PSX - Earnings call transcript Q1 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Welcome to the First Quarter 2020 Phillips 66 Earnings Conference Call. My name is David 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 to include and and and President Refining; Participants President, and morning Brian welcome Vice Kevin Tim and on conference quarter CEO; Vice Executive Midstream. today’s Roberts, call. CFO; earnings Mandell, Bob Executive call Vice Executive Executive Commercial; will Mitchell, Greg Herman, Chairman Phillips Garland, Vice XX’s President, first Marketing President,

the the presentation website, Phillips can of found Relations Today’s and XX on with information. Investor financial material supplemental along section be operating

X Safe Slide our Harbor contains statement.

the We may and will our be comments. results making forward-looking from here, materially are Q&A statements Factors results in during as Actual differ filings. could as cause presentation to SEC session. today’s that our differ included well

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

Greg Garland

Jeff. everyone, Thanks, today. for joining you us thank morning, and Good

we addressing environment. the comment Before current quarter, on the want to

continues our and families, on of foremost, be the our and our operations, company. and of reliable communities, focus our and ensuring the wellbeing operational First financial their strength to maintaining and employees safe

we’re that Coronavirus. We’ve XX strict workforce protocols the prevent essential steps energy our consistent Our limited and is of products our to priority. customers. The focused business for of appropriate and on safety health are state staff, directives. providing national, business implemented and protect workforce and top our our and has is with implemented to services and Phillips local CDC, critical operating facilities critical introduction spread our to

Houston are our offices, remotely. In employees and XX% of Bartlesville our over working

ways times ensure these continuity. and to up stepped of the employees Our during challenge business unprecedented are to new working adopting have

organizations efforts return healthcare, operations. have first our a in responders, banks, for The the place and we our food and critical provide where relief million vulnerable operate. company, support funds We populations. normal today serving to in live essential to ensure them other COVID-XX will for $X plan communities Our we to contributed safe

the actions business We recently environment. to in response announced challenging

through conserving We’re loan down-cycle. cash of focused We secured on and facility manage $X senior $X unsecured term strong a and issued billion liquidity this unprecedented to notes. maintaining billion

We is this great We’ve identifying And March. a to job $XXX Organization opportunities achieve suspended [Vantage savings. year. in to taken we’re reduce cost doing million and XX] of by our share repurchases these [ph] initiatives leveraging cost efficiencies. action

will spending by will capital consolidated participate option be million million. $XXX to its this year, exercising X reducing reduction X Sweeny by in We’re Midstream partly and This not $XXX increase as offset be DCP Fracs

Red XX In Oak Midstream, investment also Pipeline deferred projects. decision Liberty Frac the the and Sweeny and Pipeline. Phillips final deferred X ACE we’ve Pipeline on Partners postponed has

In canceling certain Refining, we’re and projects. discretionary deferring

ensure capital We are projects We this some until to completion. and later the reliable turnarounds continue to nearing safe fund executing into that in-flight we’re and year also And operations. sustaining deferred XXXX.

doing We’ve in flexibility, across reduced to These rating. and our company, we’re security of navigate additional lower the global the this product crude high the utilization the provide By in steps credit protecting April, and system grade liquidity we XX% so, our range. margins. and was as capacity strong refinery crisis. In investment response runs dividend demand the

million, share. quarter operating and the our capital $XXX cash earnings We In We $XXX allocation or capital. remain total million, generated shareholders. of creating to million shareholders. excluding We $X.XX per flow disciplined value returned $XXX focused $XXX working or long-term on first were our for adjusted million

During we quarter, achieved performance. strong the safety

zero incident, strive to continue toward workplace. accident zero a We

of the and project. of starting Ford the strategy The our Eagle growth executing Oak completion commenced operations segment the Texas full Pipeline and X; more on major service We’re Gray West operations, progressing of pipeline projects. recently, marking April

crude total stores contracted crude we barrels. the Terminal, capacity fully XX.X added million to X.X At the barrels terminal’s storage, product of and Beaumont increasing million oil

continue dock Terminal. year, Texas as this X, planned. as including advance Fracs Sweeny progressing are PSXP’s for well X midstream These Beaumont projects as and completion South scheduled and X, Gateway the We well to Clemens projects growth Caverns expansion

CPChem development partner. of Coast U.S. joint Qatar. on discussions design Petroleum pursuing the petrochemical engineering project. Chemicals, and investment continued deferred project for U.S. Gulf Coast are has a with Qatar facilities and jointly Gulf decision the its Coast In Gulf front-end CPChem in on final venture and its advanced CPChem

increase budget. at project the In The of completed higher-octane FCC time the products and completed Refining, we within to petrochemical higher-value production Sweeney upgrade gasoline. unit Refinery was and on

of expected placement venture of to our is margins. acquisition West sites and previously enables as our retail exposure announced. Marketing, The in quarter of venture long-term the close production XXX retail refinery XXXX to on Coast increases approximately increased In joint joint second the

In that recently X XXXX closing, were refineries our for we’re by AFPM honored of performance. safety recognized their

in Lake and Bayway Awards. annual a Maria, year in the award Distinguished Santa Charles our have Borger, This our refineries Ferndale, row and industry, received highest Our honor. safety refineries that is the this fourth received Safety

performance. XXXX CPChem’s also Borger, for Arthur and Port recognized AFPM Conroe, safety facilities Orange exemplary

congratulations those facilities. to So all

you, well of really proud done. We’re

call I’m the go to with through to And that, financials. going to over turn the Kevin

Kevin Mitchell

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

billion. excluding segment of of $X.X share. $X.XX a a $X.X $X.X billion loss Refining a quarter adjusted pre-tax were and DCP investment of reported an $XXX billion. goodwill, We had special first or includes After to items, $X.X million loss Midstream. per impairment the earnings in special We after-tax amounting This company’s impairment billion of items

million, million to and with XXX dividends, million cash million, working projects. $XXX $XXX was ended We growth $XXX for quarter outstanding. the flow returned shares spending We share through million repurchases. $XXX million of capital of shareholders was Operating capital. $XXX excluding million for $XXX Adjusted quarter the including

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

decreased adjusted results lower by the Refining. driven $XXX period, During million, in earnings

to higher a low proportion due of income domestic rate a relative The rate to effective tax and first interests in was environment. non-controlling quarter adjusted X%. attributable results lower The earnings to foreign operations was primarily

further rate changes and Act. from reduced impacts Our was state CARES tax the recent by taxes under

results. Slide shows X our Midstream

from an reflecting adjusted pre-tax $XXX The of lower million, the $XXX quarter $XX down due Transportation million pre-tax income reduced Pipeline. million, $XX equity decrease increase quarter. earnings, affiliate previous volume commitments quarter. was largely was First the income was the to previous from million adjusted on REX

refinery on In pipelines our impacted addition, decreased utilization volumes and terminals.

online. began April, adjusted fully as the income X, of Hub. pre-tax April Pipeline is in propane record Gray On was at operational. pipeline segment from Oak due $XX and increase now NGL The the later and West Texas quarter million the Sweeny Eagle of as record full service, the prior delivered came the margins Ford and to million. Other $XXX trading activity, well The butane operation

fractionator The quarter. reflects cargoes income ran XXX% Freeport Midstream the The LPG adjusted month pre-tax hedging and $XX at per XX $XX export the utilization. DCP increase from million previous was of facility averaged as and lower million by capital as quarterly costs. driven In response cut recently distribution is environment, prices commodity costs, challenging reducing gains by well by operating growth the to XX%. Midstream the XX%, lower reducing up DCP

Turning to X. Chemicals on Slide

food the polyethylene from adjusted to adjusted demand. supplies, seasonal to million. pre-tax reflecting $XX first Olefins $XXX $XX increased million income volumes, sales and the pre-tax quarter, income due lower quarter. and packaging increase First following higher fourth The previous the was fourth was medical demand from million, million Polyolefins $XXX quarter primarily up is for in quarter quarter

SA&S income Adjusted due higher million XX%. and was utilization low pre-tax turnaround O&P $XX margins Global for decreased activity. to

by operating first cash by costs XXXX reduce received $XXX the in CPChem quarter, and capital CPChem. During million taking million we $XX $XXX is from distributions steps to million.

from Turning to margins X. first the $X.XX and Slide pre-tax $XXX pre-tax Across turnaround per was quarter decreased costs. lower million, XX% last results as of last our due Crude Refining largely XX% down Realized system, were quarter. volumes compared to barrel. adjusted quarter was for on to by well million margins adjusted realized with $XXX utilization Refining the higher quarter. weaker income as XX% loss

quarter was as by first turnaround run downtime. unplanned as The significant cuts well activity, economic impacted

Sweeny completed refineries. Angeles and We Alliance, the at Los turnarounds

outages from addition, quarter. million, the Bayway at of had the previous turnaround increase $XXX City Pre-tax $XX and In Ponca an million costs were we refineries.

quarter was decrease due the The on quarter secondary XX%, units. from clean product to downtime first yield a prior

the barrel market barrel capture the and margin market distillate more resulted Market per in overall XX%. capture. X we configuration, capture impacted is was of quarter in and X:X:X XX%. crack in barrel covers refining per capture for the an previous was in by refinery less $X.XX the Slide quarter crack. market Realized was The gasoline to – per Market $X.XX $XX.XX than first quarter. make fourth compared market X:X:X premise

approximately $X.XX $X.XX quarter. from the barrel, quarter, per $X declined per purchases Losses barrel from from distillate crack to $X.XX $X feedstock the improved barrel. Losses barrel advantage During prices. runs. quarter by primarily crack decrease gasoline The per previous the barrel. due is the crude per relative almost the to due secondary products from $X.XX to of crude crude decreased of Feedstock per barrel falling and prior were declined per timing

$X.XX The was the other prior realizations. per barrel price margins of product reduced category per clean $X.XX improvement driven realized barrel. an from by quarter This by

Moving Slide Other the products Marketing million was higher the realized of margins, $XXX quarter. refined $XXX Adjusted fourth on to than million, quarter XX. Marketing increased reflecting million to domestic and and $XXX during lower Specialties impact first We prices, volumes. quarter higher the from income due sites $X falling offset to the million total the finished first margins. the approximately of X,XXX Specialties start since program. lubricant by bring spot increased partly XXX higher reimaged branded pre-tax

product XX XXX,XXX marketing XXX,XXX XX, quarter. were international inception. day Refined in since fourth European the first sites, per to exports the per day we total the reimaged in the compared program’s our with approximately quarter In barrels barrels business, bringing

from Other due million, Slide is of an contributions. segment lower partially $XXX On and employee higher the to Corporate related decrease improvement of pre-tax prior XX, primarily expenses, adjusted quarter. offset $XX had cost by million charitable the The

was use working Consolidated the the started capital. during $X.X shows in change on balance $XXX XX cash of cash million. billion. our the Cash $XXX sheet. billion operations increased a debt with excluding working Slide year There in We capital by from was million, quarter. $X.X

to capital returned share million $XXX $XXX million repurchases. repurchase our On million funded adjusted We program. share XX, suspended $XXX of March and through including shareholders, we spending

ending Our $X.X cash billion. balance was

credit are current facility the XX, had $X XX XX reflecting billion $X.X we We March liquidity the Partners. a $XXX environment. Phillips strong on cash, revolving consolidated and of in at credit billion cash million $X.X Phillips of facility at billion At focused conserving maintaining liquidity, revolving and

a paid for incremental AAA in off respectively. maturing $XXX undrawn. of needs. we funding Phillips of In and secured short-term commercial billion issuances, Phillips investment-grade billion currently credit capacity, $X ratings term-loan million and which is and debt, executed XX BBB+ Moody’s reaffirmed S&P $X XX’s April, program has paper of bond

my review operating concludes the and of This financial results.

to rate In Next, few outlook be in Chemicals, we utilization I’ll In the to was in crude items. In the utilization mid-XX%s. second cover according XX% will range. the utilization quarter adjusted market O&P be expect conditions. a April, global high Refining,

expenses million. we’ll now the expect be come million second million to $XX that, in for second pre-tax. anticipate We and to We quarter other between and million pre-tax With costs $XX corporate turnaround $XXX questions. and $XXX between open line quarter

Operator

you. Thank

will ahead. session. question Your begin Mehta Instructions] of line [Operator Sachs. We Neil the from first now go from question-and-answer Goldman comes the Please

open. is line Your

Neil Mehta

Thanks. for the Thanks Good question. morning. team taking

first one demand? real guys are on is The a what around large have marketing You just you system. time, seeing

comments you then, be tie in data recognizing into if April, your utilization, real-time and there’s any So you points commercial XX%s the ran in you high that And valuable. able you’re probably you would could some expect on side? you on thoughts how to planning talk in of terms that in June how May, to about Any about, as go utilization the the think on forward? limitations

Greg Garland

Brian? Okay.

Brian Mandell

for Neil, the Hi, thanks question.

in sight the where Western line Europe of and U.S. in also we have have We stores

Europe. to those the up Germany we So bigger we’ll to they’re Western worst little communities We’ve starting come Austria, seen destruction, about down XX% At about and the bit, now. now a start were things stores can with demand XX%. back of open. In open

XX% to If were U.S. destruction urban demand you come over or depending we areas. the seeing rural on

about to that’s Now, XX%. up

better. getting are things So

matching our utilization demand. In are terms utilization, refinery we with of

when down to So utilization moves as got XX% up utilization well. are demand we worst. about up, was as at its our moving demand We

Greg Garland

of about to as of XX impact and public of driven to consumer-driven, to the demand, is you and rally lift some from pace by think gasoline under policies. going XX% So, And demand the starting population XX% And work. stay-at-home of be economy. recent U.S. of the form is Neil, lockdown. About relief gasoline scheduled over statistics driving roughly policies restarting COVID-XX the these recovery the from states have and towards opinion to show

and prices, should gasoline as with come they’ll support at work people support start package, XX% As which retail to year-on-year lower back from $X driving, down stimulus be well. recovery and about greeted trillion

Neil Mehta

or is, least model the The about X for in side months that. than marketing XQ quarter. way at volumes recognizing can be guidance that the and as go next appreciate thoughts offset? Is of we on better see where business, first into the margin there came XQ, think in would the there be the Yeah, standpoint an and earnings how whether follow-up our of terms down? any from we Any you a should

Greg Garland

have Thanks, company-owned Neil. very speaks are of diversity stores. you And in Certainly our we XX% where about Western strong had benefit marketing of in – the might portfolio. in margins, to know, retail-owned, very, we our as stores Europe, Europe

the margin the get segment. was So strong. very, retail retail in that we the benefit And very of margin

But And to we about hit, off. COVID when volumes. I’ll first XX% for the say so a so quarter, falling when we were volumes, of for strong running really what COVID the margins, mid-March, above came margins did about there. budgeted budget had for times very, job we of margins. probably volumes, flat until quarter, hit, X very X Typical good but price,

in jobber-owned wholesale-owned prices. good are volumes or U.S. too but stores And as good most as and in margin of not falling overseas, with decent U.S. our still had the the where U.S. we in margins the stores,

Operator

of Your ahead. Evercore Please with line next go question Terreson from Doug comes the ISI.

is line Your open.

Doug Terreson

everybody. morning, Good

Greg Garland

Hey, Doug.

Brian Mandell

Morning.

Doug Terreson

of too. And management well during upturn So, Greg, the serving it’s and the now disciplined have you downturn obviously been the guys capital shareholders originator approach.

today, while is we’re consolidation, So, with merit kudos and is unusual an if you commitment your for associated team strategic that. of stress, And which in period to reiterated industry high usually the financial available.

So question and your successful, you’ve drive while internal program, you have value, obviously is have acquisitions. my used historically capital been management often guys peers to used

and whether how that the on any today, color to other so, And you also, set different strategic can frame think share from or want philosophy this it’s you topic? opportunity downturns, I you notable see prior that

Greg Garland

Doug. XX And tell crisis, single wrong. economic of is if for several pandemic. is years the point that middle Thanks, forecasts the in in Sure. crude are This I’ve time business. Well, $XXX always a me often through is people always and And global this my first is was dangerous I in true crisis been was that, so. what $XX. and crude

side XX/XX Doug. XX% you’re back XX% in We’ve to framework. it. and business liquidity shareholders. our a We appropriate that’s king. We the be return in still our that’s through to crisis allocation good the the of way to view framework, going think Obviously, always reinvested kind that, business like lens there’s other we when think mid-cycle, current do on of is times And had of this

of to other the I on the seen $X rating we’re take this of purpose billion acknowledge as of dividend billion You’ve to the mid-cycle, credit $X come and us mid-cycle But I about we’re is investment-grade I not the as that. real thin out flow protect go side today. cash But steps certainly as liquidity. – of protect think and this, through we that to so going at

So sustaining we That’s a second, dividend dollar. at a the is $X.X billion dollars the That’s billion. always and year with capital. start first our

I’m as cuts seeing range or business, And kind growth share some, But I to to to guided then, upstream that of in $X.X going midstream XX%, CapEx in capital. billion XXXX. challenged opportunities be all $X that we’ve investable $X in are at of the to of look for think $X.X billion I that the the billion repurchase, higher billion

our more rates. as And into we we’re margins, our margins, you that, well, the so, just and if you, meet would as mid-cycle that, the December, that – hurdle think then, I of when would the in towards in of capital conditions guide part XXXX, most cetera. about we’re terms chemical opportunities, we’re Today, would organic investable of tell for get think to a to refining set budget. low-end probably terms way we et we we And long normally back

will cash, generation certainly So, improve.

share probably some opportunity the have to we’ll pay down restart repurchase So debt, program. the

very us. the of think certainly And we in our prerogative [$X.XX] for at would is probably dividend I normal As increasing midyear. In kind it’s the dividend at look [ph], of Board. the the affordable today about cycle, this

But necessity dividend the to XX-year we’ll times XXX. X we’re as a with you we the of think for get the opportunities dividend a us I think the do average what about immediately. in S&P about lot it do half think of back-half. terms the back it, in there’s something in yield, have don’t to year, increasing Because we

knife, think try or catch positioned, strong M&A around so we’re falling balance obviously. and great never first to point I how TSX acquisitions, portfolio, And question your a To as diverse about is sheet.

need on to do. what do do The have we positioned well We’re anything best is to M&A front. don’t the to we thing

have for selective. we opportunities so value can create great We to our shareholders, be highly

examples have to lot of of that. folks a it. hard create There’s doing really done side M&A value it’s there of And the out that today

I in while this to be could that the think XXXX, up will both of given assets and have, not be into balance there of year that levels do pick just the even there stress through so, comes And whole opportunities companies. that consolidation so people the midstream, upstream

you’ll everything. at us And look see I so, think

very be we we’ll and about do, might careful very, So selective what very Doug.

Doug Terreson

lot. a good Okay, framework, Thanks Greg.

Greg Garland

Thank you.

Operator

next from ahead. go from of question Your comes line Doug the Please Leggate BfA.

Your line open. is

Doug Leggate

bit Thanks, to everyone. hear reticent. I check I you can a want am okay. me

Greg Garland

Yes.

Doug Leggate

some… having [indiscernible] been

Greg Garland

Doug. clear, through coming You’re

Doug Leggate

quickly contrasting the of Greg, other But at – got just questions. first I to to at made Yeah, all, it that on and equation. address distillate as thoughts a got try their offer I’ve to the happening situation gasoline thinks your set the how the Chevron of I that Valero anyway guess, they’ve you right and could so, day comment just or of now. wonder IT got what your their a market they And think of look distillate, up, the call fortunes rebalance it expect kind what’s of if please. cut budget I you move seems. you follow I Phillips to when industry might couple a and level.

Greg Garland

actually me around the and it’s drive. the Doug, Yeah, be is may – I in. well up. actually think think of come They suspect or space some to Jeff refining let cooped can that out comments, then that overarching I I want And space about energy sector, you and to energy People make this. U.S. just Brian going been leave in gasoline. think

I going on think seat to at first. be reluctant to get the an middle they’re airplane go in

And get I to and X/XX, think took that certainly will come. back saw space. people We that in the while a after

being think actually going cooped move indeed, I up gasoline distillate. out. people up to and pretty crazy seen house, in with bring not on parity the prices that quite quarantine And to just being get going and in should good. demand want and And back gasoline we’ve are

that pick get the the then as is my economy company we to up up, again. also demand starts pick going But as view to moving distillate is

mean we’re that again. And dilemma facing for impact today many we’ve the energy in get so, the to got I going to answer real is demand companies,

you top or Brian of do. do that, please on want Jeff, So comment to

Brian Mandell

was to between X%, to XX%. much in XX% XX% U.S., take say jet you Doug, X%, from half a was yields was XX% So could the and I April see to distillate down refinery gasoline if would too, XX%, up at jet made, from as a to January and look down

a the economy lot So, from to distillate. Refiners the jet a into move economy. of distillate gasoline

cracks. to And as refiner, watch we continue the a

the West over As an distillate Coast. in gasoline example, is now

think we increase products opportunities into So the refineries now see move go storage demand some And to you’ll of distillate we about storage gasoline want. and out to when think that our come people also and starts see make think to to you’ll that I as some distillate. about continue

contango, December. If a same, it’s the you and crude to look from the take at distillate prompt the contango about

you’ll as storage some as And distillate incentive see I think So there’s well. an well. store to

Doug Leggate

signals the is, And work That’s up really you. at they go realize of reported asking, putting in quickly I respond a all my they E&Ps how price it. to all far, those Thank that’s follow guess terms of helpful to rest in so color. back who least the I rigs how question. we’ve longer-dated have to back been and

I ask utilization, now. to obviously been for sink of wanted guess, I question number you years product has refinery excess because a same a about market the the But export big for,

you’ve think uncertainty given quickly in global do mean, margins you’ll move So the I U.S., here up? maybe whether – about got specific issue market, you a utilization – the would think see how your you in when you the you more do rebound, how

I start bit Would how from to a to just want little the before respond way guys anticipating you also to a higher themselves allow you stability a you little margins a side more moving to paced the of a get be maybe standpoint, measured or in coming this. level are those that behavioral think higher – you other behavioral level? out of at

Greg Garland

tell out. margins first or go, us increase to need will we’ll of Maybe not. mean, mean, we all, I us I’ll rates it the where Doug. will I continue lead where

just You you good, it’d to. But bit to bring over-the-top talk I’ll prepared rates, and increase in had I be if back Maybe that, want you let would? increase want little – then we’ve a and if you may Bob, need them talk. refineries if Bob, then think. to And come the about we Jeff thought to really rates,

Robert Herman

Yeah.

imagined, as that ramped we’re careful that going gasoline our we there. I we and get found FCCs busy, So to actually the making are And units to park refineries we we’ve when to than reformers and have down our ready in run we’ve lower think, signals shutdown matter we’ve some but been unmake about completely, the subject ways experts ever would we’ve list, down, sure pretty kept do Doug. into we the down have utilization this, to how

or it careful, it or later, then on thing we’re capacity of is shut weeks pretty not down a anybody going couple do a else though, wants later. back to week think be about to up we bringing starting last too quickly and I the because

strong now. I to for the pretty idled units and ramping up stable look start a we we’re think So market, a demand right be might before signal going from pretty that

Jeff Dietert

Yeah.

we it’s think the I really exports and market. demand combination think of international as the about domestic demand, into

the And know, kind of So it’s both. you recovering. COVID as and a first China combination it’s of had

up then Europe to We’re kind so the recovery we’re of are markets Latin and strong with those China. back the last U.S. are got in next, America, impact. ones seeing the America, get improve. that to COVID XX%, hit – and hit XX% starting Central starting

And so we’re seeing a little bit that matches to of weakness overall guide there. at demand rate But run our it’s recovery. really that we’re refineries a holistic the approach to a as that using

Operator

comes question of next Your from Please Read line ahead. Fargo. Wells the go Roger from

is line Your open.

Roger Read

Good morning. Yeah, thanks.

Greg Garland

Roger. Hi,

Roger Read

we on at, a Just would a there bit you think as that’s But be up view that slowly the of of Doug’s starts from to inventory up. kind inventory obviously, better? everything back level? timing be the what little of to little that Do is look stack a of how the that feeling week. things have the as get I’m to pick I bit you for retail and back come demand following just trying else full overage every think all stats or as your gasoline recovery question about here might we that. mean, it about a down refining the

Jeff Dietert

Yeah.

Cushing, about a there’s at shale of capacity look million there. we inventories barrels products. at XX especially percent of at a inventories than running a capacity, think higher shale crude as I And day percentage as

out kind about about maxed million XX% of historically, shale, million would If be at so and barrels have inventories you Cushing barrels. Cushing, at XX of we’re currently that XX look

Gasoline at obviously, the regional And and lower that’s So But the crude to where an capacity the of inventories we available. of to shale into point. meet utilization how capacity the important. local demand extremely refineries and are that’s infrastructure that some high area available products, run factoring that’s there. are distillate, dynamics this relative we’re

Brian Mandell

DOEs, barrels X. what of addition flywheel take XX% import for of less, the or at because X. XXX,XXX PADD PADD gasoline, is Roger. you a just a of that comes look And gasoline this less We PADD typically came XX% in time last of XX% if That’s market, an X – about have the at year into in,

as kind us is think of just U.S. I the So overproduce won’t flywheel line refiners from that demand will bottom will that’s demand produce in and filling the gasoline But up. think keep what is. we We the about

or We’re now U.S.-wide. far from globally filling up

we have any don’t on concerns products. clean So

Roger Read

then, of Thanks. great. Chemical Why And we’re QX. demand side in probably what’s lot us across managing Can of performance QX, is of for this the a pretty a Chemicals the to than The you question idea Greg, on managed or Okay, been give is you. driving that? utilization for strong stronger guidance stay ops? rest seeing what business has most the the of an

Greg Garland

Yeah.

type that markets. just a and automotive in more of the automotive chemical I of are lot geographically hit packaging kind consumer with go mix go and you hard. bleach makes. hand more the communities think been really And shelf, lot bags. back start sales that about a bags bottles peers and the exposure into products sanitizer resurgence you’re A think bottles high-density a they and things have make diverse you the of for CPChem CPChem detergent seeing But as has disposable fact reusable of those are and flying and if off to those things the that then the kinds disposable ban bottles,

that’s been think of I and seen things all that is all geographies. – of we’ve mean, – And the I demand really segments strong across so one

the demand demand U.S. good in and in good in Asia, Europe So demand good

portfolio really product So it’s driven.

Operator

the question comes next Please from go JP Gresh of Your Morgan. Phil with line ahead.

Your line is open.

Phil Gresh

Yes. Hi there.

Greg Garland

Hey Phil.

Phil Gresh

flow. first just to There that also some negative of some negative to the a didn’t about your the that First Refining varied here much in thoughts want But then, for the description quarter performance, Kevin. really think them. question underlying the I quarter. get was in looked region. rates capture have line moving in I items best have as there on the were CFO on flow pretty of depending cash pieces probably Free I is on the cash

performance the the just underlying in So any could on give there. color you quarter

Kevin Mitchell

cash into – is right Yeah, so usually taxes you flow And statement, an that quarter deferred impairment. if anyway. that’s add is cash weak QX normally of you’re the dig cash Phil. associated a with the on use It’s details, and a was so generation back. That DCP specifically the

sort of so cash had $XXX have for And that, modest you sort million item. on of that particular you a on would inflow if line normalize

capital are in like but an that standpoint, I from there first seen. we’re say, than overall. the probably time we’ve the pleased working a think that have that impact historically So certain a it I was of quarter, this would on cash less details pretty use what But typically

may cash just barrels a you quarter that’s capital when those also capital. all of in quarter, of into we reality sold. other sort fourth is QX our at this in we aggressive working anticipated. looking of way lot a year timing optimize were fourth We’ve of not opportunities recover XXXX around the been rolled on of working from pretty inventory the standpoint Some based a remember, And did of to in had the drawdown function the – the of

little was context comment, of reduce already activities of reduce to But were other in from directly standpoint, overall the set – ability costs. just our the the an in first capital. very to quarter, and capital, spending then place really And sort actions we those influence announced

And than – to consume ended the year expect higher than a we on no billion XQ, the $X.X did quarter capital get number you’ll annualize cash debt there’s the our of cash. issued number for quite we it’s be. less started. We we doubt, quarter with over a So what we full and if you

reality course, state as a turnaround high steady don’t a drag the well. environment. normal of in Refining It of are the have was So quarter. tough And typically costs That you that a is the environment.

it that. So at leave I’ll I think

Phil Gresh

question more Okay. for No, naphtha that’s Chemicals. Probably helpful. long come experience business My your second for Greg, clearly feedstocks on seen competitive. is given this of getting time. a prices We’ve period oil down, in

you this do that about current that that fundamentals XXXX. has there about Chemicals think we announced situation is facilities feedstock the point? changed the to for any look at You anything your business? But essentially term? X Are naphtha-based facilities way deferring structurally crackers the as vis-à-vis Thanks. trough decision on how you’re at longer this And for in think advantage of the you environment, there your

Greg Garland

that for crack. first East will when see our we there’s natural as and is that you prices not crude down, come pretty between, that’s And Gulf view crack certainly capture that crude then CXs diminished play we’ll opportunity say, view. space. space. very so also NGLs certainly to to in and And as look come say Coast. would the no crude crude has sufficient normalize, in is crackers cracks all, our in LPG and question $XX Yeah, at gas CX, competitive I CPChem, think true, have U.S. are Middle such naphtha let’s crack today, sustainable of spread spread competitive there’s today, is, But ultimately us. The that back or

One tires. though, of in today the downturn, not seeing the consuming things Chemicals is given unusual that’s that we’re automotive we’re

And a issue. bigger a lot is co-products, away becoming And and of of the butadiene is so bigger makes them. know, butadiene as naphtha one you of which making go

is at looking are And so looking to just industry butadiene now industry full, make it co-cracking away. the – is go tanks

highly on to that because it’s naphtha mix, of so start that in And dependent ultimately the of co-products. will the the so value impact economics

the chain all converged that kind to So should ethane in in still balance quite they’ve a same But There’s of around volatile. for year, day this be the I that million would barrels that you space. of X rejection. probably suggest expect feedstocks chemicals

coming that of next a competing with gets confident Robert, had LPG be this lot naphtha, this highly you’ve to be until head that still crude of experience going crackers to on, back they’re year on through of we’re albeit normal. least a at of plenty to chemicals head the so balance wave going feedstocks, in And also. there’s

want You anything that? add to to

Robert Herman

No, I got think it, you’ve Greg.

delta at will back is to I get we’re come think moment. – way you’ll think moment, Crude going normal I its it’s a from And – advantaged that an just I think it’s up. work has typical feedstock. to this but a back

Jeff Dietert

I new of is Asia, domestically delays out in capacity. construction starting capacity, Phil, so and we’re pushing would of one to the thing the in say planned both see start-up

we April $X.XX index per XQ. Secondly, supplement chain I’d that in in is $X.XXX a pound polyethylene the margin The was say our pound. about reported just

that’s of are So kind we today. where

Greg Garland

digits. It go single could

before. there it seen we’ve So

is And watch The think has good. thing demand that that have really to so well should held the I and chain year. go we’ll through just fortunate as be across up we that

Operator

line Cheng from comes Paul question go next of the Your ahead. from Scotiabank. Please

line open. is Your

Paul Cheng

guys. Good Hey, morning.

Greg Garland

Good morning.

Paul Cheng

your at X year, oil front is the get to probably, argue won’t when this maybe energy even your that the next until drop, end say, million say, to in XXXX, world, barrels questions. year. then early the investment the on change of Upstream or level production to go least day that Greg, into, we criteria next company year outlook of And post-COVID excess there budget last year a and between X the year And in and XXXX, if back cuts I look for we late beyond probably going see XXXX production just except logistics? the this XXXX. say,

a your that all? in change is business So that view at about

Greg Garland

Yeah.

million probably exit look in we X barrel to exit range, over X So million a Paul. at

our seen XXXX, Midstream us that billion in this growth were you’ve We’re that probably do on opportunities. forces of the rethink billion. us I a see $X think million capital. In to $X.X do probably recovery a opportunities consolidated rates. we Midstream. where in X less exit in to It’s And cut think north phase. before. We we circa of And we’re of XXXX, we little maybe that investable you But

market us that do And do to and to can’t certainly what we’re tells so again investable that’s if willing we Paul. opportunities, the find

But back. one another get over. about. term, keep could future longer But don’t be There the just be we pandemic coming know one This last – XXXX. the was we will think, we in I

good on are There’s going still be energy. There So, going there that into here. to be of consumers the growth odds to are get going trajectory we’re people are middle a of going are consumers, the to petrochemicals, back that of to millions there be class. are coming hundreds literally

we should positive that’s answered know we’re think be real directionally, does do in back of think from where us. be the is today? I we What that don’t front was that question for go where is, a the So I to or at return start to to growth it growing growth.

to I Jeff, know don’t in. if come want you

you’re seeing anything thinking As in you’re about out different? and XXXX XXXX,

Jeff Dietert

I that No, well said. think was

Paul Cheng

is again, Kevin, about year, looking question this guys term. much the conservative sheet. a And longer that a but for next balance always out, COVID-XX, second not as there’s have you on But year, we’re after the that deal asset or ratio or it’s parameter, there you the level, the financial or your – PSXP a capital vehicle shape change? is even anything, whether as how Is on how you, debt for pumping so any those

Kevin Mitchell

long-term expectations change Yeah, on Paul, balance around I view would sheet we and leverage. our don’t the think,

debt, so have incremental impact a other times debt-to-cap access And ratio, very have on capacity the both to what the come markets. XX% that. writedowns, some PSX that consider a like between target detrimental the credit we’ve higher storm, working conservative historically And sitting obviously, we’re talked to we’ve ability, leverage weather is ratio, sort we And of at But denominator. that of the ability we’re and the obviously, an about, lot that XX%. than right we sides the and some on we come We leverage XX% been of would and our through end issue into why to a impact the a above one not reasons have equation level, the that debt added this, when had ratings now. so debt

I over leverage mentioned we of And target expect have within very financial earlier, level its so to our played expect put like we in of would our – really has range. this. flow will times we eliminating as would out debt I short-term that And way out that get cash time, the debt. Greg do back strategy on will think coming we feel that priority this. good we improves, sort that we would think

Operator

question ahead. next Manav the comes go Credit Your from Gupta of from Please line Suisse.

open. line Your is

Manav Gupta

Coast, Hey the assets then specifically environment some fuel the the to back happens were years, in refining asset trying we reconfigured to X in jet sold a fuel. current guys, time world, across to which specifically I’m understand or East what maybe jet on designed you are? to was produce these produce X which which

Greg Garland

Yeah, Bob really question? we’re that I sold comment, it of at all It’s yield not off. lead margins. hard, may the I’ll it’s really we least at much So Who sure but looking answer today move to output or that to configuration refinery a each we wants did. other. to want when I’m glad its than I’m jet guess fuel. running that – at the lot, hard to terms is produce in structure that different and

Robert Herman

Yeah.

hard kerosene products time, you molecules in because to didn’t trade than anything and business them a I oil, done only it’s they model. they’ve it their over just for of of get barrel think of kind the so do and when else of fuel, ownership the that’s fuel, margins rest away jet even if making to the at and structures. drive that, that their jet look there’s prioritized many But maybe

today parent their fuel, doing and wants So don’t them jet nobody doesn’t fuel, want what any – company insight when to to jet for don’t have they’re we jet nobody the when fuel. the want they trade

Manav Gupta

follow-up Jeff additions the the Chemical off, we think, side. side? is, we or credit the issues capacity next years. some mentioned completely X, just also scrapped And on X expansions Refining seeing were this Okay. these for on postponed crunch there because that A of that probability I other refinery of a quick global are get Is monitoring and delayed, the

Jeff Dietert

Yeah.

construction, I longer labor those be quite with COVID impacting anticipated. financial not to periods get generous new markets case tend activities start-up But projects financial than that’s that’s the even in Typically, profitable think delayed a market markets, as projects what the and forces been. right. as with and and – they especially tend to have open

X get a This under see out. we trending of and barrels projects something capacity day at definitely this expecting lower comfortably refining pushed expect million to point. probably we’re would So year, adds

Chemicals a So side, think good out. point got the yeah, additions side both and Refining capacity on are you’ve that getting pushed I new the

Operator

go next comes from line Brad ahead. RBC Markets. from Your Heffern question the of Capital Please

Your open. line is

Brad Heffern

was long could I of physical terms seen? you crude think we’ve that curious for? terms a how the in of sort side. and April Phillips, both discounts, the thing that Obviously, that how were if also about everyone. month the then go play regional those markets morning, able that to in in the much basis how capture then just talk of good of guys can on sort of And contango you on Hey, crazy sort was you

Brian Mandell

and of from I’ll Well, about say Chain different around group, called the a things Vantage XX, XX great segments. Strategy and did talked that part it at of we our and as one best we Optimization we had brightest Day, Value Investor the group the employees,

that period was very think were the optimize they entire to And how them place, it of time, to, fortuitous in about during had we system. this really able

an used were fell, When you in have I’ll So into refinery, storage might new prices the and push advantage that example. use give we contango take in to the the storage, third-party for really really crude we refinery not strong barrels able storage, around market. of

analyzing other value are are we refiners. when that So of of contango in the were good is things take There lot you’re able But refiners. to opportunities. for a play for advantage

product We there can a where we store when is midstream large have assets contango. also

us. for good was it So

Jeff Dietert

is for just relative sales, of contango there different a is on we margins. might crude and product crude and crude number that The impact and reflect placement options you other of market pricing guys benefit to typically But location refiners contango follow. do have the differentials, domestic or contracts all variables that a impact benchmark cracks purchases. product and capture influence quality But I number purchases the a versus add, of Brad, timing impact X:X:X differentials backwardation. that of transportation

So of number there consider. to are complexities

Brad Heffern

U.S. see in for significant some volumes? you think for happens got demand, if looks, of shut-in sort just touched in then you of terms given I’m the on global what also curious thank how weakness both outlook barrels. we Thanks. demand And the product that obviously guys you. the crude, but export Okay, it, oil

Greg Garland

and as see million our come X.X probably shut-in in Well, there Thailand. mentioned, particularly barrels We XX% exports. needed. Korea, And and going range be now. we’re obviously, of Japan South probably if we less shut-in, a forward. a seeing But to crude’s back, day the exports, still Jeff less right be China, will lot starting There’ll think Asia’s

think to We continue barrels crudes export others of overseas. you’ll exported. So our I light some crudes, Bakken and be see

you’ll think continue. that see I

Operator

ahead. Pickering. go question comes Blair the line Tudor, Matthew from next Please Your from of

is open. line Your

Greg Garland

morning, Matthew. Good

Operator

your open. Blair, is line Matthew

from ahead. comes question line Gabelman go from Please Jason next the of Your Cowen.

Your line open. is

Jason Gabelman

How Good everyone is morning. doing?

Greg Garland

Thank Well. you

Jeff Dietert

Good. Good morning.

Jason Gabelman

refinery I margins. wanted ask about Great. the in to recovery a question potential first

As off it’s out in we’re long to taken investors their the recessions downturns. for global at. try looking takes, really useful figure lows based off that recessions, how prior And data and refining margins past to couple is few a I think come corollary of margins, a years the

discuss of you and past Thanks. how some can in the current just refining recessions, maybe the differences the So between margins? going and impact situation in similarities recovery we’re and that’s to

Jeff Dietert

Yeah.

rapidly factor In has period had COVID and an cycles, will how of number So much big a of previous price recessionary of front a been there’s oil and demand recovery long-lasting recovers. demand, impact. that’s more I it the around really whereas impact on this think the a spike been be demand in

that back And as I will businesses to and demand so, work, margin think see recover. drive the we’ll to from that consumers really drive And and work get environment.

long be cost sold a supply well is a low period which as environment goods demand elasticity to likely We’re as in for of positive of supportive refiners. of time, for

cycles. cycle relative this think reasons are in So some there optimism I for to previous

Jason Gabelman

understood. Okay,

Robert Herman

I’d maybe one think I add on that. thing

Jason Gabelman

Yeah.

Robert Herman

a refiners if it lot about of in the co-product $XXX crude came had when margin a Maybe environment, times impacts. past more in too, was $XX out we one crude add $XX or we than thing just margins, on refining to it’s and crude, advantageous you maybe $XX is that think because I’d just a

refining you I could So think quickly. rebound see margins

Jason Gabelman

right But prices, over in earlier margins refining trending decline doing stabilized? we thanks. quarter oil what Clearly, it touched have Fair, then, to very how as now. margins rapid And are into have was strong, in the upon crude just good first visibility was the given business, Q&A. the prices but marketing now moving really the don’t are

demand extend destruction? the could you’ve Thanks. you overall relative doing if also what to discussed are in volumes then, of And comments to terms how

Brian Mandell

So or refining marketing was your margins? margins question on

Jason Gabelman

yeah. On margins, marketing

Brian Mandell

Europe in margins very strong. still the very, are So Western

U.S., We but still expect the margins to starting them we relatively good. strong. the some, stabilize to are remain as relatively In them being see

in margins increase margins the smaller wholesale it. expect the volume a wholesale our off of margins and to the retail would are remember, the to in demand than that’s we U.S., But U.S., lot Now, and overseas. to volume is and continue come

Jeff Dietert

queue? else the in David, do we have anyone

Operator

back Jeff. no have further will time. questions to call I over this turn now We at the

Jeff Dietert

and your All Phillips We interest much time appreciate your XX. for right. interest. in Thank you very

If please Thank or you questions, Brent you. further me. have contact

Phillips 66 (PSX) 1 May 202020 Q1 Earnings call transcript