PSX - Earnings call transcript Q2 2020

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Operator

Welcome to the Second 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 with operating to include and and President Mandell, Participants and morning EVP welcome Kevin Tim Roberts, the and on can Slide conference quarter CEO; EVP, today's the on call. CFO; earnings found Marketing Bob section call Refining; Executive our Commercial; will statement. EVP, Mitchell, of Greg Herman, Chairman Phillips material Garland, Vice XX's Safe Brian and and Investor XX Phillips supplemental X contains along website, be information. Midstream. Today's financial Relations Harbor presentation second

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

Greg Garland

everyone, second resulting us challenging morning, from joining COVID-XX, environment. and in for experienced Good to business disruption we Jeff. unprecedented operating quarter, Thanks, our thanks the a In today. the

quarter, demand anticipated trough, uncertainty Going working second the of and remains Across the were would we've were under we as the the demand lockdown people products for remotely. businesses, second half our be recovery into from weak seen our states for although year.

strength maintaining We continue operational to Company. and our reliable safe employees, communities, and focus of operations the families, wellbeing on and of the their ensuring financial our

our with Our national, for providing customers. the directives. our and local to appropriate implemented business critical energy workforce, committed CDC, an is Phillips essential and consistent services and business, protect products we're state safely XX to steps

of in operated our essential to We have safely provide facilities our support commitment successfully and services.

our $X senior issued billion. we term billion increased of quarter, capacity by the $X loan and notes During

in rating we strong These dividend challenging and grade navigate million security business credit environment. by million spending $XXX protect reductions consolidated expect as actions investment the and this cost $XXX our year. reduce capital exceed the to We of this

creation shareholders. $X.XX to adjusted We the for of million quarter, our returned will generated second per disciplined the continue and our or with through capital $XXX flow to dividends. an shareholders We cash share. allocation value million In $XXX million had long-term operating exercise $XXX loss of on focus we

we safety During strong the quarter, achieve performance.

in We Oak completion Eagle to projects. workplace. area, growth The incident, export the the a marking strive Terminal. executing strategy the West interest toward commenced connects from Ford continue and Pipeline XX Pipeline. Oak Phillips Texas Gateway XX.XX% multiple of the Coast, full refineries zero Oak to We're to Gulf major Gray and zero the Texas the operations has Gray Texas our South progressing Corpus Gray project. and including a Christi Partners in facilities accident

capacity first are totaling dock including second commissioned. the additional have July, oil storage barrels and for of In dock first tanker eight to of phases crude finished. expected million The year as end up Marine this by was operations, the ramp the are loaded of X.X construction tanks been export.

the total we with with the integrate With in interest We to a capacity In bringing retail of of the for joint increased barrels barrels purpose joint terminal. approximately up employees for XXX,XXX planned environment. LPG to XXXX owns completed the fracs operations, and storage disruptive XXX new barrels honor the XX at Sweeny commitments. and towards quarter our will by storage million enables Pipeline. the X Sweeny on fourth Upon total and XX commitment commissioning in to the refinery values export together living turn to what long-term Freeport quarter a fracs venture at been ways I'll from our Phillips to go and our export a West third sites, of of I'd challenging recently In X Sweeny At a The in finding their to project our Partners value-creation very focus Coast will completed for work over CXG XX% Also X Fracs the smart expect day barrels be recently X.X XX.X the acquisition call the fractionation to first demonstrating of X capacity. XXX,XXX and in capacity. sites. the through closing, the customer completed financial tie-in Hub the Hub, barrels the Hub, Partners X Caverns fracs commitment million like agile, previously XXXX. of and the operations safe, and million with of be per announced and The facility. recently capability that, XX and are increases their working exposure a support in thank long-term of to retail venture safety, expansion completion, margins. in of Kevin Marketing, begin have quarter the reliable day start Phillips determined Clemens backed in and closed of results. placement has production on to to

Kevin Mitchell

we the outstanding. million flow capital We $XXX with million million projects. $XXX we We $XXX $XXX Hello, you, an to million, cash working of we Adjusted $XXX growth $XXX per shareholders million, slide adjusted had for spending After share. $X.XX overview special summarize including or Greg. excluding Starting on to million benefit. X, which a an the included We quarter through loss and of results. our a with had returned these shares loss for Thank $XXX million. items quarter second reported items, Operating quarter financial everyone. XXX million. amounting million capital was dividends, was ended $XX

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

by results. adjusted X Slide Midstream results During million, our the period, decreased all lower across earnings driven shows $XXX segments.

was $XXX was pipeline lower from million volumes, and million, Second was previous decrease Transportation quarter lower decrease income from due utilization. refinery income quarter. $XX driven million to million, down pre-tax terminal $XXX adjusted pre-tax the previous $XXX a by of The quarter. the adjusted

oil with at affiliate $XX million and were XX cargoes NGL from decrease addition, million was equity The X reduced production of hedging quarter tie-in averaged to reflects product Sweeny of Hub, other million. earnings per as X and month, completed decrease during $XX inventory of utilization. prices. $XX Midstream The XX% The the U.S. X. LPG the lower work volumes, the impacts. $XX part lower improved to adjusted the income and margins Freeport previous quarter. pipeline was million well was to In facility quarter decreased Freeport volumes income demand. lower export delivered prior by throughput due pre-tax lower due integrate and consistent as Frac and adjust planned DCP the ran driven at pre-tax fractionator from the down from impacts, commodity Fracs as down

Turning to X. Chemicals on slide

for million. was from normal by and record previous Second million, income quarter. down lower $XXX income prices million pre-tax adjusted quarter polyethylene olefins and alpha margins, quarter decreased $XX utilization polyethylene $X to by was Global and the higher sales Olefins O&P first lower is The was $XX was pre-tax driven This from volumes. Polyolefins million. SA&S decrease Adjusted due feedstock partially sales income the $XXX XXX%. pre-tax costs. adjusted offset million

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

decrease barrel. decrease Refining was margins of Gulf loss loss by an during compared second to due The from Coast previous quarter. corridor, environment quarter Lower $XXX clean by rising quarter. runs adjusted quarter $XXX $XX to $X.XX margins lower margins for due XX% million, Refining per XX% the to last to pre-tax Canadian last down quarter $XXX of Turning the costs. to volumes the million lower million partially slide clean product differentials. margins on the realizations pre-tax XX%, was were were quarter. impacts. lower X. crude a million utilization In reduced offset and turnaround Crude with were and Refining costs due was from reflect adjusted second Pre-tax product realized turnaround inventory decreased price demand. in realized Realized lower narrowing realized central a

overall for the was The per X:X:X second per was market quarter. was to crack barrel margin covers quarter configuration. the second X:X:X in Market previous is Market first in barrel capture XX%. by X Slide $X.XX clean capture barrel, product quarter quarter XX%. than market the per an crack. We The market XX%. make refinery less and premised capture yield the distillate of in $X.XX in Realized market gasoline capture. impacted was resulted compared more $X.XX and

quarter decline $X.XX per barrel Losses from due the $X.XX differentials. barrel. per improved per from products barrel, the the the crude by During prior per Losses the lower feedstock to per gasoline crack previous distillate secondary from of barrel a Canadian barrel from $X.XX quarter barrel per to quarter, due prices. narrowing $X.XX $X.XX of declined $X.XX crude crack were and decreased

driven mile. realized realizations. margins The was lower barrel than This $X.XX prior per category per other quarter, clean lower by reduced product $X.XX by the

we cash from expenses, expense. bringing million, segment costs the the spending million to Moving barrels to to the our reimaged quarter approximately XX be $XXX operations on was program. is million. Year-to-date, change spending volumes, $X There adjusted offset the quarter. $XXX the Slide lower the term $X million, to the quarter $X.X in in and On year. is use environmental our the branded decreased decrease primarily million. since of on of as billion. The XXX balance working and and a capital XX, year. Cash in XXX, XXX,XXX domestic billion million debt. due driven $X.X by Marketing prices. loan billion with the program's marketing lower cash prior income of less Consolidated facility $X.X increase by sheet. a due billion. the of Capital working higher on year senior in total sites pretax We COVID-XX-related prior expense lower realized slide in and with rising billion, interest primarily sites, business, during quarter. Specialties million In XX. Adjusted half lower second inception. lower second including prices decreased will an XX with by product Corporate $X.X the for Specialties issued the billion reimaged of than margins quarter debt quarter. European started Other due volumes. as We $XXX debt, maturing the reflects international and was first compared $X.X product the shows lubricants capital. Other approximately quarter, per net increase excluding since exports drawn billion impacts pretax The $XXX partially demand second $XX first day, increased million is significantly $XXX bringing well in were We from employee-related adjusted X,XXX had $XXX start Marketing the $XX falling of to we capital Year-to-date, the finished approximately notes. of second the off of total to Refined quarter, paid line slide

be We shareholders expect the and our completed $X.X We million $XXX adjusted as million capital to first to XXXX approximately share we quarter. returned capital billion through of of dividends optimize $XXX $X.X billion to program. in continue repurchases

loan Our maintaining billion. was $X at strong ending $X financial review Phillips June results. $X.X my the XX capacity and liquidity on in liquidity, balance of Phillips XXth, and facility operating $X.X XX billion $X.X cash concludes billion focused undrawn conserving $X.X consolidated At cash, billion cash billion the We're of we capacity environment. at term This and reflecting had billion current credit of Partners. of available and of

quarter few adjusted O&P according in to rates mid-XXs. Next, been a I'll the the has to utilization Refining, in In market the utilization crude third low Chemicals, global cover conditions. items. will we expect XX% be range. utilization outlook July, be In In

expenses $XXX We and We $XXX quarter other costs to million between $XX to $XX pretax quarter third and between come corporate million pretax. expect anticipate third turnaround in be and million. million

for we’ll we tax not XXXX open the business. pandemic rate line effective may to impacts With guidance of providing due the questions. are now Finally, have that, COVID-XX the potential our range for on

Operator

go Gresh [Operator Phil from JPMorgan. Please Instructions] ahead.

Your open. is line

Phil Gresh

performance Basin, In areas two margin Atlantic I that the particular, had there question were bit quarter. was looking One biggest headwinds into in was refining the like at there the slides, nature. digging the of little little a your and deeper. seemed share other on feedstock the that this about Gulf First whether a additionally some color result Coast. perhaps could in anything and other that I was But, temporary know of gave the category was bit you you already. Kevin, in

talked inventory You impacts. about

So, additional yes, any color?

Bob Herman

Phil, Yes. This morning. Bob. good is

Coast The to other came two in timing. both the Gulf items really down in through

price and as rising get the prices the a out was going tend that other particular and all this turnarounds the crack. we us then, to the Colonial half of Coast, where Gulf lot a pipelines. in during wind other realizations it's pulled way, product Pipeline was that quarter, put sizable had second inventory had to there. rapidly we first pretty So, about where In into price of the hit And And that product coming of environment, we it and In into rising environment then tail the quarter a we the due not built that. capture a we quarter, the Sweeny inventory big and we two In impact. quarter. down, inventory Alliance, second we

items Gulf on up two about the the alone in capture. -- So, $X add market if you to those amounts Coast it

a us. it for land, particularly and of So, cost On to again, issue relationship those with was barrels, to really East timing a at in on feedstock market. very issue back the a volatile bit Coast, crude both timing wind Bayway little waterborne of come a

in effective XQ high, quarter really month-to-month the be moved and So, coming even we saw in feedstock second the to Bayway, costs around. as timing a crude between really pretty from quarter just into

Greg Garland

a in the in to aggregate, on see Basin. impact impact. QX There's was negative Atlantic Basin Phil, -- But, feedstock different that on typically not Atlantic on feedstock capture that you

Phil Gresh

point still you is at need that as that So, this say about? be you thinking look or past would forward, to it we're that we something

Kevin Mitchell

prices we of to are it's on what's like kind happen. on mute the last we've weeks, to of when around the to think, couple those all always stable, -- I Typically tend hard seeing time, moves more inventory going us and been predict effects.

Phil Gresh

Okay. play crash my we are soft a have the would fundamentals. question bigger on Obviously, you envisioning How the might follow-up out? half year And be just picture way question of guys second refining spreads. do the

the Inventory reasonably to as to mode be here for low. still well. most utilization down. in winter still guidance is slipping July, worked Now companies needed be is into going we're And gasoline

a lot moving pieces. you perspective, see But, of how out? playing So, curious, I'm your this

Greg Garland

Phil. Hey

a a our heating On demand much seen about oil, they're be April. right -- would about demand at better gasoline X% going customers, it on XX% XX% think, question to we We seeing we’ve off, I of in see big forward. now than talked on here about both, see disruption. demand Number in you been then, jet, XX%. the on product been and we're commercial the And that’s of airport. can room finally, on the in planes And the seeing hardest have hit, us flying pickup flights recently. the

interesting, that So, gasoline, It's wave didn't XX% get COVID, seeing year Germany where hard better Austria on and that we are will a at optimistic XX% as the our we're to of look in demand Austria have if distillate. stores second X,XXX and progresses. on demand Germany

forward. And push run through the get So, COVID -- the again, going wave in that we're optimistic, demand of of levels can we continue U.S. we second that can this wave to will demand I our refiners up think

Kevin Mitchell

that about well. from season in impact there's fall and schools coming a demand, is probably X% add up there's might and and rough impacts seasonal driving carryover some we're numbers to I commuting on the as of on

that influence. So, will expecting distillate strong excuse season fall, We're I as -- an well a harvest planting think or season to this me demand. support have

Operator

Neil Please Sachs. Mehta Goldman go from ahead.

open. line is Your

Neil Mehta

and the is question. I value model the business in businesses. integrated multiple team. taking the operating Thanks guess, question the about Hi, different first for of

fact business? the monetizing been of seen one of that. you parts of XX. Greg, for your light your course on the large I especially definitely competitors think, in curious some of their But, perspective, have over benefit cycle, Phillips a It's we've the

Greg Garland

value in, able take -- streams pandemics think to that still about that come earnings with think to integrating liquids, that like We certainly, influence gas let When added we around value, the you this. export chain. businesses But Neil. into opportunities. that strong thinking not and investable long-term LPG business terms that there's model, and for capture point that in us. in a try refining of single to think we chemicals starting us have, points through are single being and integrated out the gives or I our then times product those optionality DCP, ability gathering, the our of through model about Well, our we fracs really gas

as for think continue business say. pandemic’s we'll I add segments to this us. of So, to about unique value no integrated a us, question, not this But, would the business business. all impacted There's probably it's

Neil Mehta

Dakota around bigger on Yes, to just on was thoughts the the firm's how what's very your question too? is on Analyst picture be the it's clear. to what's And the of And out laid and at relative likely follow-up -- Day, Midstream decision would then, changed play the quantification from then, helpful any what ruling? changed any November out Access, is here,

Tim Roberts

me we're that Roberts. ruling that Tim And shutdown and on to needed a regard that which of to out is which environmental all. the they disappointed mandating that This subsequently, data, then federal the August first Xth impact address study. On led obviously, permit, on the let pipe. on potential Look, initially ruling with the with then came

Fortunately, it's DC to Appeals. Court been of appealed Circuit the

guys aware you think, that. are I of

put and waiting So outcome they're a there's the case. while we're that been stay in currently, evaluating place, for

by have safe this truly has marketplace. founded, it years, hydrocarbons most and has we think, way that's pipeline. the run look, get a to it’s on and we our position that at point, safely. and positions the three -- the clearly are it'll So, taken run for well It disappointed economic And certainly to

bit is a So, on that frustrating point. little it

play there. at court point the from let we’ll this Now, out

work it's is who at don't bit people just it, When that of value challenged also on really the a They're -- little energy in fact, is things that from this. both bit are chain energy those state, region. look little impact the the local the and support the impacted space. the on governments, got the with producers, One businesses in you we that by getting communities,

pause. And to pandemic, but be Midstream strategy, to just tough to with it’d the just so, going going us, regard that of a economically need on Look, We have projects. is our feel business, think a the with we very a With And been the certainly COVID-XX, like All of pandemic, challenged you've deferring long those shock. the I with us pandemic, with seen on pandemic more regions the especially bit, clarity. it’s be country. things bad transmission COVID-XX this. actions the characterize to without some specific haul little couple or through our this I’d caused

think, our I producers more shippers need need clarity, clarity. more

our subsequently, Midstream at got we're yes, need a transportation; out deep it's we project, clean business as the look products, terminals view to get So, do a good Yes, as Midstream then, product we're going when refineries. And that. to and we've our of chain. From you standpoint, in space. a in on if value diversity NGL the in of it. And also crude moving far we're

at we look all those. So,

trick those look through shift to a at different three have our one investment not at, When in ways point. We’re we pony business. our midstream this you very-specific businesses

returns off, do we at not mean, more to to good that we're So, make little those. be cautious going to than look as yes, transmission got lines. you come may going But, certainly see we to the we're it us solid a doesn't hence going And commitments are sense. make We're were that shorter are people long-term need. who makes sure We've counterparties. willing

those happen. So,

our our Of going build if other out to But find and pivot be will not, to we're in ways Company. interested we within integration course, that.

Kevin Mitchell

XXXX. EBITDA take the represent reported to we deferred could highlighted Day, billion XXXX. we Midstream, that the would At billion back. have of in quantify $XXX about EBITDA $X.XX to of to just projects million The scale million we that that $X $XXX that by Investor that projects Neil,

about And a a has own it We thinking so, historical PSX. roughly million think PSXP to perspective, that's see I or $XXX year contributed our one it. contributes from you PSXP. DAPL at way of XX% of From about can disclosure,

impact is the about a PSX the So, million $XXX of in ballpark year.

Operator

Evercore Doug ahead. Terreson Please go from ISI.

Your open. line is

Doug Terreson

everybody. Good morning,

Greg Garland

morning. Good

Doug Terreson

levels the implications hallmark specifically, how has the for debt? at et Simultaneously, XX Phillips has been growth is questions question included. So, the as the the capital pandemic a led a financial thinking is lot you're And priorities between financial what recover. how are management, distributions, the guys expected companies, to the over it years? which are, are about about reduced obviously you likely flexibility for and really And over of financially, in given cetera spending, higher So, thinking changes to positive does, debt balance about economic you shareholder my medium-term?

Greg Garland

next we'd probably Well, normalized to approaching can And get allocation. we view of the XX-XX framework back back our mid-year our about the and do we so, Company. to get Yes. something kind that we mid-cycle year, is, as as for think a

the is, two another XXX-day other -- billion, billion I priority first next got the $X of $X got XXXX, over going in comes to due There's a think, We've to then, $X kind be next taking I it’s thing debt the of some facility, debt to year. debt. due. on course clearly, we've say would repayment And it billion three quarter the coming normal comes of in a years.

you the three So, pay about years. to between debt of billion off to $X $X next in think to two trying us billion should

share and conditions start we with back up purchases. pick certainly approaching mid-cycle As

to would 'XX towards probably repayment 'XX investable to going in would opportunities I put be than stuff. thing and to That's debt is, is free other up say what The that and more Midstream shareholder view less anticipated. distribution a capital have our we going are in

this that's time. thinking at So, in how I'm anyway, moment about it

Doug Terreson

IMO And factors the great you current announcements in tally refining Okay. million and million refining of over economics three think to aren't my to day how trough of the question next is the We've X is [indiscernible] few I last the [ph] guys ask barrels either. cycle, closures that specifically, following and seen of sounds Asia. two the reason recent refining And I have because, cycle. about over related closures good. about was are thinking during That then, years, And per the got about closures years. capacity second X in final we

seems like stages that in the closure as could So, track back well. early be it to we of going

just will see years, coming how be thinking how could this side be So, meaningful? want if to think you by supply factor affected in you're the about it

Bob Herman

It’s Doug. here. Hey Bob

think by good I would in kind a and business. expect rationalization is go of is see it XXXX-XXXX Europe with pandemic, we rationalization we expected frankly the in that you we global would some globe and across before since a Even quite the to significant agree really the U.S.

And would so, hangs we've right PES down, lot back. seen depends I in view Whether coming there. agree not got got temporary probably get pushes they that, million right? later. and how and it barrels long forward, The that's back, across We've only We've to other this. be expected the could now. bigger that's the probably a guess, globe, I everybody several we on pandemic it we rationalize sooner COVID-XX than before think closures our come

going not with turnarounds parts ratably people of against you'll So, their to impact run that's make of them, of a in as some they're because see people as maybe I happen it lot world. And can will may I really they I moves these think assets, going think. here up make And, early. long think a the run but expensive decision for some or regulatory either to kind

Greg Garland

in delays the I labor. the thing with spending that only have COVID in put impact would I place is been significant add but new other additions Doug, with facilities, capacity the reductions on existing rationalization capital getting challenges think, not of

but to As projects these environment know, even you significantly. in in in good delayed, more even get will delayed a the get they're tend we're likely to environment, today,

Operator

ahead. Fargo. from Roger Wells go Read Please

Roger Read

on in side specifically market big questions obviously to a see Coast coming the get then was specifically, or one you supply on happening on of is Gulf WCS in? exports I kind Refining, you that what back, If you headwind Chemicals. how here? and On what then, And think two can small of with happen that questions, in thinking kind to think Refining the do bring pretty do Because QX. crude the needs

think second half year? of Just the curious how the you for that of

Brian Mandell

QX over off. close and X.X, in is look in and QX, little which X.X if million July, about the you a we're On about This to Brian. exports, barrels would were typical say at gasoline is exports, day, XX% we about little which QX, XX% is off distillate

we the marketplace. So, In down that more about we're problems. back probably We July, XXs, come in June, high starting refinery marketplace some them even We've see in for level. volumes retail the just see We have in were talked barrels, in and come turned they having XX% in to before. spot barrels coming can out Mexico's their some who problems. they folks to that to with and can see the that can said were utilization. of the We back business pre-COVID think, they’re have

was at quarters. in Phillips Phillips the for next of for we're in QX exported QX. the better we same us XX, more over opportunistic, it’s That and barrels. XX, couple amount better -- XXX,XXX domestically had opportunities exported demand seeing So, we we've Typically

Bob Herman

think, I I might that. on add

That's at that. look X where market this get for mostly in you the to sitting the clean those business, the levels We were back missing right. Pad if overhang, at Coast the think, Gulf piece the point, help in I to right? distillate think. into barrels That's up it’s inventory export need in I inventory the

Kevin Mitchell

coming weekly, pace are European DOE they've off the kind and highs I if U.S. of evident. come Asian U.S. a and you what look we're at out faster inventories, statistics, their distillate seeing than improving the the at But, that's think in the most

Greg Garland

Brian, take do want to WCS you part of question? the

Brian Mandell

of in differentials $X and baked from off On kind of off. QX came for to QX WCS, another about QX $X differentials in to see is we'll we've it, QX, seen about QX, two-thirds

barrels for For XXX,XXX what offline for XXX,XXX -- pipeline seeing maintenance That August, about is we're about production in barrels production. takeaway seeing in than we're production shut-in. another that greater -- Canada means and and

pipeline that's capacity rail be production to So, will months going think what's takeaway. the and differential September few going we'll to closer differential change And rather October. kept -- see the on widen tight. start will the greater We next arms. think that than We in that

Roger Read

Chem then, quarter Thanks. margins in weak side, understand, XXX%. great. wanted And Okay, the I at to obviously you ran the but just on were

margins QX like but are only mid guidance is better probably Sounds XXs. in the

So, when I think but things running when things kind weak underwrote the run guess market at can look were we about the build about QX you the later of a that high a What decisions see better to so so such And pull should way in it, utilization? why less QX little bit I better? pricing? sold maybe we or conditions in think inventories hard

Kevin Mitchell

the really Yes, segment. building inventory Chemicals not in

So, if was $X.XX first XXXX, we're ethane’s but the the $X.XX, $X.XX pushing and you And go in of today, back was margin second in actually got Difficulty] kind quarter May. troughed [Technical $X.XX. to $X.XX about quarter to in it

As the we’re across to prices. seeing rising Europe look and Asia, U.S., you

up So, up are spot $X.XX and $X.XXX. prices Asia $X.XX, contracts in spot the U.S. $X.XX, up Europe contracts

so, crude good consumer of there's strong just rising price movement. products. been for that environment, And demand really a of Part really that reflects price part reflects

I improving. doing bifurcate into petrochemicals the durables, the challenging, The well. really consumer durables of still is so, kind business if and And you say, but consumer would part is

that there's side, trains consumer is on. is is, market think So, hygiene. kind on One which the two are others. mostly facing, going and automotive CPChem where And of

bleach trying the are calling strongly. chemicals the that the from all find And and -- trash more, projects, the and wrapped more things cooking chairs. the garden is far products or cans so, continue disposables, improvement so they’re aren't very home, outside with world other paint doing sanitizer using more And and they're They're buying and staying the nest a wipes they of water using more They're the that across bags And nesting think detergent bottled to guys to people sell plastic. to do about buying the house. polyethylene and term moving those or hand that’s that. home are

density So, more materials things money for It's they're and spending high and really kayaks that. camping like coolers demand. on and positive all

improving say and we're running would And So, strong I demand margins, on that’s demand, into. think side. to constructive I the we're where weak

Operator

Leggate from America. ahead. of go Please Doug Bank

open. is line Your

Doug Leggate

but, cycle balance priorities cash, but of Kevin, your you stock what sheet. of if where of unnecessary visibility sort does on So, talk on far? and as use terms do navigating headwind balance in the Obviously, going you're is the of wonder for see I sheet up for the relative debt could the you so what with tolerance about

Kevin Mitchell

Yes.

you come term debt term to is down of from debt don't in sources a that pay look you're standpoint. part And of construct. about allocation having the capital typically pay-down talk allocation we're of a side the of liquidity That from in as that we've will have year. have be loan, near because billion in $X in beyond us, matures availability if going as other on priority terms start got works of it we need the of we of, next additional available still see to through the to what capital this us So, commented that But shape and still the the okay I sort loan. out prioritization a And for I out walk good first term components we as quarter earlier. we cash, we to the standpoint, that different through on

rate and note in of go of due also a billion coming quarter $X.X the coming another first notes due then, billion maturity, into you have also $X.X as in next $X there year. XXXX. there's is XXXX, floating We And

we couple with plenty So, of so. of to the opportunity sort or years have next over deal this of coming

slightly higher feel debt the went where we'll when pretty than us. in comfortable point. of pretty we still that of That had the I will with take if scheme able I this. I we're think, sheet think, the that to puts is where billion, XXXX have with balance $X.X maturities, a comfortable think things, we'll at into like overall care us we But, feel

Doug Leggate

want on support we’re afraid, for to the a I'm the But, bit We Baker-Shultz topic of going from they might new I'm a election. majors track of different given a months take heard appeared the to -- of articulate the Democratic three I amongst that legislative tax. of others. possibility as plan ahead setting. a guess carbon push something two some months Greg, the it's that ahead election The platform

PSX’s just tax So leave Thanks. I'm official I'll and is there. wondering what position carbon it on

Greg Garland

Yes.

we Congress, done needs our is that prefer to does at tax, that be -- what it policy position really would a see to I partly look that. legislate need what say We haven't view on an We official they Doug, it it had climate and the need carbon is to like. program. because really

which of in we So, local for a looking would that regulations, any for us. and There's state patchwork obviously to less efficient having is a lot be things few a program. key

be important any impact understand able the program. people. And really about and consumers to First of costs I'm climate is the to associated with all, talking for transparency

a recognize be needs gas got emissions. to It it's based, internationally to all market to to to to economy play come. is to used and I it's applicable going also, think many to oil have of And be got years be and sources big really role for wide it companywide, predictable it's that and competitive.

conditions, around that's out method something the So, carbon certainly all we the if those would preferred comes given boundary a that Congress. support tax of

Operator

go please Scotiabank, ahead. from Cheng Paul

Paul Cheng

in some past, Greg, diesel the of business reservation, Couple government that. of and mandate the have about because questions. talked you and renewable have all

or with perhaps everything the you curious view willing administration, be on on is if yes, to pandemic like that going may -- that long And you the that you have be big Democratic or will how that haul. does and change? Just targeting in your also that may that business and

Greg Garland

specifically. kind back that question to and going I'm come Bob in we're then doing let and about of what renewables, address talk I'll

Bob Herman

Okay.

last in over are year So, refinery or. Humber business, our currently, the we for a at renewables

any get We renewable to a to to it into got about the oil, now So, flight logistics committed and it cat in cracker Nevada. right, making the around in a running commercial a in project co-processing the processing we've being It's we've right And X,XXX actually diesel. X,XXX raise by We've third-party are problem a built barrels renewable don't been our used plant. barrels day. on about that that front, it. day to have a cooking there backing plants two

of take them those product of feedstock and the So, XXX% off supply we'll two plants.

So, to needs day renewable of our disposal between at California. own those we'll in meet have two, that's about our the -- that XX,XXX needs a diesel barrels

will project to renewable convert about that treater barrels X,XXX day at got another or renewable a addition, our In a run refinery hydro we've our Francisco diesel. make so San progress of feedstocks, in

understand what build does capacity we Beyond do renewable make across system. sense more that, to our continue to it engineering the to

we project XX,XXX had there. make certainty a to you in in As day Washington could get renewable that at big of up state a barrels We know, diesel. our Ferndale permit, environment not refinery up

evaluate But continuing West the options us the sense we to stopped hasn't make to renewables. that on as Coast Gulf and where project. it canceled from do So, other Coast, to our that at plants does more

renewable to there Our going fundamental long be belief it's is term. need and is there the

So, the we and particular. to of meet find way diesel renewable help for need demand market a in to the

Greg Garland

I point use where this we mode. has been our to approach So, at think, certainly capital existing to assets partner can in light and a

So, the maybe I the of the the that going happening, Coast, for to how But, watch what's fuel price U.S., think the as on low credit still place East Coast, about up to portfolio gets standard, you be carbon Coast in credit there's set. the moving worry West and renewables. particularly a I entire West

Paul Cheng

Great.

say how be that be the that you or assess [indiscernible] that think say want cash business it business long-term to have this a niche for will overall So, do some and and too don't really flow, willing your your let's you that is is to big as big? you in percentage, you asset just

Greg Garland

yet, would or we remain changed what view credits about that's kind views XX% is, our But, exposed our and we Well, current for we view XX%. of this market. our requirements, And probably of cover either partner we for strategy our in to haven't build that is Paul. probably current about current

Operator

James, please Raymond from Jenkins Justin go ahead.

Your line is open.

Justin Jenkins

question stand own follow-up that the events Access earlier. would might or DAPL supportive I some financially Neil's on everyone. willing to more just be the I'm options to morning, Thanks. to has maybe to otherwise MLP? is down PSXP shut its like curious on Dakota in case, than be PSX about Good want that entertain the

Kevin Mitchell

Yes. Justin, Kevin. it's

play distribution; And spending. look disposal, at terms one it's you But decisions to to capital are capital this two that at around high position. of spending its two levers or those a pretty So, may fundamentally, or and helping may lot got as that not the that of of may hard and right, when it's MLP, happen the course know, in year. the this an year. end the speculate out. its activities But, coming is projects then, will of you is financial the is level And how over

also it flexibility, step at you sit PSXP, be -- in the position. But, future say, there'll I'd terms of in look is MLP. what look to so, a in back you the as And into a very needs CapEx what more it goes at this as strong years into and

on a works time, last of to hard strategy for place transactions PSX MLP really on same financial the and almost been good the the on PSXP both It's of sponsor know strong -- actually have that's billion MLP all sheet a really year that. between you around So, the and a of at all and years, rating. taken at and least of we've $X.X EBITDA. around last all And the they've generated, in policy -- done that may balance of the PSXP, what credit got several sort managed strong over very at lay provided function we And support sheet, it basis, for It's a that was a sponsor. that how event other conservative what happen it's around position. sort might balance don't speculate the be fair

It's just assets. it's is great just one though is bear a DAPL asset fee-based within predominantly mind, I'll PSXP portfolio. it driven leave is there. DAPL probably comment is, very also One a think And significant I a asset, in while broader it asset, asset, portfolio. is one other -- So, good so the it's

be its will PSXP able this that way confident pretty work through we're so, to situation. And whole

Justin Jenkins

I appreciate Kevin. answer, the Understood.

on a question one were quick as is you just pretty well high. flow second statement, distributions think for the cash JV I

CPChem the a in distribution, good nature? one mentioned You of time is chunk that

Kevin Mitchell

Yes.

QX. in at high I basis, in QX, think, -- look CPChem to probably were to year-to-date were and a they what the you it's fair distributions on at want look

earnings that And on of benefit. it was the distributed so, a distributed standpoint. earnings from an think it's -- flow they appropriate under driver cash shows to more probably big And it because that of up statement. in like QX It an equity under that's under

Operator

from Gupta Manav go ahead. Credit Suisse, Please

Your line is open.

Manav Gupta

Hey, quick guys, question. a

either where regions the where and and wholesale question. You recovery? you're like little And footprint strongest pre-pandemic a to of lagging understand levels? trying there actually a demand are follow-up operations, Roger’s to seeing gasoline the the regions retail think the bit versus demand you are may domestically, the where the very light And is and regions are recover have which which average? Domestically, never to

Greg Garland

be work. back We to the that at that look difference of got something this that actually that that's office morning, say get There's office companies get we on at of any guess see pads My makes the in have that work. that more ideas hard the at about to seeing XX whether and it's see the in. we've West and the will destruction. there we're to we're that operating a We of each the going to in been know, back at we’re schools, XX% they're fact, we'll while, in. would when seconds continued say a Coast, back that announced operating the this I demand earlier don't know for future, work. destruction work gasoline, way pads didn't in people I in took that a positive our same exchange to that being would demand to

and So, this like been. I work By normal, think term. it back be short I year, think has of somewhat people will to middle be just next is the will

Manav Gupta

follow-up question quick Canadian the a side. And on again

of crude. buyers Canadian the biggest You have are you one of expenses,

from or volumes volumes May, kind this three April or Canada what months of -- terms just ago? two in you point increase versus, of May at versus are of seeing time, In or

Greg Garland

from that’s XXX,XXX over little We're pipelines, exported a the of amount, roughly the Canada of importing been same logistics, out West and a Coast. we've day. for So, limited crude kind on barrels Canada limits

Manav Gupta

you. Thank

Operator

please Barclays, from Chen Theresa ahead. go

open. is Your line

Theresa Chen

you taking for Hi. Thank question. my

system be $XXX EBITDA. of on the understand if Ferndale? Bayway to differentials will I rail you Can shutdown the event talk out, end you by your PSX, import that and blow a accrued front. in at million potential of can of first roughly DAPL and about So, do year offsets per

Greg Garland

those We barrels additional day. day at another a extra think we'll XX% a Bakken. we move in maybe Ferndale differentials. both the And rail to crude of XX,XXX barrels. and by get We're can we position move currently, a XXX,XXX refineries look taking wider, to a So, to be up by to they barrels Bayway from as get

Theresa Chen

Got it. on And to Brian, a structural question follow-up Manav’s demand.

things and So, and progressed -- where of for about in Germany recovering to talk Austria, the steadily when XX% more you close have markets example. demand to normal,

are XX%? you talk up that? So, about it can should Is think about we you like plateauing to seeing structural at How continuing recover, X% to losses?

Brian Mandell

here gone gone I and you in affect of mean, isn't just still U.S. it like Austria, the can in that's think Germany not is COVID -- COVID I

point So, we or they of that that would current where of rate, to some People we want drive. XXX% out, kind to the some at to therapeutic cure is expect at get have want COVID. But to back type get to instructional.

So, effects just the of it's we COVID-XX. lingering think

Operator

ahead. go Prashant please Rao Citi, from

open. is line Your

Prashant Rao

question. the taking for Thanks Hi.

the Oak should coming Gray are got like Sweeney. of moving product -- back demand parts pace Throughput sense so demands to there's operations, lot a it on least leave look two a work kind to with you've on and parts and the volumes get at but Sort is of up. just the at crude I'll a done tie-in two-part, of they I -- like of Midstream. it, both here, with wanted one are they full feels are

second help is per of How earnings of least seems helpful get for in two then is that But, should from of of we sort that as if of I that from year. that both. what's north I to the So, assumption. now. to think to some it scope Boe for half half the of it back a those of get -- the levels, snapback come if per trend like volume-driven the year, interrelated. on ultimately know, trajectory much million I the margin should XQ how of sort or more of of think stand there, sort the color your parts, earnings So, XQ margin if were, Does you where then, could back, And driven? wanted year much where back year? are fair last right part, at this quarter. bottom is that's sense that you and $XXX this volumes be towards feels getting really of that something sort us the a -- be we on, about how to the would two get back about on and

Greg Garland

we've that with so systems you're to all you The got and going first look Oak that when at say on, part, I our right. the forth, that and can on activity regard Gray

go going Certainly, progressively does Obviously, the Second the like quarter. But, seen it's to through up bottom a that. little move was second trough. we've quarter, of really tough kind work seem the at the out it the with our way through things to of wave pandemic. we're

We've that So on. would currently. I say of we got that activity is feel going way a lot --

example I'm Gray tell up We you we're running. on Oak, pleased that have for to and seen,

the see and of we we and seen quarter, were for have which we're in which middle quarter. picked not second global up, the We near have is the currently, [ph] volumes is good, where

them through volumes are in overall NGL the directionally our see month-to-month going we improving. that's all When direction. So, of right system,

the moving to see you back directionally, middle time is it year So where takes of good that a mid of we the It's when cycle. banks point, pretty we're think length We still start next in recover. right the feel to it's normalize direction. in

Kevin Mitchell

thing I the to I'd only think, that. maybe add

Oak those X, think Fracs X, pretty about much of Gray fixed you kind fee. As are

commodity So, downtime exposure some the And we the of export. still exposure commodity quarter, we lot there. course in Where tie-in. LPG is there's really had around not second of for a have the

more see also volume and export think the of also dock get a So, we dock and lighter we the frac the improvement out across the some quarter. dock little do in fees. terms ran opportunities barrels across and down fees the second give increase didn't some to But, that we'll went in

set And us. big that's $XXX the probably, is. million, think that's So exposure more the the scope, opportunity where it total if the about you than for in

Greg Garland

that And I on Prashant, investment projects the these commitments as support and long-term underwritten think, know the shipper return are these you projects. by

Operator

go Ryan Todd, Simmons ahead. Energy, please

Your line is open.

Ryan Todd

Coast on of Maybe regional or of talk that East rates quick you Despite Martinez the the see how from still Can other about follow-ups struggling MPC’s demand are a regions? Coast Refinery, utilization to Coast? fundamentals utilization couple maybe the relative the are different of driving Refining. the those what recovery Gulf trough of for downturn rates you kind the in versus paths idling West

Greg Garland

Yes.

think different don't utilization. that actually, our system I see difference we look you our much across if pads, at in

balance, pads the think, pad. above wisdom California in right, I was refinery Right conventional if think market for I the we're something that. long is before were now, in California we particular, pandemic in today, sometimes

there the system out also. refining require market running be constructive So, currently California pretty across to our low-XXs than really the and system, even don't the down, with of Martinez are. the We're that's for harder we demands in

Ryan Todd

further ask and speak the build Okay, or the they retail have quarter. organically how your results retail spot side. started to to commodity I here? The been the West prices to thanks. looking maybe And to then, on wanted outlook relative JV were opportunities again marketing this maybe bright in on quarter, have Coast third is can from you normalize as

Kevin Mitchell

joint finished earlier which West year, fortunate most venture retail late Obviously, this time for the the Coast rest We've last of is we completed us. month.

margins XX and -- and EBITDA, in would been million XX joint a on coast in $XX driven by venture, barrels terms it about that we $XX said it's million about So, cash what venture. for we've be year to taken value the of million the million back the to joint West

where we're So, it is. happy of about kind

period to earlier, we integrate joint mentioned venture where on for we're Of as our on more integration and the opportunities track. large during America, even Coast and but at think and particularly to into course, take West continue to very have look think We tell refining we'll business. And it's in to opportunities opportunities grow looking integrate, COVID hard Middle business. important we to Greg a the that particularly the is it's

Operator

now I the over the today's will now have of call. We back turn to call reached end Jeff.

Jeff Dietert

Phillips Thank you, all of XX. for David. Thank in you your interest

questions additional have you. please or Brent myself. If contact you today's call, after Thank

Operator

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

disconnect. now You may

Phillips 66 (PSX) 31 Jul 202020 Q2 Earnings call transcript