was rate for and was billion. $X.X million, from with projects. working flow Capital This million was spending $XXX affiliates XX%. million capital on quarter quarter cash included positive Operating distributions spent $XXX effective

equity shows X to quarter segment. quarter distributions $XXX quarter income adjusted $XXX positive $XXX outstanding. $XX $XX repurchases. the was and were asset by quarter. mainly net We second completion million, Quarter-over-quarter quarter first Increased million, million turnarounds higher seasonal shareholders first adjusted the increased quarter $XX line quarter quarter the previous and impairments million in of with Bakken maintenance. X Midstream reflecting compares shares by income Transportation in results. and Refining. with pipeline in earnings down volumes Second and ended of for million, first over NGL consisted the driven in share dividends was million, $XXX inventory other by of net Slide offset earnings following earnings and the million. impacts adjusted adjusted refinery million our about $XXX Slide

Sweeny at hub. to run well We the continue

a XXX% facility utilization. During the average month XX.X fractionator the cargoes averaged the export and quarter,

$XX remain Gulf While income quarter $X second Asia challenged. decrease adjusted and million from quarter. the improved, LPG in had margins U.S. of million DCP export the Coast previous to net Midstream

was The costs. benefit during of incentive and operating by quarter impact $X from included quarter to a The timing increased volumes the due distributions. seasonal offset million first maintenance

Turning to X. on Slide Chemicals

million Second net the O&P income utilization Global increased quarter ethane capitalized quarter. polyethylene was ramp net the second the following million $XX due for quarter. the was quarter to lower adjusted first and segment units. adjusted XX% first interest Gulf petrochemicals $XX from completion adjusted Polyolefins, SA&S than of million, $XX the increased In of income cost and of Adjusted net increased from income the $XXX new completion up other U.S. Coast the net higher million project. Olefins CPChem’s turnarounds. in for cracker

on cover the X, Refining. Next, Crude quarter. XX% first was compared utilization XXX%, in Slide with we’ll

was of Refining was $XXX a to from $XXX second net up regions, $XXX costs million, from decrease turnaround quarter costs increased previous the due XX% completion $XX adjusted income were the WRB at volumes XX%. increased were Our quarter to Across the higher yield market lower quarter. also as turnarounds. product this realized equity our Wood million earnings quarter. due crack clean million, second the during and quarter. turnarounds increased earnings of higher of margins, The as completion well quarter first refineries. Pre-tax last River following million the quarter the global and

from differentials. widening on Brent The per $X.XX WTI $XX.XX to due Our quarter. our on capture increased barrel was widening market and the differentials. the improved infrastructure quarter. the last covers improved barrel heavy was barrel, Slide XX% we response margin crudes into U.S. $XX.XX inland network, our crude barrel, capture. crudes supply spread, in per quarter realized sourced in The primarily discounts and crack system up to Refining Capitalizing to advantaged integrated to margin compared market more for $XX.XX per second per first X:X:X X

refineries. overall per in $X.XX Our prices. barrel market was from margins crack. $X.XX, realized XX%, up less made barrel, Losses Feedstock configuration in by per of Market quarter X:X:X and per differentials. due quarter capture crude primarily distillate We quarter. $X.XX was impacted to higher an due rising first of gasoline better than for market the margin previous which realized the the was the $XX.XX quarter XX% in part premised the improved the were resulting barrel, barrel of our per from products second by of in than crude $X.XX more than by capture secondary to prior improved

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

to since total Specialties than West volumes first $XX net increased the and start marketing move million, and $XXX contributed Marketing Marketing sites Region XXX Let’s to the Other, higher million Adjusted X,XXX seasonally and of improved XX. earnings. higher In income second bringing over quarter, Coast domestic quarter. on and Slide to the the margins We was reimaged quarter the during Central over program.

levels of We increase during expense compared base of improved income costs with million million prior oil see XXX,XXX in adjusted balance interest $X continue The Working quarter following higher in by $X.X capital barrels $XXX quarter, with from strong the margins. the operating and segment million working per Cash changes cash million, was exports. change reflects capital our Slide the XX the day export to returned quarter. demand the quarter. taxes. the entered to increased We turnarounds. Slide Refining $XXX on quarter had $XXX $XXX as million of sheet. XX, product primarily from Other during flow net On payables, this first adjusted billion. net and $XX from impact Specialties cash with the million highlights cash Corporate in net the refined excluding increased operations, quarter increased normal

During quarter, repurchase and $XXX of of through capital returned expenditures debt. investments, of $XXX funded $XXX we the million repaid shares and and million to dividends million the shareholders

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

and Next, expect mid-XXs. Bayou in This reflects crude pre-tax utilization outlook million. come for now utilization mid-XXs to the and Corporate quarter. the In $XX between billion We for the year. O&P the of capacity I’ll million we be at and per anticipate $XXX questions. items a Refining, be in rate the expenses the third line pounds Chemicals, we that, between Cedar costs $XX cracker million worldwide Other and open expect million the global to cover to after-tax. ethane recently to With few we’ll increased the be X.X $XXX rate In in turnaround

Operator

you. Thank

from question-and-answer [Operator Mehta the Neil session. ahead. begin now please will Goldman Instructions]. go We Sachs,

line open. is Your

Neil Mehta

Hey, thanks.

Greg Garland

Good morning.

Neil Mehta

helpful comments because congrats to captures, versus morning, drop about we’re deltas better if capture, delta has Good go-forward? discounts were what internally? want to that hey, Jeff. terms the pre-tax tendency they came we modeling bit even the the morning, talk appreciate good drove suspect, can product the Kevin. the But to be more the have to have Good guys a the understand segment. part there quarter. a in just I certainly it I what crude any Refining help on a us than sense, crude would Greg what versus margin. of framing little those just you of and I modeling And maybe just with and on expected do the capture the to way makes that, in of of And the you

Greg Garland

Yes.

I quarter performed think, well Refining exceptionally utilization. averaging the in XXX%

substantially strong up I It most So were and in is, think, quarter-on-quarter operating Turnaround running costs. increased a down improve yield. well expenses thing helped we and volumes that the margin down important were environment. and brought

Brent supply the crudes, network our Bakken Coast discounts Coast benefited Canadian took wide including advantage from West crudes crudes. Gulf from and steeper heavy We trading benefited heavy, improved We through well also the inland discounts, as on WTI the to capture at as and We integrated Permian as on well. differential.

product We cut in I quarter, Gulf West during also saw the price were in well. improvement Coast as rates half well. and the And on RINs the helped costs as finally, Coast realizations, some especially in so capture that think

Neil Mehta

No, color. we’ve that widened – seen really I build out differentials WCS that’s because here. on helpful to want the point, that

You else. import more guys WCS than anybody

before IMO this see and talk just about into you you year Enbridge the X the out of and how of can kind ahead playing impact? balance So that XXXX of through Line

Greg Garland

which now back But supported project temporarily. starting is Sure. summer, We WCS that to outage the come this – had it Syncrude on.

volumes September. additional expect and August in We

continuing higher. with Brent XXX,XXX towards potentially its day is barrels Hills impressive a Fort

we average demand for fall, activity, well maintenance As WCS and as reduce look the for pad to two well. maintenance is refinery has going the at of above that planned some

we fall. this discounts So opening of WCS seasonal a see

discount Canadian XXX,XXX last day, a is exports the not only minus about that’s by average expect see the barrels day of at kind it year. would higher When rail, slightly be equivalent look XXX,XXX the in we you new of only to April, capacity, a be sufficient by the which rail, did could rail is – of assuming wider. than barrels WTI high rail We sufficient, be a there If XX. but set a

little a more getting we’re but substantially more. bit So rail, not

WCS XX expect we at longer. So attractive next discounts to for the be and least months potentially

Neil Mehta

Thanks, Greg.

Operator

go Please Fargo. Wells ahead. from Read Roger

is line Your open.

Roger Read

Good utilization good DOE Refining great I of is the properly, XXX% quarter measured and the from or IMO-driven from a stats, that at above I should capacity but we’ve for here, for side. being really you. is to curious, have come was increases Thank there next not would morning say. Yes. running much the that so then as function And the maybe utilization just we think, utilization I we like really we it industry? an in how exactly event think utilization industry. this performance really been about seen has whole roll you, levels aren’t year? for maybe some into to

Greg Garland

the out I XXXX. open then a up We to back we run. really a those Roger, quarter. ran our we maintenance cases. fall, XXXX, the the And you’re came I suspect back-half of market up. opportunities where in certainly, in just of Well, case the be in we’re we well. We us, see came into in many nice industries given this may heavy to turnaround first the IMOs period, to come currently bit, a little available going but in I into season going that think, come a moving just for back as tailwind, think, the start in particularly as

demand supply opportunities think on so we’re XXXX, Jeff, We’ve in pretty going. add think that you on anything constructive pretty that the know, to about both strong got I side. And color I want the that. economy the you come and IMO. a on constructive don’t And we’re

Jeff Dietert

No, I accurate. all that’s think

I think, benefit going refining. complex is to the IMO

coking at complex industry higher And in higher so and there. utilization in the leader refineries of capacity, utilization U.S. would our an we’re the portfolio expect I which

continue to focused be our certainly And portfolio. so I think, they’ll well running on within

Roger Read

more the think into appreciate at about you that. that, like mean, just latter it as else margins or XXX% can is? and within XXX% that, is quarter is it, XXX% I’m would focused work way to or we that or of if to ran XXXX. do anticipation be is, part is guess, I this XXXX should simply something in as the you be something of this I the what we kind on there I Yes, trying this even run favorable have your it you so system like that’s at and get

Greg Garland

of Well, couple just a points.

during to quarter. that our probably the we’re to quarter, downtime about think even in turnaround X.X% and downtime, activity I unplanned second due due

well assets had we that they coming obviously, the XXX% into it. level So ran above

through I XXXX in we’ve other come would turnaround for The heavy us. two thing say, XXXX here and

think, a for and XXXX to XXXX really, so standpoint, well And well. I positioned turnaround we’re portfolio from standpoint, run

Roger Read

or at IMO that. how as effect demand? the the of flows thoughts that there And crude I U.S. appreciate here out. really then pushed you for impacts Any secondary get some outside of about look competitors will the out potential product weaker to

Jeff Dietert

Well, refineries across I Latin can fall We’ll are we’re produce the a in portfolio oil of to – flows our see stressed sure category. American we think, how the refineries. standards our meet be product on that ones that the have to to making high all and going that lot the focused going percentage that are stretch fuel refineries of just

Roger Read

you. Okay. I appreciate Thank it.

Operator

Phil Gresh from JPMorgan. ahead. Please go

open. Your is line

Phil Gresh

afternoon, good good Hey, morning.

may question Chemicals. in from just just you First quarter? it anything the you kind you tie elaborate you second just to a if a start-up that? your think mid-cycle little to basis, bit cracker have of of kind And what still contribution adjusted on costs the run guidance of kind What the on saw quarterly kind incurring? about try Could have rate of been back on

Kevin Mitchell

ramp-up Kevin. quarter, in say, at you it’s you certainly as look the of I’d terms Phil, have Yes, second utilization. some

quarter So – it’s you have those from of not assets. contribution don’t a complete

the this, we’ve intact. been not I to guidance of bit, at we a may the to be There don’t think still think, anything quarter, the healthy mid-cycle is as it’s end at And of look very move quarter. the material. back a previously I were were – expenses rates. just we by some have Although really the that utilization may in needle talked and but there step little that

same expect EBITDA the about numbers generate that of range to in in incremental So the past. we’ve talked still

Greg Garland

kind of Yes, asset. of think moving out would run I type third the into that certainly we quarter, levels of expect performance rate

you near-term, think we’re up, now about ExxonMobil’s up. coming the was think – up, I so that

starting marketplace. some And you are is strong. I so absorbed Offsetting could economy global volumes get in near-term, the as though margins compression these of have to – that mean,

U.S. the for saw the number GDP You today.

this. great on we’ve got so And demand

on constructive you view window. if four-year to three of And three our kind that growth. four demand out there’s next this solid good in the the upside than to more still think out And I so years look pretty downside probably margins that, we’re of is want to over

Phil Gresh

And, if think about timing second to your thoughts that cracker were Greg, a potential latest I how are your seasoned and of there? what

Greg Garland

I you kind think, fundamentals. Well, with of start the

You a day at. in barrels come more still there’s have XXX,XX, ethane of XXX,XXX rejection,

So crackers. for so of plenty going of there’s next feedstock wave to the speak to

We’re today. cracker funding the second on work

of I think, cracker. – taken XXXX FID we we’re the haven’t what on the frankly obviously Phil. I yet, still think FID that project is in one late terms that, decision and thinking project. probably like next But in-between the will spacing could is XXXX, And we next this

Phil Gresh

cash Kevin, cash some pay about the Obviously, just you’ve reversal working that. in the cash wanting and and – the nicely. the to the allocation on talked Okay. of up the balances you flow you quarter. the incurred the of some And first of know built I capital down got then, balances and that debt

of do how balances want think the where for So the to the now rest prioritize about and you cash year? you

Kevin Mitchell

Yes.

the drain as for drained capital the the by end back that to we second fund only quarter. Berkshire not comfortable quarter to getting that with of us. cash working in the first $X.X XQ, so range we partly see but buyback more the well, normal at cash Obviously, billion So impacted

we’d credit the great to we’d buybacks higher the I on a more to sheet I we’d down, We’ll to strong ratings. is sorry, strong like generation. bit balance running But still – bit like a it continue do pay debt to probably more probably be. think debt little have mean, bit that’s see, of still with paydown. little do – on than you’ll a probably cash we extent, the

Greg Garland

Phil. too, buybacks, It’s more some okay. do We’ll

Kevin Mitchell

the right capital about That’s and then a we possibility, growth program. as projects well and there the as talked

So a end little up we cash. building bit may more

billion – if running or still look of to cash for we’ve we’ve billion where over a certainly time. last been the we’re chunk years think, $X or you five $X I had been so, that’s four that been

bit if time. So cash more wouldn’t carrying up little for of end surprise me you period a a

Phil Gresh

Got Thank it, okay. you.

Operator

Paul Barclays. Cheng from ahead. Please go

open. is line Your

Paul Cheng

good guys, Hey, morning.

Greg Garland

Paul. Hey,

Paul Cheng

quarter. good Very

Greg Garland

Thank you.

Paul Cheng

you that, to you difficult condition, have if yet think this we curious the market is is would repeat this do for not in or it? start is right for think you guys and in just Maybe a Refining repeatable performance the your Greg, that that that quarter heavy be that similar or

Greg Garland

set we that coming Well, we’re to run don’t turnaround in into standpoint. lot And I of from front that third a think terms that in big of utilization up well. have the of quarter us

the definitely that the our think of brings marketplace I – portfolio. this

fourth commercial our then folks really running and forward. crews quarter, constructive in kind great job creating refining guys of refineries and out the look third quarter, the think of value. right I supply still job a did to nice going crews and those into a But on getting I’m as front, did I refineries

So third that I into going quarter But the $X.X or forecast to can’t do that whether well is quarter. billion coming can you do for we Refining repeat that think today. I not,

Paul Cheng

June, have certain surge. last they days several that margin the the May, in near-term recovering in been seen bottom a Since have

behind curious the several any that days you see last margins? why theory the strong such in have see movement we a that Just that guys product

Jeff Dietert

slightly above Demands the are Since time, healthy the remained middle five-year strong utilization come in down. and the utilization that early mainly the driven range. gasoline in gasoline very relatively and up into I XQ. gasoline on quarter We drove now soft saw seen in down side. by relatively And summer prices to back think, June utilization. or the it’s cracks that we’ve

low-end seeing up movements with and seeing strength And range demand activity days the strong year-on-year, increase strong basis. at trucking five-year in and the demand that’s the by areas on actually the On the an drilling activity ongoing where Rail are or year-on-year. is cover distillate diesel driven really inventories of as side, X% and up year-on-year, we’re absolute X% are below well. we’re oil X.X%

totally strong. looks distillate So

Paul Cheng

that, you. sudden great I’m thank jump. several last because mean, going [indiscernible] for your information. those not curious typically, are I Yes, day just to a all meet those are the

that in several seen the sudden anything that of or last have wondering happened that such have marketing the a news out substantial people days there all So may any saying triggered have move?

Kevin Mitchell

There power some some specific heat nothing that. unplanned more broader has related been issues, downtime, – than more but

Paul Cheng

And the to can you year that the as you’ve heavy first in in a the oil U.S. is much run tell last us quarter how second the comparing quarter second quarter the percentage? or

Kevin Mitchell

slightly, I top was that but It you. with get I’d to of have be the up off don’t my head, back happy

Paul Cheng

guys CapEx, Okay. you that we Kevin, have still assume and given, more this that previous money a to going good even cash? make And if the more you’re is range that for range

Kevin Mitchell

Paul? CapEx, The

Paul Cheng

Yes?

Kevin Mitchell

Yes.

rolls So, the you number. consolidated know, that being Midstream into Pipeline two large at level. up we’ve recently projects but as just MLP, the sanctioned consolidated Gray at Oak done a Obviously,

year-to-date, we running is so the that seeing continue and million So spend to up year-to-date budget the rate consolidated the spend’s $X.X lower, of to the year. are under into pick would expect just second-half we’re $XXX we But billion.

the I significantly there’s little bit a So as up. at point, by, would end mean, at would much $X.X we potential visibility $X.X into be – going that’s somewhere that. above be billion to $X.X could I where we’ll between I Obviously, in would budget aggregate. that we next it months guess the think go year. few point, don’t I’d better the billion have go this it billion this over say, for

Paul Cheng

Should about or to next be How several $X.X Kevin? of we assume it’s going higher? still range, billion the years, about type

Kevin Mitchell

Yes, I would.

of billion good to go CapEx terms, overall the billion in so. guidance to $X a with think, a I is year $X

Paul Cheng

Two that final next will say, think the over have export or you three the Gulf sufficient if, do years. two guys capability Coast in One, quick question, crude one. we have

is you that think the get that day whether also secondly, you And we export guys prices we more? And need to million IMO government want contact business if that rise to in your continue barrel being of a a the that up the X people, do to out that will We a Thank by to pushed we potential materialize? – end with increase high terms what million backslash to that you product when you. X.X XXXX volume into of year. per a in -risk rapid expect a because come there’s

Jeff Dietert

see right. would products. oil we Yes, opportunity do Paul, exports big All and for a say, I across

As of part Texas expansion, of options. Gray we majority large got Oak got pipelines, long-haul we’ve the look have at as Gateway. they the – South pipe the And export the

so believe We is incremental to being added. most we the see export And production capability of going exported. get

demand, vast The bunker but SOX so opportunity moving fuel regard When the addressing you percentage the With certainly up it majority date. the emissions. small look to And total transport see in it. IMO we are and do confidence makes is a and sulfur is of see at implementation the other fuels reduced that we have market IMO, gaining already emphasizing of forward.

the China year. see going X.X import and forward. And to focus export We’ve taking to incentive sulfur to announcing require X.X% on down We of it so is marine following regulations I their the facilities. increase recent in year move there think then both announcement seen next the to that out the fuel and IMO they’re on sulfur inspections

would be but that up it specific And in would we basis may one-off waiver, may a available moving this expect would be the system to be on There or a that in on not forward X/X/XXXX. set that there so nature there is and supply short-term a event we incidents. see be particular

Paul Cheng

you. Thank

Greg Garland

Thanks, Paul.

Operator

James. go Justin Please Jenkins from ahead. Raymond

open. is line Your

Justin Jenkins

is XXX Gray maybe details the guess, on additional the think that everybody. of morning, Good in pretty taken being starting Thanks. with Permian, to Great. starting I the the from the that can incremental million project day a the all designed I right the day that way it $X number little it is project. to appreciate all a scope point? Oak be But capital

Greg Garland

X million that be in that we’re pretty barrels putting XX-inch easy to the a tells a it’s going kind you of day. lift pipes, to Well, to so get

still I where capacity, with pleased yes, terms the we’re and I execution. lot of Permian interest that takeaway with of think, at we’re in So, think in project

essentially And, is on yes, You’ve up track. order the really still got the project so the on lined contractors.

So we’re pleased with where we’re at.

Justin Jenkins

there Perfect, I about all, capital Phil’s we then following of appreciate allocation. Midstream packages at if that How And that. the should some process, in M&A, think on question on maybe out especially up with maybe today?

Greg Garland

think, space, value. particularly the us, Things to everything still kind opportunity Midstream to that’s we in as I at else create out really of like the Well, about everyone look you looks there. pricey think

such a organic of terms of create out something and rush great don’t it But like We watch today. if space in that front doing continue we’ll we do the we to M&A profile it. we by value us to have in need feel

willing our the the to to it, the opportunity We’ve do capability got and happens if do. to right way. certainly come balance sheet We’re

Justin Jenkins

Great. Thanks, Greg. I appreciate it.

Greg Garland

bet. You

Operator

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

open. is line Your

Doug Leggate

everybody. question. Thanks. I maybe Good could, cash to I if morning, back the could Kevin, go

a to to? that that cash that kind you a a so You’ve How guess, nice suggest please? are that, going a do build latest and and curious got broad is to and that distribution to? to obviously buybacks Is idea this distribution? you want thoughts get bit level I’ve buyback how bolt-on kind might quarter. this evolve. cash there balance you a the buyback Is dividends you look got want you want I biannual from And to to I more cash of quick obviously the a think get level back share a follow-up, of there of of as of little want expect And those CPChem to between the I’m after Berkshire macro on? just forward?

Kevin Mitchell

Okay.

cash I’d level, level. today. There’s terms with say, very where in target not there’s are comfortable of a we a number absolute not So

of think $XXX – I were So at we’d end bit quarter, first the when lower of we to be. million the a than like that’s

any So targeting is at billion north that. particular of something looking range comfortable billion very not on $X to $X.X but $X.X one a in, you’re be billion-plus, probably number to

CPChem distributions, on set of distributions. terms schedule cash is no In there

capital function a have flow as to of coming million The CPChem well cash – at been year. much higher level. within So where million we’ve driven and it’s significant $XXX to as lower guided by from operating this online, $XXX spending increase the we new assets increase

perfect, Now be doesn’t a like quarterly necessarily distribution play out would ideally, that. it but

board on what cash are dependent month-to-month as it’s appropriate be. and work somewhat a the we balances of So through the to distributions CPChem over going at how kind move

So probably ratable lumpy far and too be somewhat it third be still one. ratable, a it would those are not there, but nice will and can be off

Greg Garland

on comment just little that I bit? a Can just

Kevin Mitchell

Yes.

Greg Garland

hold a out. of to the I cash what really We at are, do the do foundation Obviously, distribute programs. CPChem. to the basis as can hold Board we of at to the lot capital don’t But tend cash enough mean, CPChem. the decide agreements we won’t cash

basic but tend at venture the cash. of of it’s on a kind So distribute to we going is whatever CPChem, fundamental joint the tenet

Kevin Mitchell

Okay.

Doug Leggate

Thanks, Greg.

one Kevin, embedded any in in change of Sorry, the thoughts the balance? last buyback there was dividend

Kevin Mitchell

our that but around we’ll look view year on billion buybacks, to last are not, and shares transaction the circumstances, the saw with look XX% the relative bit in normal value. this obviously to did at intrinsic billion competitive overall terms quarter, a increase at obviously little intrinsic range per then We’ll dividend last unique to guided principles year we quarter secure, is and We’ve $X growing, no trading where so Really change. large in value. $X a you the the of

Doug Leggate

payout question On just this I may been, you’ve wonder two there parts little could Greg, to my that go to but quick IMO got has you I’m much bolt-on bit [indiscernible] to if has mentioned. up. you the phrase think And to questions assuming my one it one to a really, been outlets just the I’ll from measured if if I characterized comfortable been mentioned, no there, pipelines then, I more where scale if I but move trade are of way, of the and was German and your refineries ramifications once back gets dormant leave board kind bottle gets want the built, it random away I we’re or about obviously of starting a FDX potential refineries curious a thoughts your on as expectations is be think the of it’s I’ve issue, may. potential new how frame earlier export there it, I hear than mentioned,[indiscernible] may coming refinery this how macro as to is could on how, thanks. cleared conviction benefits? we wall there how to neck a the is there, the capacity you’ve have

Greg Garland

our Yes, NPLs like all fundamental you at barrels XX% we Beaumont that I can is is our or U.S. clear gas get what products that the three it production – U.S. go and know this the by that to think to probably I us I going looks all capabilities because exports a years year But faster to talked built, we that, to you exporting actually XXX,XXX going consume into going the we’ll start or over is to going Buckeye platforms and to XX% so we want off are infrastructure think get think that a about be just are – products late so. we one of built, coast, going participate probably in we next or go are new crude good are we in about or the think to also to backwards, two the expansion that going the there than day, kind capacity those, to but XXX,XXX permits get SX gulf have know is you the we from the

products. ready down. you shut on think the and just we mentioned, So position get with And then we’re German trying IMO, I familiar people, the I are and portfolio export suspect one it more to to to crude that we

Doug Leggate

speculating – then. the was was you equity can selling no speak of Right. I this to speculation probably well, and private

Greg Garland

position I that let’s We think people that. can. that going there with to yes, guy are are people But happy I opportunity a it people, they try to as our and think to to extent kind put like opportunity play big the perceived of Doug, it’s IMO

view I hasn’t our changed. fundamentally think that

when enough problem. to years in argue of nice get it will global next can tailwind the long continue we of that to timeframe is over say a go couple $XX A distillate the going $X what Middle the crack about is lot you build for do capacity but think be, that or that that we’ll I think on out industry, capacity up I whether and refining solve capacity I going that China look it’s over the a India. directed in of it’s going to mean and to to East and be

way on and a that that competed indeed been through time and big will away period So work just a I today. opportunities to over don’t time industry so this long history the of of over fundamentally have it’s the different its are think over that that’s I view industry just the a time, get tend

Doug Leggate

the one, in very you announcement Gary all factoring quickly, the go in Valero last and bold-on their Joe maintenance for have are year relatively of half, been the your second Just guys refinery same just mean system like like that the Mexico from thoughts? have was constructive I in in a half you the second down could entire

Greg Garland

that. saw I Maybe

Kevin Mitchell

Yes.

Greg Garland

is a nice tailwind. certainly So that

Kevin Mitchell

refining year, Yes, ongoing refining Dennis the it Mexico utilization utilization. could a to next meaningful an Venezuela and be impact trend

meet time, utilization long there take there’s are them IMO, that’s think and – running projects time. at substantial to in spending not lead many the likely specs You is capital of these high rates are about that we’ll IMO are some underway refineries, capital The high uptick already. a intensive as we know and complexity

a industry, up are it will So for. I challenge for but be a the challenge we think

Doug Leggate

answers. appreciate Thanks everybody, your we

Operator

Brad Heffern go ahead, RBC Capital is line Markets. your with open. Please

Brad Heffern

sure to go morning are everyone. already far nameplate so not where the A as time the demonstrated in you healthy question good either, Hey if already any thoughts you’ve above level? such on over very you have crackers, could process on along that, I’m demonstrated that guys debottlenecking that

Greg Garland

that get as in think better we’ll and to with certainly startup too able those and you all we’ll assets of it’s I seen cap you know and asset coming think be with we ran and in I running probably started we know better asset bottleneck get that the that the have more facility that in more I some big we’ve know we experience five quarters, cost Well, the that we better think to low address came the our probably probably up. smoothest than last up expectations that but

Brad Heffern

hub so getting think great. so then I a the fracs, original imagine guys together, EBITDA system the if you will, probably no work on the put the just or any fracs you is? on would one, but I uplift tolling Okay I’d fee the that new out normal whole of obviously what a thoughts EBITDA should whole the know estimate, number, sort cost better across are you And themselves overbuilt

Greg Garland

are kind the to if you it so Well typical of themselves, so expect that, higher and you it. on the fracs back probably end of the and X type to the lower new of the can to returns of into midstream probably let’s that X call pipes kind are and facts end

Brad Heffern

is Okay two having from any assets installed? uplifts the – for fracs but there existing new the

Greg Garland

at XXX,XXX get that question a and all, the no, frac to did, is work part to one to of frac yes was some cabin back of infrastructure in no today Yes, there we there’s pipes investment Bellevue we’re facility brining propane large of the are early I you for export off Bellevue. actually we’re from day know barrels don’t a what what delta and and that were XX,XXX of so we’ll running day and between making to one Mt. it we’re barrels a exporting,

fee we today those buying Bellevue on so pipe. them are we are in And a barrels to paying the move and

And so exported. side uplifts swingy of to there be going to making propane the be the are by at and synergies more assets

Brad Heffern

Okay, you. thank

Greg Garland

You bet.

Operator

line go ahead, Credit Please your is from open. Gupta Suisse, Manav

Manav Gupta

crackers decade, over some issues. the XXXX that Middle the ethylene East Hey guys at in so and came last looking XXXX between all startup startup had online the cracker

the then One and start six peers of mechanical cracker up. the at multiple XQ start for run who months, your in achieved could issues completion not into

cracker to [indiscernible]. already had ethylene Most the rate, smoothest last the you one witnessed ethylene has on in decade. achieved Your are XX% hitting have crackers XX% design of starts we

bucked could So it’s pretty just I’m do you impressive to trend? differently didn’t, how what so and like trying not you guys that understand the did others

Kevin Mitchell

and that parties in running of I the get facility. ops we the on the of multiple took we we -- cracker strong the and that construction that on all it people from started way to and Polymers times Middle and of this last one something five and and had think beginning challenges up design, to project Well our think we are had the East, from team the that a hopefully the Saudi time the I dedicated issues think we very up our started months up startup know learn outing project you I eight the had trouble project over

just facility. going really that, the we quality better think had I so we very, probably we were we then the this construction watch help, was fabrications think And time this we up months we’re see with this very the the equipment X quality starting disappointing issues were control that, by and and the construction didn’t I while – they’re of overall as construction to to and that late good. X

Manav Gupta

further you see earnings to is, second you get completed? positive question Gulf momentum Gulf from That’s on to and the about Can a this And how second the on job the great Bridge contribution once talk guys. the leg get it’s the adds Coast Bayou good uplift you refining meaningful Coast.

Greg Garland

don’t fee sorry asset company Charles that I running for I up and is of XX,XXX interest day, get Bayou strong know $X we’re know is the a probably but us we important our general the a Bridge think picking or for like the are barrel, a you moving a general barrel a XX,XXX an you on which no, basis refinery, barrels really over we for on to performance. something the Well, Lake barrels know interest obviously

to to looking pipe to James James at running get Alliance. St. And this pipe anxious down the to we’re St. also year. the We’re then completed

can. of Lake thing refineries Obviously, just say other about our into this we lot general the all ultimately, Lake Louisiana benefited the into LLS Canadian a by some Charles. quarter, And from Charles Gulf Sweeny sell But import would a Maya, with Texas Coast. think the that’s And all we the So then We to We perspective, also. we heavy the down. Canadian I we of Coast. got Gulf heavy want run connect We rest. interest good.

the this just Coast so Gulf things well for us And its – quarter. in work worked

Manav Gupta

that, your actually business ethane And moved could does you $X.XX DCP? NGL value that if talk last gallon. entire Great. of about wondering prices per to impacts change you and that how the was I And is how intrinsically view your have up question

Greg Garland

each they’ve I given as to. point up. don’t Well, that cycle, NGL day moved up startups, there’s X no this think much needing as I the of moved people question XX,XXX think prices have expected in them cracker barrels At ethane. about a

footprint that extent mean, DCP. prices areas continue Permian, We a benefits we’re so Ford, I for We they the view the the in To the no DCP. towards question more where fundamentally that DCP. to have basin, the There’s also in like also of asset higher particularly contributes, But like it So the change in Eagle for doesn��t rejection good very on in DCP. our we on NGL assets DJ positive ethane the pulling DCP. them. out the like barrel very, Midcontinent, DCP that’s that

Manav Gupta

guys. much, Thank you so

Greg Garland

You bet.

Operator

Tudor, Please ahead. from Matthew Holt. Blair Pickering, go

Your line is open.

Matthew Blair

everyone. good Hey, morning,

Greg Garland

Good morning.

Matthew Blair

I derivative Greg, any here, I’m does model capacity. an you so, of run online a next not capacity we capacity? coming know low prices. with CPChem or derivative if but interest And wondering, the looking if see years more look ethylene ethylene we five that. I out definitely over more cracker in you lot agree than spot more integrated have adding was we’re at pretty sure

mentioned that growth PE was I think, you strong. previously demand

a say, advantage So any, trends? standalone of these would if of what kind you of some in, take to PE unit like have interest,

Greg Garland

if all, We long a change. bit, – I’d like spot Yes. generally balanced. don’t relatively well, going be price to the ethylene like first ethylene. – little slightly because today, runs it’s hang you I of I look, around just CPChem say, to just on

or add is, so. some long? capacity. build your question, derivative would To And speculative wouldn’t based else’s reason think them want through value And chain. capture so that the someone to to we we I capacity derivative be don’t I surprised on see debottleneck the full

to right? in that moves, the It’s If derivative, ethylene not value sometimes the always moves it side. you look,

that be stay And that we full integration value chain. to able like in so and

Matthew Blair

How runs more made sense. recently. regardless, you or don’t your if U.S. more Coast much Makes pretty to Enbridge shipper you appetite on Are progress Line maxed their WCS an supply And I would heavy a Canadian, Central But Gulf to the could Corridor some run you additional supply replacement X on on then would mix. is out, add of either we Enbridge. so Phillips was available? overall have of or WCS much in ramp think system?

Greg Garland

Yes.

over XXX,XXX a today. bringing of in crude day We’re barrels Canadian

We’re Canadian crude. importer of the largest

it I We’re I if probably would number… so, exact running the guess. got of about XX% Jeff, don’t you’ve or know,

Jeff Dietert

Yes.

Greg Garland

in …but range. it’s right that

kind of on Canadian today. maxed out So we’re heavy

Jeff Dietert

what running Yes, that we of can. heavy about XX% and is we’re

shippers Matthew. big not We’re Enbridge, on

Matthew Blair

much. Great. very Thank you

Operator

Craig go Shere ahead. Please from Brothers. Tuohy

open. line is Your

Craig Shere

Hi, congratulations on great a quarter.

Greg Garland

Thank you.

Craig Shere

I you on worked leading and get how with I you but up one-time-ish understand there’s But back it, has of think like call for you extra a IMO very the vision with the changed nice, come pay flows allocation that here at don’t billion first into a the terms buyback low in really cash couple do the really and windfall? market. billion, do share you of we mean, But eventually will repeatable, another And, up capital the that the in three-year about nothing by that? maybe to of XXX. kind want of strong we, out sounds dollars $X it’s least, maybe quarter. $X.XX billion debt maybe what inventories, if an two, it thinking think took a do course,

Greg Garland

trading want well, purchase on to great And as as six can to to I reinvest And side. generate years We growing returns. sources. but available then to in – back cash share really our strategy, as XX%, value that of to and kind give going share about we have I secure XX% the intrinsic to extent served that first for strong, the acceptable opportunities a Look, long of we which dividend our we’re long business shareholders problem from of below think capital fundamental have. this we’re allocation repurchases through a We – XX-XX, well all, has all our change. going what isn’t think,

the So, we higher years than sum the the historical multiples. is value three of continue look market, of out, if that buying. we’re parts, price And

we’re today market. buying So in the

a would changes. pay change little debt But fundamental you’re bit way. higher change that us the our fundamentally, capital going we So, allocation little not – to I that we think don’t see Maybe cash, more down a hold maybe strategy. along

Craig Shere

look the for couple do work $X the on do to a hiatus In you there’s ability had take you I How temporary terms of an think Oak up the as to we much Sweeny XXXX, flows cash growth that some into think down billion after annual to mean, little project we fracs portfolio. $X have? the announced reinvestment, massive then And we in years? materially you expansions. Gray we as billion increase if basis a early of CapEx and

Greg Garland

come just So I’ll back.

billion $X We We’ve sustaining of of kind to generate I to got fund billion to billion growth, think of so going capital. $X billion it, call $X to cash. billion $X $X billion billion is of portfolio $X $X want the to of capital. another

share balanced room got So for billion to repurchases care billion that and $X and of leaves of that. of $X.X that that another $X billion We’ve dividend takes all our today within kind means.

opportunities. opportunities as future, export-oriented I for opportunities, We’d think be there I and out to there. continue may beyond. do to X like pipe to the so more work you see us think frac more other In us about we do And that think there’s be that. going XXXX

terms So us of opportunities around of just good in a see business. that the petrochemicals infrastructure, I we’ve and, got the midstream think run course, in front we of

Craig Shere

you. Thank Great.

Operator

at call Jeff. will turn have We further time. back I no questions over this to now the

Jeff Dietert

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

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

Operator

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

You may now disconnect.

Phillips 66 (PSX) 27 Jul 182018 Q2 Earnings call transcript