PSX - Earnings call transcript Q4 2018

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Operator

Welcome to the Fourth 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

Harbor statement. Good to will and as Executive call. making could our Chairman morning, that welcome CEO; Vice It's allow Participants our earnings fourth and order The follow-up. the a in on from a financial Q&A. the reminder In conference contains yourself statements and material you President ask quarter and Factors that comments. cause of we to website, one well actual XX today's the presentation everyone Kevin during be opportunity and we information. on one filings. X call to supplemental materially call will Slide presentation operating and ask we include differ today's CFO. question, that Safe forward-looking will to Garland, be limit the the found SEC be Greg our here, Phillips results along can Actual Mitchell, to may Phillips included results XX and using the are Investor during differ question section as with Relations

I'll that to have we you questions, With call rejoin Greg the ask additional queue. the that, Garland If for remarks. turn over you opening

Greg Garland

morning, strong billion operated fourth [ph] our capacity We and throughput In returning the billion crudes midstream, benefited terminal crude quarter we other generated heavy increased performance record for utilization our bandage to share and setting the from we and during purchases. million network. $XXX and revisions capture a cash and Good for of joining for towards system another strongest through operating refining strong our with Adjusted throughout $X.XX pipeline operating and flow. us across margins. [ph] were thank earnings Canadian integrated or we Jeff. everyone, Thanks, dividends you XX% Refining shareholders share, record delivered financial and of today. $X.X Phillips reordered per quarter XX quarter XXXX. $X.X results

to share share. For during the in outstanding repurchased years. record and XXXX and shares service secure $X.X by the dividend. priority, we repurchases year, our adjusted billion of the the earnings were $X.X financial per cash of refining committed and and XX% XXXX adjusted reducing the in capital portfolios market exchanges the The we're run increased to contributing to allocation chemicals to $X.X shares operating also performance our in $X.X demonstrates or strong We generated results provided $XX.XX products competitive shareholders to our past billion which resulting through pull-through two quarterly ability of dividend our billion dividends, of well being refined returned midstream flow. record earnings, capture were billion keep outstanding Marketing growing a and projects our initial to In placed growth opportunities. XX%. a capital XX%, Disciplined and is for

largest across returns attractive demonstrated We're by double-digit the the program as look we our Texas crude shares Grey Oak trade to barrels Permian PSXP multiple to X supported on-schedule shipper the project portfolio investing fractionation deliver XXX,XXX projects Terminal expansion South positioned commitments, to value. have of the in two Oak transportation connect repurchase and Corpus storage The Phillips day Through expect is a Partners and Clements to Sweeney has refinery. barrels hub, docks, NGL destinations, ongoing day our late of to share PSXP from when X Ford XXX,XXX XXXX, XX% XX% with financial scale, barrels and XX oil Gulf It will sustain Partners businesses The XXXX. Coast Eagle a provide which by and including will the below pace XX strength Phillips pipeline target. industry-leading terminals XXXX. the end fourth by two is X-year to per IPO program Grey completed create of this barrels also Gateway Caverns. Christi, quarter of of is Texas our shareholder operator million year. be a XX organic XX at mid-XXXX. Sweeny storage is adding our robust service well EBITDA capacity building continue and opportunities drive planned achieved With to million is and of fund barrel in million since owner. barrels, have at it's to to The the hub growth. growth repurchases. and when expected intrinsic ownership. will they in and Terminal The Marine buy dividend in will another deepwater day we As project million is per At Partners of it's distribution start-up to including increase. X.X storage continue fractionators, we delivered the in Philip value we're capacity with in it's to XXX,XXX CAGR

in to increased continue expansion this have in domestic growth capitalize to opportunity. for Gulf making need crude Coast investments result in strong interest projects. from an production The fractionation We at Terminal on additional to Beaumont exports; customers our we're is expected

from to of across and In pipeline with Gulf expected in ethylene X.X quarter also crude XXXX. XX% is capacity transport is Express of include into X multiple refining, we the derivative day lines both will running At the underway to high in expected anticipated per development. to interest continue barrels product in Construction terminals growth Coast the Midstream Coast XX.X contracted projects a DCP return and During capacity service; million cash begin opportunities. Gulf billion high million well Gulf through crude debottlenecked further increases to Basin, Permian is is natural cubic A second free generating Gulf additional placed Completion feet DCPs early Coast by quarter the fourth second approximately CPChem project to markets. completion that has storage of of storage XXXX. total gas fully barrels. new million are the X.X focus the this quarter, improve on operations to brings is we oil barrels capacity plant under CPChem's X project petrochemical fourth to is O'Connor margins. in evaluating assets new Coast flow. XXXX. strong the DJ expected increase

year. increase gasoline; run an fourth crude during upgrade our Sweeny we and octane unit -- project FCC project have quarter, We Lake production products gasoline of Partners to to per planned quarter completed be this X at unit [ph] increase underway higher unit Also will XX refinery is isomer that in additional the at at completed Refinery is components; XX,XXX valued higher barrel crudes. of of is petrochemical octane to advantage modifications Charles Phillips domestic higher third constructing this Charles day Lake production expected the this a

executing projects. [ph]. we we attractive projects on portfolio operating As the and optimistic excellence our into investment growth our strong focus remained in return future will about opportunities across We're with back XXXX move businesses, and

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

Kevin Mitchell

of delivered billion CPChem Thank XXXX is distributions with in from working billion the and since you, million. operating began cash We operating company's highest We for Working the of employed This year. our overview the the an year $X.X our cash with XX%. the share. annual each WRB. Greg, summarize capital from net $X.X the financial the $X capital end At capital from was during our were hello equity in of approximately the on billion the capital we fourth and everyone. Slide earnings was XX%, billion. we cash $X $X.X Cash balance shows earnings to ratio inception. Starting the year. return cash changes X, by debt generated change affiliates, billion reduced excluding billion have flow quarter $XX.XX $X.X per sheet. or our impact flow in was year on operations adjusted on with results Slide for $XXX X

the $X.X of our $X.X shares $X.X XX% we billion During of and dividends repurchased billion billion expenditures representing outstanding. investments, shares capital of and of year paid funded

$X.X was including of was per million. and Adjusted ending million $X operating from the Our year share cash billion ended $XXX growth affiliates to $XXX spent Capital Slide million fourth billion, distributions through flow generated $X.XX. earnings $XXX results. million adjusted was million quarter $X.X projects. returned cash repurchases. our balance earnings We on quarter XXX of summarizes X equity approximately with of were dividends $XXX and spending outstanding. We $X share billion the with $XXX shareholders We for shares of million billion.

Moving X. Slide to

$XXX a have our lower level, $XXX increased changed I last to reflected third refining, reporting the results. quarter pretax offset more chemicals assets. for The two fourth results. partially prior million adjusted the than effective quarter a [ph] with This million by the are results shows basis. higher slide than makes fourth segment the venture quarter $X.X full Transportation higher consolidated more and quarter's pretax was quarter. comparable Fourth the income midstream, fourth company by wholly-owned at billion, As Income from peers. Slide adjusted tax reporting joint XX%. pretax midstream both, pretax our segment year rate the and this marketing was adjusted income on taxes call, change on adjusted change we record Quarter-over-quarter our income X by adjusted earnings our year. in was quarter pretax to driven in our highlights segment mentioned

strong our refineries. from Our operated utilization benefited pipelines at

pipeline Bakken barrels per impacts. income In NGL primarily an addition, $XX was inventory throughput from fourth the other million day. pretax increased million, adjusted of increase on quarter and $XXX

Sweeny averaged million offset XXX% the averaged We the a primarily continue to the run well $XX is at to cargos quarter Pretax income XX hedging million during export fourth the improved quarter the of results previous due quarter, hub, month, higher and fractionator costs. by up utilization. partially $XX facility operating from in the

DCP to owned per by XX is DCP the expansion Phillips Hills quarter, Partners. completed one-third two-thirds pipeline of Hills fourth the day. Sand XXX,XXX During by capacity Sand and the barrels

fourth costs. $XXX lower reflects was pretax from on sales a on and seasonally higher turnaround and volumes million, fourth for Chemicals million pretax and the pretax costs. income in third other third and X; Turning O&P adjusted was million, reflects polyolefins adjusted and and The quarter decrease of an income segment Olefins down adjusted maintenance million the turnaround million gain to affiliates $XXX equity quarter. polyethylene in than fourth sale previous Global domestic quarter. $XX the was income $XXX lower $X quarter. the the Slide decrease increase The quarter, the liability, higher contingent asset quarter CPChem's XX% from utilization

we CPChem. than were million was $XXX from in turnaround third Gulf The higher million, XX% the in was fourth XX% quarter. view from received pretax XX% million costs from declined fourth chart central change and third yield primarily the from distributions with quarter previous previous provides the margin of was $XXX product $X market the crack $XX.XX barrel, in XX% a XX% which During realized increased Coast the quarter. of [ph] quarter clean XX compared the corridor income results cash pretax and $XXX strong reasonable moving Crude Slide utilization quarter. quarter, The regions. the The per million, on adjusted

was was refining billion. income pretax expanded Coast product $X.X increased with the XXX quarter improved adjusted the million Gulf basin Adjusted in Canadian Coast For from utilization realizations XXX%. the downtime. in billion, income Alliance Capacity crudes. $X.XX pretax in less benefited of oil crude corridor Advantage crack. gasoline market configuration Capacity higher the an on by increased oil income distillate operations prices. full to was realized differentials. $XXX per and market the realized was primarily crack year, XXX%. XXX%. costs. from barrel, $X.XX of decline XX the reflecting to crude an the resulted by NGL, increase differentials, and gasoline corridor margins The central $X.XX in per quarter return per barrel fuel region Canadian realizations [ph] covers widening market the driven We heavy in previous improvement improved discounts prices $X.XX quarter of the and barrel. barrel, central our clean of quarter improved margins higher Refinery In margin utilization crack Refinery the higher turnaround barrel the $X.XX quarter, normal overall by crude due secondary distillate generated compared the quarter. Canadian an mainly declining per coke. partially third the $X.XX third to volumes X:X:X per improved premised the X:X:X than fourth pretax The to market crude capture. products due were as Atlantic to Gulf Slide in of Market $X.X the during per was The barrel by $X.XX following Losses per of prior results per market product West following refineries. feedstock spread the capture The barrel declined third widening offset $XX.XX differentials Bayway barrel for adjusted of impacted downtime. from quarter, increase due realized Coast, was and at from the relative capture made with in more while by crack $XX.XX The by

further category optimization per across primarily improved by differentials. to opportunities $X.XX with clean to Gulf by realizations. realized margins other logistics capture Coast price improved Realize The our barrel, NIST widening market due margins were network associated product crude

fourth from higher falling margins income the record Moving XX; third to quarter Slide than other million, $XXX improved day. bringing was a the and million domestic the Marketing sites fourth approximately fourth adjusted to XXX total the were in & reimaged start Specialties with branded Marketing pretax exports of the associated $XXX our on quarter. quarter barrels product sharply a Refined million We $XXX XXX,XXX increased prices. X,XXX since quarter per program. record during spot

income net due overhead to quarter. to on scheduled quarter. the the corporate primarily quarter, and the XXXX, adjusted operating margins. of in of Lower due interest results. This which For prior other lubricants the to recognized additional review severance pretax $XX higher financial are third costs On interest corporate due improved and for was X,XXX XX, my cost an adjusted and Specialties million segment employee Slide income $X expense concludes cost from had reimaging. million, the $XXX increased pretax during decrease higher is million a sites

$XXX million Next, a in mid-XXs come first $XXX We to the $XXX first right the I'll and outlook and to anticipate pretax expenses cover few costs $XXX million. and corporate pretax. between for quarter be items be in million and between to million other

between pretax. full $XXX we $XXX be and turnaround year million For XXXX, plan expenses to million

of pretax expect the We With XX's. expect corporate income open million D&A year. billion. $XXX low in $XXX that, full be anticipate to questions. rate other the to and costs line we million to the we'll the the year in $X.X about finally, We for range of for effective be now And tax

Operator

Gresh JPMorgan. Phil from Instructions] [Operator

Phil Gresh

I single-handedly be but well; of to of strong strong side Hi, or other different straight of expectations, refining's XXXX, is and sell congratulations question back Greg, either guess under-appreciated Phillips a the the have on look mean going been given reforming this think portfolio at the consensus would you third the of that's some quarter improvement first see the sustainable you parts solid where obviously the at is quarter you if about year? I very been here. parts you beaten as be by keeping here portfolio seems this so how just control kind structural Do there? do on this driven

Greg Garland

doing are a guys You great Phil. job,

two in things; differentials, and the market it's a and of differential no no strength X% look distillate portfolio So to just we're We we think creation. it's that fourth of yield. ourselves so WCS question the there's distillate environment the find playing yield, our in improved is so I up question, our fourth quarter, that quarter another -- lot the XX% drove the the right value

versus So given peers ability heavy, on run coking the of it's were at the distillate, high-end our our our capacity to differential. range and and

starting assets chemicals chemicals they're continue that mid to they're business in, versus actually we made I earnings more Then would our think in got well; drive we us. running, XXXX. midstream kick that's performing going cycle about just made are thing in say we've to for you these other than improvement is, The up, in midstream to

XXX% that we central it the needed and Operational to ran to the really Coast on ran show finally, up quarter, quarter run emphasize continue in we've across portfolio, things where value. run key XXX% then to to We up showed the on as for been So value. we is And we well. utilization we well. investing excellence Gulf are the deliver starting the us, continue and

are changes? other So you on comments structural having Jeff,

Jeff Dietert

midstream Yes, that's of a refining billion flow our $X.X between and kind of evenly from operations and overall chemicals normalized projects improved and incremental I'm distributed environment. across about in EBITDA thinking added cash

Greg Garland

used I would of say to to $X billion normalized of $X given say the we $X of now on $X billion kind to -- a quite kind billion, basis. Yes, normalized cash we're mid-cycle billion flow

Phil Gresh

I the run quarter? some and utilization on the entire guess second are in turnarounds the here the just or for at guidance question the first that mid-utilization the the cost industry is looking and you say for or first quarter, environment that refining the Would is here turnaround yourselves warranting cuts you for there. seeing an impact the

Greg Garland

Most is sure maybe that's pulled margins centered year in lot a there. back that the of turnaround could activity. can the we making we front We've Phil, the into back half few work the around where from of that the but wasn't year run there of guidance things half a half around

So it's focused around turnaround activity. mostly our

Phil Gresh

Kevin. sheet you feel finishing to Last Obviously, cash year balance shares; levels year really for some just on the How in you here? you're do the strong the about flow, debt clearly. buyback, some one, earlier issued

So here? down from about desires you pay to how do feel debt

Kevin Mitchell

So, where pretty we to. about good got we feel

basically we this with the from the and we fourth -- where strong third year. we quarter had In fact, been replenished cash

on So cash, that. debt $X billion we fully to XX% consolidated is XX% a of cap on feel good of so net basis, at cash,

quarter, weak in a We year and start available context of we so it any on a nice so work is work the margins we'd have turnaround typically kind fund We'll for a flexibility we'll use that's our of thing But pay -- the of extended period, if some through; have have we'll to that the the of happen to of the have expect little overall bit flexibility for as cash working typically continue how that's to but the to the first down, capital at does. we that have in all through obligations. and look of out. shakes see that

Operator

Evercore with Terreson ISI. Doug

Doug Terreson

on shares are Good outstanding employed morning, U.S. the your your in return and XX% in capital Does industry. XX% reduction everybody. best the energy

the results, because with think variable to some low, My unusually processes And or going the outlook with year, your do conversion is work weakness is on on really to for team this going for there. on kudos businesses. is the for seasonal starting of throughput cost refining, good margins you capacity So question utilization exceptional to remain that's high. often these time that is of decline key

is, question managing the it So circumstances? the these utilization And plays do out industry? you how you conversion thinking about across are guys think also, given how

Greg Garland

So, to about tailwind; to can or diesel the How gasoline and point the level mid-cycle When comes environment up X% the encouraging in there's cracks great concerned you it at still this at market season, as terms a going a so is I'll that of weren't due XXXX there; we correct inventories in North I take there for IMO all gasoline this that? that so everyone in time going Doug. in cracks, demand outages pool; fourth the and directionally our run, to that know will cycle, we're was in about still for that Look, heading we're to refining get issues above it's given top in XXXX. the but terms but on question for to to me. gasoline, this debate some better for cracks X.X% is add gasoline America The year, no range. and little We'd still be assessment look flat and is stab into is had Jeff think about that's we're out we of constructing there the high and gasoline. of think quarter. demand; the IMO, We're a some overall be When we end helpful butane probably normal gasoline out turnaround see are spring you the operational year. that of I

Jeff Dietert

Go ahead, Doug

Doug Terreson

at and Well, strength and a in same the I on question last position about just for you today. comments couple to spending capacity going in guys of based the more area years are was Greg's specifically, ask chemicals

is area; basis just So view bit on constructive little optimistic to more chemicals that guys increased and investment so update why are want I your get than the construct for which you a an some chemicals? on

Greg Garland

growing should about polyethylene growth than lower what we're 'XX than build the and 'XX is In that of U.S. makes. all that XXXX. demand, Then what grow capacity particularly probably a First rates constructive you operating advantage mostly in are available albeit to still But it margins still global all, constructive for that. you in is economy view, think year going you so for says should globally. of so faster be and look our is CPChem again, demand is really in XXXX, at feedstock which into

you advantage a which business. of have great does, technology, position return CPChem feedstock, great to If great access

a business it's into. that so And we to should invest want

Jeff Dietert

demand Polyethylene We above in seasonal a but in did some X% compounded year, a GDP was quarter. grew by decline We crude softness XX% experienced have it the growth. by in prices. weakness last fourth typical substantially

started in we As price year, were improvement. demand crude is CPChem prices to Healthy but demand first soft rebounded of the seeing expected polyethylene have drive quarter. signs increases some the margins the and

Operator

Neil from Goldman Sachs. Mehta

Neil Mehta

The quarter my on in I'll crude XQ. tailwind me Western add which and morning one question obviously were have team congratulations big here here. first and on ever is Canadian differentials good a XQ kickoff Good for

that? here and around term Our thoughts view but there still than lot your this and the just which is in is that plays business is XXXX of ultimately to pipe uncertainty economics how just advantage take transportation out wider how will out adjusting longer towards you're your of on settle a latest then

Greg Garland

unsustainably unsustainably what off targeted discount. from We was. to were cuts, mandated than the wide Canadian believe market volume that the $XXX discount there for the narrow gone more amount came with heavy an We've substantially

below run comments economics this what rail do to running economic We the passes. to some reductions in move expect Canada. had your to We we're producing as is also -- well similar reductions production so capacity and

of mandates minus the away rail number of to have moving a we so area. Canadian the back producers in kind argued think go and something that from expect the XX for differentials to I economics WTI

Neil Mehta

That's then of margins. of refining sense. you through something lot of walk up more specific. Kevin deck Slide the helpful stock your that and a follow little a to the configuration XX on made

bigger and felt that think that about normal number any we a than strength $X.XX how part about carry talk down other is big detail we of can realized just to a a precipitously in more is prices is the The that that coming little what the forward? that of and should market bit function of crude or

Kevin Mitchell

to as on do just on saw there of available probably crude they we on helped positive it of capture that's you're the product barrels moving kind differential big the barrel, lends know were the opportunities side, for category things around other that environment are Neil, quarter in us crude cover So in does able realizations. per of then a network the the overall side to other fourth our why able to $X itself drivers that market the being it in that. which is to how being price to the a market you variety declining so And we're plus optimize but that

that those something fourth was not in really have would about you you good capture -- not good it quarter, So but think assume both could is rateable are the of to [ph]. we it

Operator

with Fernandez Piper Blake Jaffray.

Blake Fernandez

you about could second bit and cracker. a know I that's de-bottlenecking but little a bit there. print strong the the on on from elaborate well maybe some potential release, in was little covered as I'm totally I already you hoping congrats chemicals talked you assuming and that. morning potential separate a Good

that? sense maybe get significant to trying be -- that and timing time around could a how Just of

Kevin Mitchell

Yes, Blake, its Kevin.

-- opportunities, returns cracker very not usually consider and in production to the are like to be opportunities major In able drive anything project are incremental I for of next on CPChem investment identify major We're incremental like of has. those would terms strong investments. de-bottleneck always scale a to those the of project. These the what portfolio I -- expansion second

scream to being don't because So as them investment the portfolio they the of any to at one large for nature existing very significantly I of think high of usually typically by priorities look we but list those pretty attractive returns. incremental

Greg Garland

more the have was XX% increase Coast I Gulf debottleneck X%, all of Project certainly think maybe out and but But the some very the mean, typically capacity FX are order actually units Like not the of XX%. returns. places derivatives workers the where across specific to on when it's of we there doing is you we get like we the too. capacity at can and products look

Blake Fernandez

Yes, got it.

you really one and the where ability light know be toward an this maybe guess back the moving max if distillate as at you're are the to gasoline focused as far second is I may light on on is it differentials the could just just point? system in same with mode I forth and given The if flex on on your distillate between compression sweet give at sweet the heavy you and in you then market guess while we're so update

Greg Garland

a driven sweet given is and the do XXX,XXX light potential the crude; XX% it's but economic sour, there, we're current that's day, another is a that's that about making in there our XX% go products and on of sweet dependent the on so upside we're as as barrels and million to obviously given diesel what a economics diesel, shifted we been need so a there. to much move economics, the Similar can, we really have the towards we maxing Yes, side, there we've marketplace, about we're about economics. barrels potential or incentives so a maybe day they've

Operator

Read Roger Wells with Fargo.

Roger Read

the bit the heart guess but understand at and terms about quarter next 'XX what it be Oak so the talk could guess, for you obviously, your midstream And of about think maybe least growth in the I look segment, forth, Grey pulled transportation the looking guess, a morning. of in good really as I NGL get too? Thanks, little trying at prospects midstream highlight about fractionation And think we expectation as for to slowing in in I the spending pipeline to -- does that may little compare etcetera environment I investments? may side year or 'XX out in industry trigger I'm the How be the what EMP on NGL future production. baseline and are be as laid it's that the of it the an slowing over seems a the 'XX you've to in bit, may we that performance 'XX?

Greg Garland

with Roger. we're not to let's build So speculative going start -- just capacity,

with the are counterparts on contracts, have the midstream think with other and these side. queue long-term subscribed projects I P&D we are good XX-year the and contracts in X-year

that's So I a point. starting think

think and interest know right, some going end drill the these seeing additional -- -- capacity. just on frac to fully the North I that. Oak, investments down. exactly yet in to open interest and slows people We Liberty we'll additional still well, good starting Grey see of things to now going We're frac open you're I subscribed; and when get where but don't down X, season we'll to we're [ph], it's fully sign. we're out can those, Oak will successful in Red Dapple good seasons XXX. and the subscribed; X that up extent on it's say bit want we I'd subscribed, probably point them; build levels on completed Then slow these interesting, America, not

Jeff, clear seeing market centers the production infrastructure good So want and from in to investing out you there the producers or the still centers. to having we're from comment? to interest level

Jeff Dietert

type with 'XX. not production activity There infrastructure coming day available, substantial and potential -- a is resumes the capacity adding we're growth looking new still XXX,XXX that NGL that barrels at that's we're of in year-on-year, around been Yes. resource

the and infrastructure challenge getting what And will growth; is to growth for the to grow projects contracted continues so continue, timing production attempts matching so and structure fully infrastructure that's as with do. need the production

Roger Read

And globally then that to much petrochemical online how about at for too feedstock? Greg, shifting of a demand versus that us. investors kind Seems aimed a the or normally get forecast of that growth what growth; coming new do demand you in on raised tough as in concerns aimed 'XX. the be will we asking macro really assumption coming think refining; than transportation not capacity mid-cycle you margins market new terms refining front gears to is any you online, better as at of side more by back the mentioned But is think on for of faster you capacity

Greg Garland

Yes.

in So oriented those China East coming refineries China, XXXX. little on two gasoline a The petrochemical view into feedstock for us, in in oriented. the that and probably more Middle less we is transparency our a couple have one probably are is harder

people on this bigger but they're yes, that's I'm you half not it's comment? there probably as the we and impact Jeff, be what to of XXXX; so that want the So, particularly some the towards to is year is come of think. think a first going sure year capacity going back through half to

Jeff Dietert

Greg Yes, petrochemical low but it's as Chinese side mentioned focused I the with the well. think as on diesel yields

Operator

Paul Sankey Mizuho. from

Paul Sankey

Greg, made comments keeping demand about with us demand you on general the some interesting China picture. recently to

already about may the the on of referred you also sales you that so which the you what just bit be excess about because you capacity Your Exxon could market all particular little saying the add interesting. were and about new weakness is well. market that think anything on talk I to capacity. had you be would you've earlier how petrochemicals? shipped clearing, this you Thanks. I saying up there concerned a could So pretty global other China, in market has Could call, know -- as on expand held think Could

Greg Garland

Paul. Yes, absolutely. Thanks,

fourth into buying demand mean I we're of of I the or fundamentals ultimately well hundreds the see China, as way so; there. when coming they know crude they up still drastically to did petrochemical over by bottom next decade prices still and so the driven because as in they class the always slowdown that quarter, in XXXX, in to are the fall are set think coming millions/billions again. down time First follow you to prices a all, constructive middle people those try interesting of of petrochemical going start

into environment. the chemicals relatively think growth, probably China China, it's slowdown activity that's healthy. been we surprise demand, of in So demand European through the the in the North some American fourth still and look base pretty in healthy so I'd demand still terms see we into in the as quarter upside I to China but say around -- did

that So is, would for fundamental come chemicals thing is on and demand constructive, to may is other I is in grow the going see on say additions; capacity we XXXX still I XXXX. these slated view think chemicals that other faster to up our than on slippage some that projects are

Paul Sankey

framework example, but shift we reasons XX:XX which I company, of scale And return was of versus at it's the large? what might now to wondering Thanks. for know is the so cash for drastic moment. the related and follow-up then getting that is as timeframe given the CapEx question your is large pretty

Greg Garland

I X-year a but In The and the on core way, in growing tended if the we equity to of X I on XX:XX XX% XX% most that projects right think kind think about horizon horizons us of and go a our we think have X-year midstream But investing competitive the our I and over it want back for XX% shareholders you XX% just back be. right dividend to business. is think still of of banking to to them. were on refinery, XX:XX; we're X-year was company affiliate, in to exchanges. in consider about about place to and as were and horizon, distributions into XX kind into a them secure XXXX, I mid-term; projects top other and chemicals our XX horizon, the we think reinvested XX:XX, investments share repurchases X-year If to we're investment Paul,

Operator

from Cheng Barclays. Paul

Paul Cheng

Mexico year we -- your where issue Greg, can in see spot first any the talked that's with the That you early in talk the founder widespread some impact questions. salty; China; mean, there? of seen you That's And question. trend? expanded I that about do on an about heard fell you have of the have that change in [ph]. volume Couple market quick you

the said difference The crude quarter it there, fourth in share? tax. look depends wondering billion, $X.X billion, matter [ph]; you looks And the the Exxon -- it that fourth is fact, $X.X question at about quarter upon of the it's that you I'm can fee a that is have about if the like crude second half on versus number before is chart, the year

Greg Garland

question. Mexico the take I'll

some impact in U.S., day has gasoline, XXXX. and their about barrels seeing as the demand the to of a that diesel. XX% demand from gone shutdowns. exports are import down a of at Mexico is on They about with least pipeline Mexico We about barrels day XXX,XXX XXX,XXX

expecting last averaged year to know we're lower down As utilization you from XX% it refining and year. go about this

some to resume the seen lost We and the into are into down, of on but central imports be Mexico to but signs have back into we're somewhat. as some down some impact movement able product of is exports permanently, some seeing country, are that demand and their going seeing interior they're we that those volumes get that of will

Paul Cheng

Jeff, has the -- have start recover sign increasing? you export or only seen to any Mexico to

Jeff Dietert

recover they of little of from but in as Yes, be transparency area we to going these outages. don't it's to have seen we pipeline lot a try bit recently an probably a have relief

Paul Cheng

differential? crude the about how And

Greg Garland

is of billion. question, $X million, at EBITDA about so your versus $XXX first basis, $X.X look On it's an when it's 'XX, year-over-year about WCF-TI, $XX. And on 'XX kind you

Operator

Doug Merrill Leggate of America from Lynch. Bank

Unidentified Analyst

thanks the for This Doug, taking is [ph] for on Clay question.

So about is cash. question Phil's -- follow-up to my use a it's of first the on

your Just this billion $X wondering to for reloaded, buyback balance target billion $X affirm is whether does the high-end XXXX? of

Greg Garland

billion $X will the it to of guide I billion. think $X to range

Unidentified Analyst

is second Neil's a follow-up question My to question.

the but WCF the it dip Just rail. is worked now well they since work out on differential, of have to relates too the perhaps money cuts Alberta the as

not a see October but that you towards slowdown of rail? do think widening this in So catalyst my that do could question levels sharp is, a a for maybe you to sharp And direction? be the dips;

Greg Garland

seeing February. I closed, of a we arms economics the closed, that we Canadian some believe are come marketplace reduction. into reduced as starting rail have acknowledged ship by the react. rail are and to of is Yes, utilization Those their producers

Jeff Dietert

pulled us to on it It's government to we've build us and the overshot are was differential looks intervention, interesting, like whole again to that the we've inventories like Canada. in looks idea and of inventories it starting the which

where point differential, to to will loaded and a you about least back I probably cost get so $XX -- So we $XX the fully have by of you to a is think barrel, $XX $XX. at that look we cost kind clear think at a variable rail rail,

we'll I and we'll goes So as to cost the think then variable variable get to year move a cost on.

Operator

Prashant Rao with Citigroup.

Prashant Rao

couple into Gulf sort handle thoughts know that the be of it capacity the lanes? on in to hit invested each And storage the that since so in and how a about terms hydrocarbon is IMO. various will chain at have infrastructure you've refining value towards were we longer of best longer thinking medium in a see off Phillips wave or where might to capacity along sort are being sorts One thinking and of Gulf where sort chains Coast through dynamics. -- and particular, needs here; are; distillate, of opportunity of through years. midstream the Coast expecting hydrocarbon for for existing figured curious the two about And these play is I the expect export I'm opportunities to different that fuel I'm the your least opportunities storage barrels where there of I'm chains. windows needs, [ph] second against the in startles projects in wins IMO, and sort for needs changes the things needs of being how we as crude bit. we XXXX-XXXX; here, of trade for of oil, I sort and to next storage particularly view have get logistics you a other? incremental stands over first My demand one the

Greg Garland

Yes.

Sweeny, to build out and exported. to LPG Beaumont, to that out -- LPG that and capability more We've be need be similar associated we're out more export major Oak comes got have a capacity fractionation do of facility. continuing South we to production So Grey growing of our Terminal. most them lot tied the to pipelines export export got largely online, be as We've export of of Gateway the expect is announced, pipelines and the with are in going as terminals Texas

see we our those so opportunities chains. many of across And do value

Operator

Gupta Credit Manav with Suisse.

Manav Gupta

Gulf refining date? startup Can of Bayou your about system Coast and Bridge actual the the talk you benefits on

Greg Garland

St. then service have At which service there Charles, benefiting James Lake continuing strong we March future. near ability in that and and James. the it from on Charles our Bayou Bayou our the from for in season up that Lake interest the we've Bayou in domestic discounted have increase provides Bridge provide Lake to we're access the projects is so pipeline, is And and Refinery. Lake So there we'll Bridge, also report use into expectations start to for provides crudes into had and with Beaumont to Charles Charles, hopefully more East open to opportunity crudes. Bridge Bayou and Bridge, St. season to open

Manav Gupta

we any areas feel where follow-up; very markets. Demand polyethylene demand. And a probably but those Is thing, coming in you Jeff, there two a approaching softness demand end of markets distillate first one any you're quick that sign both recession and two those recession? is close is to are

Jeff Dietert

X% is Global Greg revenue demand information. X% see up airline more most look year-on-year. I covered recent the strong. at when Yes, information Tonnage to demand polyethylene the we year-on-year, think strong and continuing in the diesel side miles participate. of diesel, in up We're markets we very perhaps but there, equation which

point. this signs So of we don't as see any

Operator

Chris with Sighinolfi Jefferies.

Christopher Sighinolfi

look Specialties. for two here fuel and have relate and the fourth expectations taking if it I and at I history, how very quarter. Thanks questions. particularly bright performed spot. versus were in guess, international I And strong to Marketing both they my things results our margins appears first,

a near doubling second there. the consecutive fuel it's margins foreign you So I'm the for believe almost wondering quarter-on-quarter, double with -- on margin it's record I a of

about you've anything to attention that of of it to? Just structural, pay us for to any is particular if And wanted cautioned it that? drivers kind check

Greg Garland

UK. and water levels challenges maybe to the focused logistic we use the our had and advantaged. presented systems Germany, start in in markets to infrastructure the some that of Rhine I'd we logistical our low opportunity with Austria, and Germany, able at -- some are In Europe, around were capture Switzerland and

year in and rebuilding you sites increased kind we're that. JET As from reimaging, of Europe uplift a so about know, new XX some seeing we're

we're but not, it's [ph]. the piece, a And don't know doing that's added -- UK. certainly it's the brand UK work around the structural So moving JET in in into it's if then similar some I UK or

just created opportunity and combination the logistical good opportunities. of nice fourth quarter growth in a some So

Jeff Dietert

see that. And like markets I on would add expect as well, environment environment, to those would the The US. overall falling you in saw price had just the benefit the we in

Christopher Sighinolfi

here to sites, to I figure compare sites And be to the how sites for branded growth sales reimaging would curious, continued that noted same-store effort execute you that on you've think secondly guess, reimaged that in yet last year. roughly release the the And I X% reimaged? just have I'm

Greg Garland

a a mean, that's I think good more and and the money people reason number drawing certainly campaign. sites spending It's whole what terms the I are really doing in they're uplift. is X% we're it's and attractive. of see the the we in outside inside

Operator

[ph] Jason Company. & Cowen from

Unidentified Analyst

do to they going geography back highest products? as uplift prices see margins. addressing in I to that. I product my secondary Wondering secondary thanks terms realizations, going you with just guess, ask just from the of so international falling other Refining the those question did margin, for about oil the which is was

Jeff Dietert

do We all our see across uplift regions.

As except Bayway. at cokers and you refineries, know, we all have for our Ferndale

fuel from and products meaningful quarter, meaningful contribution, benefit across oil And some of saw it all the NGLs and regions. so really it there each the the of contribution from was is there was the contributions We all regions. different so coke during

Unidentified Analyst

to benefit more others, you than sounds more wouldn't tends just region that So like? it general say way in one a

Jeff Dietert

across it's the Yes, board.

Unidentified Analyst

resulting a CapEx a in And a quarter. if in follow-up; I flow And not quick little a that big in it lower coming just the like year? the cash high. wondering, you bit obviously was looks CapEx generated XQ just then concern, from? was But ran what given And next that maybe

Kevin Mitchell

Kevin. is This

that the capacity. to with two projects spend the ramp-up Oak started expansion of just last those, the Sweeny we of year You and sanctioned the at and timing on Hub that was so Gray look the really when the large additional fractionation

XXXX And impact level just the that's we of back And up already the our in seeing on budget for December. capital into ramping spend projects. those factored that communicated so you're

Operator

Holt. Matthew Pickering, from Blair Tudor,

Matthew Blair

outperformed everyone. morning, Gulf It Refining system seems your really peers. Coast Good like

You was anything or down anything quarter? that bringing unusual WCS or think this was stood barrels there out the result of that the

Jeff Dietert

the optimize able of we the the in most consume Canadian I integrated Canadian We amount think as fair logistics that are we -- did network, allocate to did a heavy the area Gulf to are Coast. across volumes heavy beneficial.

into We Bakken Bayou Coast across pipeline the Bridge wide differential Charles. the and into feeding Bakken also Lake Gulf benefit with the from

Gulf contributions. the oil in for pricing we Refinery during big because of Configuration diesel in less And quarter environment ran is those Alliance price more from meaningful quarter. during and Product finally produce is impact a than lags a part So were and the Coast declining gasoline was down I think the on maintenance X:X:X. third the positive. were realizations fourth

higher had volumes and there. we expense So turnaround lower

Kevin Mitchell

utilization XXX% for quarter always the to. region for the helps

Matthew Blair

of impact, are if pipeline recent expecting good. this any, Sounds Keystone And outage? from what kind you

Jeff Dietert

a Yes, what be. going impact to know it's the little is to early bit

the shipper that see some a impact, what have the are We are. wait and to on there for the but pipe, we details of situation potential will is so

Greg Garland

guess, We [ph] around, actually Platte talked too. I down is morning. to about this got that work we

need we're the down. to So think I as long -- we more pipe to details going about is think but I be how prepared, again see said, we're Jeff

Operator

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

Jeff Dietert

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

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

Operator

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

You may disconnect. now

Phillips 66 (PSX) 8 Feb 192018 Q4 Earnings call transcript