PSX - Earnings call transcript Q4 2020

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Operator

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

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

Greg Garland

everyone, that worked morning the could you Good tirelessly many challenges unprecedented start Jeff. have in grateful people of to who to this the and and joining At not last of Thanks, and COVID-XX year, we vaccines. XXXX. We're the we us envisioned today. develop proud diligently thank Okay. face have for

months quarter, have of optimistic impact In are positive in or $X.XX of ahead. million we conditions $XXX fourth the challenged. vaccines economic Market We the had remain the an recovery loss will about on adjusted share. per

by destruction with associated demand affected the be to continue business refining Our pandemic.

generation repurchases. investment our secure more took $XXX flow spending steps per additional reductions grade combined to Pipeline, liquidity Sweeny we our ratings, costs million sustain capital cut Oak the decisive us with to segment, For We in $X.XX pipeline $XXX and suspend the in maintain Midstream navigate diversified strong adjusted projects well of capital expansion. Phase largest dividend spending, X project flexibility and cost or major financial reduce including with provided the year, our than million. by crisis. growth cash share in from our We Hub actions portfolio, the in early to We had exceeded These loss million our an to the and operated share. date $XXX completed credit and Gray

with people continues focus to remain on our safe, and the of our million the organizations, of In toward including XXXX, employees our $XX operations communities. year strategy. our wellbeing history company. the contributed company, the distractions be of we Our charitable relief. reliable disaster safest and COVID-XX the on challenges in was to XXXX our pandemic, of our the million $X Even execution in focused in

X.XX was Our total injury recordable XXXX. rate industry-leading rate our of XX% than better in

Company, budget Partners, safety the disciplined growing $XX competitive secure, of ever. the and a In process sheet reduction December, Phillips exchanges. capital $X.X our announced In capital Entering our We compared and in a returned cash formed generated and is we flow maintain to Our allocation. balance $X.X and and there strong shareholders. by through billion years. is includes We'll uncertainty market. continue committed share billion of Since best remain our we performance environmental to shareholders billion was operating we $X XXXX, to XX% returned approximately dividends, improved still we the to and XXXX billion that recent XXXX, XX to dividend. repurchases

generation debt billion as In debt. cash of improves. So $X to it's we approximately levels repayment. plan capital for pre-COVID debt added reduce We XXXX, to

environmental sustaining budget, of XXXX $X.X includes and reliability, billion capital Our safety capital for projects.

renewable million fuels. in-flight projects, addition, of investments growth and directed In is capital towards $XXX

day At Upon million Cedar of facilities our mid-XXXX. have fourth construction to in capacity. area. long-term day commitments to XX Upon At project of Christi crude product the in capacity construction production In Sweeny of have of is the XXXX. XXXX, the a commenced will long-term interest October. advance will total customer Bayou We connecting resume and than we fourth to The At XXX,XXX per Since Partners completion capacity our XX.X a half owns barrels day. the oil recently South started of the at of the barrels backed is operations export fourth commenced X includes ethylene advancing storage total we Clemens Frac Sweeny the capacity Terminal, Beaumont and storage first doubled petrochemical Phillips second During fractionation and docks continued growth terminal and bringing we supported capacity. Frac X dock its the expected storage in be CXG approved debottleneck has the per This dock Hub increase in million program. Hub, Texas completed barrels quarter. optimization that completed acquiring the and operations doubled a barrels. Phillips of terminal. in the September completion, Pipeline, in up plan capacity fractionator storage in terminal the is Chemicals, quarter, XXX,XXX projects in its and facility, of dock Caverns in will second capacity more by by the XXX,XXX crude the Corpus polyethylene. XX opportunities. CPChem barrels XX% The its expected to dock X.X terminal commitments. and the quarter Terminal, Gateway Partners of XXXX, throughput operations

is CPChem an production. expansion addition, for this normal developing olefins In alpha

the CPChem Rodeo recycled at received Francisco CPChem quarter, Bayou at advancing first the Cedar and of of finding from elimination facility project plastics announced certification. We're the sustainable PLUS solutions, waste Refinery. its San During including committed Renewed its to ISCC our polyethylene remains production in environment. plastic

we will Marketing, recently investment In barrels day California conversion early diesel Full to in which per XX%. XX,XXX hydrotreater day. expected acquired advanced the gas retail to XX of extending and sites our in barrels facility We complete through will plant's low is and conversion the placement participation to over the carbon value project the Central in in to of This This of region, the venture. our strong deliver production fostered retail. strategy by and produce mid-XXXX, digital produce of fuels. and expect capital greenhouse long-term This XXXX optimize renewable its emissions predict X,XXX also refinery digital for a securing efficient returns a chain reduce processes, objectives. unit and aligns helps including systems of intelligence across We've maintenance efforts, work joint requirements XXX performance. innovation implemented to processing our technologies, new with Phillips artificial company transformation meet

investments this technologies. We our pursue charged & energy portfolio, establishing Company's such group Research Energy Energy within us business with Earlier future. low this Our announced lower with competitively emerging renewable carbon opportunities we and as platform. work company group is to making commercialize Emerging organization, is for to position our fuels, carbon Innovation month, our a

to example, that of clean collaboration grant potential Phillips has Tech, received the the electrolysis Georgia Department fuels. COX of For support and a the from on will to technology XX Energy, development with convert U.S. that

same shareholder Our committed to challenge, company is addressing time climate the deliver the returns. global at

the that, results. to Kevin call with financial I'll over So the review to turn

Kevin Mitchell

you, loss on We everyone. overview reported Thank our Greg. quarter million. Hello, $XXX summarize Starting with a fourth we Slide of an results. X,

cash paid had or $XXX projects. the flow $X.XX affiliates $XXX during million. Excluding an million, including million Capital adjusted operating in share. $XXX for of generated of fourth equity We per quarter special million from including for We loss million was spending $XXX growth distributions the of dividends we $XXX quarter. million $XXX items,

quarter lower million. pre-tax X the The pre-tax offset Slide lower losses the to down The by decrease $XX equity quarter. our decrease as the demonstrated down the on tax quarter of barrels Sand day due to a the lower contributed in third was utilization. The Midstream reduced impacts This maintenance in income quarter. income variance Also operating $XXX Other was $XXX XXX,XXX This offset was Slide Midstream million income $XX in earnings results. $X million other partially to earnings volumes, million quarter, quarter. Sweeny prior back NGL the pre-tax to and adjusted X higher million quarter-over-quarter, was Hub, the per during which $X X. XX equity equity from to the $XXX the propane Sweeny pre-tax $XX partially ability terminal the of facility complex from was loaded declined. a higher adjusted had Pipeline. by Moving slide well quarter, from reduction to driven previous the as adjusted the LPG adjusted from Freeport quarter. reflecting Chemicals This and earnings, Bakken DCP of segments lower fourth previous third Fracs million and of the decrease timing while adjusted adjusted million, previous was shows results related operations refinery reflecting to fourth CARES quarter was quarter. carry the export capacity. tax Fourth our cargoes $XX The periods. design costs. averaged Act due the increased results. million Sweeny and net at income shows Hills income to record fractionation by from pipeline Pipeline volumes previous of pre-tax under above Transportation relates favorable fractionation and the fourth trading butane million, income ramp-up we X,

quarter $XX pre-tax including is Turning O&P affiliates, million million. maintenance to increased Polyolefins record primarily million, pre-tax income equity polyethylene from global by was $X million Olefins sales medical from turnaround partially supported supplies. a margins. for Adjusted was Slide adjusted $XX quarter offset adjusted $XXX on third due to to international from $XXX volumes demand, utilization quarter. higher the income margins, Chemicals by food SA&S up by set increase pre-tax the XXX% and consumer improved new X. CPChem and The higher higher previous in Fourth earnings XXXX. income costs. and polyethylene Global packaging driven million, due was

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

the of in the of safely turnaround mid-September turnaround Alliance the maintenance quarter operations largely results last Refining for refinery million plant's billion with yield quarter per the Market million, market increased X. there during less it maintenance pre-tax our decreased Sally an refineries. $XX product XX%. to and Pre-tax capture. Both Maintenance at fourth Market was utilization quarter primarily $X.XX for Crude $XX was from million Alliance of quarter. the was capture market per overall $X.XX reflect crack third XX% in and than the capture We month. and to pre-tax costs Slide and quarter. for fourth adjusted were quarter. remain challenging covers in activities configuration last of activity. in X was fourth XX%. quarter. the shutdown Realized Hurricane prior fourth quarter loss XX%. in costs by Slide to barrel quarter. is distillate barrel by driven capture were clean was adjusted conditions. preparation fourth loss market compared earlier Refining the continued impacted Refinery. Turning The premised up more impact in market resumed compared higher quarter The per in make periods $XXX the an on $X.X turnaround and was We $X.XX margin crack. compared barrel X:X:X the XX% X:X:X The gasoline resulted this previous The market and

per of per barrel the quarter the of from barrel, Losses $X.XX in gasoline secondary our barrel improved quarter, per per $X.XX During from relative barrel of feedstock the barrel, prior were the capture last NGL resulting per to improved per decreased modest prices products compared $X.XX Losses to previous crack a barrel crude. quarter. from $X.XX to distillate $X.XX improved $X.XX was due improvement crack quarter. from the

category impacts. The costs, This barrel. and per category freight RINs, realizations realized inventory $X.XX reduced margins clean product by other includes

a quarter $XXX compared million and lubricant in quarter. XXX,XXX per margins. billion in million, the the other marketing were were pre-tax to volumes of was on also higher working decreased barrels employee-related reflecting results this adjusted million pre-tax quarter. was to to rising capitalized in income $XXX XXXX. Specialties XX due prior We was full $X.X in senior primarily quarter, lower $XX impacted and Partners and $XX day. was million included paid Marketing of million $XXX loan. million million This $X.XX year-end since the billion Moving during highest This adjusted Net cash shows million. for Adjusted due primarily costs lower had from an the benefit a million, lower billion by dividends. $X.XX the of of billion, with notes Corporate started and $XXX million On the the $XXX operations the of Refined and income Capital Slide quarter. increase fourth the on capital in quarter realized term on COVID-XX. spin-off balance. from Other revolver. debt change due Other product $XXX million million. were lower were prices quarter included XX, decreased prior quarter. was the its cash exports interest segment fourth largely with related $XXX to to Cash Specialties due expenses. of fourth drawdown repayment in $XXX inventory. pre-tax lower issuances Slide Slide finished Marketing XX while We and year $XXX And the to grew margins, $XXX Phillips in We spending $X.X the XX. XXXX

$XXX we of billion financial and We billion the cash of or at $X.XX had our $X.X CPChem. consolidated end from of Phillips was financing of December balance approximately of approximately affiliates $X.X Slide We cash XX cash billion. Partners. At shows a million Our results ending a operations million with the of was for on liquidity, $X had credit capacity use of from flow. million cash facilities had $X.X summarize was XXst, ratio from In There at including Distributions cash $XXX XX%. million. Phillips an operating net $XXX XX we $X.XX available net On $X.X capital. We the billion We Phillips $X.X XX loss debt Cash to balance capital at XXXX and year. capital fourth Slide working excluding billion, reflecting per billion. share. million billion, a plus was XX XX, quarter, flow. $XXX billion $X.X XX billion working full Phillips $X.X our billion adjusted committed equity we our $XXX of from Partners. began At debt a at $X.X of XXXX, year generated totaled our activities. receive

Capital We and $XXX recovers billion. in program investment of grade of my $X $X.X strong billion debt our repurchase generation We March. through returned prioritize credit repurchases. billion share and to spending conservative a dividends we'll cash operating the We $X.X results. review This As committed ratings. repayments. and sheet of remain balance shareholders financial to million suspended concludes was share

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

to to expect $XXX between to be million We million quarter in $XXX first quarter $XXX between corporate We turnaround million. expenses million first and pre-tax anticipate come and other pre-tax. $XXX costs

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

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

Operator

ISI. Doug Evercore ahead. Please Instructions] Terreson go [Operator with

open. is line Your

Doug Terreson

year. you last on decades. also was only capital and executed projects guys that but cost operating five most its the four reduction years performance feature of the major in notable to what and of a plans, Was one not completed Greg, tumultuous recent company

So far Simultaneously, likely energy but the of to investments to the feature on were their that as change kudos year seems sector. industry the diversification did of investors the while it also taking pace strong expect which from last be you energy care as clear. and relates performance. of only team to The quickening, business and like policy, not in mix, in benefits

to changing more do do strategic of you questions. got One, environment? - questions. than for think XX the to tactical And So how evolving how past and more you Two, be navigate it's the dexterity guys the a same? and obvious there about think about couple likely three, how or you this strategy Phillips maybe think do three then needed way? are along in implications I've financial for So,

Greg Garland

Probably of you impact lot gave me there, Doug. Thanks. a

though. start So [indiscernible] with I will

capital our to us choose as returning we And allocation for and what above its - strategy capital, of that's in cost core that weighted shareholders, invest our average discipline, earning capital company. to do. what a to we think I capital in remains returns

So stars those lines we think about about guiding think and this, or guiding transition. are as we our energy

three we're think of in in in Clearly how response about to near it term, tend the navigate I Doug, terms our it. fuels we're longer midterm term, going buckets, we're through near term, So renewable and and a to pathway, what building doing.

a X,XXX mid-year barrels a full have So we'll there. this year, Rodeo, XXXX, By a conversion, working co-processing of day our than facility first a We're moving more XX,XXX a XX,XXX barrels we'll of the day We're up U.K., of barrels part with day. day. that in to of renewable facility. coming a the today day barrels X,XXX price renewables kind where barrels X,XXX Humber out start

of EBITDA, as installers middle decade, point business. so, have billion we we our a And should fuels think we approach the as about, the the of renewable

certainly So about. that's pathway one we think

kind second the we're specialty medium the we'll we of The and to more battery bucket term. to to help but with lower And you as improve go that, cost. work into of and anode-production in supplier is performance graphite improve continue amine batteries, the also know

to fueling contributions Certainly, is term. stations that's hydrogen And EV's one that are grow, EVs there in also business going we batteries And around think I to is then grow and think Europe. the nice terms in battery were we longer and going sales And to and bring so what portion hydrogen, of globally they of as I we grow. maybe can grow, they're the make going third technologies. see to building

Humber We're hydrogen. working at first fuels the Kingdom consortium electrolysis the taken So is our Gigastack the and the which of to reduce our we're carbon wind using step, produced content Humber. that United green with refinery that's in in a offshore

and and it. hydrogen is of hydrogen, about as really I consumers And think we big industry producers our so, understand

I continue transportation moving think way big fuels we'll probably hydrogen hydrogen around the for out. to But build is in longer-term. into pathway a decades

got seen but and from have we grant talked the taking solid really COX and about that then a cell it oxide around our to cell clean we comments may running technology fuels. You that's today, the produce in the DOE opening through fuel fuel and

pathway so, us And too. for a probably is there there

we is returns challenges use marketing We idea Rodeo. converted some the where do can, been about they're earn to to the before great solve have, of And engineers climate and to providing or weighted people the business the reliable, help So of think have here our equipment that we earn industry. above whole participate affordable of have. time, I efficient problem we're that's the about their think I they're the we existing try XX want people, understand on work in day. this scientists a where want approach to exploit is abundant need that can Doug returns. want to, in energy thing, they're capital. their transition, complexity it, energy energy to we - today, that the the challenge planet at we solvers, industry something people what we the million positioned that we if But I dual technology best I of average the addressing are capital people that same Yes, that best think like can are and base we the other certainly that cost find doing our where to you is, out at We solutions, we point think want

if questions, as know - our play And industry but with role energy know to you three, could so optimist and ahead, best answered will that. transition up. to certainly I'm maybe I and forward. want have the the don't I I big I you think we And and an did in go move always, this follow But asked three I if I company

Doug Terreson

Greg. say didn't you, Well, no. interrupt ahead of like I shareholder was sounds a responsible and strategy, to just but so I kind finish, It go oriented want

Greg Garland

on yesterday up know I recognize was we didn't - if you're and Well, point. a transition would also Joe we point we tie to going I coming with made it a my just say remiss buddy

the very business of do long some that's hard period of top really made that great for a game been You your calls, at with the you're you've time to in.

a But industry had when to had always heart. been challenge challenged you at courage the need you've our company. shareholder friend we yet, be and of and interest to You've us

to around So best you done, very miss I and in you the the future. you we'll wish would tell really we see well and you, hopefully going the for energy we're patch

Doug Terreson

them. Those Well, thanks, are Greg. appreciate kind I comments and

You guys executed. had support, to success because model a have really for you've and easy you've been

And best for again well of so, and you team and you example. this for very luck, future, your the company position and the thanks

Operator

Neil go Please Mehta with Goldman Sachs. ahead.

Your line open. is

Neil Mehta

ago, target. point? first think that a yeah, at I anchor? different company a back can can that's far share on, this question still just right I you the it's But billion an think And the from tell, one, do your but the minuses laid and pieces $X moving - it the you as Day obviously $X going flow the to pluses about guess think, XXXX, you going perspective went recognizing ago, as are Analyst you right all feels $X But long-term billion Greg, out had to billion And it's to now, ago, that is I what into billion, like capitalize $X cash as just eternity forward. does the pandemic, target? to hard

Greg Garland

off mid-cycle think, I don't think Yes, me. we call and yet. other make help can has really Jeff and folks changed start then, that I I'll a

do it's to early that. that I think

probably we million plans to pipeline. and announced run at pause of we growth opportunities terms not because simply to as To think going kind and to under of that capital terms not that also the things In - read other Red We're the pipeline $XXX the upstream we're the of million midstream plan of raise we we plan find wasn't opportunities, stopped other going the be generator our well big EBITDA review we just a to in just numbers. that's to do we've But continue optimization done working have so strategy that of that, to lot to laid those it. how some Oak [indiscernible] you work to there. that's had on. if day, it's the $XXX going going around we've remember that so mid-cycle of our or us. Certainly, itself that XX in in COVID, All injuries come somewhere work, you and the into response going kind a we're around million reoriented available we're going value here. may and was so chain prosecute $XXX I - has that to predicated, we to

been We in haven't conditions. mid-cycle

so We into XXXX, we're part get we into that And around XXXX, pretty I in portfolio. but the not we that the if in to and mid-cycle recover there, got, the of conditions achieve achieving results. think XXXX we back move we're optimistic

Jeff, don't anything on think if know I you would there But be to my and So, views. that. to want add I that tag

Jeff Dietert

Yes.

demand market, I Gulf that we CPChem, JV where $X.X really there project. conditions, and had in X Roswell in Coast Fracs all and early generated obviously a approach, the Clemens, year they strong with contributions full X EBITDA we billion Gateway outlook from had a $X.X for market in not tough year. we've segment, South there, of XXXX with nicely contributing contributions the $X.X think is XXXX. by some have retail in Sweeny kind of had within and this year there changed the acquisition X, is The last Texas a Marketing Midstream we've we potential future billion of in, billion up made of and EBITDA held fee-based supported hits EBITDA baked the that

as still I forward. is So we there lot think to be look encouraged a about

Neil Mehta

generating there XX%, low-XXs And in on system-wide call tough running was quarter the fourth on utilization think is be utilization back for dependent. is it follow-up a kind trajectory you're recognizing thumb I profit? of business of of think view the refining to term, Do to And a it's January. have a there when you the just utilization good the and obviously demand it of near it, pre-tax was in gets the is certain refining, you and rule of was sort level, to a very much industry, going

Bob Herman

Herman. is This Yes.

we months summer, we if out would our But and obviously here. over a the public got that market the get expect and the [indiscernible] vaccines, good following think to people to school, first utilizations, barrels. when to leads think work, Greg you timing, to But got all a on out do the to. type to the start kind distillate to the better a we signal gasoline get extent. you we as utilizations, that we've think of the higher believe life certainly of the weekend. get summer going step And get roads that able portion near-term at to be is back I think by more government lesser add capacity back on the kind future back. go their opening starts is comments, We of back normal of going by of you level. with running normal to it to about will to more efficient on American and cards, his make of about getting a have how spreading vaccinated get in to see right. cost pull and to referenced will will out thumb back and kind what the and that more fuels That's I And a to that soccer we the the should going a burn going that demand don't lead We more to rule for and people using

to because leads think then get utilization normalized should of is plants kind to the more utilization are really differentials that you up, together be how We of out our we higher barrels gets salary play have know profitability. always help of on our kind more about is got the costs, lot there get and on more industry, market efficient at of I get to that move the return. more crack back and market. really, crude going efficient clean run and that and rises more and there in we to product we crude back Some high capture rates, spreads to and higher rates, run to all heavy signal across need out the rates those covering primarily pull utilization more have and that's the path a cracking, a your

Operator

JPMorgan. ahead. Please Phil Gresh go with

Your line is open.

Phil Gresh

strong wanted just business, outlook in think be little question result in continue your and of to peers as Chemicals for It had thoughts lag have results and business, many And bit get there some first to maybe a strong the put more headwinds the a the quarter. particular fourth on of here or cost margins have own effect quarter. been in the your extremely on there your First your like I a well. seems

to and So something outlook that you bit elaborate might here as be able we your XXXX? a enter on

Greg Garland

Well, chemicals, Phil. constructive we're

that sales still North where Europe strong in think really demand has run I is had regions all America. volumes. or see We CPChem that that across segment. is record there really well China,

either didn't other seen or related has on paused startup delays sites. have as see economic-related, we've Partners thing construction COVID Partners The seen people new workers is construction, slowed been big we've in they facilities, of been the these

year. did us. XXXX, then actually the this At point So equivalent in point, last at and - to better point this they look balances

delta think that. chest margins, past. And in times pretty as it's geography unusual of the to of operating that And rates. marker of certainly kind it's optimistic and are the - you I think about margins, deviate marker seen not portfolio, timing, we've a so CPChem we're Margins the around it's many see value it's

XX there - go poly And If were contract your about think you then December. essentially XX - you to think is export-oriented just fourth those a sales up about CPChem portfolio, price November, the are polyethylene days flat, they portfolio, fully part geography, the realizing could increases October, of are they that so through of contract be in if the of probably obviously of quarter, third lag really sales. prices

what the prices U.S. about that think all think and have above the But price said delta. And good so it's above you that. at think XXXX. are higher sight market I looking price Asian of you're the that line you mid-cycle margins mean, under also usually by usually certainly North we and to Europe of when for is mid-cycle freight higher today. American play into been probably margins price, So about we geographic that we the mix having our have, that, comes The $X.XX

confident. feel we So

you about of want propylene talk going the Tim, some there things too. think, on I or to

Tim Roberts

Yes, along, to in your to I and what's and had a regard the well summarized, we with especially different consumable side. Chemicals, had lain industries lot really you well, Greg, demand it to March, come what think, COVID had comments, probably important in is impact did that we demand. regard on an of is see With really

benefited CPChem has consumables very that. really really which exposure remain So off. which fell strong, a larger to Durables

durables the So back, are Phil more what now, think there coming is, durables. exposure to I have competitors of as some you're seeing other out

that is it's reducing that's they're overall a on. rebalancing now durables, out which consumables, And which are So But people going buying good because good. good. out, is the thing still buying back

should it where pivot to started they hopefully, towards economy to building back be. again So

Phil Gresh

for A second Kevin. guess question, is probably I this

past, you the of you've But that you about coverage I refund targets? flow cash factor. flow and the think tax be and dividend profile, think one how progression the that As think about the free and a sheet generation post balance cash do about will in talked Thanks. coming sheet, in, balance XXXX

Kevin Mitchell

a of the positive as we'll Yes, when show generations Phil, certainly in receivables. will so be tax will because up one - be cash working - will it element it capital collecting our on XXXX

we of billion. then about And year-end first the $X.X year. that receivable the come have the the remainder quarter, probably second So tax towards year, we of and in, end of in two-thirds a at - the by half expect of to

cash significant generation. that's of a component So

and and as 'XX bad you in XXXX, conditions XXXX, in compared when in better about full were 'XX. we're projecting XXXX. back step the as so think - year things full think full year year you to And When about

capital, had we $X.X billion XXXX. in of So working generation cash free

a So the stronger that, we'd plus impact expect number positive than working from capital.

only not capital covering pretty program, us line the sight is to is $X.X there which so, And clear to billion. of

billion as So before, a then lot the down And of program progress on some we've previous It's expect the we - we've that. have $X.X capital debt. to taken billion of years. able and $X.X around make of talked flexibility paying lot capital dividends, relative a we'd to of some to be

due without either debt to callable do that's of or terms coming is debt, In that. that any penalty

to the we'll good to that to XXXX we maintain credit that And it's to over AX want way debt getting the able back BBB+. the to confident good about strength. of able important think of the feel important that couple want where investment flexibility next be those, We have over to where get make financial we to to all able and us, be sheet some of sort it strong I those not years. be. ratings probably that pretty progress, to course want down, we've So we and get that's balance like the we added maintain - feel to to we came grade We'd be

Operator

Please Roger go with ahead. Wells Read Fargo.

Your line is open.

Roger Read

follow going path still little on down. Maybe kind the a to up is of

look You things was CPChem talked I area. hampered taking you all quarter, issues in late midstream QX started at a that through QX that the about this up, the but of

So if see in cost. could the on of of of Not pace there? expectation on I so the but the more I much start-up? wanted given revenue, to maybe the guess so as maybe missed in some performance then And issues type QX you quantify and QX, I've just

Tim Roberts

key with down or higher performed of projected I'll Tim but this that. and we're refinery utilization A is part Roberts, quarter-over-quarter, is have our pipelines and were of is some in a bit being things. Roger, one we what here. over to expectation before our of Clearly, little truly chime down, couple related out up we transportation

there, an the that. out driving has which seen we've on a as had volumes meantime some the people In through of also that's producers the clearly impact pipes. putting piece So of well,

that shown those, up seen a continue XXXX. capacity has little on So on. bit, been spot, it's that's And really actually in space. the We've But the a there. out shown we've in been NGL the one new little to on The we're side. crude more here anticipating bright we brought this

at really fact, say $XX to was at with and as our butane, the increase to then subsequently and XQ, on bringing X, which our with had LPG export trade in improvement fourth quarter, we fracs Hub. that right a the a go two system. regard plus and a to X record related bit would business contributed make performance make we you we sure having that shipments, little million And we facility, $XX It's to Sweeny the In the regard I in get to to also right some quarter-over-quarter. our million that place. our which Have trading really to with optimize sure the molecule around propane activity XQ

impact bit little also mark-to-market And and we inventory, But wants little so there you we fourth of XQ which to on bit an also, well in the saw the getting and rejection. from was impacted rejection. us. impact a some of have back really now a back NGL XQ, into quarter, going - it's go if gone it's barrel in into ethane Ethane as XQ,

so you coming volumes pipe. well just in got a the And were equity Hills. there heavier us, impact of Sand volumes where most is, bit cracking were it down margins, barrels did then as and few had lower it our NGL two the and ownership was some fracs, and other And we've by that's of JD impacted a driven part little barrel lower that

Greg Garland

contributions, with they're and Frac outline We capital to X, midstream Clemens all and the updates. to new kind Gateway, got I'd Roger, contributing to billion. respect eight the South kind you We've Sweeny multiple Texas EBITDA the $X.X investor point project six our of project X of update as and well. investments. spending

from one-quarter 'XX. asset get contributions CXG So kind XXXX. contribution half year in Pipeline to of that that in mid-year, a will get we'll scheduled were come a year in full those XXXX, on so contribution of

and the So in supporting are be those of, midstream. the aware profitability profitability ultimately 'XX to think XXXX I increments

Kevin Mitchell

I'd a talked as about talked well. just costs year, reduced look if And at we up step back we've costs comment you make But quarter-over-quarter. costs. were we that. Roger, like the to on and about

$XXX XXXX. were cost full-year Our than million lower

a had of in activity came good new feel And $XXX we that and all also reduction look we we million in in that you where So at factor on extremely as step the online. target. costs. came When assets we've actually project up about we came we everything the back work cost had and done,

we actually are. good overall, feel So about we where very

Roger Read

that question. understand ramped you impact whole better impact kind Yes, QX, trying things trying the criticize - not was in would cost you side. a That's to QX. in I cost on the if I look had to where more up impact start-ups, of wasn't would just you started I full but a volumes, volume

Greg Garland

of Yes. Roger. That's an that element right. is there, in There

Roger Read

question also the the piggybacking in side, you on follow-up $X a of year, flow. on just then mentioned solely flow And of Okay. with billion cash cash kind the

other words there as taken Is the that quarters down I through? 'XX was we for have it of would think any to In it cash partnerships, about before to coming Or would constrainable? expect 'XX to come there paid equity will does if that maybe we 'XX? fine that is flows of get three look kind has from additional be but on, be at back? What partnerships. be that paid cash performance expectation flow of

Greg Garland

distributions of in to direct the affiliates? terms Yes,

Roger Read

sir. Yes,

Greg Garland

would, level. I see that don't thinking just why wouldn't that continue number No, I that, through at Yes. high level

a given in standpoint, CPChem fact, from CPChem they're there. up, million In expect in the go on certainly had CPChem from We XXXX, trajectory it and probably XXXX. would $XXX margins come stronger doing may to we in what

the So single come-off by that's biggest no element reason them, dramatically. we distribution and the think that And far they rest receive. real of to equity would

would I So anything, a positive on expect that. if think we slight

Operator

of ahead. Bank America. with Please go Leggate Doug

Your is open. line

Doug Leggate

balance choose guys. morning. Good sheet is to morning set Happy Kevin, Good if question name the Year. I New Doug. again. wonder I My

the simple side of be level? changes of reset where view real other debt term? first level any to of balance the volatility a to we of different the sheet question. metrics us consider want does How that question. than seen this, obviously your perhaps So we through lower a you We've thought My lot a cycle. do medium absolute the was Once

Kevin Mitchell

Yes.

to indicator. as would And run to useful need to that terms As we But in that credit debt really target, sort leverage the we're $X only, I absolute you calculate. of that's both been the of maintaining on we in course strong credit ratios. - Doug, year. non-refining capital an how pretty of about actually because the certainly And construct think, think of feel a it's Ultimately, I balance we're the ratings. to all that buying same think about business were the we've around we refining growing, may and I volatility. that you'd grade that talked lower we the need that a feel over only a maintaining And know focused last we the debt investment segments, capital expect guidelines added you as be And if about consider. levels sheet, debt something ratings, XX% we billion more of number of past, easy good, really

So to we when very close in factor can growth that, or something in of business. the take parts that the the you care of other

sheet balance we'll in perspective. good be think a I a position very from

Doug Leggate

offer nevertheless can in a recovery the weeks. then still recovery I'll cracks I two going to you. high. just mid-cycle micro-question. of Demand we're course, back, near I'm answer. you in substantial been of your And if on. of you are I going as fairly those? could substantial pass come it Thank has some trying anywhere the And what kind My offer fells not little the color appreciate to bit inventories three just last figure hoping out follow just up prospect fairly what's on the what's on just or to on, but color wonder,

Greg Garland

actually have Well, are average, below Product five-year come in we gasoline say, inventories by I inventories would seen X%. the is down. the average five-year product

to as I when future you about about are the optimistic. Crater markets, seeing looks think people who there and think out, markets is bright. are and think gets we're that, future vaccine So the

distillate been as So well. moving gasoline cracks cracks have

Doug Leggate

Yes.

demand I think, I more was on basis. thinking a adjusted

point. system of was the my We addresses, haven't seen tightening really any

context, stockpiling wondered, enough appreciate maintenance right just with and inventories, another normalization I fair - if round so to your of spring a I going unusual you're anything [indiscernible]. But I now. just Maybe if you there perhaps So or going maintenance, even just ahead on of was maintenance of want...

Greg Garland

we if I would the comment, RINs, you crack. one think about just are think in RINs make

RIN and about products, for in prices think crack you prices So when the there. product

the the as up, that and margins up goes you to crack cracks. So on distillate both would gasoline in RIN show expect our

Operator

ahead. go Paul Please Cheng Scotiabank. with

Your open. line is

Paul Cheng

any longer-term question. mean, curious, seeing looking I make That's your arguably there do we're you And challenging, that fit that we're how portfolio the that, maybe the given is you even just reconfiguration there. meaningful getting in [indiscernible]. Greg, at that if is your you portfolio, environment into business? some need first And will regulatory more Europe to adjustment in

Greg Garland

I the …in going portfolio, was start to with California.

Okay, but Europe. lets go to

first I if you Europe return return. plus think, employed, think of and about in capital mean, on all, I it's a XX%

over of at So - a world better we it's to businesses. Europe. has actually one marketing part you certainly Humber do good business stronger return it. it's that standpoint. of a the contributor the especially in refineries that really our It refinery in the an with needle move It's Then coke businesses our in around of excel portfolio from U.K., the in one think our job we

And so that value with that we asset. like proposition

that, Europe, I you the position Bob, only to we Humber not the if have in to to So standpoint, theater. from don't know want from in we like cost European we an that like tend that add environmental enjoys, Continental business the a standpoint, that but you on can.

Bob Herman

and on batteries. add would I for to, is the thing earlier one we talking transition anode the the about were energy Yes,

the is local going coke, look be in U.K., ambitions laws at batteries. the they produced in so to a their to EVs, Brexit, after player and want right And content have if that. And even you Humber

opportunity and like government cluster, blue sitting with hydrogen think about. an hydrogen I today Humber schemes is in interested the we very up Humber opens we're that there that that, the a designated for like sitting and advantage of also things the Greg being So that. developing the really and in talked U.K. is has that green

term, the and in strong medium opportunity of beyond for lot a provider being think see the fuels we in kind a just I of So Humber, U.K.

Greg Garland

the [indiscernible]. We're had brand the marketing Australia, certainly we're States, And strong Germany, I would in with best just in maybe capital familiar in second-biggest because brands third people add very, Switzerland, our strong brand very we in in on brand employed. side, less the United and the return -

Paul Cheng

great. Okay,

in the company. mean, public you the that. that I EU rush PSXP get into the benefit mix you Second don't been But timeline in structure question you debt XX%. I we at? with would to that saying have that, I at kind having debt to that think What then what I And for yourself has been of maintain? that asked on think with mean, strategically a that past sense guys want you as looking trade

Kevin Mitchell

Yes, Paul, it's Kevin.

battle just would reiterate is think big I past, what overhang on a I is worked that which clearly well uncertainty the PSXP, that's And said understandable. actually extremely - PSXP in of significant creating has the we've the sort for there us.

where from that You and look entity at growth and come the has where today. is it

and so look like, and we've got feel obviously, And this so feel rash uncertainty make about around we an objective don't very decisions the it. measure, we you appropriate at price, to don't But any unit right now. and be that will just good we DAPL

the kind timing think right to over something We is it's that. of don't it, and just considering be there uncertainty While different. doing

Paul Cheng

just I Can shy question. as maybe a

still [indiscernible] hydrocarbon balance really business. But other your your that, Those other comparing transition. that, it at You we looking impact. think business because fuel, level, or NGL, we have the we're mentioned change earlier been didn't we're to also you beat transportation, sheet of that other going pre-pandemic the laid through debt Chemical, there energy we get the And longer-term to Doug's business the the some that. whether question that ratio, is than if also

still standpoint, far that we more should from with, sheet? So a conservative balance go

Kevin Mitchell

- that don't fuels margin you have business. traditional refining you have hydrocarbon-based the in businesses their the volatility Well, but

And minimum are committed so by there fundamentally volume assets contracts, our commitments. long-term supported are volumes,

far cash, and I are debt the balance therefore I and that. we - of going and generation have solid, there within question stable there think point horizon, enough we is feel would maybe your that out different support a that on think I sheet. is don't And time provide earnings so you get But a think on still can the businesses good to reasonable those

Operator

Gabelman Cowen. Jason with Please go ahead.

is line open. Your

Jason Gabelman

we On and been of crack. on headwind It refining looks this expected a to the it had couple the been a other it's we than barrel past a think been to business, going I in as base be. $X the And year weaker bucket big quarters has little it's the headwind. entire versus you're first, like

$X.XX. year last was think I under it

is can that is you headwind exactly but talk So I just part year? follow-up, about you I reversing expanded have that a it RINs going what next timing see thanks. and And And this is on there? year? do know, impacts, are of there why

Bob Herman

Bob. It's

headwind, You're category [indiscernible]. the the right, a kind of is is that we where it but put

it, a RINs So right. big is of piece

quarter, RIN it was on refining we If fourth draw of box about what talking $X.XX. per the on that at recover the you $X so the and look quarter, around just basis just not we're the fourth refining, we downstream barrel in the -

So it part other is a big of category. that

one from to other market. The big get gate products refinery the our to spend there in what is we

kind back So those some come there that of some and fall fixed into the those category. but barrel, are is of per distribution of costs in there,

downstream. rented we've got So tankage

pushing minimum through got take-or-pays kind costs when So that to then volumes, those back all you've volume we've need but comes there. pipelines on pay we we're elevate of less got that

we big kind that, come those by And for will the the of really XXXX. definition, volumes down accounting other up that drivers gets first back ramp in smaller part So through and of and period two costs as category.

Jason Gabelman

headwind business be about that the the a on refining should think RIN, to way is the technically, in And it? marketing the right just in tailwind

Bob Herman

of the those downstream We portion correct. refiners. that's Yes, recover cost of

Greg Garland

we where by America, And in business. majority our the the running our RIN. we capture difficult to we quarter, in in export, business, refineries the of it's gasoline retail the our more will integration marketing of of And as blend get that much Middle more add produced the particularly for

Jason Gabelman

heard process. Can And there wanted to is of lower-court process pipeline which mention, in get case permit to the the about about place litigation I to trying new while a path was to the the in in the ongoing being this good is you discuss believe just then EIS just permit. and keep the DAPL, support terms to just forward? the ability ask I shutdown,

and through in Can on wondering down on process? what Biden and shut the next step pipeline of without just Thanks. going the any adjudication So steps process the that other litigation thoughts kind that?

Greg Garland

at operated working it's think We I Bakken we operate look through it as we're environmental Yes, the statement. to continue impact Pipeline well. think as should extremely the

out. to courts are We the analyze and I to review think the speculate hard going how But on process how this play we depending are many the to scenarios work and legal accordingly. on to will it's plays proceedings out. have react and through react to going will as continue how

Operator

Gupta go with ahead. Suisse. Manav Credit Please

Your line is open.

Manav Gupta

And hit hard question, Gulf to decided on your quick Coast then move pretty think forward you a turnaround. operations hurricane. I some First got the

here of And the refineries last even operating you So been two in those turnaround. the the from for operations? do versus where for have they quarters get back refineries XX% you your on, two do quarters? a when understand to Gulf stabilize just Coast have to utilization kind trying been let's XX%, say I'm how

Tim Roberts

Manav, absolutely Yes, right. you're

look now, quarter. if that we've got refineries really chose conditions per Sweeny, in kind which have the quarter. Alliance, we for to entire we got at So the the of you down entire the market operated three

September We we in catalyst since we shutting at the to - second some minute, because Hurricane quarter of executed Coast September in hurricane are usually came for we're Gulf down conditions a weeks away half - And We tough. only last of in down, market U.S. decided change down. work. fourth stay down that pretty moved work. you the couple are So reformer the straight a then back had pointed we out. from

early advantage and of turnaround got So it and it pulled done we We down next do that would this of pulled the we the out have year. difficult work to took that kept late forward some and refinery way. year,

up. through came one, we and running just came electricity the Alliance a So in back before Charles part, to were had of the and couple that operating a day few The with. for down a early coming second all Lake days, an one up at Charles standpoint. most And running weighted then then them that we've crude. down, it and from and keep is January, processing we Alliance of Lake was back in we're again back back the We of on restarted a that's two right decision dealing came and then with that issues operating came running for they and there. that, range running We the to about and conscious are be down barrel first after up market for kind that up at. rate was want XXX,XXX out hurricanes And

normal quarter kind we So going don't or anticipate next any in and the other on, this Gulf stuff we've work Coast. got turnaround of issues than other in

Operator

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

Jeff Dietert

call you. you Thank please additional of or If all your thank me. interest Phillips and Shannon XX. for David, there are questions, in you, Thank

Operator

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

disconnect. now may You

Phillips 66 (PSX) 30 Jan 212020 Q4 Earnings call transcript