PSX - Earnings call transcript Q3 2019

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Operator

Welcome to the Third 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 information. to include Phillips of and Vice be Participants supplemental and morning, found welcome with and XX President on conference quarter CEO; and Investor presentation financial today’s website, call. and earnings on CFO. along call material Mitchell, the the will Kevin Greg Today's Chairman Phillips Garland, operating Executive XX can third section Relations

statement. X contains Harbor Slide Safe our

statements presentation could as today’s are one that ask and ask forward-looking results session. making order results may yourself from as limit Q&A in you differ be materially Actual filings. to In a follow-up. comments. to will We question, well and during SEC included question to a here to cause allow we the our opportunity differ everyone that Factors actual the

If questions, you have additional rejoin the queue. please

to for With call Garland opening that, Greg over remarks. the turn I’ll

Greg Garland

earnings us morning, Thanks, share. everyone, Good Adjusted operating $X.XX $X.X or $X.X We Jeff. third cash for generated per billion and joining quarter billion, of were today. for flow. thanks the

We continued another of and of performance. continue executing achieved reliably, and its Midstream in adjusted growth to and quarter progress record earnings its NGL strong projects. and strategy businesses to transportation safely our operate delivering successfully portfolio

to favorable We contributed generation. our strong our CPChem and Refining margins well cash in also captured and Marketing operated businesses.

and repurchase return recently share During the program We dividends to shareholders. our quarter, billion we demonstrating commitment our capital repurchases. through million distributed a shareholders further new $XXX announced to to $X share

shareholders. it and our our allocation for Disciplined to capital is value strategy, fundamental creates

We the and to We're and repurchases. operating our XX% value. they we cash return dividend. competitive long-term, buy will dedicated of shareholders, the reinvest back our through flow when back intrinsic trade secure, We're shares growing shares our below into buying business and Over today. dividends a share to XX%

the fill commissioning future to the projects. per Gray Partners Midstream and quarter to will Texas Phillips contribute projects refinery. Sweeny barrel activities Pipeline. value from for our our and Ford additional During the oil the shareholders. transport These portfolio will including earnings our Eagle Oak we started Gulf XXX,XXX growth, Permian The of advanced XX line Coast, growth pipeline creating the on day has crude

PSXP We connect Partners the facilities November expect owns to terminal service quarter The to begin two in in day barrels Gray anticipate in has South capacity, barrels a ownership. docks, is start and XX% the storage and in venture. over to expected with Christi will The service mid initial XXX,XXX Terminal, including Texas XXXX. and interest refineries the in which XX.XX% Phillips multiple XXXX. out export have of throughput area, per million Pipeline full terminal Gateway deepwater up marine the joint will XX a Oak of in of first Corpus X capacity.

initial operate Permian construct will will Pipeline and Oak will Christi, Beaumont. XX% a will backed Corpus and begin via Bakken are The The and Liberty Pipeline growing first including and and operate the We provide by to the access transportation Oak Basin locations Red Houston are and in own Coast XXXX. Gulf the have service long-term pipelines multiple targeted to Rockies connect half Pipeline. The to Ingleside, interest of Gulf commitments the from XX% to along a interest Oklahoma. Liberty Oak will Liberty production Coast, and Red Red own Cushing Oak. Red the Cushing, volume We Liberty. areas system and the

serve connectivity the producing key Gulf With positions regions these crude new this pipelines, provides oil and centers. Coast along with system, existing major to to our market shale us

in are barrels start sanctioned on per the three the XXX,XXX fourth and X X have a capacity expected backed XXX,XXX by to adding day Fracs fracs XXXX. of fractionation barrels of of of track Sweeny per quarter customer each are will The up quarter XXXX. be commitments. capacity. the The completed fractionators the Frac second of to to recently Hub with are Hub, X in X We Frac Sweeny is Upon day. completion

barrels. is In to expansion the quarter of is million Sweeny Hub, at to connection with our Clemens XX expected storage X the barrels in fourth completed Caverns be PSXP capacity at increasing from project XXXX. million The

pipeline XXX,XXX CXG pipeline, Corpus the XXXX. barrels the at Clemens customers is complete PSXP is pipeline the will capacity Hub, area. of expected day Also ethane have be per from to to and Caverns XX Sweeny the mid in Christi constructing inch petrochemical The in

the In U.S. locations. polymers. Gulf Chemicals, polyethylene for world's petrochemical will scale the decisions, Pending strategic Qatar. is in ethylene partnership these expanding its Qatar Coast develop feedstock This and with world assets projects demand density to investment to advantaged position supply CPChem capacity in leading add enhances growing final polyethylene high at CPChem’s and petroleum further

refinery, Charles started gasoline up components. Lake our the unit, day higher XX,XXX XX At barrels Phillips Partners of octane per increasing isomerization blend we production

refinery, to Sweeny This gasoline. and of increase quarter of At in production we’re XXXX. octane higher the project on is the FCC higher second the feedstock track to upgrading value petrochemical complete

Look our to on Investor Kevin. like So I to call York turn an Day forward before Xth our returns in November for deliver to I shareholders. positioned to our update City. us New on how superior to you the providing join would to strategy, over invite we're

Marketing. we’re from they'll Midstream projects Chemicals returns grow discuss You'll improved each see including management and our businesses, as Refining well as members their and executing to team, in and

through the Kevin that, With us financial results. take will

Kevin Mitchell

Starting everyone. Hello, Greg. summarize you, we results. with our X, financial Slide on an overview Thank

for an continued including We an on impact. projects. $XXX quarter excluding $X.XX flow unit per of to million items working Midstream after-tax $X.X spending the loss mostly was or $XXX had Operating excluding million, After and adjusted Capital million. share. million, valuations. investment, due quarter earnings GP were $XXX items, that of billion price growth earnings were special DCP billion deterioration netted special cash DCP our the Third was impairment of to $X.X lower reflecting capital $XXX

We and million XXX of $XXX $XXX share $XXX outstanding. to quarter of shares returned million We repurchases. ended million million shareholders the dividends with through

This to billion income quarter up the Specialties and from offset lower X. change Adjusted $X.X quarter. highlights quarter. Refining. by by Moving in earnings segment in of in the second from the to the Marketing Slide slightly slide were results pre-tax third Increased prior were earnings

The XX%. tax adjusted third was effective quarter rate

shows our Slide X results. Midstream

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

higher income achieved million due we transportation the $XXX volumes. million quarter and adjusted businesses. in adjusted from pipeline $X record This Transportation income previous quarter pre-tax to was up pre-tax NGL the

pre-tax the NGL Sweeny $XX activity. cargoes driven increased Hub, ran million, XXX% utilization. improved by facility and month and propane other income export adjusted trading a at fractionator XX and the averaged butane At the

Charles reached expectations. unit with Lake line in The production September, full and isomerization in is initial the performance operating

adjusted from million $XX hedging million down $XX previous impacts. Midstream income of due was quarter DCP the to pre-tax

a began pipeline Permian gas the approximately the operations. During Gulf cubic transports X quarter, Gulf per The DCP feet day billion Coast XX% markets. Express the from which Coast interest natural in to commercial had Pipeline of

Slide on Turning to Chemicals X.

from polyethylene pre-tax reflects volumes. sales previous XX%. income the utilization $XXX income second Third for than million margins the decrease adjusted million, Global partially adjusted was Olefins quarter. O&P down lower million $X pre-tax Polyolefins and was quarter. which The by $X $XXX higher low million segment, the quarter offset

Adjusted pre-tax for million. income $X increased SA&S

received million approximately cash quarter third During the $XXX distributions we in from CPChem.

X Slide Refining. we'll on cover Next

million was third the up were The second utilization million, crude consistent yield prior $XXX XX% quarter. in was clean costs and $XX with from quarter rate product XX%, the quarter. both Turnaround

adjusted In income The addition, change reasonable prior amounted was down pre-tax share quarter the to period. $XXX was expenses third Corridor. chart $XXX largely million, our decrease by million driven last WRB The from provides million. a from Central of Refining quarter. of the the turnaround view $XX

In partially Central by a Atlantic Basin offset the and lower partially income the narrowing In driven pre-tax the crude the Corridor, was WTI higher margins by was to costs crack the was widening decrease the crack distillate due that decrease by mainly WCS in million, Gulf differentials. market LLS turnaround improved Coast decline due to lower from differentials. offset adjusted volumes. $XX

driven Additionally, higher were In the decrease costs turnaround WRB. turnaround West was by the there Coast, at costs.

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

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

from per Losses due distillate increased crack XX%. the $X.XX $X.XX barrel from butane per of and previous quarter quarter, barrel secondary decreased the gasoline. During into blending to products the X% increased the gasoline crack improved

Coast from quarter differentials. widening per feedstock was barrel Our the the by narrowing offset of Gulf differentials in $X.XX as crude was Canadian impact prior line advantage with

The product includes impacts. and associated other differentials category inventory RINs, mainly with freight, costs outgoing

by margins The per other realized $X.XX barrel. category reduced

was million, $XXX XX. than Moving million Other to on Specialties million $XXX and $XXX and income margins. Adjusted quarter. from higher the increased Marketing Marketing quarter second higher Slide third pre-tax

the branded the we the able product the conditions. with domestic bringing per X,XXX XXX,XXX were capture in reimaged program. to start XXX in prior exports favorable the the approximately market was Refined across during regions During We multiple sites were total integrated in barrels logistics of quarter optimize product to quarter, to quarter, day. supply our third approximately the since line network Specialties quarter. third

prior of primarily in improved costs to the net due due Lower decrease The adjusted $XX was overhead Corporate environmental lower corporate interest was interest. increased expenses. $XXX quarter. costs from XX, On Slide had and million the segment Other to pre-tax million, expense capitalized

issued quarter. in was balance capital. our slight excluding cash on We billion XX the with working Slide to term cash transit There the from million capital facility. of the shows in a working unsecured primarily use were expanding sheet. the quarter under during $X.X the $X.X billion of Cash end. change started proceeds loan a was operations at repay portion cargoes $XXX a quarter with inventory associated used PSXP from million notes remaining and and $XXX

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

was due senior February Phillips Partners In ending million Our $X.X XXXX. balance $XXX October, billion. repaid XX cash of also notes

results. This concludes financial and operating the my of review

expenses $XXX to Next, slide, look cover million expect the our we capital in turnaround providing few In be capital million corporate the items In We guidance item and the consistent you $X.X program we pre-tax. and come billion $X.X This One come in $XXX is between and not billion. reflected and prior at adjusted to on additional Investor mid-XXs. Day. forward for other with a Chemicals, $XXX and the detail Refining, on we XXXX outlook fourth the we utilization to crude anticipate expect expect quarter. in fourth between I'll more and rate is broadly the mid-XXs spend to $XXX upcoming utilization O&P in quarter between to pre-tax be costs rate the million. to be global

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

Operator

Thank you.

begin We line from will ahead, Doug now the is [Operator Evercore ISI. Instructions]. open. your question-and-answer Terreson go session. Please

Doug Terreson

and the past why which see in this overall that and been which outperformance against or capital So is a to only and but stronger and to it see bar, return management obviously operational start on or that's have outperformance against the lower broad is peers, want most do the in of of than case. XX? really you be specifically because want I just governance of four seem at so Phillips for in think peers recur have years, advantage profits energy why the to you’re financial two, guys the rather one; three Midstream sustained does benchmarked or on it's you strategic during with point the seems to better Philips array one reasons have you companies you XX potential energy do at the few think Refining market think competitive been Meaning performance Or rooms.

Greg Garland

And about as In we a assets end been refining the thoughtful to of with all, we the around high we around, create how the day. careful return, our Midstream, assets. pursue advantage of of set First invest by around I great structure. business certainly our in more have and investments integrated that we've think or infrastructure, been we've we've value Refining our investments that at crude existing footprint doing leveraged our quick investments to yield access are payout

is also to we're have group, compare who our business about think and Chemicals peer business, chem's broad we S&P ourselves the Midstream XXX. at and pretty our mean, think peers in about performance and at competitors think the I we when our Refining Chemicals, we looking we I a versus differentiating. look

as capital return you return And know, matter, on on total for of we're at employed, so also looking is comp -- teacher we that a our of long-term basis still shareholder you're return Doug us half but that. the

watching about, competitive, that you then investing. intrinsic And our to be So we're brilliant. know returned as and over people We below think of investors and know to billion And would important period we're back back secured, we shares trade time. we've this value $XX that that growing strong then buying when always our the a value. returns we creates is

Doug Terreson

the that too. Yes, to getting specifically wanted over thinking for for we're speak just on crunch Refining line? spreads the IMO about to differentials, question had to is impressive non-compliant the goal and compliant, get about how views outlook And another we guys are fields light-heavy results and years updated -- market themselves. your that obviously between so XXXX you and just closer also your get I as I this time on closer

Greg Garland

Kevin? Hey,

Kevin Mitchell

trade. out a curve, to because have about consistently consensus Brent market $XX the XX We've of $XX barrel. continuing at is to it's Cal willing we’re about not barrel. an XX watch. is or crack forward are because Cal predictor indication think I a views wider distillate it's cracks, where least we XX-year on talked move some an people the versus average seen accurate about the Yes, are And but distillate

high average XX strengthened implementation sulfur has Brent implementation we've oil $XX that is for is continue We've to sulfur for the high a fuel to that product. produce fuel market seen that discounts moved date. So start currently moved is for There and as XX-year sulfur wider. to towards a closer declining widen barrel fuel. we've high Cal refineries oil discount as the below $XX about the rapidly at Similarly and

we cycle impact. mid by So think IMO into those and discounts see we we'll are as above look XXXX starting margins out to this widen driven

Operator

is Neil open. Sachs. Please your Mehta ahead, line Goldman from go

Neil Mehta

coming you to there just expectations. that think particularly pull market the with If of relative something I environment want marketing, set kind of and strength? kick on think you I earnings strong that for much crude off Can to the about can about versus street sustainable business ratable and was outlook you talk its How of how that forward? down

Kevin Mitchell

let for me that address you. Neil,

with a quarter quarter, the as up had the stronger seasonally fact the think you with quarter short-lived movement probably as that happened right business, very terms went spike got probably in and certainly third that to So marketing quarter the about combine quarter you strikes. on our you you in until the is best set usually average that anyway it's price the of later prices in the through the in the Saudi you

opportunities sort you And product upsets those into are country around able of have and so -- you the capture had had to the as And in had leverage we then place situation various were. we the we at that locations of issues that where product also move network were supply, to environment. they market

I a ratable sequential you roll wouldn't the of we $XXX forward. up third amounts probably saw that to quarter It So reasonable of we or just When increase. the portion so. consider the that there what look increase, element at an is certainly were in quarter-over-quarter million normal

portion And all so it's a that, it. of certainly of but reasonable not

Neil Mehta

helpful, then The that other outperformed there? the And given margin like our chemicals is resilience felt commodity Chemicals you've place model be about it for comments weakness throughput too? any which and would in the margins, the earnings versus chemicals global again more but outlook

Jeff Dietert

quarter was they're a made on and bit utilization You're have, basis very little actually to they on right, third space. others margin strong and inventory as had help to Neil. fundamentally a The in at to environment and of able sales out but prior that. you in competitive really portfolio is it's weak of to CPChem margin didn't well combination operations, positioned feedstocks CPChem anything off of the where us margins But still on well up think we polyethylene the now record in quarter. slightly do relative a we that were contributed to do of right think terms I the relative assets to is the they the if where I continue globally, volumes sales well look perform a that high had volumes their relatively a -- We factor

Greg Garland

outlook, over a I to ethane the continue we estimating at outlook rejection, X grow. think million supply. see look it for a we as we're day, robust Ethane barrels continues to

ethane going fractionators supply So outlook very forward. seeing availability online pipeline strong for and positive in increase we're that creates new a ethane capacity, coming

to expect demand grow at a global see faster We growth. continue to pace polyethylene than GDP

the seen have immediate We softness term. in some

$X.XX change margin XQ, IHS polythene our down to and release for was October. in $X.XX You'll see it's the in $X.XX

of bit little a there. So softness continuing

Operator

Paul go ahead, your Please Weil. Cheng Howard open. Scotia line from is

Paul Cheng

fit quick high be component? able couple to how that to worked just to you? coker for you questions, sulfur You And through does is your varied make any using a resid coker see delayed coker, fluid A recycle it Refinery or technology? economics, you that of it resid have much given as the may are or whether the you difference test whether it

Jeff Dietert

Yes.

we further day the discounts there, of a rapid depending high here refinery an volumes, in a refineries. sulfur fuel the utilization barrels So X,XXX They're to other across and and the seen heavy X,XXX on our to oil relatively opportunity discounts small with or our number increase are portfolio. have in intermediates,

volumes streams. substantial storage or have factor As limiting you infrastructure these meaningful of other bringing from sulfur requires capacity oil intermediates, high these discounts. and streams a managing these provide know, large benefit capacity, expect to capable of coking we do fuel as upgrade Logistics to in pipeline

And limiting think so factor. that’s a I

going of producers high for we the oil be that sulfur substantially fuel fuel has forward, sulfur high weakened for utilization. headwind that's are a oil, go to refiners As capacity and

cokers to fuel run high heavy sulfur discounts refineries for economic lower expect wider the stress some sulfur fuel the sulfur don't oil those to so high result refineries and this that at rates cuts high process and to run expect we have utilization for on We in oil crudes.

widen on sulfur And starting differentials wider discounts marketplace so flowing and we're those lag. little to to we out from see a to a see in fuel high through a bit And of expect crudes. the with benefit that

Paul Cheng

to have and terms limitation you the can consideration number of what into here? that taking the logistic or you share willing you that is will run, guys do technicality what's be Jeff, a economic in

Jeff Dietert

that in a and intermediates. be are to Well, to heavy set volumes of large the factor bring restricting I think up logistics not are many going plants big

Paul Cheng

On Gray start-up in a whether can capacity initial that full and also will current guys to Do you to share there’s the that just the that going you the beyond happen? Oak, that November. before is that's export core is And Corpus Christi have estimate you Corpus what with and capacity startup any extension when at? us Christi the whether going

Jeff Dietert

Yes.

and quarter I So are later ramping quarter up the first Oak know first you think this in have it quarter, then full by impact timeframe. as will Gray probably second late we quarter,

Texas South up. mid-summer scheduled start gateway Our a facility for is

really X.X potential that Christi. from we've capacity clear of a in seen industry-wide, and rates. running Cactus you and exports the day actually that so facilities at but pipelines. million Epic barrels XXX,XXX day maximum startup can high throughput it's not Christi is million of that Theoretically Corpus run of with the barrels that at been day look a utilization a the Corpus about about As far to rapidly increase barrels had there We all saw X.X that's

Christi across Permian see increase think and probably market for barrels. facilities take other Corpus export Gulf, from to especially I continue share the we'll So

half capacity of more until may Corpus. tight export it back in XXXX the so And is available here there when be

Greg Garland

will Houston obviously do system The Kinder area to to Corpus hop is able on they other but and going service producers thing, to the be that. if choose the get Paul, so the the early

Operator

Gresh Phil JPMorgan. is your ahead, go line Please from open.

Phil Gresh

of impact or think in see to First we've product general impact will as the just freight and moving question do availability. crude is refineries you it markets? how on rates and a markets curious Thanks. potential this just forward if crude you with result seen differentials impact and I'm any

Jeff Dietert

number had September. you back earlier and wider rates seeing month They are to scrubbers to XXX factor, VLCC well. Venezuela recently of jumped Chinese $X think could are vessels we to prior currently a going that, as Gulf these recently come are Company added. a due longer that The we COSCO to influences, was around barrel. I dockyards we going inflows think barrel. linked to There to as in $XX sales as tariffs think have Asia as And a that some has Shipping rates tanker implications, they're having with slight the China's as changes influence a longer are sanctioning to this about ship Coast an are times be result of in being on big those a influence routes well. in then ships are IMO barrel That of around

So mix I to you've a of factors some steeper shipping cost. and contributing factors long-term think short-term got factors, intermediate-term that are

looks is look to us spread. really impacted as for that to at requirements spread it Brent Brent wider Brent particularly we though WTI be to Gulf it's to the As likely this, Houston and Coast

So rates. Asia there. reduced higher are are a of portion, seeing a the tanker bit, US being we some in for importers expenses by refineries that WTI tanker Many these expect the short-term. We're the impacted will that particular widen responsible imports in also long-haul tanker perhaps

that we've some of in And out product market. will Asia seen cuts so take of the reports run

the So I are influences. major those think probably

Greg Garland

balance, we positive it's portfolio view On PSX though. for the

Jeff Dietert

are dealing in expect short-term mainly we as don't and we movements influencing think point. market our we at portfolio, this it look capture spot see I would at our And --

Phil Gresh

Day. to in that And question, flow at a the just stick I'll second the cash be the question than think quarter rather discussed will Analyst strategic I

in there a cash flip like was there working it taxes the looks on capital with is flows the headwind. deferred Kevin, quarter, So, a

Is gave a the expecting think And so you past, would CapEx any any there there? XXXX. Thanks. tailwind have the half, you've know are on you that? updates in quick I you in be XXXX the given I just refresher think you back I if to could

Kevin Mitchell

deferred the first. hit me taxes Let

slight because -- tax a an deferred had DCP the we quarter had adjustment we of this impairment. on So

is on the deferred statement. tax you so no the million of So I give impact that tax can could there. taxes that impairment affected and pre-tax impairment. in so income standpoint, basis $XXX change flows million out suggest there in It's statement XXX through is a income back tax and about deferred From

year-to-date deferred $XXX our taxes million So be DCP of for we'd you expect to exactly if million $XXX that is it which about around about be. where would normalize item

guidance year Our the is $XXX million. for

the of I broader terms on the the inventories I working think capital use position, In related did cash of to water. talk quarter to slight in the third

you majority use our in quarter expect as later we we back year. beginning normal of build sort the full of that reflects year the fourth to As seasonal full look which inventories down of the the that come and has year, to-date at the the back We'd cash, in bring working majority the a capital of so trend at would expect billion. year them capital that working recorded $X.X the of we've been use

be we’d where on we then expect capital of Investor that. So And defer that that's the Day. to will in to terms

Operator

ahead, Fargo. from line is Please Read Wells open. Roger your go

Roger Read

them I'll the have you DCP I of list given questions then want. out just as And business. them can clarity assets go I follow-up, the ahead of of here. to were and by a part kind affected wanted you as Just maybe think on take write-off? to what couple guess any and the you here One, Midstream

Cushing the X.X through my risk you to capacity from in idea from barrels and XXXX ran some Ford of in running pipelines give affected? Beaumont above the that's little going us believe run Eagle then Houston, unit With limitations as down and of question specifically cannibalizing above think frac day to maybe of from West then capacity to by on that a issues to -- any Corpus on coming other at on? Should new out the And any here, I'm the a do sort both capacity I how million about dock we Sweeny? of thinking an growth have ops the Midstream about capacity at Texas we think XXXX. you over final area, look about capacity you

Jeff Dietert

see facilities from provides question for have as Bakken and Cushing, With be Bridge the pipeline that exporting Mid-Continent might and and be option down in -- other we barrels Beaumont an the the storing, facility, take we I an Beaumont, Alliance. Bayou for exporting, crude from the we Lake excellent Beaumont substantial Lake do moves advantage DCP. coming advantage Charles it the it Kevin ultimately into for see let to and area. Obviously, Charles ACE Houston into feedstock reaching Pipeline also potentially that

other Mid-Continent with very being water and see to lowest a Basin Beaumont at advantages Christi strong to options. Permian it's from whereas I Christi So, for at option get the Corpus option barrels the lower cost fog Corpus and the less relative transportation to days much congestion there

substantially Corpus So is relative advantage barrels. Permian to I think

that and all the it Beaumont, relative Oak a commit to Liberty facilities to deliver Sweeny and those pipelines coming flexibility to is other flexibility that Houston, export options. Red our advantage to of to shippers to pipeline hitting Eagle Corpus side, reason why Red to big I our about think in has the willing you Oak think substantial was Refinery over were to As to a

Kevin Mitchell

then And on DCP.

to impairment to our there of relates So although were of elements two bulk DCP. impairment it investment our in the write-down, the all

impairment financials. of level was the investment some through reduction about million our asset bulk The component of flow that included relatively impairing there which in related XX a DCP So to us in small was That's a of aggregate. impairing $XXX million our out to that's the small which goodwill, DCP.

value considered be price to XQ this time. DCP in third we value our the at had that XX-Q in calculation So take in impairment quarter, the the unit may temporary in sheet the we quarter. carrying have that's it's relative but our for by not value investment the is to asset dominated unit DCP on we that fair potential price. the this deteriorate was at given that We’ve point the highlighted specific and one appropriate that looking But impairment any to balance fair it that to a continued over

Jeff Dietert

yield day. the kind Last XX% of barrels question a XX%, propane, barrels around was XXX,XXX that’s day and a of XXX,XXX fracs,

So it capacity our will be fractionation export capacity. imbalance between LPG and our

Operator

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

open. is line Your

Doug Leggate

don't quite about Roger's as had benefits too just Have Midstream the all get couple I'm right I'm much question with about obvious not structure the I've weeks, ownership IDRs, as what could a got did ownership please. several of how might -- And want wondering just I that Greg specifically you simplification follow-up a one kind to is you business, a perhaps I'm after obviously significant the say having thinking to your they're follow-up, any thinking the argue thoughts ago ahead today. different were on a for the that? you of Midstream. years of you're PSXP? curious but ownership the of the there and in arbitrage

Greg Garland

probably Upper some transaction IDR X% of parts point, in the I on of think of since the business Midstream on yield advantaged a X.X%, basis. unit price has just and a done PSX to has We're standpoint, still our PSXP, straight-up still capital nicely cost advantage cost versus build capital PSXP.

kind last done billion as organically of to we've and of couple organic grow you've investments. So plus we'll indeed seen, continue capital as years of X PSXP

portfolio. PSXP growth great a to great execute. has capacity have We

same I lines. think along those see you'll us continue So

Doug Leggate

experience how if feel rallying this Okay, often every I but I'll get question, appreciate My levels you're kind Day. taking good know don't years when do the versus to keeps what's back. changes Buybacks it accelerator color I dividends, step latest time more price very sensitive you expect I been you've ask you’ve in terms quite follow-up is I this think question stock been -- and thinking? like ask when my you to does you of will this Because new the of the pull I obviously Analyst kind I of Greg, your watching is over on we of at question.

some been the yield good in lower one in the than reasons, for quite of probably a obviously Your is and little now. obviously peer time is lowest recently it's group

Now I'll of leave over right about business the got between several there. next thinking especially you two, are good growth how trajectory So a capacity cash underlying it years? as Thanks. flow the balance the pretty the those has

Greg Garland

billion be and No, billion, capital. of flow I kind share healthy can $X.X of of $X.X start $X.X and always $X there. Might repurchase, a billion $X.X $X billion $X.X tension billion, we can billion billion dividend and we $X billion to capital, Doug afford in mid-cycle of sustaining of growth afford cash

we we to look competitive start from group, we be in certainly peer S&P want that the So at XXX basis the that. our dividend with

I since XX% we've growth dividend. dividend annual our think compound first had

strong demonstrated track of growth. good we've a So record dividend

$X.X us. billion, cash X so billion X got to it. You continue expect flow, of affordable is billion very X we've grow that Certainly and room will for billion,

our we intrinsic Now to in more plan share repurchases, value, of out look that business below trade kind earnings and at buying. we’re We're value years two streams. long-range looking we're one planning intrinsic of multiple mid-cycle out our historical we're

have less We the price a grid every buy buy down we if a grid, quarter. If up share price we and reset share goes more. goes we

that. that's so the way we And handle

our of $XX.XX about since in share since total all inception. terms we're repurchases in think I

the pretty price where share given today is trading with happy that. we're So

Operator

Prashant Rao Citigroup. ahead. Please from go

open. Your line is

Prashant Rao

in how couple front are counts among global the that concerns investors falling and I don't well a year longer you a there is oil On we've concerns investors’ and some risk on do demand had macro basis, mind. decisions, is and U.S. production say the growth on segment on some is there given recession weeks still but mean especially you'll have next a of on capital or term, ramp is performing. run to question Midstream anything that mounting, rig

I you capital look should late mean how put So terms at disposal deployments, thinking maybe consolidated of Midstream the defend was at should some of, on sort you could return could there on projects protect projects of your impact? of levers of talk materialize? be the XXXX, wondering on about and pressures if And on factors invested Liberty growth come could queue? portfolio early about capital XXXX? the those demand that if for some in and your I longer-term the I the And commitments, sort intermediate in maybe that potential these the

Greg Garland

so of can fill and start and Kevin I'll blank. Jeff then Well, in and kind the

So mentioned. you by just timeframe commitments Red the extend are first that backed Oak, well all, and long-term of that all beyond Liberty Oak customer Gray

don't at of of a million. think I U.S. need in the all our in I upstream about we period barrels day a segments million a business upstream. the demand viable world U.S. going don't think upstream the U.S. to U.S. into us we're against for I As the business move in I X.X industry good the particularly a think healthy we think slowing that's and strong in think can to thing. for that's I going industry, grow growth continue Actually, X.X

to negative from a set. growth of want terms don't So Kevin, in or the as on opportunity Jeff high-level you just the I view slowing standpoint, hop-in that?

Prashant Rao

the quick technical a -- of And viscosity a concerns? of flash one VLSFO, the commodity by as valid is blends? or along that and like vacuum there around marketing so, with are paraffinic or clearly run a like you just lot the follow-up, get one are any determined this values, how these blending on VLSFO straight preference sort economics are IMO engine And gas sulfur questions any is a you newer sort we between points, maybe of market? is if of that these between is been if of speculation there's or the And and some parameters related oil compatibility using of operating doing XXXX, question,

Jeff Dietert

compatibility one able we fuels for Yes, that of that. I been center a think we taken technology and of to of the having advantage is have test advantages have

gas will as of the to those traction oil in in fuels some that will them. We test shipping that builds We the compliant we've prefer ability offering marine well. the on the will and and as confidence market be gain VGOs suspect companies low-sulfur had that early

core for is in Phillips and industry Our fuels think of total. blending competency our I industry kind for XX a

expect we So to IMO move the forward as with planned.

Operator

from Please Gupta Suisse. Credit Manav ahead. go

line Your open. is

Manav Gupta

with before X? out this other would compliance your and you of assuming what's test before sense get speak the you like might suppliers, level to that shippers like Jan the I'm of even you we As enter Jan month.

think So of two how the compliance last the into will you year? do months trend

Jeff Dietert

think saw in we're I period. Yes, tanks We and converting August compliance really fuels transition to September. other the a starting in

compliance in we maybe compliant fuels with interest move is accelerate fleet seeing deals That's increases it maybe as XX% and know, compliant of and fleet. XX% guess today. the the the would experimenting of as in use fuels into now to going you November are to days, January of We to then be or these XX% of going in December. to compliant number in XX have November need XX we to switched depart And late arrive in a when be to to fleet think the you voyages with you if going to December. you're of in compliant, when you're go XX% will And

a this good to what get to market of start look we'll like. view so starts And

We Asia. are reported with in XX inventories VLCCs build seeing with fuel compliant

is expecting And period, through transition to it's we're volatility be few there implementation price so and to once months work to some this go transition to this going January. ready a be going take in probably full to and hits us

Manav Gupta

any quick can LSFO? have Quick probably hit And diesel or projects there trying do, will for make hit small of great. XX,XXX but just barrels industry, the which production distillate you one you yields allow That's small more follow-up, XX,XXX you any will XXXX? which of highest increase quick projects, same are your which in I'm we LSFO, in understand the to to

Jeff Dietert

IMO. of total in from diesel and think gasoline were got had going more we've stronger rapidly 'XX will demand, diesel full and of barrels XXXX increase projects Yes, Quite of a return our IMO what stronger diesel projects. cracks day regardless a yield. high we with industry that growing implementing shift these intentions frankly about projects early our the capital the will number than demand will forward. XX,XXX benefit be small we that trend for they demand in It's And towards but

treater to and ability to oil, early XXXX. be going some increase are low-sulfur early late make sulfur implemented year also that have those oil high as will our hydro this We XXXX, in fuel and projects well fuel

Operator

Raymond Justin from Jenkins Please James. go ahead.

open. line is Your

Justin Jenkins

hour here we've region volatility We’re curious some recently is your today haven't the about that on think one. the and past top the outlook for one of and just normalized the keep to so California margin margins I the particular of here I'll discussed but over it have the to a of month obviously topic seen But drivers there? that half and maybe we

Jeff Dietert

on some well. quarter and Yes, fourth the the downtime that planned That months as I some had at ago typical will fall planned have had think planned and was on XQ impact for we've season impact is Francisco. maintenance San some

maintenance we're the that just maintenance on facilities those normalize some Coast West and We probably heavy of maintenance the margins to and our the have December. will we other at on but was to refineries of planned close some November go as the and delayed as due come peak into expect margins strong

Operator

Sighinolfi ahead. Chris go from Jefferies. Please

Your line is open.

Chris Sighinolfi

is, was and trying to now. in pretty multiple you your GP a help at Does I guess to around I end your be So the think use public around decline DCP base payment. better that to a and but times asked last just and the front the that some I the guys of looking I eliminate something and circle multiple I'm stake, or helpful. If I is compression at sharp the interest the pace million else am. value September about for suggest if I would I I to all a X just the understand to I been guess, something hoping, cut just appreciate has Thanks. value that $XX on am at of me net there mechanics IDR I with am on that know LP one I'm versus it GP LP payout was Kevin, you write-down, lot A quarter write-down, touched there it differences pricing look correctly? added I there. Roger deterioration there if of could answered back the color. times? PSXP, the question GP growth can anything quickly but led we XX obviously coverage the assuming the magnitude the when calculating

Kevin Mitchell

seen we've LP and you're that that Yes, has multiple drives then GP or ongoing of that the of GP about no the so down unit of impairment the There got of price sort linked price then come in you as any distributions level unit I of think valuation assumptions and correctly. unit significant is then around. the you've price multiple. to reflects distribution This that got the the at a valuation thinking portion valuation but look you and is to LP GP how also because the across the translates change declines

to and what a when we combine get factor big into both I'm you where of going we've across the unit all multiples exactly are, so details LP valuation. determining GP And together the the the used not that’s where is get we that to price but

Chris Sighinolfi

follow-up one or estimation in coordination growth exercise fair PSX independent you with value an is on this something your do guess Is that. I Enbridge?

Kevin Mitchell

is investment all No PSX. by DCP analysis this This have our that drives impairment conventional that all of is for sort how in methodology accounting we on our based book and driven it's look that. we at value

Operator

from Please and Company. Gabelman Cowen ahead. Jason go

line open. Your is

Jason Gabelman

the on ask I Midstream projects. organic growth just wanted to

range or you Thanks. the if can those landed seeing the fall times. maybe to over build of EBITDA range if years, the or couple types have You’ve multiples X typically pipeline wondering you're multiple at you've those top announced give past any sanctioned X of projects times indication those the of on the and talked us at projects? end bottom you've on I'm if and that that about projects pipeline of those within the

Jeff Dietert

X would to stay just I X with range. that

a the that's be to our for Midstream range across about projects think board. thinking good I

Jason Gabelman

to Okay. the And higher like then CapEx, if higher I spend guess from XQ, which could this it it looks just I XQ. and big billion year on is continue $X.X like step a ask drift for seems implied

again? higher that move range and driving what's was Thanks. higher once the why moved So

Greg Garland

had are to Gray the in of in so that where a estimate the several But Oak in uncertainty the programs projects cash and ventures, part reflects ventures that's those element addition. sit the related in -- that budget, original we Earlier signaled capital is a projects not basis. the that what number into joint were exactly are the on range reason. other flight several increase of so final joint bit flow Well, the creates and year, primary of Midstream the is, the capital lands now little

when of not which so the it's precise. also And get always flow sometime easy we're cash hit exact to the that to to subject timing

always a -- reasons of fracs And is uncertainty lot so of that we've Pipeline. spending in it that got Gray Oak CXG the right Pipeline, element the the some have in bear goes. where as of Red the because that also way given we're one there range to mind, why liberty, that's you've we a projects Sweeney, Pipeline, on and the now between the Oak But

as suite through out And those parts well we projects the as work larger that. projects lot smaller of and so of there as of are a some different moving

Operator

you. Thank

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

Jeff Dietert

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

place Day that Investors the York. our in be on will on webcast Phillips XX will website. reminder New event a November X The take Investor Just

you any you. If on have questions call, Thank call Brent me. or please today's

Operator

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

disconnect. You may now

Phillips 66 (PSX) 25 Oct 192019 Q3 Earnings call transcript