PSX - Earnings call transcript Q4 2019

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Operator

Welcome to the Fourth Quarter 2019 Phillips 66 Earnings Conference Call. My name is Rob 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 materials Mitchell, the the will Kevin Greg Today’s Chairman Phillips Garland, operating Executive XX can fourth section Relations

statement. X includes Harbor Slide Safe our

banking statements differ In could as question one today. you be here, are to opportunity to be follow-up. that SEC a results order and well going Factors going everyone ask the limit cause to are We yourself filings. forward-looking allow in our as are ask to Actual to we different. a to results included question,

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

Greg Garland

Good Thanks, We cash for and us earnings for you adjusted flow. or Jeff. per Total million quarter morning, today. of operating everyone, $XXX $X.X billion $X.XX fourth joining the thank were generated share.

For were or share. per $X.X earnings the $X.XX billion year, adjusted

fourth major the initial and with we During another delivering the major progress in performed ran transportation record Chemicals start-up, XX% Midstream Oak well, milestone Gray Pipeline. the at achieved We quarter continue growth projects. Refining our the quarter, a to business. utilization.

financial Our product petrochemical results. our turnaround weak impacted and activity margins and

and Chemicals. completed delivered another earnings of operating work is goal workplace We We performance, maintain contributing growth remains better. we segment. projects adjusted progress we achievable, can and zero a accidents growth excellence strong we significant in incidents, on of hard Operating record made that that do Midstream for XXXX, Midstream top daily. our believe number it’s always During performance. us, priority executing a a industry-leading our for and to for strategy year zero and

position, partnership allocation. $X.X for disciplined Phillips program, end performance, strong and at with integral a We execute business midstream utilization. of delivered a Partners XX XX% XX we announced AdvantEdgeXX leading opportunities, O&P distribution return is Refining a to In PSXP return billion AdvantEdgeXX technology the incentive XX% rights, expect CPChem shareholders. while continues to strong unitholder year, make in transformation operating XX XXXX. Partners to a late delivered financial the run of total this eliminated master XXXX, we to operations, in achieved attractive ran Phillips the way our growth Phillips shareholder Due decisions. to For limited our be total utilization, our capital operated XX% XX% is leveraging XXXX. by deliver projects, and transform XXXX. we enhancements, program strategy.

to committed shareholder strong are distributions. We

on operations and create Coast, will pipeline Pipeline Gulf per cash service billion Phillips dividends $X and dividend crude we full to the Gray projects. barrel the contribute including repurchase and XX in increase will our from transport and The quarter XXXX. anticipate our a on through Refinery. the made we share oil second the billion shareholders, initial Eagle Texas future our progress day During to reduced year, the announced returned shares In Partners generation to and increased initial These and value. XX.X% commenced we’ve by November, We share key quarterly XX%. significant of Since to we program. the projects outstanding XXXX, Ford Permian XXX,XXX our shareholder XXXX, Oak $X.X in the $XX repurchases. Sweeny billion returned

the and own Oak Red Pipeline has will South locations expected The Corpus day to X.X including Liberty. in construct XX% and transportation along deepwater and Christi, interest docks, Gray The of will start-up Corpus to We XXX,XXX the of per Red in Cushing, long-term the first XX% a the and will in Pipeline growing capacity, XX.XX% interest We we XXXX. Beaumont. service connect Ingleside, with connect Red which Terminal Basin Texas Houston The are of by area, XX% Liberty Rockies terminal and and barrels terminal multiple pipelines provide and ownership. XX operate pipeline. and production Oklahoma. own interest, to targeting Oak. of is owns the Oak multiple Gulf Partners refineries backed PSXP system commitments, will operate Oak Christi to the export and XXXX. Bakken storage and the facilities are Cushing two initial Permian a areas a Phillips in including up quarter will The third The barrels million marine Liberty will in throughput have the Coast, capacity. half Gateway

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

storage of We the storage to completion XX.X capacity. the Terminal the of quarter infrastructure. XX.X need million meet product will our barrels are first barrels million crude increased adding for terminal in Gulf and export XXXX, Upon of at crude oil Coast Beaumont have

per per of new In Beaumont completed addition, XXX,XXX Terminal. be barrels day is day constructing our in XXX,XXX capacity of barrel resulting to dock we XXXX, total project This a expected third dock. a at the in are quarter

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

second project City process upgrading expect FCC’s petrochemical to Permitting of of project production we the to increase we’re We this octane quarter value and and This feedstocks. in quarter fourth increase project, to Ferndale to Refinery. In products, project diesel the renewable The higher at canceled at XXXX. our track increased be yields Refining, higher-value completed be the project. Ponca is advantaged upgrading impacting higher Refinery gasoline. are FCC of Sweeny of viability one more products XXXX. to The on were and costs, the in to the completed the delays of leading recently uncertainties of Refinery,

Our renewable strategy changed. not diesel has

continue opportunities We network that supply diesel capabilities. renewable our pursue to existing infrastructure, leverage and

the entered sites. joint In retail Marketing, XXX Coast. fourth with we joint marketing The a the quarter, on venture West primarily currently operations, retail during operates venture US into

addition, acquisition year. first production of XXX in retail the margins. venture additional increased the is approximately sites an long-term joint exposure placement refinery to on increases close our enables In of of this and our joint venture The expected to half

and capital strategy commitment to Our remains steadfast. discipline

providing strength, financial We’re operating excellence, focused shareholders. project strong our execution, to returns on maintaining while

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

Kevin Mitchell

for cash XX%. debt fourth ratio working from overview were Starting financial or Slide the equity an million generated summarize to $X.X totaled results including operating excluding quarter, share. adjusted end Thank net you, of earnings everyone. Distributions we Greg. X, year. $X.X $XXX billion was billion, billion capital affiliates, on $X.X Hello, the the from our of the XXXX with $X.XX per capital. We flow, CPChem. At

after-tax return XX%. adjusted for year on Our the capital was employed

million, working with sheet. to year. issuances during a mainly our sales crude Consolidated increase of the by $X.X PSXP. increased use of working capital at to $XXX related end. timing in million, $XXX at oil an receivables, year associated started debt due change Cash in billion, the operations excluding There $X shows in capital. was cash with year We from billion the cash X was the balance Slide on

$X.X During billion the year, adjusted we spending $X.X funded share $X.X shareholders, of repurchases. returned and to billion of including capital billion

balance Our $X.X cash ending billion. was

capital Slide capital was venture. returned XXX billion, We Capital benefit with associated quarter in results. projects, share. of spending million $XXX the X a summarizes working the shares shareholders $XXX was earnings of billion. fourth repurchases. or were per We $XXX approximately $XXX million $XXX including our $X.XX share and with cash Operating for million $XXX including the million quarter marketing retail Adjusted invested flow $X.X million of $X.X million million million. $XXX ended joint We year growth outstanding. through to dividends of

Moving highlights quarter. pre-tax quarter the X, this from the to third segment slide in change income Slide to by fourth

results adjusted XX% tax of quarter liabilities driven effective adjusted million, tax to was tax lower our to year earnings a reflect rate segments. adjustments XX%. the rate all by The decreased effective $XXX fourth During driven adjusted by period, in full

third a averaged a IDRs. At third effect cargoes as up was elimination the utilization. income driven ran pipeline increased the NGL as was the and offset by previous propane income Slide X $XX facility as income inventory the maintenance record depreciation increase Hub, pre-tax as decreased of XXX% shows adjusted due million fractionator following pre-tax trading reflects up of terminal quarter results, butane from export million our previous quarter, income Transportation pre-tax increased Midstream $XX and adjusted quarter. of units, The adjusted impairments, and pre-tax delivered Other results. that our and lower The DCP quarter. LP a million, and the increase following XX quarter strong to million, costs. amortization, planned of at quarter Fourth per million, $X the following from mostly month quarter. $XX $XXX higher by lower ownership were Midstream volumes million from adjusted $XX well was with decrease of impacts. previous the another record the Sweeny well of the million $XXX

seasonally Turning the from Olefins the costs. on pre-tax million and million. quarter previous decrease quarter. and $X utilization pre-tax well lower as Global $XX Slide to quarter O&P third income polyethylene for as is Adjusted turnaround XX%. The Polyolefins from income Chemicals adjusted X, was decreased million. $XXX and SA&S to adjusted margins, down was was fourth $XXX volumes, income lower million $XX due million, pre-tax higher maintenance

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

heavy million crude quarter. from Next the Refining. was Both XX%. up product quarter. This a million XX, was on in are third $XXX with with utilization the consistent yield cover will XX%. of fourth rate quarter turnaround Slide prior quarter $XXX costs, was The Clean we

turnaround crack impacts. $XXX decrease to Refinery San Refinery. the Lake widening Francisco due was driven the by Central product partially lower in the change was and amounted gasoline offset cracks million, of as In by lower the crude In as view coke adjusted margin widening pre-tax million the WCS $XXX differentials. due by this decrease a inventory gasoline was down income the fourth and at Coast turnaround. Gulf offset share Gulf income the regional million, The decrease adjusted $XXX crude was period. from Atlantic to This West million In was prior WRB addition, decreased our margins, Refining pre-tax the chart partially of decline Basin last Charles the Coast, $XX provides driven the million premium differentials. expenses was In quarter. well from to that quarter Coast, market $XXX The quarter. activity a by turnaround Corridor, the

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

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

the approximately gasoline to blending per barrel, of crack coke Losses almost by from premium increased products quarter, previous $X gasoline. barrel the During the impacts, butane by quarter declined barrel. partially increased distillate $X.XX crack increased into offset $X.XX due from per $X the barrel secondary and per per

barrel per $X.XX of differentials. WCS from quarter by benefited prior crude per the from advantage widening Gulf feedstock we improved Coast and barrel was as $X.XX Our

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

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

associated re-imaged well $X true-up costs as a credits. branded pre-tax with marketing and margins, during than one-time since the Specialties million XX, seasonality, quarter and and Specialties program bio-diesel XXXX the less fourth million benefit XX Refined to quarter. start We the from a favorable The margins. approximately our million Slide branded European barrels to by $XXX marketing per fourth compared conditions other quarter. exports with day lower domestic marketing market lower quarter, product re-imaged barrels decreased quarter day, on decreased a million we X,XXX XXX,XXX due Moving third XXX,XXX were to in driven from per international in $XXX the business, total as Marketing start lubricant Marketing of the agreement. program. XXXX. income bringing $XX results $XXX adjusted the the included tax million sites third sites early XXX in higher to fourth since was finished the lower blender In of the

pre-tax higher adjusted employee-related from million financial On and increase review the other segment prior Slide quarter. to had increase results. $XX concludes operating and primarily my of expenses. The due environmental net costs Corporate This of is $XXX XX, the interest million, an and of the

few items mid-XXs. the a the expect In first cover will we in the worldwide the for $XXX in quarter I outlook the utilization and In rate to million. year. XX%, quarter O&P Next, global Refining, expenses be first and first quarter, Chemicals, expect million and other to costs we between $XXX quarter pre-tax be rate full $XXX crude to first and $XXX pre-tax. million between corporate be utilization about come We anticipate and turnaround to

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

the billion. be about million in income of pre-tax to other the to the We the finally, effective range. full to we D&A $XXX $X.X expect anticipate of low-XX% costs for in and be rate We expect million corporate year. range And tax $XXX year

With for the that, we will questions. line now open

Operator

you. Thank

begin now Gresh, session. will [Operator Instructions] the Phil We JPMorgan. question-and-answer

Phil Gresh

good Yes, morning.

Greg Garland

Phil. Hi,

Phil Gresh

Can Hi, hear you good morning. me?

Greg Garland

Yes.

Phil Gresh

Okay.

just at expectations, for of you peers, mean So think particularly this the guys. tougher is relative your a and here, results quarter first obviously up I question, I to stronger Refining looking quarter put several in

were? hoping big was looking out here, help us possible there headwind secondary you a Basin. or am that could it also Obviously, disaggregate at but I in understand the factor, as think called what So I us Atlantic pretty were for a as you the the be products turnarounds might differences

well. coke So factor I needle the am if there wondering was as

us moving Thanks. help just the So pieces? could through if of some you think

Jeff Dietert

Yes.

look you turnaround And in of the one the as was October. better was quarter, we So that margin activity the actually I environments focused year. at heavily think last October had

of million $XXX up quarter. than the half in and third the guidance, the and so focused million kind And from that more in our in $XXX were was Margin expense substantially turnarounds November back December. The period. in softened substantially our in turnaround

EV at as sales Both Both China impacting in weaker there, activity declining the think steel our were EVs. disappointing manufacturing and batteries. I and you sales primary in to lower well coke as markets with XXXX XXXX. products, as volumes sales India there weak industry or and premium look are two relative for sales steel, had GDP volume

product capability. As significantly we coke faster the line you know, have substantially the market, are investing profile to serve to growth increase manufacturers extended a has our and manufacturing which battery car

So balance return growth to we expect and that market. that

Phil Gresh

thanks. Okay,

side it been picture. getting just of Obviously, has seems of would lot like be question second The here everybody on the the questions a chemical things. on fundamental

viewing So, Greg, investment ahead at prepared would cycle recovery? potential situation concern Thank respect forward? pace the in investments right your now love you you you. to those possible get the does look as your that to latest outlined thoughts and cycle moving about at And you with remarks, how this you’re of all the opportunities

Greg Garland

margins on effect whether coming had on ‘XX $X.XX new bit $X.XX But is some the any We Margins long-term. think ��XX, ‘XX so like has on I an So, they ‘XX today that. no and hey, Phil, it’s some in in on There coming medium the we’re are impact. suspect constructive way in there is feel margins, there half think I Yes, trough It’s or globally, just have of it back headwinds time. from it or slowdown in as least depressing in between. to question at a the saw be first ‘XX. going capacity and somewhere quite in all, ‘XX and and came into Chemicals move cyclical is couple as had economic tariffs certainly globally. I we of Certainly, that in point in, this some at of of a also we capacity tailwinds. global

has positioned. to how their CPChem they’re hand going about and like I how hand. think their play I

And in in a Middle assets in naphtha advantage be a $XXX all $XXX East cracker US of to today the Coast First and the cracker is location. Gulf an or the advantage over from on ton in Gulf Coast to LPG an Asia going probably a Europe. are feedstock

I is high-density as product So the side. we of portfolio, then polyethylene dissect really exposure kind look that’s the And good. on and CPChem’s think

quite impacted some the to going And be as XXXX. as so derivatives out of we other ethylene that’s in look as not

terms of can’t closely. FIDs We don’t hit the ‘XX to in projects, new projects for call until FID or We probably these the build. the early the that cycle on Now five-year late that are an first project. XXXX

just projects of kind for So we’ve I certainly got projects, be of and with ranking polyethylene, that those But would we given track we supply time assets. some where what and to demand improve at forward balances look CPChem those say, sits see it. to in that around high-density the today, would on move

Kevin Mitchell

we say year-to-date it the fourth Phil, chain below averaged quarter. average. December $X.XXX back IHS with I have that pound when $X.XX seen flat per would and rally slightly the margin, at $X.XXX the fourth about down full we look in was quarter

Operator

Doug Terreson from Evercore ahead. go ISI, please

is Your open. line

Doug Terreson

everybody. morning, Good

Jeff Dietert

Hi, Doug.

Doug Terreson

XX So, the and the years, sustain Greg, term. the it several posted peers over than performance super consistently and better is over results better especially in AdvantEdgeXX the downstream going and that like than seems medium especially past majors, to has Phillips

AdvantEdgeXX that into companies high disciplined plays play on at governance is would my have got also question and higher I’ve And capital benchmarks you’re performance return two have that XX? one is and peers, role pretty advantages a at other capital outlook how only management companies bar than that on Phillips specifically help a into competitive questions, you your you few management don’t are stronger one be view, this plan what which insight progressing? since then or energy corporate role So, that of that AdvantEdgeXX regards the So and energy advantages, whether obviously emphasis? also does and it explain second, there capital performance that disadvantages you in against for diversified progress corporate the into feel reasons governance meaning,

Greg Garland

Doug. Okay. the for Well, thanks question,

with allocation. working have We Directors Directors, about don’t the XX, may Board of of of a have They are where and don’t strategy We a we I the be, don’t So backwards Phillips strong strong talk strong governance fully at capital starts the in Board think Directors. company. engaged talk of meeting discussions. strategy a Board we about

So every meeting. cover those Board we are two topics

given some of we shareholders, period want we and But XX-XX, return where that’s long all I a is back think reinvested if our methodology and contingent are back of in company, opportunities us that around rates. is and invest the flexibility about that where invest, time, XX% the that upon our three-year you return employed having are and front think our so to our opportunities that in shares our of as XX% XXXX, capital that in hurdle be. XX%. look criteria over at kind to to where mean last ‘XX period, And ‘XX, exceed I and trading. on

high an Our nearest that’s are peers capital by on after-tax Refining employed. single-digits kind way, return of the and

if So back we’re about shares, fundamental they $X.X And capital always to interested going good not through when then value we’re returning and return dividend XXXX, billion shareholders simply in intrinsic in to trade returns. invest. a to our you just can’t that’s secured think we find strategy. our projects, allocation our below growing And buying strong

us see you’ll to do so And continue that.

around strong, our of got in DCP, of refining now. what about diversified $X.X of our million one, a differentiates Midstream billion business of question, good have Midstream a business. excluding billion, assets. the we couple to first do EBITDA a EBITDA Really, XXXX, portfolio, were strong back kind you portfolio. things, $XXX Midstream think We’ve go us? in we We’ve I if business, there built is portfolio your a of To $X.X

got midstream on Specialties So you Chemicals business business. Marketing, built of add we’ve Then business. stronger significantly Phillips We’ve great top the XX. at that, a a

for I opportunities XX I say like we diversification It the across have So portfolio. great Phillips is operator. us. a that the It’s that that portfolio And creates strong returns. a investable generates would

in one industry. are safest the of consistently the operators We

on so operate gets, at the our going what to is, terms capital these money better good we assets, we to what the we And or the demonstrated assets projects. all years at are went on execute earnings importantly, Board said and investments the Doug. that’s generally has of XXXX well. organization of on from probably ability average right which terms the rates, we’re we to and promised We’re the put for. in of this of well my looked in those And to and in We in as in money than XXXX we’re from ground to back terms it really XX the the right on industry our operating business, deliver as on

Doug Terreson

Greg, this sustain on And Yes. like the performance there anything that medium plan seems report to the it help then will Is term. guys also, AdvantEdgeXX over project? you there

Greg Garland

our consistent opportunity is the line we Investor that bottom Day, XX%, I us. hope think we of with in what see $X.X of to to We that still said there in for XX% seeing billion at drive EBITDA. of that terms

you’ll capital terms you’ll the margin of a the At of avoidance cost that of you’ll terms our So to changing enterprise, reduction, place much the way people. from in be see of see that that work. to importantly but also working end going across day, that, better more it’s of in the but capture, for in avoidance, see cost terms

make better we’ll efficient. more that peers. to be agile, And tools smarter, better differentiate have from will to our I more decisions. work We’ll will going We’re think be we

but Now point you think least business, you everyone lead some Doug, think the is in time, at we to move here. are way, I in die this or this digital at out going in position go I either

Operator

Mehta go from please Sachs, ahead. Goldman Neil

Your line open. is

Neil Mehta

thanks guys. Yes, very much

some also differentials right the and Western nature. on the heavy OPEC to import and crude wide question more from are your that Alaska that are wanted you of think first get from or on you crude perspective discounts, side Western now. So, how about Canadian Canadian in barrels is but medium

upcoming to those of OPEC influence sense outcomes the are get just a we the there? to And trying We sustainability with how trying your meeting medium of and about are that perspective. think that could from sours,

Kevin Mitchell

curtailment question. coming XXX,XXX XXXX. the think I day of more production the returning into that’s to with production another seen There’s allowance, a rail With waivers, good from a Canada production Canada. new production start-up in the barrels or in of we’ve special so in some Yes, schedule market

supply the quarter. into first is there’s here coming that So in, more wider the supported market differentials in

we delivery a know, there. lag you XX-day about on have As

discounts So in up really the December will wide XQ. show in

We differentials, expect WCS seasonal wider get in production to discounts they follow the pattern the with as winter then maintenance. companies and normal perform summer tighter the

as we IMO look so I differentials, but see sulfur transportation in with environment the discounts, some new penalty think, your occur. the expecting and we’re content historical are probably wider only increased high-sulfur oil to to fuel expecting for we that not

many Coast, Gulf of from the a we’ve there. reduced of lot the have from away we exposure On imports countries, OPEC moved

we Venezuela. you pull anything from As know, in don’t

exposure is from sour more the indirectly into with the discount. perspective, barrels, heavy OPEC widen think market, should I so there eventually direct which there sour barrels less will a coming be And but those heavy

more is you Mexico XX is coming incremental zone, Gulf in Kuwait barrels XXXX, some as production is and production sour up We’ve of Canadian are production. into Norway there are Saudi, also, heavy the medium think, market. neutral new heavy API got look sulfur. in X.X% and sour. the And which which bringing barrels, I in

quality a barrel. normal than So lower Sea North

Neil Mehta

Kevin. Thanks,

perspectives on bull how on in I particularly the But a to IMO we’ve love distillate affecting views of Just recognizing got sticking equation, and bear lot are on Greg. Jeff of side get is with that the the versus call and your that just both the the on macro, there? the a is dynamic other there variables are lot but – there of refresh of a changing, the wanted

Jeff Dietert

miss. Greg what I and start clarify can I’ll Yes.

are complex I like The factor of XX-year considerations. a think, a positive is to widened average relative Brent. fuel $XX refineries, discount sulfur number is in about Obviously, High there a IMO has other barrel. for isolation, ours. to oil $XX a

has discounts $XX So, there. was It in a wider IMO some December. caused barrel

under in little at to bit. But forward $XX Brent. if of come a XXXX you last curve, it’s trading year, $XX it was as look the So

very at non-available of FONAR, kind to or the industry’s we’re few reports. range. of credit, that has issues market So marine smoothly, low-end the the fuel compatibility the To gone very fuel low-sulfur transition

rapidly be will oil with think ULSD I qualities. been viscosity and lubricating its there fuel actually markets. has wider oil low-sulfur than strong low-sulfur adopted trading fuel high-energy in Very Very contact is enforcement. some

the I recently and mild on diesel weak winter manufacturing been disappointment that’s been the has following think weather. been disappointing activity has side, diesel

the as year, think first some to the is you seasonal barrels XQ. have if million quarter in and the typically from decline the the day weakest at we of Long look LA, trends, at diesel fuel, look I U.S., major ports, quarter Beach, XQ Houston, demand, all the gasoline, a X they quarter Marine the Singapore, demand transportation. demand first where marine of for is lowest quarter over

the FCC’s, into fuel demand cracks we picks VGO that of as So and gasoline improvement. in weakness that’s pulling the marine see low-sulfur I could up, some out market. And then finally, think with the

summer-grade be not As that’s we the the season, to move into case. likely gasoline

demand cleaned faster that and for than the spring case fuel So market market would provide the probably up in otherwise some diesel the have been in gasoline the marine summer. the incremental

Greg Garland

Jeff. Good job,

Operator

ahead. go Read please Fargo Wells Roger from

is open. line Your

Roger Read

do Good a becomes X, a thanks. that ties bigger but something to just on from this come market that’s particular see out or impacts or X? Tier is winter-grade will we have we any back there you the issue gasoline whether that that Tier the where any into and and switch probably was in seen little comes affecting not Maybe butane summer grade fall Hey, talked about from as whole to spring market, anything you’ve to and description thoughts morning. of the

Jeff Dietert

Yes.

good I point. think it’s a

vast of for X. already positioned Tier tier very occurred. The spending majority our are We well has

We as than the there. produce we’re industry shape good in And a so percent total, higher gasoline, of average. much premium

stock cheap haven’t yet, taking the winter-grade. shift blend good but looking RVP is seen summer-grade, for like we’re We the to you, strengthening in butane and think I and octane a

We are in the strengthened seeing of anticipation acolyte prices summer.

As our material, stocks you completed will as high-octane which know, we blend recently isom high-octane Lake well. unit, Charles provide

of looking to think we’re see of the importance summer to evidence I X. the So Tier

Roger Read

completely outlook a you might make gears see there companies return there, Greg, than more on at seems of I the facilities would other changing market current the project, tougher project, quite have discount where you the Okay, specific have the within as midstream to great. sense come to valuations to acquisitive shouldn’t side and it wondering, like anything it be gotten was look in lot things business, to Midstream. Is for do fit but it And from Thanks. build levels a your rather of need say criteria? I bit in or

Greg Garland

be we today interested There’s criteria part, would that from in, a just Yes. return nothing Roger. simply

I think We’ve investable that ‘XX. for projects can find if we’re well-positioned. opportunities, we ‘XX great we don’t, won’t. we’ll got the of portfolio ‘XX And invest. and that we’ll We Post but executing. really a that, thing we’re nice see. Certainly,

So there opportunities Midstream not We’ll interested the in the continue in are there at what really time goes we in concerned point be that doing terms in is on space. that this in have but to us. that out would we watch we of space, before today nothing

Operator

go please Scotiabank, ahead. from Cheng Paul

line open. Your is

Paul Cheng

morning. Good guys. Hey,

Jeff Dietert

Hey, Paul.

Paul Cheng

over that down Houston. We intelligence on slowing your Mexico has mean down seen a or in is Greg to I is LatAm. and there that, slowdown the have year to that wondering market slow have that export in core driven demand every by the – based fall is we that

dynamic I So is understand what yes, factors, year-over-year like are seems so that should be incremental we to doesn’t but trying we that the seeing? have am that, it fall,

Jeff Dietert

demand Yes, stealing recovered with that regard few back Mexico, I you were And shut a sure there were all I’m down quarters product as to fully the not were we pipelines remember there. people off pipelines. the think, Paul,

think Mexico. demand I suppressed may some that have in

exports. market seeing as product good for a that continued are We

from see market cases priced the I at quarter, market, domestic continue maintenance, driven really they of American in being refineries expect and exports finding export bit, higher that to what export a see by than you were we growth if in think in but little an was the some markets available Latin some in fourth perspective. the was down some in – to export our look our and

Paul Cheng

maybe XXX,XXX I net WCS you, JV going about And I barrel another guys Jeff, partner. you the think to day receiving per XXX,XXX to of think

that guys With for there the the any in on? increase that are guys opportunity you receive working to or something you production, WCS is more is

Jeff Dietert

Yes.

assessing of the Gulf more our attractively there, Canada Mid-continent perspective. from access priced transportation to out We the constantly Coast a and are availability barrels of and ability both

assessing And point. like take our as we those opportunities far that, of opportunities rail at so this in commitments long-term present the something when that see people advantage or commercial for they constantly we’re themselves. don’t But as

Operator

Prashant from ahead. go please Rao Citigroup,

open. line Your is

Prashant Rao

hurdles, bio-fuels. I us the wondering, Thank any is taking Greg, what for if were could Nevada, also to in the developing you on Good permitting, more prepared feedstock from picture could the you Thank feedstock portfolio decision sourcing differ in there mean from not San bit and renewables constraints Apart that question. or one question. you remarks, the projects My help how to the regulatory Thanks the terms a taking on Francisco, was permitting and only and in the you. in I morning. maybe about Ferndale maybe network? taking talk but terms other of bigger you the the off-take first on resources? of Ferndale, for cancel understand project. in said then in regulatory a of the and marketing Humber these And the view

Greg Garland

had strictly in the and it are about around that assets permit project feedstock Ferndale. withdrew. what all, ability to what Humber, existing wasn’t so, there that these we’re of the first doing sourcing When a think we It Francisco, in So concern we are do, you we’re at doing San feedstock securing then for agreement look we’re an other feedstock, responsible And very are we opportunities is, Ryze to continue either easy we’ll utilizing to to portfolio. the have we with repurposing there. in essentially and our source, for off-take certainly The deal those differently. or and was easy

So there. a it arrangement think of concerns and like we have tolling no

have look grassroots to a investments, then investment felt million thought technology want is we That to about strategy as and been with had existing that. we’re a REG. Ferndale So where $X the one do circa for renewable to existing billion where in $XXX with us, again at use partner assets want could that. to the people And in approach going partnership, we capabilities. we that cooperation how which would really We

So we will see.

the strategy places have our could build be certainly we you really should facility, a that that we changed. expect location. that grassroots Ferndale It at think I other and hasn’t may not

Prashant Rao

similar discussion on quickly at states, question, perhaps then discussion my focus the And in second is helpful. seems a pretty it That’s a to ESG a really delay. you. thank so progressing decarbonization the and but even was on be Okay, seems path, it maybe – here overseas stronger ago. than following year And

has space. positive U.S. on within momentum hydrocarbon leader going what’s in the overseas? So been a ESG PXX

you strong return of term strategies get So about with if on low maybe I focus maintaining greater and CapEx portfolio both of capital the particularly, cost looking What and overall thoughts and decisions, currently some in is if opportunities still are on just think a the longer balance capital what’s PXX’s to investors? on the of want among there decarbonization portfolio ahead the your and growth there? your across to this

Greg Garland

innovation, you a Yes. in the want Well, of leader and rest U.S. to I the the maybe think envy start world. technology the think I is our of economies, world with,

a world production. in are We energy leader

leader We including gas world emissions. greenhouse in are emissions reductions,

And better can strong so We energy have say sustainably. a can have resources and we that economy there a we forward think would I can responsibly our environment. path a that growing develop is

at they are thinking. So in all mutually our way exclusive of not

for think about investing As we us, front carbon in of economy. the technologies set in we’re lower opportunity next-generation

photovoltaics, in groups, vehicles a for OPV, us greenhouse emissions. gas increased direct fuel and one two organic for reduction seen heavy-duty our our like things solid light-duty X% mileage as one cells, trucks, oxide you’ve X%, introduced by So that the

that many many XX think problem you’ll frankly from angles. see and Phillips companies, approach I different So this

think I carbon low good a thing. around investments, it’s Specifically

companies do in think and that. see to I should still encourage should we carbon and send we to we two our that we them low technologies, decades three out look invest as But because not that with we to be from here, get fuels a the are of be able current the mix, part technologies going are just you to going there energy majority to fossil see.

Operator

of go please Doug America, Leggate from ahead. Bank

Your line open. is

Doug Leggate

assets do everybody. may again, interest online to just coming I or of wonder you those am walking and timing, be about I if what that working pretty if did for curious you take good back is the could job terms so dropped you the have and versus thorough Hi, the morning your the and and funds through I Midstream a thinking MLP on. us of different Greg, your have when those in historical you pattern?

Greg Garland

those that qualifying and they through income MLP. could are Well, all mean start go the the assets point from may be we Midstream certainly I

have when resist resisted drops, continue and specific will about We could occur. information to timing those drops of

I think us we that that, way think grow for we’ve in spoken our as yields trades the at interest giving publicly And incentive business midstream about the do still some you more PSXP of it to uplift in and to the growing generates. an our then It’s as can. PSXP. about PSXP fast parts, efficient we’re

million And our grow great year at you PSXP. in efficiently. going program, to sheet but it and beyond dribs view the view PSXP $XXX markets drabs ATM are so its program way plus generally, some this executing own But it’s at Equity is pay around that balance closed, capital our too.

expect Doug. these PSXP. So the should go should future, that, we some don’t but point end at you logically assets just through And, timing, at up in the

Doug Leggate

Okay.

what those held you assets at is can C-corp level? your tell me reminder, a with Just the associated EBITDA

Kevin Mitchell

million growing new is bringing course we these $XXX are of million to of got EBITDA projects still have $XXX is We and too. at PSX on

Doug Leggate

income That right? does the qualifying

Kevin Mitchell

That’s right.

Doug Leggate

quickly bit My a follow-up thanks. turnaround is obviously turnarounds expense just is year. this up very on Okay, your

now? Just just to industry, overhang in year is gasoline think Phillips, going as the And for this anticipate specific seen or that contributing to unusual Jeff also normal but do business? little a touched for but see to this clean of anything you on is course of up specifically, I bit, are that we for this there Phillips we’ve the particular right

Jeff Dietert

think good question, that’s a I Doug. Yes,

was think there I the on that And speculation replacement. that moved strict a lot that was a activity turnaround of there into turnaround of ‘XX high a schedule had the a out is activity pretty lot for forward been activity XXXX XXXX. given lot of in of

we relatively the high XXXX And being turnaround are so industry seeing activity well. as for

be a season Pad Gulf that of turnaround alkylation being spring looks to You FCC, an Coast. X very in active a units the look work. with at this included planned lot

So we’re I well. activity turnaround see to continuing as in XXXX think

think market. that that’s up of help could one factors clean the I gasoline the

Operator

please ahead. Sankey go Paul Mizuho, from

line open. Your is

Paul Sankey

everyone. Hi,

degree how when think do situation but be to Sorry with there? time through, regards certainty for markets Thanks. happening to for what’s wondering China, takes the you’ll actually to of in sort these you the and as I of to detailed contracts it able reference in question, over was feed some your say things

Jeff Dietert

Yes, it’s a good question, Paul.

I I cracks. on I cracks think think diesel demand we early. jet are seeing, impact mean, it’s still diesel – jet some

rates. of I measure. are say it’s we to It’s on and are this of to hard difficult It’s depth see we little I going to really the getting but I the think starting impact to And a already. think early. indication event. It’s duration bit impact determine to be think really some freight that, speculative some

So I think there out amount is there. still a of uncertainty huge

is we are your fact of at bigger a today it economy coronavirus. that to and impact than day in from one included know, as But is Paul, well lot a barrels SARS, of you in think, the China’s you’ve I the reports. time. there XXX,XXX about As with of dealing uncertainty it impact was still much on

Greg Garland

just same Paul, to going I petrochemical, say, thing right. was

think bit concerned. a We’ll I petrochemical watch we’re now, kind continue of when there is up petrochemicals. Right at to inventories at moving pricing you Asia X-year look in lows. little

it it’s and early make a we’ll attention and certainly see we’ll as I it’s our so with, just have agree And too this. almost Jeff, – to this, just just we’re call closely. on watching but to But watch

Paul Sankey

that Yes, stuff past actually to week. the understood. could given this you say. really off all before only around takes time world. just would now it in this long took be move happened I thought obviously has know I thing you mean for the the We how this wondered it

Greg Garland

Yes.

Jeff Dietert

eye on. Yes, it’s to markets. keep have volumes, certainly commodity we’ll The impacting an

Paul Sankey

your what your a have been been because you I skewed it’s it it could for downtime. And had I Yes. thinking somewhat, was turnaround? obviously again you in for sense Give if opportunity know this more the turnaround? a over quarter how cost was you’ve you was for year Thanks. addressed terms but to or there? hadn’t environment October If real could think just tough outlook was I in it this of opportunity volumes. might cost had a interesting many of good October and go the switch, ways terms

Jeff Dietert

October Yes, November the We of April versus adjust and would LPOs. downtime But comment it’s kind you on think typically most versus of get occurred close. I good a model it I if point. you assume in don’t think and and December,

guidance have turnaround We on provided activity.

the activity and we’ve First do guidance also. turnaround well, as planned got some there year full quarter, have we

might just that I lean guidance. to So

Operator

please Suisse, Credit from go Gupta ahead. Manav

Your open. line is

Manav Gupta

where you hoping are Hi, because the the with Red both were was And you news Jeff. record there over of you Can some straight there, Liberty and I the set and clarify Oak items permitting specifically, process Liberty? could out there?

Jeff Dietert

ahead are Yes, there, we – here. are some getting moving go that feedback forward we I’ll – is

forward. moving are We

delivery The taken process forward We for have as expected. moving ordered is permitting and the pipe Liberty pipe. of

Liberty Oak. systems So Red there. all well we service are as go as a in on and It’s much as date, very XXXX half both first are anticipated moving forward

Manav Gupta

payment or the follow-up is are the on the side, XXX acquire a CapEx jump JV XQ in to thing, stores in $XXX more XXXX. saying, saw quick XQ going press A between we million. I Coast release of XQ about the the is slight with this in am and but and specialties West marketing assuming you associated the

there am XXX has would stores payment I So these associated been made second here? a payment already trying be to all understand, or the with

Kevin Mitchell

it’s Manav, Kevin. Yes,

the is of that formation segment to the venture. for So variance right yes, all attributable joint CapEx in you’re that that

additional almost additional of It’s there variance in timing million some was full JV to not have – whenever formation that. additional does that that the in some closes, magnitude, spend whenever the press upfront The the which $XXX acquisition spend same went release acquisition on So the referred quarter-over-quarter. will that initial as be is in, though.

So through you’ll that that whenever see coming closes.

Operator

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

line open. is Your

Matthew Blair

everyone. morning, good Hey,

And in discounted if to And I quarter, your so, the not, was runs sort just fourth if your the equipment-related? you refineries. any can high-sulfur as more guess oil HSFO uplift? of the increase or on feedstock like or the prices able EBITDA constraint volumes Given of economic numbers fuel were you incremental you provide

Jeff Dietert

upside good Investor a a XX,XXX stock. Refining about year, projects X.X% very some would is one the there that with And to we high-sulfur Day barrels day, I Matthew. volumes. actually it’s highlight some think to low-sulfur things question, Yes, over to fuel blend we sub last at talked and us allow the that a upgrade of oil accomplished late those

So, we into low-sulfur product are moving some market. very the

IMO. finding of to are associated with take dislocations advantage We opportunities

not been the the high-sulfur on premiums think of oil to I only the sales capture fuel to increase market able production some the have we low-sulfur of low-sulfur side, into but on material.

a our We processing have units. high-sulfur also bring as been material for in feedstock able to

upgrade substantial coking know, capacity and heavy treating streams. you to have sour As we

our crude I supplemental a And both probably in those lot provide good a of you intermediate sour give We on difference total there, think volumes. the as would our information. being well look process as throughput might feedstocks indication and you product. our heavy

Matthew Blair

first? PE the Chem Asia need or little on markets. your bit shutdowns. And some could hoping color. the I guess dip to opinion for then Are haven’t cut Greg, or seen through you margins just thanks Great, back was the We’ve a regions now those share seen in I coming insights on side, really negative other

Greg Garland

Europe there. would cuts that see is view are be though. you’re movement in there And under our think expect Also starting and pressure I probably today. to some most you some probably price could Asia, the Asia

that’s something then environment tariffs they say, sign do the I find particularly to are China. an about think And need in. a overhang just of would that So kind margin that’s, to themselves people I still

so, see there And out environment will that we think yes, margin plays pretty I tough it’s all now. out. where But right

Operator

you. Thank

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

Jeff Dietert

your in Thank XX. you for very Phillips much interest

follow-up you any If me. contact or questions, Brent please you. Thank have

Operator

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

You may now disconnect.

Phillips 66 (PSX) 31 Jan 202019 Q4 Earnings call transcript