PSX - Earnings call transcript Q4 2021

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Operator

Good morning. And welcome to the Fourth Quarter 2021 Phillips 66 Earnings Conference Call. My name is Sia, 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. conference recorded. this that note is being Please I Dietert, Vice turn the to Jeff call over President, will now Investor Relations. Jeff, you may begin.

Jeff Dietert

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

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

Greg Garland

morning, Okay, joining Good Jeff. $X.X thanks today. earnings $X.XX adjusted we billion Thank call the of or for per the you. fourth had share. quarter, Hey. everyone, and In

earnings portfolio. year, Chemicals, Specialties, were and the and billion our per share. or adjusted We in delivered Marketing the For demonstrating of strength Midstream, $X.XX record diversified results $X.X

For performance. saw quarter a improved the third row, we in Refining

outlook Looking commitment. our the we company’s ahead, are In safety, optimistic honor and for XXXX, values business. our about employees of exemplified the

better than allowed to growth this Renewed. lower opportunities, $X.X program average. The billion debt. $X.X XX% year total workforce will of generation combined of the billion Rodeo back our invest billion business, manufacturing capital capital recordable rate XX $X.X of U.S. down pay XXXX billion returned times more year, Our Approximately cash to and was including our reflects X.XX commitment our Last us discipline. shareholders flow of strong support $X.X carbon into than capital to XXXX

repurchases committed will we to to increase getting per share. returns repayment. the prioritize remain cash our further, years. and would We $X.XX debt on and path dividend. like year competitive pre-COVID As shareholder next over couple growing debt dividend resume and quarterly improves towards levels We we the this share a to flow secure, In October, back of to

XX we on are assessing competitiveness. position long-term call opportunities the are Phillips quarter for steps are to our reactions. Mark Kevin businesses the permanent Across first for provide leading will and initiative, We details additional cost taking in April. and we this

deliver intensity XXXX reduce lives plan globe. are and We to XX%, Scope future, last our emissions emissions a by by Scope energy the committed emissions while X compared X to to and Scope greenhouse By of gas around XXXX, XX% year. levels. lower X to and targets announced improving providing reduce carbon we continuing vision We to

some details. So, with that, turn I over to the to Mark call more provide will

Mark Lashier

Coast from the This CPChem In olefins continued everyone. also Cedar up earnings high-performance petrochemical saw well the at as and to on alpha facility, operations are critical produce strong two morning, Refining polyethylene. Good XX quarter, its Greg. of In base, U.S. well asset Chemicals includes Thanks, we Bayou in year. Qatar. existing progress recovery CPChem began normal position we X business Partners, Phillips with expected made and splitting the CPChem optimizing Specialties, world-scale this our by actions located and X investing as XX% world-scale fourth Pipeline is growth of facilities its portfolio Phillips begin complete unit billion in Midstream, start projects growing Midstream, for to projects pounds the Marketing return to Laffan, develop commercial operations. X-hexene, advancing continues and per component new a XXXX. with Gulf is its to is unit in a second projects, growing year in Hub strategic to taking as its in both We as propylene had we and Sweeny XX Ras at capacity a future. CXG we expanding quarter fourth operations a construction its in the high of Frac of expect profitability.

In X of addition, Circular materials. quality pyrolysis which recycling by CPChem waste of Polyethylene, to targeting and commercial-scale to production uses first oil completed is XXXX. successfully its trial sales advanced circular certified into Marlex commercial polyethylene processed a billion high technology plastic pounds difficult annual in convert of raw Anew recycle CPChem

fuel the capacity. business produce renewable acquired emissions conversion production customers. diesel further day Marketing, a year, early to fuels. diesel lower fueling production Rodeo expected to Renewed, for renewable will placement at production from subject transportation opportunities San progress Rodeo XX,XXX per carbon completed barrels and to reduce permitting we approvals. and fleet facility renewable Upon the providing began in over to end-use will During The completion, In we in XXXX be of continued is initially which the Francisco and Refinery have Rodeo California commercial

Additionally, XXX in extend to XX product acquired our the placement our in chain. participation XXXX. venture the Central acquired approximately sites December, total joint sites retail These in the bringing and in marketing retail region long-term value sites support

We battery of advancing Emerging development U.S. agreement own for a accelerate the value stake our Our to We next-generation produced NOVONIX supply Humber fuel into year. XX% to chain. Group fuels, agreement supply company, development British aviation with -- in batteries, materials presence recently the the multiyear in carbon chain. signed Refining in Energy a a our Refinery is this December, In by capture renewable with hydrogen. opportunities and technical sustainable Airways entered extending battery beginning we the

excellence cost our operating with For on execute will management. a XXXX, and focus strategy we

capital the allocation to carbon future, advance We emphasis returns. discipline and our will maintaining while lower do part an on

Kevin review the Now, I turn results. will call over to the financial to

Kevin Mitchell

annual billion We capital. four, everyone. with record CPChem. debt billion from operating year. per and $X.X the slide results $X and our affiliates Marketing Starting summarize or We for $X.X billion, hello, and These to Mark, equity ended Chemicals, capital generated Midstream, the XXXX highest segments. overview billion of results an you, earnings our financial of $X.XX flow a ratio earnings for distributions excluding cash $X.X Thank net on were Adjusted with Cash working billion Specialties including XX%. from or totaled $X reflect we share. a

on our billion. billion, $X was receipt due return for as of capital after-tax working five in Cash refunds, was to year the adjusted capital the operations year. the with impact started from on included payable $X.X year in Our during employed change position. the as benefit cash. a of prices tax mainly of cash X%. the net rising $X.X billion Slide the We shows well This

we In $X.X outlooks S&P both Moody’s debt. down of year, stable. paid from and to billion the During negative November, their revised

investment our prioritize billion We are further deleveraging committed funded $X.X we through grade $X.X continue dividends. We ratings. capital credit shareholders as to to spending and of to strong billion returned

balance quarter a billion. $XXX $X.X cash growth our $XXX distributions in million We Capital flow million. of billion Marketing was investments from million summarizes was million, included equity affiliates fourth Slide paid which per quarter capital of working generated for the the business. $XXX Adjusted $X.XX dividends. Our operating for or approximately to retail million ending and $X.X $XXX billion, cash were six earnings cash results. spending million in $X.X including projects, benefit $XXX $XXX of increased share. We for

of third the quarter, results from million. decrease quarter slide to this seven, in slide to adjusted the fourth a change the $XXX highlights Moving

from revenue. quarter. Our adjusted million adjusted our tax quarter. Slide favorable contributed quarter. the Midstream primarily of mainly rate the the Hub at million, income investment to million, increase NOVONIX, offset for eight The adjusted results. compared decrease Transportation by was in effective Sweeny prior adjusted impacts. inventory from quarter and higher quarter. due lower was income recognition reflects income was unrealized The third NGL million, was pretax $XX $XXX related of volumes fourth $XXX other $XXX million XX% previous the the $XXX Fourth of million gains pretax with and to shows $XX increase pretax up deferred partially an income

the total $XXX per the the at barrels facility exchange results compared hedge export million. LPG million period. of Midstream of record Hub quarter. previous in third from million increase in the day an quarter. averaged XXX,XXX to to the $XX in mainly adjusted quarter, the up Our XX in in each mark-to-market recognized a third quarter benefit the amounted was quarter, The The million, loaded Sweeny hedge and $XX investment, fourth favorable end $XXX is NOVONIX at actual foreign fourth cargoes quarter. Freeport million reporting DCP increased the investment in due of fourth record the to impacts $XXX including The the pretax to a in value the fractionators negative approximately impacts income quarter, fourth of hedging compared

was reduced utilization quarter. due was and $XXX third decrease adjusted quarter SA&S the pretax income polyethylene million Turning increased nine. million million, adjusted Polyolefins to the on with to down the of fourth million the Global as XX% Olefins was primarily from $XXX slide well $XX $XXX was million lower O&P Chemicals as income Chemicals million. quarter was The income for previous volumes, costs. Adjusted sales in quarter. $XX $XXX utility pretax margins, for pretax from quarter. compared third

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

higher margins reduction and lower quarter volumes. than by costs. by Refining by year XX. barrel. and estimated on million slide increased higher Impacts crack prices. $XXX This lower obligation to offset pretax of driven from costs the spreads from from adjusted $XXX for the quarter, RIN in our per $XX.XX quarter were to Realized improvement partially compliance margins Turning offset an XXXX was was XX% RIN more income lower fourth improved by million, Refining market third realized a

configuration capture. Slide had first XX the and third was the was in in Market the capture Market previous product reflect per quarter quarter. clean Realized quarter we improved per RVO, three approximately by yield results the $XX of market overall XX% refineries. XX%. for the impacts year. margin $XXX the XX%. was from quarter. quarters about an XX% in fourth million resulted product was clean is compared covers million $XXX fourth barrel our adjusted up of quarter related reduction the proposed which X:X:X the capture $XX.XX differrentials. capture addition, to and in turnaround were to in $XX.XX market barrel, $XX.XX utilization In favorable to crack impacted The market the barrel applies of XX%. per Refining was EPA’s of Crude million, and the costs Pretax of prior inventory

indicator. refineries weighted and distillate are production heavily market toward Our the more

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

per of improved $X.XX quarter. by per prior $X.XX advantage the feedstock from Our barrel barrel

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

to quarter. for $XX volumes, up from fuel that to and pretax XX, of interest well our $XXX consecutive operating generated and as and million fourth the in cash. million the cash down $XX from return Adjusted We pretax quarter shareholders, lower change Slide flow and fourth the fourth to $XX higher Specialties and our quarter. us Corporate of On expense. prior quarter. XX. million cash business, on the Marketing is higher quarter. income prior other quarter income Moving in pay million, had million balance. had due the This financial This with margins costs the the primarily the quarter quarter. during while an decreased prior increase quarter pretax in of cash net costs. $XXX shows slide employee-related compared slide Marketing concludes This review and adjusted was from $XX costs XX primarily adjusted Other cash another marketing the increasing was million, was as due my results. debt, strong to to million, of segment Specialties operating invest in the enabled prior third $XXX This

to the worldwide to $XXX between high-XXs utilization come In first Refining, year. cover pretax. rate Chemicals, a $XXX in O&P and Next, turnaround pretax first in first We million. be quarter and be be crude first items in outlook utilization expect $XXX we million costs million full the we and the expect quarter million the anticipate I In quarter the to few between Other $XXX to Global quarter will Corporate mid-XXs. rate for and the expenses and

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

the income costs Other be range and million the about tax $XXX and to of effective expect to XX% full to to We rate year in we We the $XXX year. for Corporate finally, pretax D&A the be anticipate $X.X in million expect range. of billion, XX%

we questions. will for open line Now, the

Operator

Neil go question Thank from with you. [Operator Instructions] Sachs. Your Goldman come ahead. Please Mehta first will

Neil Mehta

morning, how close Greg to look you you Kevin, back of normalized you at first up XXXX, billion question about are and for team. the Greg, working I thinking capital, flow. morning. almost annualized, of $X Good $X ex good so cash billion. If put cash on, flow, half

us Greg, that it’s I normalized billion clear to you of think sort lot billion. $X But of $X use to to closer $X think a that billion range. you $X cash kind flow been of of have billion

the so that’s segments $X through $X your can buildup kind would of how just whether to still are mid-cycle world And thinking that great. of you walk underlying billion of thoughts get you be and on different you your billion, there how the to about if

Greg Garland

changed our I do don’t of mean, to view think billion. really from $X to we happy be will I I billion $X that.

it’s happened to a It traditional of in buckets to expect nice you billion see last just different might course, Of cycle. $X occur that year. cash from

So been couple in I the think last months. we of signaling have

We through think are rest constructive performed better about all in pretty at mid-cycle and pandemic the pretty coming We the have businesses the constructive if XXXX at coming business the they XXXX into on XXXX. or into businesses, actually of you XXXX. Refining than those on all. into remain And

kind in cash. Midstream, really EBITDA us, in just and and in to when Chemicals you something Refining billion it billion it been Marketing like wildcard billion, builds really, has remember in Refining, $X-ish EBITDA, $X to recovered a of an So something mid-cycle. has on billion of a billion to how approaching Refining $X-ish $X.X billion of for all pushes $X billion back billion to to But basis $X $X.X kind up translates of Specialties, which $X and

comfortable we control I of that And margins. pretty Obviously, great in are that fundamentally good last have kind still by some costs operations, their we super had are then and so year, driven I think range. outperformance. mean, we all of

our Our Marketing $X billion But in I upside business been is, would really particularly billion, are in say European we side, where have and think U.S., joint good adding retail billion. volumes, that. and we operations the I that our typically it’s $X.X Specialties businesses, on we execution probably across in operations, on say course, we which great margins $X.X a And of investing saw the that but also the ventures. was of so good would

$X.X $X billion leaves cash given of first bit debt frees billion that a little budget to year, less, a to $X.X always constrained dividend some share going capital That’s while the is year capital, are $X signal we this doing of to sustaining pursue going for get flow, capital, us. repayment and so deliberate our signaling be year. repurchases, that’s next or So billion that is $X or to growth. billion this we are be room for then can very back and dollar is up to that going to go on $X that for We to billion billion, us

all I think about And think that balance that. so we as make we

please want Now to Kevin add to you or step I in, Jeff, if that, don’t…

Kevin Mitchell

No.

all. you think covered I it

Greg Garland

Okay.

Neil Mehta

are you Thanks, the Greg. for are the giving the repurchases, thinking me, get that’s right like you at the ratings And which things lower. how clear level has about moving debt logical is the that been Looks the focus agencies direction. share least to follow-up are again all in

what program So about it? begin how share you and factors gating sizing for to the are a do you think repurchase

Greg Garland

in cash a a the approaching said to getting factor dent back Well, repayment. we the debt have and mid-cycle flows always gating making is something

of another due. $X.X as billion-ish comes we So April, I April are coming off in it going to think debt pay into

billion. that’s of So $X billion $X the

have We big that. dent a made in

we that So in kind I mode our that’s be disappointed at midyear, think are repurchase if that, of said company. not would I post-April, why a back I share by

Neil Mehta

Perfect. Thanks, Greg.

Greg Garland

Sure.

Operator

The go from next ahead. Phil come question Gresh with Please JPMorgan. will

Phil Gresh

the the or below the about was of I the I like million, when didn’t I And maintenance, industry be your the on XXXX I terms And seems the utilization there, million then XXXX it norms? it’s of what of it just what and I anything think guess question, of about history $XXX curious, be think picture, too we the first My highest back, just said, year. Hello. in thinking historical to far looks just unique should bigger is looking there kind items others were might be maintenance company. mean, Yes. in here on one $XXX guidance Refining capped like have this can

we just to is are demand? higher So keep where margins with an pressured going up get to see this environment

Greg Garland

level let But since did Bob turnaround about we high come me of if and And it’s will and his of a in So push XXXX. XXXX let talk $X.XX XXXX terms it just XXXX and we look of total you kind there’s in through about into billion averaged then I take XXXX, some business. expense. --

were think did lot the of that industry in cash as balance probably trying we conserve the the people protecting and sheet. to I a

So there’s let will speak doing to the I Phil, what and it’s number, we specifics there. no a But question. big Bob are

Bob Herman

Yeah.

I years to good. on XXXX of pretty lower larger of always last turnaround. years a it were to The bit be anyway going going with Greg, a think, turnaround be this couple hit

they take to to you got find kind coming, We both have the their see entire years facility and in cycle. they and Ferndale them got back of two you refineries, -- turnaround Billings, go when turnaround, are five their

and XXXX in a of really out -- their that agree lot managed turnarounds second would we it. work and your bit I lumpiness maintenance XXXX. that question, of a people little causes of to So And then,

We work sure We lot hydro to You were it’s and mechanical that. lift to standpoint. put going pretty of we us now year, runs. coming made across of a longer, traders catalyst into heavy making are stretch able that we due, hydrocrackers are only a last lower so in Some and do utilizations. that But the from ones it that’s those a could our see are I those integrity the do And that things for can’t suspect right? this not forever, the running system.

Phil Gresh

Thanks. that Great. color. for Thanks Okay.

business of on I XX in an Needle Thanks. you other but are it beyond? it’s Refining versus how of it you curious what business, XXXX how was bit of a in and seeing more to unique market, opaque about is the could XXXX Coke out one kind finished and fundamentals refiners. the see a Just you the talk that progressing business, Phillips

Bob Herman

Sure.

So, as anodes -- you may lithium-ion batteries. furnaces, know, is a internally for electrodes, have years, some last steel strengthening used which last steel, are cleaner producers we also electric Needle to Needle Needle Coke end furnaces off graphite and this make seen market we two make Coke used But actually year well. to as technology The than do blast of a this is weaker past this use Coke high arc see we production which running with inventories. year and year, slow of

which year, a last market had to steel they to year. as even record opinions of If inventories. The because the seems year mixed steel this listen markets is you high indicator, have production a leading production, about Needle lagged, Coke

coming Either we We think to will expect have graphite will it increase, it slightly back anode and seen market a think electrodes lower strengthening refinery with that continue and producers, gradually utilization that producers to increase. steel we steel market. some continue and think from up be producers Some both way, come good demand it the will to off.

Phil Gresh

Great. Thank you.

Operator

ahead. Fargo. Roger will with come question from go next Wells The Please Read

Roger Read

and Yeah. morning. Thank you good

Greg Garland

Good morning, Roger.

Mark Lashier

Roger. Hi,

Roger Read

timing on back Phil’s kind higher getting the tagging some those morning. is overall comments comfortable? with certain and and a see markers to spending past a Maybe about to off little repos. you feel cash of on on the about you start want are sheet I’d to where turnaround want like would of on or picture balance it maybe share get question side? kind the issue level -- Good to of you the for what turnarounds will Is there your flows when with bigger would a

Greg Garland

of kind we cracks? Yeah. back cracks. mean, when and the to Refining Well, are I question on mid-cycle think, does get Refining to in XQ, XX.XX we I are realized

seen since XXXX. that that’s So, highest quarterly the crack mean, Refining I have fourth we in quarter of the

demand, number, off think So there always on, think it that where but hit lot to are that’s we going into It’s But longer look it’s the to all market, XXXX, supply coming a people supply to there’s come supply to staged. not it’s some new come that going been be there’s hit as of in on. are coming obviously. things takes going when constructive because and we

next that of sure from are that so variant, side. are standpoint, when impacts each but of the So recovering year. to demand could But Jet COVID, demand we see I we and COVID. in Prior with to endemic, gasoline and levels. demand time above demand wave transition we demand disciplined kind am XXXX on wave less, There’s back levels. as from impacts were successive to was less pandemic less moment we regardless, at constructive seeing the XXXX of happen we from the the not current that see nicely. What each less and successive

are and back in that -- could talked everything turnaround towards demand crack and on utilizations We impact So a out Refining. what mid-cycle more ultimately as get XXXX, the move balancing about so activity we have of into just we around see the constructive we side. towards we

if going have we program want pay get sufficient that. to so, are the you growth our sustaining flow, pretty that add to share And feel repurchases our dividend, $XXX fund that down think, debt, anything million we get have this in growth. which once comfortable back Refining cover to is we there, and year, about Kevin, I cash we capital, some

Kevin Mitchell

No.

very that’s think complete. I

terms debt in term loan April. have detail, million we pay maturity down of the in $XXX Just a

that, will those to in We of both intend flexibility. April -- of flexibility. at care we what with have still available maturity, of and maturing back have happens notes have But care we levels, a after of and We if we just lot we debt cash callable $X billion take and that need to. at if mid-cycle would then other have flows taken we

Greg Garland

I $X borrowed that billion think we down. of billion XXXX we $X the paid during

think that on our year the couple basis. billion of resembles say, $XX consolidated of a to to down kind that sheet a and I balance pre-COVID period let’s paying debt demonstrates commitment returning over something levels,

are I in we comfortable So, think, pretty Roger. construct, that

Roger Read

Okay. Appreciate sort I follow-up. it. Other question had unrelated of the

As of on at coming questions targeting? up diesel what of need or level setting level any business that, in side increased that returns mean, the the our that you of you each look the comfort get able be everything a I to you feedstock biggest of what side, in renewable healthy terms will and progress maintain the comfort that seems is, to is one in be we are supply companies the margin to that

Brian Mandell

Hey, the feedstock don’t Roger. with We issue Brian. availability. It’s any see

diesel. Prices access may both better it less greatest expected. from feedstock Although, and And of those We oil, yield, cooking vary on we California. biodiesel, renewable think switching on are we used water center we over maybe also plenty that to are have we time sit challenging demand be of to will may increased for domestic the and acreage logistics and U.S.’ so in produce less to the aggregation between Rodeo, commercial, foreign have be feedstock. At have that’s experience.

there. good feel So

has quite organization working feedstock for on a while. commercial Our been

around We world. have the offices

storage have Asia in in and U.S. We and Europe

We have good vegetable producers. with oil relationships

Soy distilled last oil, purchased Rock since for oil, Rodeo. Shell the in startup We investment oil corn purchased canola our soybean in April. announcement processing. our of heard We You

of We strong producers have oil. aggregators with used relationships cooking and

have with years fact, XX oil, different in In been cooking four oil that the Humber for over cooking countries. used supplying world, market currently from used around we

then maximum program linear cost to not is market will most Rodeo generation system and use and So effective best credit what a just will the CI, in I logistics. based price, but a and decide the Renewed sales to think optionality have its we on feedstock

Roger Read

MLP for Thank there. All right. like sounds It you. its open an

Operator

The from with Piper next Todd question go come will Sandler. Ryan ahead. Please

Ryan Todd

European some refining, Refining, talk impact you in to on exposure a benefit prices with the in and a world. refiner can you nat Maybe Refining part high rates Do on the nat high Thanks. are of expect that economics about the Hi. there this European year? that impact to gas one you as utilization prices of seeing gas over refiners sense broader U.S. of to European

Bob Herman

Yeah. This is Bob.

I look strong in refinery of on at in goes we then that we It’s I the got for them to Europe. of really be over impact be right. we translate now right tough refineries We prices very think and some us am high and what that’s natural simpler to are and the money have sure hydrogen us. going to absolutely good there complex got and to a gas operations making sour because is on buying Central buying for our in to up bunch are of yield that It’s they will showing or out we refineries We which see a is natural the crudes, on putting know be in the clean long-term. in not that. product for good of us those pressure down, high gas hydrogen make stuff somewhat because market, sulfur see the the which hydrotreat, to

while think Europe to are left. really in to a it is that going refiners for prices of and I natural gas high are bottom kind strain of continue going that So quartile

Greg Garland

refineries As Bob export crude, Europe. to pointed we to if they beneficial the because kind for sweet more to those good are widens That’s dip, to out, is afford on products off utilization able because sweet can’t the well, Europeans be us. which as run. will The running it comes that U.S. of sour

our well. as for good be would it businesses So

Ryan Todd

decent have producing think a what full your there? can you comment Great. as year spreads a about seen at you in belt then seen in as And the completion project improved. I renewables maybe the operations, about and how production learned for your you saw mean, a for on? before level. last as on we well headline, has later narrow of there you placement, pretty product Thanks. the quarters this, there, half the question of And follow-up under you preparation then both [ph] on kind from as couple of your in I you about California mean, in feedstock back profitability now of Any have acquisition talk -- what the have feedstock have spreads

Greg Garland

QX you profitability the renewable a about There’s has diesel lot the credits. to are and think QX Well, between about have renewable price, diesel think you the feedstock, strengthened. about thinking of when things margins, to the

to about logistics. have think You

there’s lot of So it. a to pieces

linear plant, logistics can on. you renewables key feedstocks, a as is the is production have well. working which and the to as The as many many to will we get having have We what been program renewable as finding to for it suppliers

have set hard. key the organization the to the renewable diesel, are In margin for We more a to way. of up we and diesel the end-user. us that that to keep That’s do global getting the key is renewable working

So our some users. enabled to our of to business commercial in get that purchase end was to fleet -- fueling for that us part, of product

to continue type will see those of things. You

have, we have renewable well. We in have all diesel converted and we that taken the stores California those as

to much through can as and So going we to will going the plant as to we linear our can we we bigger feedstock program. renewable are slate for diesel have we the optimize end-user are have as and

Bob Herman

given and in of is and handling are operate really the to it to with runs good able different operators feedstocks renewable it. it dealing and the learn, characteristics being than that it -- hydrocarbon-based getting that opportunity to XXX us has out to to unit different instead it a add might on for there different I there because staff and very feedstocks

able just, a the hard Renewed warm-up us that with ability the to really right yet I to of level our for to for unit. gate that’s Rodeo think, project great been confidence it’s and raises our come out and run be So

Greg Garland

CI pathways, et approval, the cetera? about talk to the want You

Bob Herman

Yeah.

So it earlier, since, soybean the on turnaround mentioned And started to oil. have unit after the able and basically last we up Brian clean establish we been pathways.

California, run in say, have you other to your get go So to and new qualify bureaucratic you pretty CI for number provisional feedstocks, then process through, I’d them lengthy feedstock. you a

have the that, have but been we to we corn working oil, we only on. since oil, So distillers not soybean able are the done qualify

oil. on pathway a gotten have We canola

Renewed Rodeo feedstocks take lower more find more XXXX XXXX, material coming us will I that’s repeating of CI allow of right that think or really -- in the yet advantage up early that as process to itself keep and away. we ahead

Greg Garland

I guess, and process that California. is in navigate key process get that how you another learning just through

Bob Herman

else, better everything get at Like the it time. you second

Greg Garland

Right.

Ryan Todd

guys. Thanks, Perfect.

Operator

Bank The with America. ahead. next Please go will Doug Leggate from come question of

Doug Leggate

back have I looking can hope at one, questions for Kevin, back some that it sheet. I in when seems now. memory horrible that and on period, the price twice the guess color everybody. But a half you much buy XXXX did was share happened, during price, the got got circumstances. add I guys. balance I pretty Thanks, given share obviously, like two and my not your stock cut first last is your

during this than corrections? the business my of buybacks to What’s allow that? versus take you recovery the advantage during and to in the building of why rather going to balance know philosophy sheet balance is where back the down the happen buying the recovery sheet behind billion occasionally question are corrections these net we in debt carry work a So $XX to level

Kevin Mitchell

Yeah. a it multiple I to a think, meet -- Doug, really a of bit is priorities. trying balancing, it’s

optimum in So of of you got right? that about capital, it. is of terms capital cost to capital So structure cost increasing we component have too little so and think an debt

that opportunities are we are as the to other are got in are non-Refining fund. seeing improve also we so continuing have we just to strengthening We we we in and that are do obviously, condition, that. not had the effectively and was actually, bear so to are to the shares accept we want $XX, our because but -- segments, we mind we overall And the at on buying be that And able a position that as were fact in financial a to like that debt-to-EBITDA growing business, growing we standpoint. weren’t we don’t basis, that, from business we

what optimum is lower more And -- so around an that year-over-year structure you structure period, the between over so stick returns provides to the that extended flexibility. XX% sort recognizing and fluctuate. allocation can that got buybacks capital We to dividend where we with have at that? And the have that capital always got the debt The give time cycle, will shareholders XX% of sufficient cost through But flexibility it’s optimum our reinvestment albeit really be the will so finding us business, adequate framework, cash having obviously, added that balance, it’s flexibility. flexibility. in

through sure it’s debt I is on much going really of all lot to that. whole than to just stated am of further not balance too in a trying going objectives, sort So context. down our bias that

how So I still are objectives. good out we feel with our laying pretty

Doug Leggate

perfect, looks answer. gets kind wonder but debt this. I I if hindsight view XXXX volatility the because guess, COVID its reset appreciate I like. question, net of of it everybody’s back is of more obviously, a what to has it’s

follow-up golden periodically to on a I appreciate up, structural just to the are been of am the much lines? view? has with IMO. those your guess, I my I I answer. do really additions, don’t say of terms disclosures in see is, along where guys impacting in mid-cycle did you but higher, outlook like for Refining and probably are net now I is, wondering, And nature. mid-XXXXs? that’s gas from that price we question So, here’s but it How thinking something mid-cycle my the age, net you outlook. point, value the net something And are point additions subtractions you capacity getting prices the players, My reset is additions want view guys international like that demand

Bob Herman

and at we Refining of at we been announced think, barrels capacity where so look and year I When benefit. than Doug, of last X.X of you Yeah. least a has about much added a XX it are rationalization fleet occurred. rationalized there seeing have total already there of in million that that’s global seen was day year, years the that was was the more first out capacity

still unit’s higher As profitability. in pressure forward, on we Europe look that gas those there’s -- natural prices with

So we see that continuing to occur.

We getting they spread seen have additions, are so also labor into new getting delays, COVID capacity out. challenges execute

transition. a seen and spending of over capital have energy concerns We reduction

supply it’s back. come the of are side equation we definitely demand the seeing and So impacting

COVID demand well. levels this above jet coming XXXX recent think mentioned, back XXXX back gasoline levels could before as by was year Greg this be As and at hit, diesel late been comfortably so we aggressively jet’s above,

supply what and constrained the So the than historically. we more system have the is still demand’s in seen

Operator

with question from go Please Chen Theresa ahead. Barclays. next is The

Theresa Chen

there. for my Hi, Thanks taking question.

the First, wanted your the Refining on out to about adjustments results. from lower Kevin, RVO follow-up just I of for comment XXXX the

million So be of clear, $XXX just EBT, did to adjusted million? the that include $XXX the

Kevin Mitchell

Yes. It does, Theresa.

year. million million. So full includes the $XXX It to the applies $XXX the

that would in And you three million the kind three could if around to you was, quarters that of of first doing year apply the so additional that. are about $XXX and my as say, the think if think if comment you quarter, any normalization terms of quarters you about of

Theresa Chen

Okay.

would over presumably get you million? the $XXX the quarter so and would again, that revaluation number So, that clean for be over not

Kevin Mitchell

yes. If -- you

out the million. Yeah. If you back full $XXX

Theresa Chen

your I over Okay. that there along? Great. that as diesel on were state of also diesel wanted time I fleet hit California production. terms or your about renewable you. you to your user that will more comments all in you you place to grow the integration love of the And the thinking to Thank it fuel incremental to to barrels of to follow-up of expect seek something something then, your this here. and as the would insulate you bought all end understand strategy one position vertical Is is doing Brian’s footprint for renewable in

Brian Mandell

exactly that’s right. Theresa, Yeah.

the end-user. that this export of be diesel just make will Our possible that may That on but we one we is some see. barrels at We be of to to some step. markets, XX,XXX depending the entire goal is able, point, but to not may get

As we all renewable to I said, upgraded diesel. stores the

to the to But at we We and think the the path. the goal way. that’s also is a We to are looking of to end-user. different that margin diesel the end-user best of it get lot opportunities get keep all

Theresa Chen

Thank much. you so

Operator

Manav The go Gupta question from Suisse. with Please Credit is ahead. next

Manav Gupta

Hi which lot shoot don’t of guys. a so we the question, is messenger. investors, This a get

partner don’t statement of be and really want business Your ahead made to has in a Refining. gone JV that they the

a over of in the years has well very which that and profitable has a very have speculation. lot resulted worked You JV, you for

you could status little if quo, you sell you they one If both, there one, situation? or are you keep they multiple the both. comment refinery keep that just a them sell There scenarios on keep

Greg Garland

Take that Bob. Yeah, actually…

Bob Herman

-- I our all tell Yeah. for venture, can we on River WRB joint and to are we continue really Border. And work is, our Wood partner well seeing. with I you

those partner good As to them. operator. They for and out, have needed and But time. work with continue to partnership since work as a the stood insights seem great we you give run changed. been two together and like XXXX, us good in it’s of us a facilities on as has invest to things pointed very of They an both test now, world their to WRB been

Manav Gupta

little will follow-up quick like assuming my and and Gulf the and your the so am the the for sequentially, op when was trend up was look just question closes, Coast at not DD&A. refinery you And actually segments operating costs Perfect. here, down is these one-times so the DD&A. are a cost higher I as

like look If you the one-times mean, on I results? they just that the Coast comment one-times, could from Gulf alliance on

Greg Garland

Yeah.

XQ we in the lot some is are quarter, There’s the because -- people of have fourth through right. a there exactly and still -- are in all redeploying noise You that. and it worked all we

go quarter, the to costs no had the we in fourth and in volume quarter. first So obviously,

off barrel we are same Coast, quickly see on per our costs, those in very the On refineries dollar trend about Gulf costs in quarter. basis ex-turnarounds a -- barrel. the all per first base the So cost will basis are

see So Coast a metric. controllable you absolute But in big the the down. that won’t Gulf costs go will change cost, in

Kevin Mitchell

Hi, Manav. It’s Kevin.

we conversion, you flows that some associated alliance with Just the impaired we on suspected, did assets as D&A through the the D&A, line.

in one-time is that So nature.

Manav Gupta

and much for taking a so questions great my you quarter. Thank

Operator

will question go ahead. Please come Cheng Paul The with from Scotiabank. next

Paul Cheng

Good morning. guys. Hey,

Greg Garland

Good morning Paul.

Kevin Mitchell

Good morning.

Paul Cheng

for you. questions Two

the first one think is for I Kevin.

Can and you I in deferred deferred the quantify refining recognize you think believe those quantify question. also then the transportation, your -- -- about inventory revenue can quarter. number? asked get the you the also to tax that benefit NGL how that after in talked second in the I prepared help Maybe the if that that that also? you remarks And I

Kevin Mitchell

essentially. Paul, deferred deferred to the equates the quarter-over-quarter revenue Yeah. revenue, variance basically the on it’s

deferred one-time say, we those to is as way the and I revenues no, of deferred we the a that going the is recognized and But we about because the the So either item, still are of it. the have think nature that revenue, then think that in contracts would recognize pipelines, as revenue. of don’t get there’s or get volumes rights, cash I if collect or volumes you to the ultimately, with on sort a makeup shortfall the volumes,

So you period-to-period. a see that that’s phenomena going

a inventory inventory it as impacts not of the midst it’s -- And So was both -- quantify in terms not it excessively impacts typically every we that’s period. impact. unless don’t something have think large the true I we a in

quantify those. we don’t typically So

Paul Cheng

Okay. Refining, fine. impact? which And that at in that least region That’s inventory is the

Kevin Mitchell

going to It’s all across No. show up areas.

Paul Cheng

Okay.

the growth billion -- pandemic, The think, the before $X.X of long-term in are at that range range, second the $X the past question, that I of CapEx the to kind $X looking sort just talking I $X about CapEx. think of of Greg, billion in billion you billion maybe to

spend of to Midstream probably Now the investment much not you since has money. outlook then, course, in for the going are that the so changed, opportunity

a mean, you say million problem, It not I you to side debt look in PCP, is back capital to level growth is adding value. you? any on phase, $XX comfortable it a way at be does there like, maybe I more of to the mean, yes, quarter on business. lot a seems and long-term but not causing is allocation the what that on also should And restructure start a your into for So basis? fit we a $XX you longer the portfolio once structure, a million, really it’s that question term also,

Greg Garland

mean, up used $X.X will to all, my think, how I Okay. CapEx. but billion questions least about that? have now, at one, one growth is I of historically, by best to five will try you $X.X answer to first -- we I I we billion Paul, -- So, are

many purposely signaled think I billion and next of and year. this repurchases. budgets of need to reasons, We for for the CapEx debt less or repayment share back structured to year around get total that So $X be kind

$XX years pre-COVID, forward. happens call what But back get sheet the to balance something to I see will going we next the two billion. want so approaching We do think it, over

going on We are I step repurchases have get to mean, share into back and back it’s share those. to been to we repurchases. time

all those for next hit right across want of think, capital the will we be your the in the front the project $XXX biggest I And now, will keep investable right to years. are reasons, two just project. circa years where so, But to next see return the the don’t going couple in [Audio that renewables Midstream there think in over million renewables of us takes we and business. opportunities goes is where And to us. we And constrained portfolio Gap] Renewed Rodeo our hurdles

So, I mean, megaproject that in almost standard. a any itself by is

around are in two then CPChem at. there’s the they megaprojects going add portfolio and things of terms I So growth big on and looking on still think you the

to take So for whole to there think it. of are Kevin, point, be getting very I capital to we the free to idea take back But DCP, your and debt want portfolio, us will share about into is you about certainly the repurchases. allows how more you let still structured cash if allocation. repayment around lots up growth

Kevin Mitchell

Thanks.

pretty generation you Paul, million and quarter So, noise, that. are per the earnings we consistent are are all that with right DCP, I $XX distribution you you along mean, probably that hedging a looking at, take with comes out of $XX million, a

has are in a It’s we with the -- very with our had us The place -- some a for successful to nonetheless, JV ownership that years. time successful say, structurally have us. over as It be M&A we own nice integration business. changed could over challenged. for been you it But has activity owners type does continued through period. Midstream It’s JV. XX While been give the

come we and of Sweeny volumes, we jointly with our system integration. and DCP and into benefit pipelines have into that So own fracs DCP SunHills the so through NGL Santel volumes that the

for reality looking nothing long you period we not There’s that. to be you of of hard have different to exit time, the be might must that get party that it when of business, all a And a kind structure different done. been placed any have arrangements us we that of a way get while a at for is more when tax solution. have can something and look into pretty tells at efficient considerations So it’s compelling the that these

a actually does little from we to take the like JV it Synovus it’s feel We bit the will and there. successful. want It So what it been has that we question very earlier. do

of we continued work but are always with are open us. it’s as to We to for portfolio, well most alternatives our

Operator

Please from is ahead. Matthew Blair next Tudor, Pickering, with The question go Holt.

Matthew Blair

else? morning. think like RD? you on deal? How we And seeing economic you or to shed deals some SAS, Could then, SAS British a but something maybe light Is Good also, should why PSX do are Airways in arrangement impact it in more the this here? these take-or-pay think offtake not Hey. about we really

Mark Lashier

take first will shot I the the one. So at

to yet. It’s So Humber renewable the Humber a Refinery entered We into this deal of lot to at sustainable supply a run don’t aviation small fuel Airways. British feedstock volume.

the working in a intensity from fuels that of things on are lot of Humber the We plant. to carbon that reduce come

good to do can going be British entered and what their they we into this and a business grow this understand the Airways to and understand can can needs we with over partnership we really supplier. and get So time

Airways We are supplier anyway. to British

reach just our kind extends of there. this So

with British used to and that in our yet, that cooking signals other going but Europe So it’s feedstocks really Airways ability material in and to are business that Humber. we run not oils expand large renewable as expand we it

Bob Herman

Yeah.

and Mark, think that I think certain the the want in aviation get how to you if push sustainable that and part how yield we even to yield Rodeo you challenge going that make on aviation us this, be sustainable and more of but about we is structure once fuel to think a fuel that’s yield, think do add about Renewed. to I maybe, if Humber, we for future. is There the

Mark Lashier

Yeah.

so But supply. incentive, there make not on. for that shift SAS to also think is, a a the out wholesale can demand financial the is airlines has will yet. see regulatory big of there’s that but we into there’s commitments we We this renewable SAS away there to to SAS think from incentives that be a sort difference making commitments work co-product but diesel I optimization pull come, and there will it at for we they point

Bob Herman

difference plant, fuel European the only renewable scheme able that make in U.S. gasoline is and the to scheme, jet the which is Hamburg different from treats were the because the in reason scheme, And overseas is we renewable deal our diesel, renewable that same.

expect SAF. So that why that as either But and or commitments that incentive incentive haven’t was more Better time, make get the deal will the airlines more we and for pay that part over why United will was will to there plan, done we some Build of done that’s States the Back in yet. deals get been we we

Mark Lashier

aviation the fuel. We think think the to I planes. only going don’t nature is Yeah. sustainable in And it’s long-haul work. work the business, planes. today to airline about to going their how I mean, hydrogen market in you decarbonize to the is just of When think Batteries going option aren’t work

think, relationships there. access developed the going going fuels And are and so, you to going aviation to they I that with are be be developing to sustainable that work what anxious are to in they see I is contractual have so the think to molecules industry

Matthew Blair

there. the for it color. Thanks all will I leave

Operator

Jason Gabelman with Please from The is go ahead. Cowen. next question

Jason Gabelman

the to for business those or Midstream the now build going crackers. be going bit than is portfolio? in fact just, guided to. larger are the higher segments. Thanks is Chemicals this then and evaluating correctly, you you million, question, previously you that do wanted versus I on I consolidating Rodeo heard And diversify still PSXP, some you you to to world-scale light question two stronger and CapEx $XXX selling are are what taking in if you is be which buy you assets And mentioned given be of Chemicals that I assets think the have my build Midstream, Hey. you of Marketing second ask outlook a my a to Yeah. M&A position acquire questions. that to about expect non-core

had Thanks. that’s you $XXX like I think correct. to I million. said confirm just want previously something

Greg Garland

start? you want Do Okay. to

Bob Herman

Sure.

summer history scanned I got Things buy to think level, tough they assets, on Chemicals, always at valued to the for in we it’s that highly we of opportunities on environment very organic really the are an year. the U.S. U.S. II what’s through partnerships build timeframe ROPP project. the horizon, acquire have to Coast a Coast and acquire. growth mid-summer, doing and true that’s have And project driving looking looking Gulf And they but that. I been an are versus and late CPChem successful long think, that’s FID this forward both II in Gulf

bring to engineering next cleared already an tough optimistic project with then front-end now to We and way its year. to the a later. will, that well we at FID taking we contractors to sure it’s develop have in that place, the is And about are that it that EPC economics sometime year so but look design whole a ROPP are package the well economic make but we are It’s on meets it hurdles working forward. --

that Chemical we So in opportunities continue more acquisition opportunities organic any see than space. the attractive are to

Greg Garland

many the retail or planning. or on second be generation doesn’t They They the and want over. business family particularly Marketing U.S. the businesses comment estate to business the third That want seeing take long consolidating, is just and might exit may maybe are I of we our And Specialties. generation current to partners. Yeah. in time for marketing generation

creating And those so it’s opportunities.

we what’s to driving are to ensure and markets a of have long-term lot we thinking. we continue access that what So so those that’s

are and did really a value we can. making Brian the think all capturing nice sure of job I we diesel renewable about talking

is are of things some one that diesel chain frustrated to that. new capture we able the we sure value explain going have we the of is, with so want RINs have we the around full think I been leakage never been value to to in that side make and what think we RINs

the do So, we I Marketing think an versus about what maybe in you point Specialties always important that. at and to is We trying are that think buy build. as around look space

we that, please? to the kind roll certainly that how as particularly that a on to that anything have think assets of think Midstream then on about Midstream, like your businesses consolidation. we you an for if PSXP, optimize of our will think around to out instance, still in want our to we are is consolidate, And I have control, really we think suite chance going I have about that. within NGL-oriented point, think Midstream. Tim, opportunity our full and to I add Midstream particularly, portfolio some

Tim Roberts

Greg, I mean, you at covered high level. the

are We value. about all creating

value. going that how stewarding we are and that’s or building the we the But we look can at divesting. that always So running. business we that are include that portfolio got have That to of just in buying, capital maximize part

Operator

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

Jeff Dietert

you, And we Thank you all Phillips your Sia. interest in thank of for XX.

you. on have Thank you today’s If Shannon further questions call, me. please call or

Operator

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

now disconnect. may You

Phillips 66 (PSX) 28 Jan 222021 Q4 Earnings call transcript