PSX - Earnings call transcript Q2 2019

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Operator

Welcome to the Second 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

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

the ask question everyone and allow one to opportunity a to we order a ask you yourself to In follow-up. limit that question,

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

Greg Garland

for during over by record you strong $X.X quarter. We operated and the Good and Jeff. everyone, Refining We earnings to years solid Adjusted and the cracks. growth two contributed gasoline segment improved quarter flow. billion delivered driven of operating joining In projects favorable past $X.X billion, performance margins XX% utilization earnings. Midstream, captured generated completed second thank morning, today. us earnings or Thanks, $X.XX share. the were for per operating cash

ninth We're share the growth and secure, and competitive quarter annual in growing to XX.X%. the to shareholders increase increased During the quarter, a since distributed our we resulting through dedicated compound a by inception, is we XX% dividends rate. this This dividend and dividend million repurchases. $XXX

creates Disciplined shareholders. value strategy capital it that we and for our allocation to our know remains fundamental

to dividends XX% XX% cash Consistent when with will flow is through below into we're and buy reinvest objective the share a projects trade we of earnings These intrinsic our back operating and value We'll our back Our long-term shareholders new return attractive business repurchases. our growth our robust to shares strategy, us executing returns. of growth. portfolio with with continued Midstream projects buying we're provide future and shares today.

production multiple Permian to locations backed XX% Red operate and the and will we joint Liberty announced During Pipeline The are will the Oak and Pipeline the Ingleside in have areas to of to Corpus Oklahoma. Gulf construct open service first targeted access Oil pipelines Pipeline. capacity. with Coast Liberty pipelines and commitments. will volume quarter from quarter, the will XXXX. provide Crude commitments initial begin will the operate are a We the connect XX% are the additional Coast, remaining growing Red supplemental Beaumont. Cushing, construct Cushing system The in and limited by season, the seeking interest Red Basin ventures including Liberty. along Liberty systems. own These Oak in The Christi, interest Oak. a and Both Bakken to long-term via Rockies and Red Gulf Houston Pipeline Oak projects transportation own We

which The on-track in XX% all major to of project owns including Coast from per We Eagle the Partners and will including way the PSXP Phillips XX joint refineries owns capacity. export quarter the up pipeline Corpus up throughput Terminal in pipe. expected and start right and Ford terminal of multiple the day day the facilities the to The received have fourth to Christi XXX,XXX Texas with all remains in this of connect the ownership. venture. Gray acquired to XX.XX% XX barrels in XX% XXX,XXX-barrel terminal area Gulf Texas our the is marine million interest deepwater per Phillips capacity Gateway Oak permits will Sweeny installed South year. refinery. Oak docks, The and to mid-XXXX. X The storage transport of Partners construct start Permian continues barrels X Pipeline. oil up will by Gray crude

With Coast will with regions major Liberty Oak, the market Gray Oak existing we centers. the all shale network pipelines, Red to Gulf oil-producing and of our connectivity serve key

Gulf as that is believe South further well We Our our our and portfolio. a pipeline competitive across Coast integration the value refineries network advantage Export enhances terminals. Beaumont our and Central with integrated Texas this Corridor Gateway as is

and to that expand of fractionator will capacity increasing Hub meet moving have of We're demand. to day We global the million. forward continue approximately per is barrels a expected XXX,XXX $XXX cost fourth production Sweeny market construction domestic to NGL and with

well fractionation up will be Frac per X Frac backed second commitments X day progressing is Hub the customer in completed XXXX. XXX,XXX of completion is Sweeny and and Upon track ethane start expected at on Sweeny and fourth in barrels PSXP to in quarter we're PSXP million of XXXX. by the of Clemens have Gregory Construction to of will is capacity. of Caverns Completion is to expansion Fracs to capacity In X XXXX. of X, the Clemens Hub quarter fourth pipeline barrels Hub, from of Also X XX-inch Caverns the connection increasing a with the Texas. barrels. from storage Sweeny at expected XX our expansion is million construct at the quarter

Pending feedstock In complete partnership customers The world-scale will serve world's per to is U.S. will is decisions, in petrochemical develop Qatar CPChem polymers. enhances ethylene in further Petroleum these the and advantaged polyethylene area. access Coast This polyethylene final supply Gulf in high-density with growing markets. Corpus to in demand XXX,XXX global have petrochemical the projects CPChem's with The barrels add day CXG position investment to Pipeline leading the Qatar. and for mid-XXXX. its to assets and Christi locations will of strategic capacity Chemicals, pipeline in expanding expected be

At the construction production to reach Partners Sweeny Charles project full FCC of Refining, production Lake second isomerization This unit of In XX per expected feedstocks is in higher-octane day components. the at blend of that XX,XXX-barrel This completed its gasoline of on in unit refinery gasoline. production increase will XXXX. third Phillips increase higher-valued the quarter we're upgrading track petrochemical the to the is to and refinery, higher-octane quarter. complete recently

GP PSXP. its we capital, incentive economic aligns morning announced This LP and PSXP's cost the and further capital elimination distribution at rights of of transaction This the interests. simplifies improves structure

to closes. it component remains PSXP of PSXP our shareholders key XX We MLP unitholders. ownership PSXP will Our attractive both a premier growth after a midstream and in for transaction XX% Phillips and increase is the transaction strategy. the believe is

and So Day we'd York call Xth we'll New you hold hosting in ask I the be over the before turn November an to Analyst date for City. Kevin, Investor that

that, Kevin can through financials. With you go the

Kevin Mitchell

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

X. to the change slide by second highlights quarter slide to This first the income quarter. segment in the pre-tax Moving from

mostly had results. earnings by During driven refining. All adjusted increased billion, segments improved the $X.X period,

adjusted rate quarter XX%. The tax second effective was

our X Slide shows midstream results.

pre-tax Second million $XXX increase $XXX quarter million, income quarter. adjusted previous was from an of the

previous businesses. adjusted quarter, wholly-owned both This segment, joint due volumes quarter the Transportation the driven and $XX transportation results the in and our pre-tax pre-tax income and we NGL terminals. $XXX achieved up was in venture strong midstream pipelines million, higher by on from to record million income

quarter. record and at margins Sweeny is utilization improved by Hub hedging previous number Sweeny the to XXX%. Sweeny $XX second $XX from $XX cargoes butane as million impacts. up quarter due NGL earnings well facility of income results. loaded and a million, Hub in adjusted volumes fractionator strong had during and income favorable DCP Other of the operations quarter and Midstream the LPG The pre-tax pre-tax adjusted million trading the achieved increased export record of The driven higher the as

Turning to X. chemicals on slide

higher polyethylene to SA&S for for quarter and was related margins, million Olefins costs $XX $XX was utilization million, driven natural The by the falling income utility million lower income quarter lower costs reflects prices. higher $XXX was quarter. following the activity. adjusted as up turnaround quarter. NGL well million as from first the gas previous pre-tax pre-tax income adjusted increase Second segment O&P Adjusted than Polyolefins pre-tax Global million, feedstock $XXX increased XX%. first $X

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

up Realized income. adjusted $X.X from $XX.XX in Refining's volumes. provides increased increase to Crude with for due to refining. a $X.XX regional was and pre-tax higher driven view was utilization $XXX from income The first million adjusted slide on gasoline quarter. higher of per Refining's last barrel, X quarter margins quarter. the mostly second pre-tax cracks. by XX% The the margins compared chart billion quarter the was per XX% in change to Moving realized barrel XX%

impacted The turnaround activity as by as downtime. first unplanned significant quarter was well

second $XX The million. product were quarter clean pre-tax and yield XX% turnaround was costs

market second per $X.XX first capture. quarter. in The covers $XX.XX barrel quarter per market crack the for X:X:X to barrel, Slide compared X the was

refineries. distillate impacted Our crack. was We overall market capture of capture than premised in less X:X:X configuration of $XX.XX and resulted XX%. more by an and in market was barrel per realized our Market gasoline make margin the the

the prices X%. crack quarter by per from the Losses secondary to XXX%, NGL During products the increased relative barrel margins. while per crude, decreased $X.XX of from increased to the partially coke declining previous offset quarter, gasoline distillate improved due barrel crack $X.XX

the advantage per differentials. Our declined quarter from narrowing crude $X.XX due barrel of $X.XX prior feedstock to per barrel

barrel realized in largest barrel $X.XX with $X.XX second other margins quarter, realizations. from This by The improved driver the reduced per prior being was clean per product the quarter. category the

product Other start decreased We and the $X second Adjusted during Marketing since XX. bringing $XXX reimaged approximately slide Moving quarter higher second our per the quarter, increased Specialties XXX domestic million and of than to prices lubricant margins, total with first million the to barrels day. quarter. higher million, program. and were was quarter. margins. from the during quarter lower primarily million falling the on due Refined domestic-branded income in to XXX,XXX approximately sites exports X,XXX the international spot $XXX pre-tax from Specialties Marketing associated $XXX second

We working XX during quarter. $X.X balance change primarily from $XXX related shows million the was sheet. with on cash the billion in $X.X inventory a which the quarter draws. billion, benefit in included operations Slide capital our Cash started cash to

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

balance ending Our cash was $X.X billion.

operating of and concludes financial results. This review the my

rate in be the cover expect a In crude expect the the I'll quarter outlook O&P for Refining, rates few to we Next, mid-XXs. and we expenses pre-tax in third and $XXX pre-tax. items in anticipate million. the Chemicals, and utilization In global $XXX to the Other million million quarter. million and utilization between come third to between costs $XXX $XXX be mid-XXs turnaround to Corporate be We

the With for that, we'll open line now questions.

Operator

Sachs, Mehta go please ahead. Goldman Instructions] [Operator from Neil

open. Your line is

Neil Mehta

morning, Good team.

Greg Garland

Good morning, Neil.

Kevin Mitchell

Hi, Neil.

Neil Mehta

Good morning.

grown for that when couple large here, of really reinforces be I business, this question I strategy. first your the business The one Coast which type Gulf inconsistent grown you you've you've step-out press you've with some Qatar -- historical this was, potential here, good reports the have I historically projects would CPChem of in historical a transaction think a guys business. do There's organically. to been of one guess way that And in about the that had kind announced you been

business So way without helpful the clarify think for be -- kind about investors would of we to about you speculate here, of to anything could think do sort asking this to you it? building when you

Greg Garland

just think the on and first on step we even inorganically Well, Where Great. you entire side. organic across practice or we as has of speculation. outside don't the seven of portfolio, a our last market we've been rumors followed chemicals an all, asset when And years. comment over path things back done

Beaumont SCOOP/STACK Plains. Terminal the River the about think so or Parish or And or

from side time been So time. the opportunistic we to on organic have in

would we generate the strong can inorganically the read with to report us opportunities. side. a returns, organic morning, organic really do compete you of this the portfolio For would we we anything eventually have And on have as

leave that. And so, I'll just it at

accretive I find are but struggle everything look. we’re at that there. think everyone to things we We that out we'll think look that's we returns, continue to to like

Neil Mehta

is refiners on DCP question you lot Fair under enough. think certainly element your pieces prices have a off your some a do right. better, And the comes chemicals company have that of All And recognizing yield you we consolidated are basis? ethane-consuming if follow-up pressure. come business then and you product there's with that when about NGL a think level all just have we -- product about of Do on how NGLs large consolidated and business, a moving the a lower? PSX should NGL

Greg Garland

-- and of The would I lower ethane our low net export CPChem, we're benefit at prices definitely Well, so, ethane mean, chemicals start position given a business. propane buyer today prices I across a our LPG benefit on side. we're that's the us the impacted particularly There arcs the to DCP DCP to strong export portfolio lower prices. NGL Asia seeing is for

So -- have offsetting but we on across portfolio. balance, the

Kevin Mitchell

some they're to but exposure. their contracts within fee-based side. and those growing the from we benefit regard of against fractionators DCP many pipes more remaining converting on commodity say of PSX commodity majority With and really are portfolio been hedged the I fee-based contracts price PSXP the would historical their volumes, to of and successful so they've not exposed

Operator

Doug Terreson Evercore please go ahead. ISI, from

Doug Terreson

your on guys. Congratulations results

Jeff Dietert

Doug. Thanks,

Doug Terreson

In be exceeding demand may XX refining factors revisions be volume. U.S. your demand on and of may be estimates may forthcoming. seems outperforming this one peers government product to marketing, of consistently Phillips to peers suggested and be positive that And that to recently several one point, which due higher

share So markets and whether wanted that demand products and export I too, outlook you to for please? get the in to your U.S. overall see view

Jeff Dietert

Yes.

demand at think it quarter he’s in pretty The be strong the and low vehicle I saw look healthy confidence, the and miles U.S. good rallied quarter. you consumer he slightly first when in good down growth, is wage shape. in was in in up We up again up traveled but unemployment, gasoline in shape the second consumer, may May. April

of is year-to-date the gasoline And on the what of year. the half so expect we I kind side we're seeing think back demand flattish in and

flat with up that's demand-side, On the comps to to very year-on-year. XXXX and compared demand see diesel it we up slightly tough being X% diesel

So as well. side still very the diesel healthy demand on

the quarter the as the we in planting think -- flooding of went some did strong. I finish industry the the delayed of Mississippi River through and was some and there

going XX,XXX barrels a And closer XX,XXX season, or was maybe so day. XX,XXX day the be of demand what loss planting XX,XXX thought a barrels was in we it a of to to or

that's little So been than a was feared. better bit

Doug Terreson

of to processing output Okay. share if E&Ps is though returns to planned a further shale spending current by have midstream share want related of decline future be the Jeff. in consolidation, course then valuation Good the summary, seems in it term and to and takeaway And export are have sustain pressured and even growth prices. And if decelerating ever would like medium there may over projects we E&P were too. lot industry, spending output

how my one is manage returns So perspective this question about for as such are and company scenarios in protected? does on think the that such midstream investment risk the

Greg Garland

pipes, we've we so partners. mean these big strong in these pipes, I Well, start with see got you partnering, partners

are with strong grade to throughput look X at volume XX-year Secondly, commitments investment parties. these commitments, you when the commitments

Doug. the to And that's way mitigate try the risk we so

Doug Terreson

lot, Okay. Thanks Greg. a

Greg Garland

bet. You

Operator

go Phil ahead. please from Gresh JPMorgan,

Your open. line is

Phil Gresh

Yeah.

active here for So, Greg in been months midstream quite couple all and PSX an these with projects it's of chemicals. announcements

fits in certainly you. next can the then help how we're we maybe looks signed out reaccelerated see a perhaps that. of years? behind I through and dive bit why especially band Day another So, of cycle. the financing us could think XX/XX But Kevin, in Obviously over some detail help couple hoping growth Thank where Analyst projects the about advance these And you with was are late if the talk the of plans a that you what you given to that cycle. could for philosophy, event, like in I into economic

Greg Garland

cash, Phil. to start billion from moved billion I'll high to kind $X $X to of recycle at Yeah. just level We billion we $X billion. $X

just take range the of you're you $X.X billion XX% end budget. billion if So at reinvested and capital of low kind the in $X

in investable any the you've suite like of portfolio. that. to going the balance down. have where within -- Certainly way CapEx build we all and probably pull year, think opportunities returns across past we very think could that attractive we we seen have. below the projects we We above/or we’re They're I that So on given that value didn't

that investment right just company. terms for for the been past saying we've XX/XX in been seven in. So of of kind it's return I we're paradigm that. to what from standpoint years we've comfortable about think of with the think we're And consistent kind shareholders the We with that

Doug's partners, in to volume tried other That's we financing. that. commitments the speak of the projects. on to talked another question, on project on way with projects, use these in taking we've mitigate we at end by Kevin these good the certainly, the will looking As -- counterparties to risk de-risk

think, the go the the balance, So on about we still we're company. year. We're I positive capital first a we sustaining to about generate organic cash to that have. cash as profile generation We positive of $X going is the billion that think dollar

dollar going $X.X Second, billion. to our as go to dividend is

And existing $X.X then, growth fit but make billion to the financing. you have can billion to be $X.X project options, in flow. we we $X.X the can our within of let talk repurchases. share cash I'll $X.X And And Kevin, of within our to terms to we certainly, all in that billion billion terms

Kevin Mitchell

Yeah. Thanks.

as So the closed a we second that couple just walking our talked of Oak, in about projects. the we quarter. through these the and finance intention to we communicated on past, in Gray financing had

out CapEx. of $X.X place that's over Liberty just on project. there two billion combined is this and spend gross Red pipelines, of that Oak the So should projects, year put most the facility and a so The in numbers cover effectively on $X.X that's CapEx billion we basis, those remaining

the we've full of also. put joint in ventures while it where those path down each we project-level intention haven't they in those to projects place will structured financing And be XX% project And yet, be financeable. are to gone would our them. We on financing

other two the I'll one, more. just then And well, is actually comment -- on

So, Those financing three And as are just capital all fits also the just lastly got and in so We being projects. allocation within by the under Midstream, we're place spend construction. then Greg comfortably that those just us, Fracs two X. – you’ve overall in on framework, sanctioned chemicals. And frac no outlined. funded constructing on so

are so these announced, it, to partnerships with the yet, not So these the level go. still were CPChem that that being the mind But to a should amenable bear structure given level, FID two projects in at be ways they financing. there's

Now, the each parties with those around funding reality and is, you've got four plans. align

So within structured be financing QP the in CPChem, then around us if for But that to align there's in those. that. should Chevron potential a and they are owners way need alignment, around

So, in much the overall, this you capital together, our very context all put of when framework. still works overall allocation this

Phil Gresh

financing And we the That's at to entity, maybe very you at be Kevin. plus there, flow project level, just helpful. CPChem some debt even the thinking say combination maybe of project free plus some CPChem When of level? clarify, cash the financing should raising at

Kevin Mitchell

of could all is, any above. Well, it reality the be the or

you project So have the potential at the level.

project, around well. two potential of there's CPChem on funding. point. if CPChem Coast at be all you have But path you things project, forward that the for require entity take of sheet owner to the sort do very So They projects the level the potential they as take so the balance also you on financing take level these But sort Qatar alignment have at to of Gulf strong or capability have and that debt. a

Phil Gresh

have I talking like. haven't others with And any to there products I refining missed on Neil's Is know any I naphtha provide could around follow-up you seen Okay, kind it unless, great. NGLs and think it. the the exposure would question, about Thanks. through be your just specific of help and to And pieces? disclosure your there my the specifically propylene exposures disclosure and been to moving business. more additional maybe then

Jeff Dietert

Yes.

our products, look and Coke refining X%. products. you naphtha But de-minimis go secondary fuel NGL through is that there yield between about within when and summarized opening oil X% the our the is are Kevin So products X% it X%. as yield we about at in remarks. yields really

to So those would there secondary that There are lot are are products. our give level well, in smaller that primary as included products exposures of the you individual products high the a but product within a of category.

Operator

Merrill go from Lynch, Leggate ahead. please Doug America Bank of

is line Your open.

Doug Leggate

should is don't de-emphasizing Thank morning it much going we I too where fairly everybody. to now as bit another rest correct, just Analyst to as the wondering a think projects we a stacking mid-cycle rapid you've the evolution the of relates forward if the Greg of that refining. relative is to mix I'm front-run you you. of go mix right Good the seems see here, basis about EBITDA got company read that and how in November Day but want with of the it shift portfolio? list through the refining up do

Greg Garland

Well, of you is if billion at just $X averages kind of kind about of Refining XX. to EBITDA. XX look

Our midstream about business billion. is now $X

Our Specialties at is billion. Marketing and $X.X

distributions $X.X billion. from about CPChem Our

million $XXX interest gets kind taxes we've about or about. think that of of you when that so and then of $X billion of flow cash talking billion to been $X.X corporate that So you and

payout business, items in. So kind that's the we've that we they've capital Certainly, we've quick chosen of the made refining of in kind been lower think portfolio. but to investments invest about how

tower in have upgrading EBITDA we $XXX probably of still to the our investments. of in dollars years FCCs, a And generated through next hundred million another and investments refining vacuum of coming $XXX upgrading making our EBITDA the we're refining. instance, these on For though couple of way we million three the billings our from million business

to million EBITDA business. million in all through On midstream there's coming on probably to $XXX of the the you way if midstream side, want look XXXX, the $XXX

not business over around been and midstream, chemicals business our the really growing strategy has and seven the strategy refining last smartly in our our growing we're the So investing from departing years that.

Kevin Mitchell

comment. to I you Jeff, don't if want know,

Greg Garland

the on me Jeff, that. topic, give A ..on an

Kevin Mitchell

ahead. Go a was good That summary.

Doug Leggate

complete? to you've so, under I of just basis. with mid-cycle well now dropdowns, at consider we we're No list sound moving going you’ve right portfolio Once the fair I is a yet. got before joint that looks XX% are be on got us, got would reasonable? ventures it assume chemical once these trending the refining it towards at I obviously, projects refining projects on going that we further to moved mean with under for mid-cycle of But in the say definition was midstream -- EBITDA? on mean you've through to least Does haven't the what XX% corporate the

Greg Garland

Yeah.

you're our from If true refining, statement. business Marketing Specialties excluding and I think that's probably a

Doug Leggate

Yes, I'm that right? separating out,

Jeff Dietert

frame. as Especially you think XXXX XXXX, time

Doug Leggate

Okay. and that Thank positives finally actually a Tier to there. for My are I'll of the for been put questions support primary space broader up swing for years. year your the Tier guess follow-up issues is kind it at that to from amongst bit next X potential just has Gasoline lower maybe obviously, alignment the beginning of of, in us X used little slate -- to an of, little But and more coming grounds has, being that. to And industry I'm here. can around couple perspective gasoline go leave a of to our bit for little I end that utilization VGO supporting, the Tier actually a gasoline. the pretty whether a certainly perhaps bit was some of to X come on a optimism I cautious supply market? rates I there across some as next kind curious three-year little of gasoline VGO want last you the -- back lifted bunkers runway year, it offsetting it that under the guess, a couple seems the there towards crude has of chatter the basis with about structural years

Jeff Dietert

credits million Yeah, XX the gasoline next per point and Tier pool last I sulfur X The the to content with somewhat an per over parts average swelling currently. the -- Tier at year moving are year. of X XX that available million is credits start think are excellent parts

figure though how I doesn't think marine still as It production that's -- fuel challenge to to going situation, as day to I think meet out. incremental be to that million at the look of to incremental us two market. exactly look play you IMO a going diesel it's out barrels a there's

what some is from be other of be predict to gasoline that percentage it much be. pool. take And that could certainly products. have And But going to or We're some come to total how VGO. that some of out would struggling really should will the of gasoline

think XX, I Phillips to where with comfortably sulfur gasoline the regard with is. industry the content currently producing below overall we're

will a year come of projects. isom as production. XX,XXX-barrel to a and increase the upgrading Sweeny gasoline are X normal grade the majority into spending growth couple well good Tier which premium standards. spending is premium unit, gasoline than industry as day shape is occurred this Lake Tier we're from premium vast to within spend. capital of up We sustaining us average allow more left FCC quarter what meet One, our little range Both benefit of in the When example, next The Charles X to we the capital will the them already has optimization. and fall of scheduled will the at look for gasoline,

Operator

Roger Read from Fargo, please ahead. Wells go

Your line is open.

Roger Read

morning. Thank Thanks Yes, you. the good for Jeff. there, the on gasoline explanation side

Jeff Dietert

You’ve Tier done on X Roger. some work nice

Roger Read

midstream Thank the to bit maybe change here side. back quarter. gears to the a Great you. Thank performance Hoping little you. in

something volume bit back then, then, with a the obviously little is I'm that to seeing? talked And export go about, the we big. the what there pretty record, the first margins? was typical we I good of that's when as what to that, were and really LPG fractionator did beyond QX guess, at and in extra additional here mean come were get when think I the fractionator at a wondering, numbers now docks XXX% back we're is LPG Sweeny utilization of budget. with exports I'm is a the as gets And particular then, it the we kind or in drove there? to that else maximum tank? area as leverage little the getting I what is, throughputs through operating did see

Greg Garland

So, at had We're a in dock in facility export and arbs well prices. terms are the both strong we in frac, across running the at XXX,XXX day we've lower rates. I propane above the of barrels design of think, Asia and had kind

driven We've the bottom years kind range in second profitability. in digits the that's double the $X.XX $X.XX the kind fees a up the of of dock to they and quarter. of So ago the and seen couple arbs low were in

EBITDA which running, rate, approaching you project. kind approved if the thought the you end kind So -- had is will, we Sweeny Hub the of we at when what the million run of of $XXX annualized low had a

room We to some above million. thought as there'll the arb much we play $XXX numbers and had out so there as that be

So is underperforming this expectations ever we've on. and frac year million best this probably across later frac capacity the year, X.X is the but and export we're LPG but had facility. next also certainly there's some coming quarter There the another there, our still on capacity coming

And so, be to the years, our to next active docks over view quite is needing going are the export propane couple clear the of that, to the markets.

Jeff Dietert

Greg demand mentioned. as as arb supply healthy Asia, coming units as strong We've Yes. new domestically, well in seen the on, widening

but Gulf and So as that taken shippers arb as between some there widening. disproportionate Asia, as well. have Europe, been has that Gulf seeing of The the well share Coast Coast and we're benefit

Kevin Mitchell

uplift, on off LPGs to the some The you about the with think because two the year, dock export one three be additional so and XXXX, that other coming as Roger, we'll in I'd out essentially Fracs coming next thing fill provides fracs. add, able

that assets going to not to propane you And and so, uplift so get down at those are from point some Belvieu pay move when complete. we're

Roger Read

questions from then, CPChem. the earlier, distributions really one Okay. Yeah. of That's back Thanks. to helpful. And

I think, billion. was the number $X.X

As It Qatar of different the in next a about projects? about big but the of we U.S. through and be levels will baseline? But the the impact margins, good we build-out billion good talked that these will at and think facility $X.X build-out and phase two baseline. even the a look maintained in Obviously, financing. pretty should that, operating that's as CapEx

Kevin Mitchell

Yeah.

environment's margin to very another. exactly to subject and of on I you hit it's two I is. like, assumption one the the head XX% major those think that's two looking use. spend reasonable of projects a projects, Remember, the that it's mean, of the it's base profile but what much nail what XX%

assumption, than of And for just purposes, time. so, it's of sort Coast be as a world-scale reasonable But still to basis, that we close doing in cost probably recognize a but to one point less planning get going a on parts lot there's project. it's Gulf moving

Roger Read

Thanks. I'm Day? Analyst us you're value if intrinsic great. Greg, provide that Analyst Okay, wondering and going at to to forward Day the looking the

Greg Garland

You'll to come just out to have find Roger.

Roger Read

Thank it. appreciate right, All you.

Greg Garland

Take care.

Operator

ahead. from Citigroup, Rao please Prashant go

open. is line Your

Prashant Rao

for that, morning Good touch question. you. of I uncertainty Jeff answer how IMO the the previous taking wanted on things back one the to around mentioned XXXX and Thank a thanks about on get that your other the getting indicators and of views of and could XXXX indications we’re we seeing some that first some movement spreads resolved IMO gets sort be commodity impact? an in

the been Storage of high forwards. out fuel. isom time marine fuel tight Asia rates to compliant blended fuels seeing sulfur widen for spreads the announcements but has perhaps we on are new for Specifically, more in try

It's and early to views expecting hitting tend start emerge measured. still, something appreciate think always be I moderated coming all in window a more we we're where that the to were your this months. to but on bit But

anything So terms to would in have color appreciate you'd that. of share

Jeff Dietert

Yes.

you're hearing think different about more I blends. the

expecting our fourth time September-ish compliant taking expect in center are there. and tanks We fuels quarter. blends buying the of conversion We're technology frame be to of advantage shippers and in Bartlesville the testing

that trading a liquidity to CAO some early. There's of think not indications barrel marine Brent. lot for $XX a at XXXX, $XX of there compliant in market. still I are It's early fuels over

to seen reports in I've of transition. anticipation starting the to Singapore VLCCs in up inventories XX build. are of see We

starting move direction. So that in are things to I think

what to reduce fuel think for emissions degree a being I do it's still discounts. the an confidence have a on impact high I does of on exactly early from cracks, have perspective it's it sulfur high substantially compliant footprint see fuel, industry. the as well. on to It positive diesel going But industry's

Prashant Rao

that. Appreciate Thanks.

there's help a the touch for can would back planning the one about agriculture weather and the which But you us quarter sounds finish to wanted Phillips let’s have, to in the see. I this year on through or missed a the to -- up as there the sense was year, it that then the question think there as back if making get half total economic issues think exposure a of, the we the given Ag other for The in like nice strong what's exposure, would there? consolidated planning assume been pricing entity for XXXX, of exposure if And was year. in be quarter next

can through about of not material, a we that we how cadence out call next maybe or XX, any how XX months look we impacts might material should it of the the sense get be thinking as be? upside X, and so And

Jeff Dietert

take the question. might first I

in regard is business. with as demand to I think a business the our meaningful Refining chemicals driver It's the component global to a well. for drivers, product meaningful economy

regard the there. growth, think are I there to major production shale with drivers Midstream, opportunities U.S.

the So drivers think three I for businesses. as put I primary those would those

Prashant Rao

with clarify demand the sorry there because little reference talked – hearing to a have of been feared meant – specifically specifically what be as I was I exposure, about there issues. diesel distillates agricultural we but seeing mean could appear as the constant bit fuel that just about we to with a you little and little – was I impact flooding much could were a before. the from U.S. in That thinking we the that. on more side there are didn't bit

Sorry if I didn't clarify.

Jeff Dietert

than and the midway maybe through planning so looking the negative at Okay the end anticipated. were perspective, planning we activity looking barrels we from And were from impact season. a more an day or apologize. up through as the industry-wide picked season I Yeah, XX,XXX partway initially planning

estimate XX. XX,XXX the day that's XX,XXX Phillips to is barrels like I specific or industry-wide And and so think something not closer a

Operator

Paul please from Scotia ahead. Weil, Chang go Howard

is open. Your line

Paul Chang

guys. Hi afternoon. Good

Jeff Dietert

Paul. Hi,

Greg Garland

back. Welcome

Jeff Dietert

Welcome back, Paul.

Paul Chang

questions IMO fuel standpoint, brand ingredient Greg as sulfur you branding are may. oil? going oil, Thank the a Jeff, trying the VGO you. Two Phillips that on I use primary or fuel very to high you're to guys One if sulfur low or the from to

Jeff Dietert

that XX,XXX got diesel refinery of with we've evaluation. know look, the is of one as a I alternatives yield the high a different And distillate a but diesel economics underway. cracks of were justified IMO Those barrels projects projects include didn't got challenges will environment. where industry that as with coming you day think So number this that within portfolio in they are by Refining. is IMO, really from another wider benefit we from an a refinery We've

to that So marine a way there's definitely component we're the fuels. approaching diesel

we naphtha low not resid are are that your marine you're most or that is I barrels sulfur. heavy that naphtha tend diesel also be -- your light look The what VGO Really molecules The we component, of at think well don't challenge for light challenging. are heavy tend as to as in sweet. perform baste of looking sour and engines. in barrels barrels see most being the and be to

might those specific you're looking the really so And for marine think sense of in make I flows VGO to fuel tough market. identify. that are And

Paul Chang

and presume infringing I guys and able the looked their Exxon by will believe patents? you And around and there at Right. that patent you I be to you that not have out guys Shell assume brand

Jeff Dietert

own are infringing in that for to blends business of people no looking patents. We intention participate and commercial anyone's at have open will and We're market our there. able we be our

Paul Chang

by debt. Is that on -- really Greg, up cracker of like, own deal? venture. terms me. your or the just going one-off for in one going got a probably the the CPC CPC-owned you've Coast expansion ethane that joint look forward, assume, shift that final how, I whole, on went replaced mean second in would strategic this a CPC? A Gulf is to That's

Greg Garland

You're Qatar talking partnership the with strategic Gulf on the Coast about cracker?

Paul Chang

I'm Yes. sorry.

Greg Garland

right? it one. in to, doing two by a we just – opportunity with versus was we're to -- we share investment great that I to to And partnering risk just a us. like able do projects And from two that of with, relationship partner was balance was we've think and an projects It opportunity that had given the long risk, reduce

So other, way to found rather we a than picking both. do one or the them

Operator

Manav Credit please from Suisse, ahead. go Gupta

open. is line Your

Manav Gupta

focus Coast Gulf and specifically I Hey, guys. the capture on on to Coast. question. A the Gulf quick want the

what capture capture. You of on higher showed I'm the Gulf the a to trying higher drivers were understand Coast. quarter-over-quarter the

actually role play as, well a talk Bridge that could As the on higher did Bayou you Coast. how capture in if much quarter-over-quarter about of Gulf

Jeff Dietert

Yeah.

XQ at activity have the for did being in when as the Charles Coast and with the we Lake So to amount XQ, first fair we turnarounds. in quarter down Gulf Sweeny of look maintenance -- a

And so impacted that capture rates.

pricing, to quarter we clean I improvement pricing, the product think with in saw the second well. product as relative XQ

Beaumont it Bridge, extends and from then and DAPL facilities the or -- there into brings Bayou our barrels -- Lake at connects look the up Bridge Charles. pipeline Bayou Beaumont Beaumont we into As

as are from a we see and domestic and easily that a that benefit perspective. Charles barrels Charles So Lake to gets access Canadian Refining do there Lake pipeline by accessible profitability

James as expansion James then talked the which to a we've completed up from ACE of Bayou our to connect We've opens the project Charles well. and Alliance Refinery also St. would Bridge Lake about, St. which Clovelly into that

to project as forward the we're well. So trying forward keep moving looking to

Kevin Mitchell

Manav, it's Kevin.

QX. big activity driver was the the in quarter-over-quarter in -- turnaround the Just of terms capture

amount to same the of see extent didn't that quarter. system fair near a second So QX across the activity the Gulf in you Coast in

Manav Gupta

follow-up to much because problems. some flooding other I issues have that pipeline could just those outages Wood Wood could comments and number that a quick had to of trying have understand, River happen? made think of better flooding you how is done A in give us that, there terms Perfect. done were Sonoma better River there's even not can if as I'm

Kevin Mitchell

Wood flooding quarter. Yes. That's a not true going something that's statement. was sort around. in type we're But impacted give by what-if of River a the to number

Operator

please Raymond go James, from Jenkins ahead. Justin

open. line is Your

Justin Jenkins

on just and I whatever seem Midstream question it's to I morning become Thanks. harder pipelines. even start to prices. commodity Doug's beyond does to maybe might just going risks Great. happen want back like Good It everyone. on guess, build

and routing level specifically there you for So maybe construction you with any sense any? of Liberty might how maybe if plans issues, are -- comfort might the just your a potential Oak and Red want address

Greg Garland

be on was really obviously that, Oak the there's I pipes go We'll issues of terms there what in you -- doing in way. the job constructed our no early certainly to Liberty, route And does. had of I Gray major out you on right constituents. executing On route, think - get a be think pick we're the terms that of an did in great Red that's that Plains so with been and pipelines issue. the ground all best without think there company likely to that and I executing construction. Along you work Oak, it the along XX% many guys

just the it in if that But is our come with will living But along come values working we in the I up we'll folks they well all be believe, think with we're we'll every issues, with done. part when safety mind commitment get it deal areas. executed positions day of So our being -- expecting they these and right-of-way and all on up.

Justin Jenkins

growth And step is in Understood. here in or evolution organic Appreciate how issue Does the pursue can scope anything that change you're PSXP Greg. it next PSXP here resolved. of or is that terms just of maybe dropdowns follow-up on thinking the with about IDR the here? this maybe

Greg Garland

XX% something simplification in et-cetera do even PSXP return a a just encouraged of But return. the a And the haven't from gone Thinking haven't with equity if XXXX. step we XX to with markets over at next when I I the capital guess since had we’re this the think is about investors us standpoint, to I've investor, the IDRs. past getting X% effectively MLP. for they we conversation back of evolution LP though you structure cost a project don't an think months, do if

And our impact does organic it capital even so unitholders. cost LP for of

that. And restructure so we just to need

of We're million you us to to this of as incented and to But out the it we be and And make gets can the $X.X We're multiples executing essentially times sum that that. course that cash can. into towards And a XX of can long we'll much PSXP do it terms put to worth would kind financing as door. growth limited going as of trading at – the and X% master to year we're to the billion sense parts in project today. of still that the cut PSX. the incent partnership $XXX grow as X% projects with down extent that's see yield multiple as

Operator

Blair Tudor Holt, ahead. Matthew from please Pickering go

line open. Your is

Matthew Blair

drivers QX. you just outperformed you your think prices PE crackers do in And the business that? Hey, peers plants ethane all near-term then for fracs, outlook the new were U.S. share on could given also and Greg behind that? and your Chems PE What

Greg Garland

ethane-based. look that performance that I peers, you assets or think primarily you are U.S., to in about portfolio at LPG the and assets the kind if of primarily relative so Well, want the CPChem's to East think in Middle

those so margins crackers Europe. or naphtha Asia very And have certainly relative been good say to in

year. give assets. it the would well always for pricing geographic can't of million CPChem really ran next the of But I base on capacity be got helps. would the certainly you In I ethane of ethane, and the forecast say day coming it's year as So barrels a we a during rejection. still think Today quarter ethane we this a barrels wrong. XXX,XXX XXX,XXX, because on that day X.X there are frac

will available. there ethane be more So

some slower have than mode, in of probably projects also people You what have some them although thought. startup are

stage. Coast years. is on is our together competitive East the relative put available attractively to to And few so U.S. that we'll just heavier priced will ethane Ethane be have global feeds that Gulf be out to next the but the into assets be and to very going all is going Middle view and the the that very, globally

Matthew Blair

you consider CPChem ethylene spot market a do And would as reduce sold Is good. Sounds length? derivative to excess the contract what ethylene basis projects your or net net long with that you And Could exported shows today? U.S. on by basis? KT. about, then any domestic talk on you about a ethylene into XXX IHS the

Greg Garland

Yeah.

one So Sweeny ethylene smaller the down have of units shut at today. we

So you get operate. on tell mid-XXs I'd we to

the and that Certainly at on length take So in of olefins, investments CPChem to CPChem up future our that they have olefins intent the alpha in unit has to some time. back around out be and polyolefins, bottleneck plans would bring to of that debottlenecks the chain care of appropriate terms opportunities make deck that the has today.

length from sales I the pair to are look big been So sales with has capacity There in say at as contractual But business our a over or ethylene the some we long-term. CPChem. primarily derivatives the ethylene the issue. don't spots should strategy the

Operator

Gabelman ahead. Jason please from Cowen, go

line Your open. is

Jason Gabelman

taking XQ? a there a timing on was affiliates than the hey like affiliate question. -- looked issues from had quarter, or least drag for It there on we the the at Yeah, lower distributions thanks the cash bit Was distribution equity any anticipated. in for

Kevin Mitchell

well. off generally over the the Really their the Kevin. little bit not, mean normally given -- the to $XXX it's those you -- $XXX you speaking, a of to That's just were were own as earnings fund expect million, have million. the mean, expect. less it's equity be equity what programs too far million, that Jason I not would $XXX CapEx, Yeah, would earnings, distributions affiliates capital I equity than distributions

anything don't so, there. I think significant And there's

I think the a – it was bit little different.

some first disproportionate had way. you distributions go think, the quarter I in that other head back, the

at And this cash so, how reasonable year-to-date on flow. very the when we look from it's we all a basis, look at

Operator

you. Thank

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

Jeff Dietert

be Thank November any your for you questions Thank to you, New And to X would we in follow-up Julie. Investor your put And Brent happy calendars, and answer I thank have. Day with Phillips York in you you would remind again, that, Analyst City. XX. on and you. interest like I

Operator

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

now may disconnect. You

Phillips 66 (PSX) 26 Jul 192019 Q2 Earnings call transcript