PSX - Earnings call transcript Q1 2022

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Operator

Welcome to the First Quarter 2022 Phillips 66 Earnings Conference Call. My name is Erica, 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 XX supplemental Investor to include And Midstream. can COO; EVP, Participants and morning. be materials Refining; welcome Mark and Kevin on Marketing conference quarter CEO; Commercial; Relations CFO; of Slide today’s our call. Mitchell, earnings Brian EVP, EVP call Bob section President Mandell, presentation will Lashier, two Greg and and with and Safe Chairman Today’s Tim Phillips Garland, and website, XX Herman, the information. operating Harbor Phillips on financial Roberts, the along EVP, contains found statement. first

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

Greg Garland

us Jeff. Thanks. the share. morning, thank we everyone, first $X.XX and Okay, for Good adjusted of or $XXX today. quarter, per million In had earnings joining you

our Our across seasonally impacted In March, improved by earnings. lower margins saw results operating we were substantially businesses.

demand earlier we of our and and season. provided In $XXX earnings. our shareholders restart provide gasoline dividends. in under $X.X debt, we we we to our with strong majority $X.XX operating and distillate million authorization. billion existing generated We during first billion returned repurchases quarter the head In $X.X as April, will strong inventories announced of first the share Well, repaid billion will today, momentum into the coupled driving quarter of fact, March summer flow cash that

employees. President increases. lead has and our outstanding annual growing secure, leadership cadence effective will competitive strategy, we become we a Mark and addition, to dividend and remain a month, to CEO of resume company XX In July Mark solid this that Phillips strong will dividend, X. announced plan Lashier of and committed Earlier a that

confident and the that with all the to over XX, comments. employees, Phillips the communities to are position turn I to that, Mark call years And company the our in as additional well leader provide We to Mark shareholders thrive serve will will right ahead.

Mark Lashier

to Thank operating talents the embark of as our our excellence we our advancing on this am role, building excited the new team I you, on and of remain continue We shareholder deliver strength on focused Greg. and strategic initiatives. assets value. to

segments is and environment. optimize efforts are any We to across position focused to enterprise. team improving and in transformation committed across organizational business a opportunities future cross-functional Business to on our the year structure last initiated market performance costs competitive sustainably our drive were our

its enhancing operations. scale the to Gulf billion, are over is a by of projects, splitting final to be per Partners two expect targeting start and investment Ras up total base, billion X-hexene, CPChem Gulf Qatar. and start expanding U.S. capital facilities $X olefins at XX%. second X new portfolio with least efforts capacity continues quarter. million. is Laffan, optimizing includes Coast projects we world sustainable This unit year, regular billion above the Coast a CPChem expected project to budget well produce to critical of business its $X barrel. component high which in $XXX updates In in coming buy-in to Sweeny Phillips Midstream, facility. propylene polyethylene. Bayou we provide CPChem on the Frac average develop a return year. at reduction completed the our a equates growth XXXX. We cost about Hub, unit its to this per plan per of million We to its CPChem’s the Frac is up year. U.S. which its year expected $X.X is as is with on X projects as a high asset of pounds project The cost with approximately total for for existing pursuing expected X Cedar third Both XXXX in $XXX return is located alpha growing petrochemical A performance expected an world-scale at the decision also normal in for are XX

have We expected Renewed the barrels day process per of over quarter. production expect of renewable in to will the is fuel continue early Rodeo capacity. steps to progress project XXXX. complete conversion permitting this and final of Completion Rodeo the initially XX,XXX

is conversion million. In will be $XXX anticipated from addition, the emissions approximately reduce cost total to project The facility. the

Our during Airways. HX quarter, XXX by an to retail into British Also hydrogen joint Europe entered capture form the refueling agreement to March, we the across to our its batteries, in in with sustainable first fuel U.K. develop aviation under Humber Energy venture to made Refinery In up agreement Austria advance supply Denmark Emerging of Germany, opportunities and XXXX. Group renewable carbon a fuels, with a Energy continues and hydrogen. delivery stations

with XXXX added During first we year. by and The Scope last emissions target the X a announced XX% target to levels. intensity new XXXX XXXX compared gas builds target reduce greenhouse X quarter, on our

reflect sustainability, commitment in to needs our and while targets the future. meeting energy Our world’s the today

recognize Before excellence. would to employees’ results, we commitment our review to financial we like operating

Well industry AFPM Borger Award, in CPChem In awards award the Congratulations its and of for businesses which XXXX recognized Sweeny, is Distinguished three received the done. and facilities. that safety Chemicals recently highest recognized Sweeny including to sites The honored all their working Chemicals, our people the Conroe, refineries, the Texas. are performance. for Refinery our these The two and Bayway. recognizes. annual Billings Safety We received AFPM were Refining at

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

Kevin Mitchell

four, cash quarter. generated and $XXX we everyone. of share. with our Starting fair affiliates Mark, million $X.X per in XXX We per financial equity investment Capital dividends. for in PSXP for million. the shares the from slide of earnings projects. XX use including billion including were share by issued We quarter $X.XX. million. summarize $X.XX spending million outstanding, operating an value Thank on NOVONIX overview hello, We or $XXX million you, The earnings the $XXX working in our paid decrease results Adjusted million ended $XXX reduced growth of of $XXX for for a quarter including million the the with the million We was $XXX million, capital merger. received shares distributions $XXX flow,

Moving quarter. highlights this segment quarter the by to slide the to the in slide five, fourth adjusted results change first from

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

the the prices schedule barrels a loaded DCP by improved the and and income on other exchange each X end per partially compared day its fourth due showing propane was the and is quarter first million of quarter, decreased with pretax million record quarter, Transportation our $XX impacts the own the quarter. quarter. million, it in rising mark-to-market was the XX million investment of separate LPG in line gain inventory, compared hedging butane Frac the by export quarter. in trading adjusted the $XX contributed income First in quarter. lower Hub and with foreign in averaged The quarter, income this was fractionators we primarily with to adjusted investment compared million, in facility quarter at startup businesses. previous This mainly the our $XXX adjusted expect XXX,XXX costs. million, million of of offset $XX at NGL million, a The by fair $XX unfavorable pretax cargoes of $XXX partially decrease in Midstream to adjusted was decrease pretax is recognized of first pretax results. from million we impacts, of The impact with ahead offset the an The of driven of down Sweeny previous was from Beginning reporting Freeport at increase $XXX quarter. are the quarter. NOVONIX hedge operating quarter. a $XXX sub-segment approximately $XXX the million value the the core million including $XXX in approximately Midstream income investment, hedging in fourth first period. from $XX previous loss fourth third

first million a million of $XXX in fair NOVONIX of the the investment value at Our million $XXX of quarter. initial -- the end had $XXX

was was income margins due volumes. polyethylene as adjusted was This supply million inventories income lower from Chemicals’ normalized, The Olefins Polyolefins pretax $XX O&P Chemicals Global in for adjusted was quarter. previous Turning SA&S to quarter. million, million with and disruptions the $XXX to the primarily line sales million XX% $XX on last year. million. fourth quarter pre-tax higher for following $XXX pretax quarter offset first slide was income seven. $XX down previous was by quarter. decrease Adjusted the of the utilization partially from

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

fourth prior Market $XXX capture the million, covers clean from of per as inventory impacts margin overall impacted turnaround was $XXX volumes slide margins, Refining of Slide the from recognition our quarter quarter. margins, than per barrel, XX%. to XX%. approximately million, XXXX market pretax X% were refineries. the were was by The the quarter million barrel to The capture lower Pretax million to was RIN down secondary the $XXX nine XX%. the the well $XXX to The the fourth crack X:X:X margins the due quarter barrel. impacts. first capture was $XX.XX was quarter quarter product by and by of quarter previous lower was in in eight. compliance in $XX.XX fourth market in quarter. yield Gulf Realized to decrease higher first Realized resulted well Crude obligation $XX.XX barrel product Market clean due product utilization $XX.XX costs Coast year is market as Refining clean from more quarter. income was higher and market as the $XXX in for maintenance. XX% costs, by lower decreased per the million. planned in per offset capture. mainly cracks Favorable compared adjusted first for higher product realized driven were of in primarily an down reduction configuration realizations and RIN Turning costs as

are secondary crude more production impact barrel market Our distillate lower of heavily $X.XX flat as products yield toward offset higher configuration previous the Losses per rising due quarter-on-quarter distillate relatively than to clean barrel cracks. quarter $X.XX indicator. the prices. refineries from was than per The were higher weighted product

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

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

day. shows the $XXX generation. also our million. balance on the business This spend Specialties income by dividend, primarily mainly million, as balance due in resulting margins. seasonally first million another started pretax the in cash this of rising due prior Marketing the spot We to quarter balance. change first the operations and the quarter. from while cash from We which from product and and was million covered up quarter. quarter Moving cash million XXX,XXX to billion quarter as quarter XX slide $X.X quarter from higher per was with row, adjusted and in the prior cash million prices to strong cash XX. to Slide $XXX cash to flow a strengthen pretax shareholders, generated million, grew Specialties $XXX operations margins, exports our the compared during Adjusted that a marketing $XXX $XXX other $XXX had decreased finished well Cash $X.X million with for the $XX return Marketing first billion, mainly lower was demand. from allowed Refined quarter barrels in of lubricant in for first increasing quarter quarter, were sheet. income in us the prior capital fourth invest lower $XXX

April, maturing ending $X.XX billion. of In Our of debt. operating balance This was cash $X.X financial billion my concludes the early and review we results. repaid

costs Chemicals, cover to second a will expect crude O&P In other between be to low the Refining, between be million. I pretax items. million and utilization second come pretax. the we expenses expect global to the $XXX in million second quarter $XXX XXs quarter Next, anticipate corporate utilization turnaround We to we rate $XXX mid-XXs. few $XXX and in and million rate In in be the worldwide outlook and quarter

Now we will open for the questions. line

Operator

Neil Instructions] Goldman Please ahead. Mehta go [Operator you. Thank Sachs. from

line open. is Your

Neil Mehta

retirement the role. And congratulations will on Mark Good your morning, Congratulations be team. Greg, on you new missed. and

Greg Garland

you, Thank Neil.

Mark Lashier

Thanks, Neil.

Neil Mehta

bones around that wanted the transformation. put meat and be basis point cost business the help upside Can to you on barrel up more or talked either potentially I the point could the on what the quantify you a about, across on dollar pick fleet? this us

Mark Lashier

initiative year. We last started this

That’s reduction. run really and organization entire the primary want the to cost just the a reduction. than want on at to it’s We be looking rate. are more that focus focus. We cost we But recurring

So minimum employees what and are that cost view transforming have of the focused that. as is to we kind line we we of that on million that, we have that on that’s sustainable people, organization contractors $XXX and ensure number, XXX on got working and reduction sight bare about the

are initiatives. We at looking over X,XXX

it’s it’s So broad, deep.

We at that structures, is simplifying working are of number looking to ways that, ensure simplifying sustainable.

So we want but know I don’t the upside, relentlessly that I to every that any there’s it. across guarantee pursuing upside are to you organization. opportunity quantify we particular

Neil Mehta

the not that’s Mark, Refining, And just organization? that’s across in

Mark Lashier

Neil. correct, That’s

Neil Mehta

on? Okay. the around is to share just your how program. capital. think repurchase Congratulations follow-up so around on strategy this, the All able market execute And right. about of then you return and Again, about talk being

Greg Garland

come stab we get back it’s cadence the I and in will take to regular increasing of think terms allocation, in. can a about the I to Well, think Neil, we capital Mark and think Kevin as and think, dividend. important I dividend a

and So think in the to comments. back of preserve that pandemic I laid those XXXX, was that. made, cash it’s to I the point opening a time Certainly, just repurchases, result think, to as down get in share we

I things, Refining. see have that in great opportunities we the our business we is base tailwind of our think, One this in

cash. We are excess have going to

Board increase we a at that’s Directors, for balance are total would our pay opportunity the more the cash the our company. as the I team, return to laser-focused But going some on time debt, build we buy back, sheet. on us of think -- shares same down improving say, give I are shareholder to dividend, some

Neil Mehta

Thanks, guys.

Greg Garland

Thank you.

Operator

from ahead. go Gresh Phil Please JPMorgan.

open. is line Your

Phil Gresh

Good career. afternoon, on Greg, I a congratulations also wanted to say fantastic

energy for you be always will You and have visionary the and definitely balanced been such a spokesman sector missed.

Greg Garland

Phil. Thanks,

Phil Gresh

I If XX-XX. how follow the to the shareholder around about I ready you move I to mean do could you pacing? are up, guess, think returns, back like just

gross I you on about You think target. point kind debt want to have basis? that you at talked highballing Thank -- maintain billion have Is cash much about talked you. how where you regular still this Kevin, of and a $XX are do a

Kevin Mitchell

target we is billion gross the feel near-term Neil, optimistic. target billion while we we Yeah. $XX are us taken the a have outlook, so added. Cash -- to to out strong. back least now that is on before pandemic. we The we And of that puts pace were of the debt the still where are we care at very $X where $X in generation there, billion is

share that we And while XX-XX. so feel comfortable we can get [Audio into repurchases back Gap]

to some funds next the be have And to program, capital we which the returning so going between billion about in through of in have for we -- $X couple we reinvesting years, the balance said the aggregate dividend. through are shareholders will business

cash of the share in continued repurchases, also and balance reduction We highlighted. working are debt a sheet on increased some back -- form but with as to cadence you

a quarter-on-quarter. comfortable has we sort not will cash You billion a $X.X continue do we while balance, look feel forever, our think, that And cash that $X and are us balance of having every much more sort to looking they more comfortable on we billion it’s that that more minimum an billion probably billion ongoing cash we $X but flexibility. that provide basis we need level not level, and just with cash, say necessarily increased over the used year to quarterly I last to of trend $X that at feel

Greg Garland

kind less next what’s is of morning. morning we maybe about year, given the is, this unsaid year say, then at this think $X a very we disciplined company. also this still guidance to And our billion would being I guidance our and for table I investments and left capital kind of been on that around guided or here have have

Phil Gresh

follow-up Thank I peers of money comment you. what Great. makes that March, interesting Okay. Refining, in sense it made on A most guess, question have to the was said. relative

some have maintenance, the quarter. do second in You guess, higher I

maintenance, $XXX and there at on year, just Thank look quarter. you performance million the was bit As could sticking you a central of corridor still million full to $XXX you. the in loss the the a with if elaborate where you are

Greg Garland

take will I a Okay. shot.

them I but there, get questions three will there’s all. think I

were in central primarily really March again, of to So -- half think had the back as get the weather I we warmed the into which north, turnaround of primarily activity corridor. month and up us in allowed March maintenance in the we mode the

entered that. -- were we So we into

We month. activity turnaround we positions us will It online have very to Labor up after come most of season run middle by certainly, will the of our Day. then our back well of activity all conversion turnaround wrapped of summer to units mid-May, back any driving and and significant until strong won’t kind throughout the really be

for total -- our I looking most we half plan, have are think to we gone activity part what has on really planned. the at year, we first for really according the executed and

to we we half, left a year. of continue And have change turnarounds out do at and type Second next turnarounds. primarily look catalyst those pushed we into catalyst some life

We some think, the year next back or half fall. out of have there, next in spring to opportunity squeak those the even of got some I into maybe

are we around that. all re-optimize constantly So to trying

The crude say Corridor about in other our Central thing Central the good headwind Corridor we a the would results I program. pretty is, buying Canadian lagged with had

for was that Corridor saw us on timing as in to system. all the a in our basis the results and significant Central what basically So that we it impact lands a there

the weeks lot particularly So of that’s up, It a in of with quarter. back ran the how to issue. the quickly timing do has crude couple a

time and it crude will as over that come prices off do then We always we see will back. to as come get back they seem

Kevin Mitchell

impact per $X barrel effect. just, Corridor, in that of on about in impact the that of terms And the timing Phil, margin realized crude a it’s through Yeah. Central the

Phil Gresh

Okay. Great. Thank you.

Operator

Please question. of America. with Leggate go ahead Bank Doug your from

line open. Your is

Doug Leggate

will and sell-side, get guys you I to and my do hope Thanks dinner encourage both retirement add to to thanks am trying I to everyone. the congratulations a Greg, I -- needless say, Greg. for we Jeff

think… hopefully, So, I

Greg Garland

Okay.

Doug Leggate

can you make. …

… going So

Greg Garland

you Doug. I are buying, thought

Doug Leggate

I company. will forward mountains to thanks look know seeing your over the years. move steer how for to Well, to and insights there, the be Mark, help but you

of have got for ask two. of One question to question, I first, also I a picture guys. So, want I a both bit perhaps philosophical big -- ask you

you you like think, all, stand we our familiar have obviously, industry with we I Humber, of think have where to now. and end opinion all responsible Europe, in the U.S. are down the we have you and year. shutting we get insights to the facilities to look, happening on the First what’s the obviously, But also for are in level, by you of on Valero, time next right

to we in when that look are just if terms new obviously, at to whole seeing thinking to what of move So we Humber dare to U.S. you that? now, a be shift you like, right I structural the some going relative are I European and peers, through gives am international, mid-cycle level you appear the say, curious you advantage, insights kind of,

Bob Herman

Yeah. a Doug, shot come can in others take I top. will over and the this is Bob.

last at was the differences. I it the on call structural beginning the of think, your of are think time we Refining the about I talked, we age talking golden

Doug Leggate

Refining. U.S.

Bob Herman

Yeah.

Doug Leggate

Yeah.

Bob Herman

Humber We most U.S. time, position. particular gas Europe generating of in large we one a a structurally the our and fuel that right? And but just and Europe doesn’t Humber lot breakeven it in And they with were are at kind refiner skyrocketing in and of in inside and strongest needs, there time, Refining. was coking own gave a just, the us capacity U.K. refiner advantaged a in use Humber. right, view. of prices the gas, were at the by the very strong far being had

we to market happen, good Humber’s making marginal that what to about to and those market incent talked whole to back fact diesel. Diesel And come had in to to the European works. profitability to fact, refiners have return up the and would cracks the be have right? move underwater that’s get exactly So that running refiners we seen and keep have incent that

Gas I takes it again, the changing a and U.S., but really puts seeing us for anywhere get see are to up this while Europe, we what don’t Sometimes are the but kind prices of it market not structure in structural really a certainly worked. advantage. right, yet at that near right? anytime, in itself

the use a If fact the one advantage U.S. fuel you cost and way Western does through improved it kind most Brian, got Refining basically make add to hydrogen, they buy a the you back of for should that Europe part, if is hydrocracker-based, rest lot you us that give the for to gas a versus of hydrogen add? Hemisphere. in to of you want the anything all got margins have of translate mid-cycle lot

Brian Mandell

we given $XX. the $XX have Last But add versus in Europe, Bob, guesstimate natural settled an have gas EU in refinery prices natural the the price MMBtu currently. a U.K. I that of benefit $X our still where off versus over would of is large about which price $X U.S. to is through the bit. quite most just of at come EU, gas and our the here gas night

Mark Lashier

probably crudes feedstock And up been light to U.S. also relative on advantage in the sweet with traded an Europe having crude

Doug Leggate

Bob, Of thought. everyone that insights course, extremely Thank your valuable just that. we well, prepared for as were you for listening,

less five that Greg, navigate, look particular, years, be you So, the if the of than we when little defensive, challenges philosophical obviously and more had volatility from if last perhaps thought, strategy think, have back over obviously, I you some moved I have exposed And the Mark, guys, are your this Greg, we in your going Refining. of a my got and to peers. say, to forward, diversified guys, reset

share So an your period, than more you a over it look at us five-year relative that performance like when behave to integrator refiner. seems we

the it are you. of think share with will to we buyback relative investment I of more, how forward, to opposed type that, case? guess, some kind group investment the pure-play starting see peer And I situation relative Refining you there. about look to say, you of as think leave about you the majors? let’s Mark, Thank the now case do do differentiating glacial curious, am I So as How

Mark Lashier

Yeah.

to of things. that North sure I that, couple our to investment we revolves that of have to want we relative American different in full then want referenced generate to number are They participant sure of things Refining cash, petrochemicals. first as a all, do want them there’s do long-term, we we the case a of so position age. I around producing going a maybe that. be to able refineries, operate -- drive the make -- our you Doug, to golden more But the for We we really around what with to that We care the refinery refineries make well. we of that? the are think take we do think them more towards future,

they you as CPChem, look debottlenecks have continue, their a mega got got have they two through growth have projects and projects teed advantage. but of then will they for lot midsized that got up, build several on We opportunities

where create So Emerging some going they we see down look And things. emerging have assets are for got then in we leverage leverage good, play high energies continue return the value opportunities to to we technologies to and in our existing real sustainable to to side drive Energy. to opportunities and our of refining

it So in and we Midstream well as our some Midstream base,. as opportunities consolidation both asset optimize got Midstream that to then drive there. as think about -- have there’s

as So well. we have that leg got

each each segments, its down way. to little continue So we delivering in own will unique, value but those drive a

Doug Leggate

Thanks Understood. again, a Congratulations lot. Greg.

Greg Garland

Doug. Thanks,

Operator

Read go Roger ahead. Please Fargo. from Wells

open. is line Your

Roger Read

to a shoes and take congratulations of into to getting my you, Mark, Greg, yes, big pair And and fill. step morning. over to Good you. you, for Thank to Yeah.

Mark Lashier

Brian. Yeah. big They Thanks, are indeed.

Roger Read

guidance to and presentation, I that and bit you your in know right on this right off jump will the has first York crack terms Jeff I or talked be us always -- am from to But squirm a the do dear turnarounds well, at I is can Greg, out were I harbor thing, the the Just little many I Phillips distillate here. here. now? earn crack. throw environment? New near to have look to everybody guess, times going margins, know the of the But heart on amount your this what you diesel diesel if of for to to in think and turnarounds. I but make what you going way calculate Phillips in about I about got there am really benefits even can not diesel if numbers so

Just possibilities the Refining should that how some guidance the and on we side? of some of think about capture

Greg Garland

Yeah.

on I able is to and available. are to be the and think the the market well advantage being operating in going take that focus of margins

I heavy think look prem some of all diesel that talked the on on on as the months. look have favorable exposures environments of cokes those about into dips we summer sour and we we have

on I think hindered Gulf moving Corridor purchasing the quarter there’s and some parts. on issues crude timing the in issues this timing in Central product and We were timing on Coast there.

in profitability think So I that show will those later will periods. normalize we see out and up

Roger Read

clarify, -- and some forward? that even think guidance is to capture I presume should should these levels? at mean, guess, we still of pretty the But, we sort just as deterioration the go is I about reasonable not Okay. broad we There’s

Jeff Dietert

but the seen we into that. half to No. and seeing just net market. mean, and in hard I don’t think to strengthening just of current on the as watch have speak we income March back we the Brian April. It’s can in predict I what I have are we cash see come cash

rates improved. comment. that will me capture mean, definitely you Brian, have are And suggests so, I that let I to

Brian Mandell

position in every terms the time. add crack amount will a of would and can to prices But day. continue terms the in to margins, lag There here. is we capture, so of money in of from I we Jeff but issue a that that, said, do absolutely increase be we Yeah. an over that we those are timing capture as will capture

Mark Lashier

basis, trading was especially on the that a there you in in crack done think the I of a that trading lot thing seeing and on diesel average we barrel across range of at see that period products, end day, daily range $X wide just with a of I a Roger, are on would the amount a a crude $XX daily volatility one to daily basis, basis time. emphasize,

think, volatility, the not be I see they to we so, when going typically high. And not accurate are so kind as indicators of volatility is as this when are

Roger Read

how There’s XXXX of That’s laid room happened that savings error, into things of question, where for million of out the does within that right But given fall of are lot think goal, know point? laid what cracks fall since lot fit that $XXX the that overall we the a I framework and at a was million the in cost fair. One $XXX how was now. out follow-up about XXXX? should

Mark Lashier

this of a digital build some efficiencies things we was those a were there, were simplify of did There innovations on what Roger, leverage XX. one-off the and to future, is captured in capture value done and to a around things drive into introduced, what out things do some lot in of going we we to innovation going lot a to lot are moved the Advantage fashion, were organization.

this is So additive to that.

Roger Read

brand think we radically opposed not different? next something process? to should So or It’s as in logical like just about new the -- step it’s iterative a

Mark Lashier

and that. this -- how as well and capture more probably building can efficiencies Well, drive on structure It’s into getting we how yeah. our transform business. It’s the we organization

what change do become efficient. to going think, not I will it, but we how more we are We do

it on I build to additive that. and it does So think is

Jeff Dietert

Yeah. going There’s a effort that’s incremental place now. substantial in

Roger Read

it. No. appreciate Thank you. Understood. I

Operator

Ryan Todd Piper Sandler. Please go from ahead.

open. is line Your

Ryan Todd

Chemicals from a comments your Maybe earlier. on follow-up some of Thanks. Hey.

a very quarter. First strong quarter was

how year into may levels year, margins trend this mid-cycle I but towards that we the have from European back came natural lately. plants? market had a And versus relative crude and you gas last from your the portfolio been I And in how can and think trending in higher like peaks advantages bit they little and it seems see market driving dynamics pricing messaging to inflected saw Asian are about your talk here? think we expecting you

Mark Lashier

Yeah. Ryan. Thanks,

to and think I that’s closing since and ethane entire for industry with advantage it that last wider well-positioned touched ethane moving the of that and margins the East. driven we take comment crude call, your to the and on really here in a are the in becoming enhanced, U.S. advantage both CPChem up Middle crude

that’s going that to think I and there that’s persist. So

going attract comes capacity is ethane we a the seasonally are That stronger consumption new out to as as You extraction point see headwind to margins. more into a ethane online. going driven to provide go more consumption value in to

other. you two kind balancing those off So things of see each

margins status kind into next see those the we in So going quo a quarter. forward of

Ryan Todd

That’s the of been talk for helpful. next you maybe And maybe environment far that then of in produce have year-to-date? the the able seen what helpful. That’s update can have steps you to Rodeo, renewable Great. at permits about have on so you there volumes any diesel the terms and process you timing that operating in

Bob Herman

moving It’s Bob. forward The permitting process expected. really Yeah. well quite is we and as

have County. had Planning from We Costa Commission conditional the in approval Contra

got quicker everything that good shortly can to was public. set actually to after world, the to fuel meeting start see, As the there’s in get to and those the and expect out have the of permit of the have needed else Supervisors allow work the drive California Xrd. community. goes that. unit while get Board that Board permit special us grant up renewable a now California part marketplace, vehicles driving we starting alternative can a It that support appealed. address going, running and we in quicker our to and to the and a Everything that we we would Realize have who it usual can diesel in we May Coming provide in fuels supervisors County the is the of to great on that,

here permit come just So we expect very, shortly. that to very

see seem XXX, California really have what we On And of soybean come of oil, renewables have profitability been we the to is the price renewable price that price unit. low credits, RINs, to carbon the diesel they standard, understand Unit we that and the marketplace. on trade, the put it continue all there, cap the in sort running of to fuel in work incent to make to us to continue diesel, of and concert

we happy oil very the are So, we the through have very units. there with what side type the and kind we operating we run to how of are encouraged by about bean feedstocks see side learned on what commercial on

So then and XXXX. forward and early looking for hopefully Renewed looking we week getting startup Rodeo the are get next and really in to phase next going permitted

Brian Mandell

our to are through the volume add, we to retail the Unit out consumer get all wholesale end I of network And would able XXX and in California.

Ryan Todd

retirement new position. been And on great. a congratulations, with Greg, It’s the your both and pleasure Mark That’s on

Greg Garland

you. Thank

Mark Lashier

Thanks.

Operator

Credit Please with Gupta Manav Suisse. ahead. go

open. line is Your

Manav Gupta

of a I more have here. strategy question

growth PSX Midstream For for was time long vehicle a a to grow earnings.

you though still you capital us business, which come Now Is really grow actually even Midstream ahead? small exist? now, a across How good the PSXP. to to invest where understand be you growth we sit brought should it overall basically in if have of strategy So, in think then would a is Midstream opportunity capital-intensive, be and PSXP about growth Midstream here? your doesn’t growth or even help does going terms going willing

Tim Roberts

Manav, as question. what complexities us reporting the think dealing When in this and takes that do for you that Hey. out Thanks some with roll-up, some both as about in simplification Tim. well cost it is with we helps and takes the out commercially, process.

to but we very So yes, pipes a we down we changed. a appear up. opportunities, out Midstream built before, have be were strategy caught hasn’t Infrastructure that and is well our you MLP really in have on built business. roll fast the because place. as of growth it out, the out said our lot Fundamentally, we slowed But trajectory,

further integration. our and and as world, best optimization out set, NGL well at build our we incremental in optimize our opportunities find So looking how we can high return are as

the comes that, in projects So, meets be point if threshold time. compete the PSXP, and do it’s if right of overall thing from optimizing we would our the outside But opportunity like right to and do the to considered. kit it are this at it’s it all going right really up,

Manav Gupta

second growing on And business. the is energy then the the more transition

fuel the the is, to a expertise? it question capital is bigger is, part you. So, are can seeing would other second you alone, part open very all of the I So some like what to like business? PSX of grow keep is do besides it project have out part the partners you are transition or question franchise think, first do renewable bringing Rodeo, diesel a else project you on this energy first cleaner you what its there obviously, Thank you in to for and partner? in of because And the of Would Rodeo. to people yourself project or to good

Greg Garland

with in we a say funded Rodeo, program year would have capital I this through partner we Well, way. don’t that our it and need next so

Some they folks partner have need because gotten a commercial expertise. a

We strong have a commercial very organization.

buying oil a time. have We for used cooking long been

a producer. know, with we As have soybean a you deal

XXX. in canola the met soybean, well. as Unit producers tallow have corn distilled to and oil We oil, Rodeo leads with We buy tallow have

So we position. are in good a very

the diesel Our is out marketing portfolio, end so business the to building users. sell we can renewable

really don’t the funding. might the need and others we that don’t we need So need expertise

Mark Lashier

doing are As so our different Refinery The their feedstocks far are U.S., a today things in fuel sustainable Airways. to Humber they can we rules in they little producing at and are co-process as than the through they other are the opportunities, are aviation British renewable today. U.K. facility supplying they that

economics be, sustainable to and at when than we from can stream helping other have economic it’s the routes number drive with ultimately, facility things going for -- Humber. fuel. there sustainable hydrocarbons. of a looking aviation flying can opportunities, on also the their planes we it, have under to of still solutions We so are fuel other if approach today technical look to Airways But, think the at British for so manufacturers us sustainable legs. to planes They drivers? what number We future. And Rodeo airlines, And fuel development. aviation that we we are sustainable produce are fuel fully has aviation are jet other fly aviation a had It’s difficult using

sustainable opportunities. renewable fuel great as both see we So diesel aviation and

Manav Gupta

you. Thank

Operator

Chen Theresa from Barclays. Please go ahead.

open. is line Your

Theresa Chen

offer mind and I May Greg to Greg role. new congratulations, questions your my go want taking down, as for to peace of Mark, the your on up go well. Thanks congratulations handicap my and Hi. and

Mark Lashier

Thanks.

Theresa Chen

I on wanted discussion Chem. to revisit the

portion a you margin Just of to by sales and you How is your break each stronger than suggested. nature versus sensitivity basis? can indicator spot came if the contracted like because us that on can, down on your rate would this in a run the much are lot portion basis, of sold your owed and a have help of

Mark Lashier

Yeah.

I little a in universe, think [Audio contractual commitments Gap] that in there’s that are you to fuzzier other than environments. the be used might bit --

their that now the and coming business the contracted And are It marker think know than driver. CPChem’s than more slower market. that I mix to capture there’s that, -- less than margins the up don’t is I came a product with So marker. substantially any primary anything. seeing high than that The do density slower off little that that. margin they IHS has do it’s

that they really discipline some And can attribute that business. the are so, great it’s driven and how you perhaps in But don’t that contractual by a I there’s driver that know in managing their to. position

Theresa Chen

or alliance the Got your clarify, it. down? And line of system that the state forma on the you side, shut the million OpEx that just reduction is does of pro had to number, OpEx within where $XXX compare to

Mark Lashier

That is the addition alliance to shutdown. in

Theresa Chen

you. Thank

Operator

ahead. go from Matthew TPH. Blair Please

open. is line Your

Matthew Blair

Hey. the here. question on for Chem Mark, side. the congrats And on a new Thanks is my run. taking questions. role Greg, congrats my Mark, on great

has opportunities if CPChem so, was and Refining think and more if have about but opportunities, talked so, I in those you the out? wondering, side any past, so, you in flesh hydrogen maybe the hydrogen could on I

Mark Lashier

CPChem really -- have some to of a is They up. hydrogen producer is facility. as that a it relationships has allow the out to cleaned got large fuel It But monetize in often of technically be the them of steam crackers. or consumed that.

So to there probably CPChem cracking that presence as capabilities. for opportunity is grow their an grow they

Matthew Blair

compared been about trend in recovery numbers far margins Okay. And talk any general has sort low marketing in you could there in of so the quarter, second to the QX? the then

Kevin Mitchell

the are quarter, prices don’t the rising The Margins move the margins. seasonality. keep Generally, as have marketplace. we rising the margins in prices marketing are second headwind quickly better now in margins marketing just as typical

quarter So on see depending prices expect go. better of slightly will will we but -- do next where see to we products the we would

Matthew Blair

Sounds good. Thanks.

Operator

go Please ahead. Gabelman Jason from Cowen.

Your line is open

Jason Gabelman

taking Thanks for new on and role. the and have retirement on your Hi. my congrats, two. questions Mark Greg, I

saying consistent the in peers and out wondering comments are between the what terms putting kind there’s is a conflicting on if been am second system, some I gasoline and demand, first, if up? of time DOE refining question. good what your particularly side is out The of would I And is demand been what are so of, some are if the while seeing my we showing more play weekly Greg, you broader wondering am been just you destruction your the this or and guess, probably you drive DOE question bearish with has in over holding all Refining demand longer-term a to margin and peers see are in right that? normalization environment on than that now. how obviously will pretty maybe past. if your what in or some This you margin insanely here the Thanks is have expect strong margins a outlook I these for higher then

Greg Garland

come So I Brian can stab then and out. a take will

business. calls And today. So, think billion mean, at for to bullish be so those at are -- on billion, right XXXX of with Midstream I started probably we parts $X.X had about the are million a we $X.X we opportunity portfolio, you think of and the EBITDA $XXX about and part, diversified luxury of our I we we had have the other most

into kind So, a more are really parts, in business coming multiple et Refining the valued terms of some the of I would the this of year that growing we though tell highly business. cetera. of on strategy you as

as We are Refining. constructive probably on

in been long have a time. we So

capacity the down of I on shutdown think have demand. see we capacity we been we inventories and that’s has that where coming last global XX where seen delayed The over a see the that’s months. slowed newbuilds combination today either or global

Refining And in combination real XX time. what time. on I a whole be the better months, XX what Brian, months’ we going to environment a us So together next that comment for are I think is or puts really can seeing for think mid-cycle you in

Brian Mandell

Hi, Jason. It’s Brian.

the to levels. XXXX So demand demand seeing Coast, we in in but West on U.S., back terms of the everywhere, are

a the they Coast, seen the West and of bit the On have particularly been of out trimming. of high, rest we later a got have COVID country than so demand little prices

a are seen very we bit have they good demand. little But So lower.

over the side, globally. XXXX On demand distillate

So as well. we there happy are pretty

XXXX driver, lowest distillate inventories are inventories the the our and and since been XXXX. I it’s PADX been lows think lowest gasoline since they have really April inventories, May are of the of of five-year

would demand So see forward. with these strong inventories, going we to expect low

Jason Gabelman

Great. the answers. Thanks for

Operator

Cheng ahead. Paul from Please Scotiabank. go

Your open. line is

Paul Cheng

million put you Greg, is or about, been year that estimate to on catalyst Good kind one. number at probably, million out on think, it the only has mentioned, XX-year is your new $XXX million just the look I congratulation like it, or the congratulations the short of that ride, one is a morning times. million. have of still good a earlier questions, range. Two in the a role because the the major has retirement, Based more spending your comments, say, think, has really turnaround? There’s forward. $XXX year, a $XXX the company $XXX lot there’s change going of doesn’t a Mark, of year, been changed, first for turnaround Hey, guys. fun and I and At expense, beginning call half

see want in if some see turnaround how the transition linked at the In country. system even your to look certainly Midstream believe company Secondly, diesel standpoint? at the level transportation your I is may So happening and this and the that energy spending point. overall gasoline to the business, demand from is directly

the to back four and or is term capital longer maybe from that and company three so scale standpoint, in the or maybe that reposition put over sales? And this a segment for the to deemphasize trying start next into the some curve Mark, will years,

Mark Lashier

again. the will take turnaround at shot I a

we the guided in this the $XXX first that million the we half about towards had are have turnaround we first year. part total of talked, a finishing program for we and of As of spend up

again During have are won’t prepared so gasoline until hard the to season, summer we right, run or turnarounds during and fall. we any the

half of continue our back those to of that we in are year, out. all catalyst and can life push look at the turnarounds We the

those We expect turnarounds some out. to push of

you back into expect update we half to we XXXX. spend to than guided to We the less turnarounds the those ready out are slide originally money can budget. XXXX that of think of I will But on able not some are of as we

Tim Roberts

with and the The from things those our the exports, transition long-term, like impact of those for Paul, time, has going NGL propane will so to very, refineries that for very diversity long around and we bringing are be well evolve we clean refineries produce see delivering petrochemical refined a to butane assets for of assets, potential crude those energy lower crude Midstream molecules got look energy we will as the There and believe for carbon at the from you upside taking other the and lower a the into in pipes of primarily our of but operations. long those have our we Midstream hydrocarbons products to intensity ways then And emerge tremendous what are opportunities going transition. and to we products, the intensity on the may facilities business. think liquid horizon be to carbon out pipes. pipelines that repurpose got go the which on refineries, a side,

Midstream at assets, always we of as are So well. will and them. that that future repurpose do we the the we We do our looking value today how in can maximize

Operator

Prashant Citi. Rao with

Your ahead. line Please open. is go

Prashant Rao

to outlook large, to forward I’d all like will working and at taking thoughts with I hearing the on It’s and your getting congratulations. industry and and question Mark, energy know echo look the Thanks more one. it Hi. to congratulations, been your Greg. for to and great keep you you

bit a and bigger on picture. Just Chemicals this is

good expansion projects queue, environment is environment You then, looking you we was targeted were when ago still happened projects hit But are there what back, north since is targets. time in you to know you incremental last the an years the a able had all invested depressed. talked several and pretty capital. higher margin and And of on XX% the of margin about return kind returns. that And announced

teens, ROCEs, seems XXs because rhymes. expenses, but sometimes volume increases. of were to curious combination be low itself at You repeat there doesn’t high history I am it sometimes

seems high We settling slowly. Chemicals be are it in right to coming out environment now margin of a and

the takeout, cost as the kind of obviously, on You it have up. outlook can is historically, margin before, done the it’s you triangulate? volumes, wondering, look with ahead shown where just you So

of could return range You it of are those just I with the to post lower together able hit sort ensure that end just that. XXXX, to now, piece like levers and you the help targets. you guess, with what I look But forward be return are will as you the we it could leave that, did,

Mark Lashier

growth mega Yeah. have at particular in forward. of multiple great history growth a demand, the Thanks executing guys. never GDP in really a both a fundamentals. long-term to the long-term It’s and CPChem’s time The long to ethylene go focus projects They question. polyethylene market as we got of tried on them demand, any conditions.

project. those project the in I and any consistently and of Gulf today And what up those we Coast getting something then ability around And why put for we we opportunities. the And products delivers take we assets U.S. advantage two you that doing us dislocations so U.S. looking those marketplace ethane. that’s low into. drives on another feedstocks. see our feedstocks advantaged short-term we access an having why can Qatar what And long-term large fundamentals that about that’s at into in planet. cost think baseload foreseeable then the where infrastructure take outstanding not you in staying value see to that see future, caught can focused capture around the and the growth, to That’s That’s and tap the value, and us as think

Prashant Rao

your Thank you for answer. Appreciate that.

Operator

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

Jeff Dietert

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

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

Operator

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

disconnect. now may You

Phillips 66 (PSX) 29 Apr 222022 Q1 Earnings call transcript