PSX - Earnings call transcript Q1 2019

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Operator

Welcome to the First Quarter 2019 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

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

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

Greg Garland

quarter morning, $XXX million thank Jeff. today. per you first and for everyone the were Thanks, Adjusted or Good for joining earnings us share. $X.XX

X results. market operated refineries. in at weak significantly earnings delivered environment. gasoline utilization, refining diversified Our crude positive capacity reflecting at narrow Refining a differentials margins Depressed portfolio impacted our XX% turnarounds and heavy

normal than a We are impacted by unplanned downtime. also higher

is to shareholders. we strategy to and capital will million capital During our the to shareholders. our our Disciplined quarter, to fundamental return continue allocation $XXX distributed we

We expect dividend to another this increase double-digit year. deliver

they intrinsic when today. buying below we We trade shares value are buyback continue to

barrel per Oak projects the of pipeline Coast Texas, XXX,XXX the day Gulf businesses. and continues from to made we transport crude and destinations. we the the on Gray portfolio XXX quarter, robust XX will a Pipeline. Construction across oil progress of During the attractive our facilities. Permian advanced Ford miles This PSXP, At Eagle pipeline on

cost of The is to We billion. project from prices, now right cost be total experiencing pressures labor higher away. the approximately and expected rates are $X.X steel

received have Corps We of permits. the all Engineers of Army

the two a We are startup X in XX.XX% had We on South interest startup is storage docks have terminal project up of in of owns strong our throughput connect day The value of Corpus across expected year. operations the initial chain. including will with pipeline. Terminal, will track capacity and in Partners XX% Rail capacity. to NGL about by Phillips mid to ownership. quarter to deepwater barrels Marine million in XX Texas this fourth multiple XXX,XXX Gateway PSXP has the terminals barrels per Christi, which with a XXXX.

global achieved performance hub at LPG a customer port in operating facility. quarter base. the With terminal’s fewer export Hub Sweeny is fractionator and delays, Our record facility export LPG both the including the well-positioned Freeport a advantages, the with first

the the capacity NGL X have will We The XXXX. Hub barrels are completed Phillips of and when a quarter day million XXX,XXX Sweeny storage barrel is expanding per the expansion Caverns. hub Partners, fourth XX barrels day XXX,XXX of with Clemens of barrels XX storage at additional fractionation million of in fractionators and

Partners, Phillips support is the Sand interest strong there and to and one-third fractionators The at supplies two-thirds Sweeny investment fractionation by customer projects, XX ongoing capacity. Pipeline, the to feedstock by DCP these Hub. owned Beyond Hills additional

fourth per barrels quarter the volumes quarter, record the day expansion. pipeline achieved its During XXX,XXX of following

components. of completion, storage capitalize barrels our Gulf increase is Coast in barrels. to also in crude the exports. quarter increase early at in high petrochemical making Beaumont crude opportunities. Upon expected XXXX, are of will million third Terminal At low underway XX.X have blend the a of Construction total X.X growth investments constructing on project This to XX,XXX quarter higher crude second XXXX. We capacity planned underway chemicals, Phillips Refinery, complete continued cost, additional to cracker terminal day bottleneck this million Gulf Sweeny refining, Charles return to to that we unit octane that Lake barrel our new by value increased would a an add Coast CPChem is higher and year, project production CPChem product X.X ethane project octane at A be higher gasoline. FCC of million and be year. products ethylene XX% its the XX complete capacity is evaluating the of to second is to which under of have storage In Partners In derivative is upgrade of unit is design. will is capability. increase the This development. gasoline per above isomerization and tons production per in

portfolio that capabilities. We projects under leverage oils and used other feedstocks fats, cooking infrastructure, renewable network be will diesel existing have for supply a our and development of recycled renewable Waste production.

third-party project We a our are Humber at and Refinery project we at we In supply our off-take agreements refinery. developing and underway have have facilities. Nevada, with Ferndale a

Phillips sites first Borger top safety recognized safety This by X closing, X Los chemicals, our the industry year their leading outstanding their our AFPM performance Association Gas In XXXX. third the award. are of and Ferndale, were recently Midstream, excellence. In for honor. highest safety also tier received CPChem at industry Safety for row Billings, The this of award a City are we is renewable our recognized awards evaluating that We the in divisions honored that and a California for facilities in XX from Refinery Processors annual Distinguished performance. performance. safety in for In received received respective has Maria Santa XXXX AFPM Ponca in fuel recognized refineries. opportunities one refineries DCP Midstream their the refineries were also our and Angeles, place

our the Kevin to to safety would done. to very to we like well review commitment and are the them over proud I employees’ congratulate a financials. call on We will job that, With of turn

Kevin Mitchell

repurchases. Thank Hello, an of overview quarter share, cash summarize X, quarter capital $XXX spending were of $XXX million ended million, for our Operating million $XXX returned excluding You, we growth capital, everyone. was and million earnings including We with was Greg. the $XXX financial $X.XX. working quarter and through earnings outstanding. was million. per flow, on Adjusted million results. with million adjusted $XXX $XXX first dividends shareholders Starting XXX share projects. Adjusted the to shares We on $XXX million Slide

the and in pre-tax slide segment by highlights quarter. decreased Moving the income lower Quarter-over-quarter first driven fourth earnings quarter from billion the results to this change marketing. refining $X.X Slide in by to X, adjusted

The quarter shows was rate Slide adjusted first X midstream our tax XX%. effective results.

by pre-tax Hub NGL decreased offset to quarter other the and quarter income First from from from previous $XX $XXX fourth million pre-tax by higher was lower adjusted $XX income previous adjusted income refinery utilization. the million terminal lower Sweeny Transportation million $XXX adjusted million, $XX pre-tax pipeline quarter was a driven decrease inventory quarter. million, of down results. and due volumes impacts partially

at Sweeny the Hub. We continue well to run

a record $XX million million due in loaded of is quarter quarter average by offset operating Sweeny During export adjusted and quarter, of the down first facility achieved per to pre-tax results XXX%. a the the quarter the utilization Freeport $XX decrease XX from Midstream month record fractionator LPG the partially previous cargoes fourth DCP on income in hedging costs.

lower the $XX Turning quarter than O&P driven million, utilization million, income by partially income the and activity quarter. for was fourth up and margins. previous increased million on from equity Global adjusted international the reflects by by polyethylene polyolefins operating fourth $XX sales $XXX and higher from XX%. million segment million maintenance higher Adjusted costs volumes to Slide was quarter. adjusted lower SA&S pre-tax $XX $XXX turnaround quarter X, earnings driven increase offset chemicals higher pre-tax first affiliates. The for pre-tax income Olefins was

from During received of the distributions million we quarter, CPChem. fourth cash $XXX

XX% refining. compared utilization the Slide fourth Next was will quarter. Crude we X, cover XX% on with in

Sweeny, Lake Ponca Borger City, During the we and Charles, turnarounds Humber at had refineries. first quarter, our

In the downtime $XXX Slide is and per lower by market billion narrowing to barrel pre-tax provides The price The realized down first crack which quarter million. were view $X.XX decreased the yield X fourth environment. the are was product back was differentials decrease and to The and regional $X.XX per crude in XX% all product in River addition, market for capture. refineries. lower clean These inland $X.X quarter. were rising Bayway, Slide Los margins facilities realizations with per on at a there turnaround change driven pre-tax in due compared X $X.XX clean results costs Wood of XX% in in margins Angeles was barrel income, covers chart first The unplanned lower X-X-X now to barrel a quarter and online. volumes. adjusted the the regions. Realized

margin realized was narrowing previous prices $X.XX lower differentials. to crack. barrel, the $X.XX gasoline of per declining which less $X.XX realized X-X-X was capture margins more an barrel configuration than to Market resulted relative barrel $X.XX from the barrel due was due Losses feedstock by than prior per crude. barrel quarter by from NGL secondary $X.XX premised improved in in capture overall We per impacted by make and crude per XX%. to our increased per Advantage market the quarter of and Canadian of refineries. Our the products distillate market

The quarter the to other due clean $X.XX category product per and first realizations, reduced barrel realized margins in RINs. by freight

cash Slide quarter. spot million domestic bringing to Marketing first of was start international domestic shows associated XXX over the quarter. entered quarter total quarter We to the the favorable program. branded the during the the the approximately and XX in conditions the since our international Slide on sites than on Moving quarter quarter change XXX,XXX balance X,XXX We from with $XXX during during working and capital, million, specialties cash quarter. income margins operations, barrels decreased prices. builds. were to pre-tax the capital was impact $X inventory XX, lower and Working million reduced first per in $XXX fourth billion with cash the from in primarily market quarter by Cash marketing due from our $X.X flow sheet. of million. billion lower excluding benefited other re-imaged sharply Refined prices adjusted $XXX first $XXX day. results product and spot Fourth falling rising exports

quarter, the capital we dividends through to $XXX repurchases. and of shareholders adjusted During share and returned $XXX spending million million funded

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

outlook chemicals, rate items to I crude Next, in be expect the few second utilization be to the quarter quarter utilization second we the O&P second rate cover refining, quarter. In mid-XXs. the a In for will the expect in million global $XXX between With and $XXX expenses $XX quarter other We million be the $XX to for open mid-XXs in turnaround to and and second now million. corporate will and line between pre-tax. costs we million questions. pre-tax that, come we anticipate

Operator

you. Thank

Evercore We the [Operator ahead. go will question-and-answer begin now Terreson session. ISI, Doug from please Instructions]

is line open. Your

Doug Terreson

morning, everybody. Good

Greg Garland

Good morning, Doug.

Kevin Mitchell

morning. Good

Doug Terreson

I have a question. fundamental

how like should looks deviations really also see it sulfur Brent since it storage expensive for down seems of variety fuel the after a this declines better as transition oil due Specifically, but standard middle couple traded and to like feedstock. XXXX a we of demand year to XXXX we factors, this quarter spreads by of that

etcetera, So, my in the Canada, managing or also sulfur that of you from of finding reductions then supply crudes are evolve cuts you couple for the we Venezuela, products expect the have how Iran, question availability guys heavy that? how OPEC seen given quarters? you regards are heavy to access how And market next

Jeff Dietert

Yes. Doug. Thanks,

the We are need crudes overall and heavy access to have we slate the operate. that to crude continuing to

we you Venezuelan not have the been XXXX Iranian and Asia. since As really buying crudes to go crudes know,

continuing we are there. so availability see And to

and barrels at look Venezuelan medium sulfur to heavy are the with we off market market of which off the cuts OPEC crudes Iranian oil, high barrels with due the As fuel was sanctions. right sour much you and the the

We oil. high have of the for fuel tightening a sulfur forward seen curve

discount. about we converting the X buy We If quarter. compliant start are testing in the it’s about starting a October. to fourth a part discount. XX-year to to we September curve to than the $XX in months Today, year, ago, and to was A expecting number XXXX talked it fuel the fuel do you historical the into $X expect and look of shipping X compliant have move of wider back tanks as for closer trading barrel back additional the forward companies

points So, widen in we differentials of year. hit expect those we to as those some the

Doug Terreson

Okay. Jeff. Thanks,

Jeff Dietert

you. Thank

Operator

Neil Goldman Mehta ahead. from go Sachs, please

open. is line Your

Neil Mehta

morning, team. Good

but operational of So, unplanned XXXX planned, the for really half an a back can’t period lot quarter, same be of was the exceptional first performance. of for outages. lot said The

on temperature from your get to about excellence wanted operational and go-forward feel just the I So, how you here?

Greg Garland

all, fourth It kind in I run have lights ran but of out Well, activity. quarter. of normally the and take downtime kind target downtime, X% turnaround we think Obviously, We the think, in Yes. would of during we first quarter, rugged is maintenance which we planned of was I kind or quarter. planned X% Neil, give first of about about the us. we factored had uncharacteristic Garland, unplanned X% had unplanned and for

sign pump are last the as Wood it’s for River, around we Kevin his It’s on downtime lineup from Bayway, kind of the then issue remarks, bases. the year. yield both new facilities, that looking Los at brought the substantial mentioned we in think both upgraded we coming a Angeles, at failure those facilities. terms issue, I met we FCC in unit really are And of crude of that online turnaround the structure three had a up restarting resulted unit

We have the through it. throughput gotten

really had We unit. down times couple up that expected and have in resiliency that we of quarter. a never the of experienced out the it third We

think up of million $XXXish and during profit now, us opportunities have a circa the you it’s technical, are so I quarter. right, but probably running we for got

Neil Mehta

corporate few from is IDR cleanup So, structure been follow-up investors? if MLP one that just to is is it’s when the And the side, has that certainly of focus PSXP and helpful. the on time big sort for on And that perspective thoughts your midstream given then still of right the structure. a a that’s governance that MLPs

Greg Garland

question, unusual an Yes, Neil. not

we a that I lot. get think

In pointed X apparently. to we IDRs have fact, MLPs two have and of there someone me like is that them out

that that – PSXP, So lifecycle. I we MLPs for think look, think a I understand IDRs and have

they an to with us that understand also will from perspective We the something investor prefer do IDR.

that really IDR – step have of value kind something to think always that think it’s and on the I unitholders, have of the so kind punish unitholders PSX accretive to to through something do the we and we also the it guardrails, don’t the we So, as recognizes do shareholder. use them we do that of we

will So, needle. we I think that thread

we you of impeded this it’s at the year. One capital hasn’t is have billion a had you growth it high PSXP, where sit about cost growth of the are been think the we issues PSXP today, of executing MLP, $X.X of program really capital

will the on to get it but grow PSXP. really So, get to will at there the impeded MLP, hasn’t ability we it, we

Neil Mehta

it, Appreciate guys.

Greg Garland

Thanks, Neil.

Operator

go Phil ahead. Gresh JPMorgan please from

line is open. Your

Phil Gresh

Hi good morning.

Greg Garland

Good morning.

Phil Gresh

in First sounds the more question may are – that on or fundamentals your thoughts your chemicals, second cases. your on chemical some of what the around latest the just some have on XXXX picture peers thoughts may cautious it getting in cracker? even and here like market impact how they in fundamental not XXXX Curious are

Greg Garland

Yes.

Kevin take a fill will and can Jeff I and come or So in. stab in

the back half So you look growth in ‘XX. first XXXX strong at slowing half year growth, really of

than cracker a cracker. in Dow against XXXX, in we CPM the of and backdrop three a we albeit As large of expecting at startups what grow U.S. the are the kind rate the the slower into came XXXX we with to probably ‘XX, cracker cracker, in ExxonMobile experienced

look signs sit for at today, I showing good economy Europe we Certainly, first we quarter the of we think GDP XXXX. are As constructive of us is the results the for to look life. U.S. where

late resolve to which with the that, summer think us and all next stimulus having two is coming big we sometime But early got we year early was this we crackers working year. tariff the in albeit this have more need think said Asia, I issue, at China.

the between get and as now this you is us there back more more would as is supply and XXXX, coming I from year. of demand growth half out So, maybe some say think compression on. there in additions But margin we that

So margin we are outlook. the constructive in terms of

the and would against some fundamentals I petrochemicals backdrop on feedstocks capacity we position say to advantaged good business Coast. Middle Gulf So, CPChem like in continue and demand East in the U.S. of of the the coming the

know but… on guys you want don’t Kevin to or I fill So in that, Jeff

Kevin Mitchell

you think that a capital that about a attractive us. returns are and fundamentally, next CPChem assets major in view building think those as very – to multi-year project I being on doesn’t still with investment our No, it for change is the you

Greg Garland

know say more portfolios peers I less in had of Europe and than outlook, They are some that our exposure does. rosy a but have different. than CPChem have their Asia

And so portfolio I still a standpoint. think CPChem is really well-positioned from

Jeff Dietert

barrels grow If and day you half continuing of production is of that. benefits XXX,XXX to look up got rapidly, have and over at the is ethane ethane the U.S. year-on-year we a NGL about

added fractionators the to additional had year from more additional and pipeline come Gulf have this on with We later to Coast Permian line. the capacity industry coming two

advantages continue to supply ethane the for look So, strong.

Phil Gresh

Thanks. the for answers. Thanks

are gears seeing Coast, propane to export comments at inventories NGL the your in a the per look you guys shifting margins around exposure running picture on facility the the arb and Just you cargos well of have view? viewing month. lot of on sustainable Is in the there, Jeff exports propane as your been it we your LPG that propane XX here the Gulf given and How pipelines to buildup pretty the in year? second half fundamental and

Jeff Dietert

Yes.

are there think there. for optimism I reasons

Asian We’re to see strong continuing demand.

the from parts impact and other to for running have As U.S. U.S. the but Houston export utilization, which first Channel well we robust at some facilities very LPGs pretty growth Ship the support export be margins. looks in us world is the it We the supply LPG market exports. are going high quarter facilities, should fog, robust you helping is know, in LPG did to that LPG We’ve of seen production as to

Phil Gresh

Thank you.

Operator

ahead. Wells Roger Fargo. go Read from Please

open. is line Your

Roger Read

morning. Good you. Thank Yes.

Jeff Dietert

Roger. morning, Good

Roger Read

mode. the that’s no and if looking you’re near so balance at and at guess margins, reported they maybe longer diesel as for the between other mentioned summer set far for I that was the better the term little were refiner here? we up a how a wondering max I you’re diesel gasoline And could bit, it one hit

Jeff Dietert

were factor quarter strength of run differently. refinery looking we the in diesel to Yes, mode a in Each run at in really gasoline. given relative programs, portfolio. can cracks fourth max the in our we across the the first diesel quarter linear which It’s

gasoline We West the in Coast. strength cracks, are in seeing especially

like going be it mode we’ve that. and seeing so, and there, feedstocks we’ll the exceptions we’re be In gasoline in industry by diesel the focus was year-round. now And And max LPs max unfolds. looked really the to but yields as some increased year driven to need February, to

So, we’ll move necessary. as market adjustments the with make and

Roger Read

VLCC. yes. Yes, and to an Gasoline the being of One is involved crude about thing but we’ve discussions ports slightly was know refining these wondering there’s yield from just in before was port exports I there one when obviously. from I crude exports, path or going thoughts timing the any I be the facilities, those crude might potential just on loadings of available? the VLCC that, pipelines anything remember. you know not a interesting side, byproduct, and standpoint of all the be you any update to see coast loading just on been coming infrastructure at talked different other that’s from

Jeff Dietert

As you Beaumont involved product crude and at with exports. know we’re

serve South that the Corpus Texas in Gateway participating We’re Oak at Gray will Pipeline. Christi the facility

VLCC to look continuing opportunities, have at anything to announce but at this we don’t point. We’re

Roger Read

Thank you. right. All

Operator

from Please Simmons Fernandez ahead. go Energy. Blake

open. is line Your

Blake Fernandez

Good morning. guys. Hi

our fairly expectations. cash Kevin, but First the in compared least probably to strong to flow goes quarter, the question was at this

capital tax than bit we I that elaborate could going the deferred out to know it part little income higher if how a normal. strip you that is should on of due didn’t which changes, is working like forward. about looks you benefit, If think some

Kevin Mitchell

$XXX We I a we as $XXX tax the $XXX the that, quarter say benefit where benefit be. Yes. cash The for on think statement I and quarter. million and about of normally right. that Blake, for still would was year $XXX would so would million I the benefit million you extrapolate say a think being is you’re year this about income million that flow deferred

first So, quarter. through of running couple in the a of, items, we sort had non-standard non-routine

think you’d level that to the as $XXX still So, full assume rest of year. get about the think you we year, you the I for

Blake Fernandez

do from bit lagged like near things Got a Jeff heavy it. a is a or away but to Doug’s term? going of That’s the the you in impact given over can initial to on are to know or if obviously a better going the next helpful. that XQ could capture get think Thanks. little be to two, heavies, the talk you hopefully WCS market I next is I from of and alternatives going about back to compressed that’s challenge year, quarter in it pricing, just to the continues fairly didn’t and challenged. it appreciate question fair present just the the WCS standpoint have bit rate shift seems

Jeff Dietert

we Well, have away to in portfolio. as many WCS continues to we do WCS. of from alternatives parts are work our

as production think the into quarter are in probably of are we peak going of been in look, more and we’re as go second quarter, number of think the you accelerated production and the have the this maintenance I we’ll we because have that’s the peak some market. those third to We production a into cuts and Canadian There now. believe right down. facilities season the of that quarter mandated second

be some to so of year. temporary probably in them the the you economics curve, fall. and to the at quarter pipeline second think in back kind look impacts reflects there’s economics we we’re of expect toward in When see it We the the forward expectation close and rail half we’ll and wider move that

Blake Fernandez

Thank you.

Operator

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

Your line is open.

Jeff Dietert

Good morning, Doug.

Doug Leggate

may part yourself and obviously everyone. on go am and diesel The with realize staged this, be little we off talking anyone could And micro. pretty Good that a to of us you. I wants but getting with capital, kind your take this, start Appreciate of if the me guess much here. a normal Jeff. Morning, Morning, Thank all I let and max but we uplift going of that through this seems bit remaining frankly always quarter who the to gasoline. you MO semi-permanent specific one forward, has recovery me got quite is about gasoline which last the constructive everybody. morning. I off, in of gasoline I on for as one But I see micro start morning, in we somewhat were it summer. yield mode peers kind

So, I’m just those please. that about that how have I are curious, spread. no I’ve windfall you guys full if onto expectations layer your industry given thinking crudes got could a this we for utilization longer and CapEx, open in

Jeff Dietert

Yes.

So, this you gasoline I forward in if to summer a to February in barrel. back through look the of $XX today, think a they’re But $XX you the speaks $X in $X barrel curve. to accuracy whereas February curve, range the to and forward look were the if cracks the

increase experienced. the January Gasoline inventories been inventories a average. high below substantial So, back and in the have an been down all-time with were drawdown there’s at five-year they’re that now in late

California gasoline we changes. those but talked about an there are your increasing And that have as yield with does So, in question? answer briefly seeing adjust cracks we’ll gasoline this, We strengthened.

Doug Leggate

been supported shift bad Yes, is, was egregious think is is quarter but to getting I the what coming into is, and at I the some expectation by the some gasoline obviously, I’m expectation year IMO. be think last so assumptions to obviously really the obviously going diesel there’s

guess your is Coast. your in what a was West getting really just from gasoline I away I if So, take but I the the I’m I’m at, really deliberate outlook. that the gasoline bias, point support industry market wondering thinking about more means to of

Jeff Dietert

Yes.

think max were year-round, which for So, have outlook, we mode the shift been IMO, diesel into refiners as may see industry to. an a you increase associated that’s demand what in I diesel going referring with to

be that going common think more may forward. I

I other mode. think max in diesel the is, were we thing

an higher fourth as and think only quarter, I yeah industry quarter yields previous. than X.X% in were a first diesel the the

And barrels day look at incremental that we be so, sure $X.X a of million $X diesel. is to going that to demand, how marine much fuel not of as I’m million

thought that a most think ago, of be was we to I going year diesel.

XX% Now in FCC an meet that we fuel as as would and happening FCCs to diesel of X% reducing our some well. market. FCC We that see to be don’t required to barrels marine across, supply improvement industry pull in a which The may gasoline utilization reduce supply out the portfolio. have order yield

Our the FCC rate, a gasoline market larger in more frankly. But both and oil the could FCCs diesel see utilization market tend efficient. support and there which may to be that the be some lower

Doug Leggate

got little I’ve on whole because getting that brought been that’s follow-up our a itself. I’m Jeff, thesis a but quick of IMO CapEx, you ahead up delighted on

My the that. the remarks, spending Oak Gray terms of CapEx. situation. just addressed schedule and had realize appreciate I on you follow-up are this is year obviously your So, really the you but on in big a things working for running cadence little ahead capital of

Thanks. the XXXX? the working the So, part net the I’m of the your see out leave through balance just us balance Because of capital just obviously to wondering see we cash year. remains spending you playing how profile on the the I’ll resilient if you returns, could story outlook unwind is of give big there. through want it our steer how of us

Kevin Mitchell

let of Kevin. two quarter to capital, the and first. The around pretty it’s usually back see over look the we’re you’ll coming quarter activity down. in us the building on the and for Really Doug, course that and working of inventory it’s is the quarter inventories capital CapEx cash the normal especially timing our the then the in working first me large as that one and hit in year fourth Yes. elements this of the capital working quarter at we first use

quarters billion think being about $X.X flat working for recover that flat. and of over we whole, the keeping capital expect that as a so year to the So, of On still year the you’d outlay, about CapEx quarter. you’ve think basis, $XXX which cash net picked an really the is, I way we it, on don’t were adjusted but for if is that to on up the million know our remaining

in So, we Oak, on budget you at you of think increased material all in year’s if to our $X.X billion. talked net and $X.X with very extrapolate that that’s factor about actually that Greg this our of that spend, much what is but into through Gray the billion. don’t cost flows that share a line on impact going out, consolidated when have

this PSX the where level, we’re point moving our we at So, are. that with guidance we’re not comfortable capital, on

Doug Leggate

thanks the clarity, again. and appreciate I Kevin

Kevin Mitchell

Leggate. Thanks,

Operator

Manav ahead. go from Suisse, Gupta please Credit

line is open. Your

Manav Gupta

the have which There Cassidy Yesterday, of by out. IMO-related in a IMO implement sent I Republican kind to him were stood Bill letter, couple a guys. urging a lines of led XXXX. to the Hey, senators X question. letter President

The bring first IMO our will one tremendous standards country. was, President timely of Senator is advantage telling XXXX implementation to the

line it was, a to might Is ground? attempt there actually What think XXXX create for industry. actually sent. this course implementation the the is seeing? you because a course here, worried to or possibility they’re we it any building understand smooth do reverse here? see President benefits is of or the political What very close you the some you a is, letter see guys are XXXX, to little second are that the U.S. Will risk energy cause IMO was these on they IMO to because because U.S. Senators The trying the harm by uncertainty, support market I’m why could reverse are

Jeff Dietert

announcement the are insurance its the port at to Guard, strictly U.S. current look previously, IMO you Singapore intentions highlighted China timetable. as IMO which companies, the Coast the different the by industry, in enforce itself the think I participants you Well, expressing in on and courts all banks

consistent participants the So, the board. been have I pretty across think

yet benefits X% to the at it’s that look about it’s of IMO associated IMO. sulfur the emissions. demand environment with When about XX% of the you to important it’s fuel, marine are think the I global

I other focused signs the timely and items implementation coming main here. improving are would are its that environmental critical implementation. the mention, thing all and to I up One has forward the IMO emissions IMO so, And agenda the is moving we’re think meeting with on really

Manav Gupta

Thanks, taking Thanks Jeff. question. for my

Jeff Dietert

Thanks, Manav.

Operator

from Prashant Rao Citigroup. ahead. Please go

Your line is open.

Prashant Rao

Hi, question. taking thanks for the

Greg Garland

morning. Good

Prashant Rao

all into as inventory that. this also of how look of maybe forward product are go Q-on-Q a maybe to there more fuel of get steep of I builds wanted to of and to prices a the that sense reverses stable, if of on and in out kind the step-down, prices wondering that go progression, out that much around there’s to bit ask question and to versus through international crude assuming wanted sort sort domestic I of headwind related lot – anything call like now normalizes we of sort wanted really feels year? we of that and we of when Appreciate a M&S. good crude Q-on-Q morning, the and sort the was I margins rest and quarter whether to now as sort to and really due timing was the within of a

Jeff Dietert

Yes.

that’s a think question. good I

in If to fourth the at quarter you largest of compared prices drop by the quarter look oil at beginning fourth in the X end fell the that’s the a XX%, oil and prices quarter, of years. the last

the a fourth marketing So, in in there quarter. margins tailwind strong was

headwinds so for first crude As quarter, those were you cracks first move quarter. into the gasoline during strong during period in increase and as there X to XX, going XX% Jan marketing and was prices March well, from the a that widened

limited You in there international fourth refinery are River. which the was the margins, Levels in logistics. right maintenance were low, Rhine the on quarter

successful their during of marketing wider was very logistics maintaining period in serving margins benefited Our time. markets group from and that

to rise crude quarters the the a to ‘XX, somewhat of price quarter, first at first similar relative first years. except headwind you previous of quarter first As that ‘XX it it was did quarter look bigger and of the have on

Kevin Mitchell

with on Well, Prashant, you it, we quarter, this of I to going at was more we of second should level environment sort and to driving just season, summer in. the as see more you’d sit the a patterns dramatic avoid normal the flat back in you and – be we say head kick start price normal into to movement is seasonal I’d expect add where yes, look face as that May hitting – the the

Prashant Rao

Okay. Thank it. answers. Appreciate very you the for much

Greg Garland

Thanks, Prashant.

Operator

Matthew Holt. Tudor Blair go Pickering Please ahead. from

open. Your line is

Matthew Blair

I Hey, want Greg, Gray circle Kevin, to cost the good morning, back Oak. to at increase and Jeff.

growth think Phillips slate. I and higher. you robust moving organic Obviously, highlighted pretty has steel labor a

pipes, talk your even in potential for and like potentially about your and too? the at your the I refining cost chems guess could So, fracs inflation projects some and other projects of other you

Greg Garland

out. I’ll then Kevin and and can Yes, start me help Jeff

of at same three Gray mean, executing all, think that I pipelines of least in I window. Oak, kind there’s first

the cost fracs, to facilities pretty on some Certainly, competition most pipe caused the schedule, we’re as you need We that to that seeing same on be think just of itself. – has and the facilities, the move pressures exposure cost or a at in we we And around around itself so so I looked right-of-way midstream the original those not Permian seen of they’re of is then right around estimate. and just on projects, also that. costs the the it And in around they within some our underestimated project then had of other that for the and the We that probably seems around the routing repurchased asset. complexity execution the facility escalations look refining and they’re budget, project facilities of where we of intense acquisition. some we’ve labor window at be, we’re in execution

Matthew Blair

on we’ve Great, side, high crude has PE year-to-date, big a like prices, the inventories changed maybe at a is hardly export over PE weak relative between looking catch-up they’ve and increase you seen structurally But prices, or pretty view my in PE you in great. expecting attribute prices demand. or historical on and then chem your but to obviously on PE spot something changed this And question link crude crude? to are that could so

Greg Garland

our moving a in estimation probably of globally. we’re behind running in think I little prices No, bit terms maybe

in of think there. I there’s factors lot a

Chinese I the out is think consultants definitely tariffs that a there. that. are on weight There

nickel the think the and just in resolved, probably of of that they reduced kicked the waited When tariffs China the tax buyers lot involved about done, a that. you so VAT get and a we stimulus till some Chinese uplift of As they’ve there’s in.

So, buyers. few we’ve seen frankly, that. reduced And some activity then are around there very

crude apparently, as bottomed were and they it long back heading to a out. we’re it’s for in we’re price and bottom waiting environment, falling As

of constructive sit So, first in next we But headwind next that kind add base I the – the margins – here we’re which as in we’re constructive today, of of of about or could think of then terms little say would our start-ups quarter you layer on top this year, put we’re quarter over couple on in a pricing. over year I the months fourth margins. that moving in of couple next And potential of quarters.

Matthew Blair

Great. Thank you.

Greg Garland

You bet.

Operator

Justin Jenkins from Raymond James. Please go ahead.

line open. is Your

Justin Jenkins

question beyond Great. late that. I you fracs start got terminal Phil’s or next Thanks. a Good potential to after come want want the at maybe just one follow-up another couple year NGL in how the with about to and new that? another everyone. from side. We I on a think Freeport earlier of morning, to see export expansion even

Greg Garland

frac the we’ve well side, construction. three on two, into Well, got

industry We’re the air don’t across expecting my build are on we’ve in up a We’ve that’s can to We’ve utilizations and XX%, of think And nail around say today up as in with dock. around hand the probably across a up about expectations down permits come customers. I export, for to know get our I’d that think the LPG frac we’ll Frac X, On the I comments. up fees quite export. underperformed if I interest on frac, which own customers Frac LPG there. as the of on of one fourth kind come the year, dock fee, a FID bit at we the discussions actually have that. seen us. probably we’ll supply challenging X fees and this probably opening in indicated and $X.XX XX% – there’s probably we’re spot more I We been have the

So, spot basis we’ve a double-digits. into kind of broking on

new I think at investment. you justify $X.XX, can

need day we’ve export XX Frac up X a the out we’re One and propane. maybe day Today, running issues capacity got of to we’re a frac facility. the across to we build of fill is, yielding that about XXX

run a XXX of that’s Belvieu, if balance out in So, bringing day not we’re across efficient. Mont the dock, we the

we’d capacity facility additional in the So, match LPG future. want export to with frac

have we this plans looking take to we’re what would So, no than facility. today debottleneck at other

our of in expansion the firm around nothing there’s LPG So, plan export. today

Justin Jenkins

Got got was for. it. it. Appreciate I Thanks. what looking it I

Greg Garland

bet. You

Operator

Jason Gabelman Company. from go and ahead. Cowen Please

open. Your line is

Jason Gabelman

couple just I a hey, questions. of had Yes,

despite using of kind just what we get that I’m It of First ethylene a the thing the an margins. on of of could was margin generate could maybe like weaker operations better of guys this this asset. to the value CPChem, were I mid-cycle? And strong looks have apply idea wondering type what chain cash mid-cycle understanding what sensitivity get you to pretty provided, mid-cycle in the wanted for quarter

Jeff Dietert

prior at of been you has line, coming which around that U.S. billion Gulf new the of since was average $X.X most at time. you EBITDA period roughly million mid-cycle if so, to historically Yes, look about spin, look – CPChem project the When $XXX environment. that on the Coast is over

where think higher that the a be bit So, chain would were would incremental, are I full margins a during polyethylene today. they that be than period where little

you mid-XXs XXs to to ethane can think chain to mid-cycle is polyethylene where I So, full use on somewhere mid-to-high adjust a margin. you the sensitivities think

Greg Garland

were shares numbers EBITDA CPChem’s Jeff’s EBITDA our though. of

Jeff Dietert

Right.

Greg Garland

good pretty thought margin. or And is I’ve ethane full $X.XX number take always a chain give for polyethylene to

Jason Gabelman

the in that. guys just you elevated maintenance like seems your I is the it really to second refining have side like in aren’t based participating And the could Got if things, shift to of it on industry it. seems guidance Thanks. and going quarter

So, I operations that was comment could you’re your both there? what seeing it just you wondering on if wide industry and and leave I’ll

Jeff Dietert

Yes.

Greg million Coast. California as well on U.S. I Kevin which agree is industry relatively quarter, Mid-Continent I especially still quarter, expense and back are would think the lot early said a in and the is wide our maintenance us. for light assets $XX market this million and the light $XX to the there��s Gulf relatively ongoing as running, maintenance for as second of turnaround for us up of

that So, number there a at least through areas. are are in planned outages of mid-March those

Operator

ahead. RBC from Please Markets. Capital Heffern go Brad

open. line Your is

Brad Heffern

back. back Gray line. been between come of lot to go ultimate pipes come I the Permian once the time a these wanted bottlenecks Hey, There’s and when while about long-haul everyone. and the Roger’s question on Oak a lag line like to sort when on line pipes come discussion on of from solutions export emerging

you do spread progressing as and viewpoint your just see widening versus how come to updated you Gulf a these on So, line? that Brent environment I see pipes on wanted Coast get

Jeff Dietert

there. Yes, lot there’s a I mix think the in

are operators facilities. than the different the that’s built the being by First pipelines operator an often of export

until Oak on really to not end seeing scheduled are with by up come we our XXXX. own of so and portfolio Texas And year in fully South Gray midyear Gateway the our the

at pipeline Oak other there other Gray well facilities Now, there’ll so Sweeny have Refinery. Corpus as as to export alternatives our be access does Christi to and

equation opportunity facilities, of production will and up, which there’s, But export those these be the of growth think there another finally is pretty pipes designed. optimally availability. how be pipes leg availability part is how that pace mismatches and to last I appear could between I the which the then think do full is determine ramp As are, rapidly pipeline export

Greg Garland

Longer term.

Jeff Dietert

Yes, longer time. have term, I export over think facility sufficient we’ll

Brad Heffern

Jeff. Okay. little the about I that, think. wanted then guys guess a bit talk for I had that time, to in renewables, for Thanks first And I press you the release

and devoting also you’re about on talk sort sort scale diesel So, maybe largely of regulatory with your I depends if investing could the talk just was something renewable level wondering about capital you that of in that support? comfort then to of

Jeff Dietert

year the a renewable XX,XXX are got starting XX,XXX up later we’ve up from that early project to we’ve so and under finally, potential agreement Brad. through of way Renewable barrels Energy Yes, day [ph] a Humber will provide and Rice barrels that’s a feedstock add the diesel. co-processing project Group got under year. a to a with Refinery, diesel with point, barrels an the of for that for X,XXX day And of Nevada diesel this renewable day in Ferndale, got got great plants a At renewable at then cooking used it’s of Yes, development next oil. offtake we’ve about

that are the the on front-burner. So, those things are immediate

barrels capacity, XXX,XXX refining our West California of that’s total day. you at look diesel, that’s day, it’s XX% barrels a roughly At XXX,XXX, a XXX,XXX a As Coast. kind

Coast. that diesel of renewable with some offsetting risk we’re into the So, West

Greg Garland

one million CapEx But sort a about two, a point how $XXX the government mandate. this and much that great time. CapEx requires put of exposure at for asked is couple of question And risk, business essentially you us a at a in

kind us see you’ll think I be so of And careful about that.

structured the things on are projects are very now, these attractive. the very, returns Given way

Coast is of given to couple exposure the this so million our the think And given on a in capacity a of West U.S. XXX,XXX plus portfolio area of barrels day certainly our particularly and we appropriate work $XXX putting

Brad Heffern

answers. the Appreciate Thanks.

Greg Garland

You bet.

Operator

Craig Tuohy Shere ahead. Please from Brothers. go

line Your is open.

Craig Shere

Hello. Thanks letting in. me for

Greg Garland

bet. You

Craig Shere

contracting. Latin on your Two de-risking there? quick at your capacity for America multi-year with piggybacking And all prospects us margins export at this outlook Justin’s Bill the own renewed questions. you point, not LPG you on One you’re can question, your efforts and expanding looking I about second export can for understand talk product question with export update but is, prospects

Jeff Dietert

Yes.

Latin levels and America, utilization to continuing Latin to exports on So, refining those very we’re American we’re low see continue. at expecting to

side. So, the Latin the America side is market export on diesel both proving to good and gasoline a be

we but that not compared some has in – saw Some of of of recovered, that come the come been to pipeline year, earlier back lot a back, that the has but market outages some of have market Mexico all the imports all. but not

the LPG that short-term export and market place. the in have delivery, and question, we commercial our agreements volumes people the trying of have the to optimize constantly in combination On we are a long-term

recall, XXX,XXX a expectations with You much XXX,XXX barrels a to operated XXX,XXX export capacity day, LPG barrel we started that that facility better day than operating of is at recently.

looking in And so, contracts. for market the we’ll be solid

Greg Garland

as got had success into the you during will and period $X.XX, time, spots When out open. to starting of export probably open think margin obviously want on in we for of around that, volumes but great is facility us. window optimum a start side. a say, had double-digits, now would you contract we We’ve push to I Yes, kind moving didn’t that the the I work that window of

Operator

you. Thank

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

Jeff Dietert

you, or if Julie, your any interest questions. of Thank in you. Please Yes. Brent Phillips you and you have Thank XX. contact me for thank all

Operator

gentlemen, Thank you. today’s and conference. this Ladies concludes

now may You disconnect.

Phillips 66 (PSX) 30 Apr 192019 Q1 Earnings call transcript