Phillips 66

Phillips 66 repeatedly told analysts the company was focused on shoveling money back to investors

Phillips 66 CEO: “ We’re committed to strong shareholder distributions… During the quarter, we ramped up share repurchases in a meaningful way, purchasing almost $700 million of common stock.” “Mark Lashier — President and Chief Executive Officer: Thanks, Jeff. Our third quarter results reflect the continued favorable market environment and our strong operating performance. We ran at high rates during the summer driving season to meet peak demand for critical transportation fuel. Our Refining business delivered improved market capture this quarter, supported by strong distillate cracks and wider discounts for heavy sour crudes. In the third quarter, we had adjusted earnings of $3.1 billion or $6.46 per share. We generated $3.1 billion in operating cash flow. We’re committed to strong shareholder distributions. During the quarter, we ramped up share repurchases in a meaningful way, purchasing almost $700 million of common stock. Including dividends, we returned $1.2 billion to shareholders. (Phillips 66 Q3 2022 Earnings Call Transcript, 11/1/2022)

Phillips 66 CFO told analysts that “we returned $1.2 billion to shareholders through $466 million of dividends and $694 million of share repurchases.” “Kevin Mitchell — Executive Vice President and Chief Financial Officer: We generated $3.1 billion of operating cash flow. Capital spending for the quarter was $735 million, including the company’s $306 million investment in DCP Midstream, LLC associated with the merger, net of cash acquired. We returned $1.2 billion to shareholders through $466 million of dividends and $694 million of share repurchases. We ended the quarter with 473 million shares outstanding. Moving to Slide 5. This slide highlights the change in adjusted results by segment from the second quarter to the third quarter, including the impact of consolidating DCP Midstream, Sand Hills Pipeline and Southern Hills Pipeline effective August 18.” (Phillips 66 Q3 2022 Earnings Call Transcript, 11/1/2022)

Phillips 66 CEO: “we are committed to buybacks.” “Mark Lashier — President and Chief Executive Officer: At a high level, John, we are committed to buybacks. We had to hold back in the second quarter due to a blackout period. And so that kind of held us back for a bit. But what you saw last quarter is just a signal that we are serious about buybacks. And I’ll let Kevin talk about the balance between what it will require to execute the roll-up of DCP versus share repurchases. But we have got a solid plan. And like a broken record, I’ll say you’ll hear more about it at investor day.” (Phillips 66 Q3 2022 Earnings Call Transcript, 11/1/2022)

A Phillips 66 executive appeared to suggest the company was benefitting from refinery shutdowns and Russian sanctions

A Phillips 66 executive said that “overseas, the refinery down actually helped us and generally helps us” and the “shortage of Russian distillate in the market as well helped us internationally.”“Brian Mandell — Executive Vice President, Marketing and Commercial: Sure, Roger. Brian again. Maybe I’ll start by saying that our diverse geographic portfolio with business both here in the U.S. and in Western Europe and our diverse channels of trade, we have unbranded, branded and retail help us when we think about our Marketing business. But Q3, a number of things that we saw that helped the business. In Germany, it was a tax holiday starting in January 1 and ending at the end of August. Also overseas, the refinery down actually helped us and generally helps us. We have alternative supply at MiRO Refinery there in the south of Germany, which helps us particularly in the south of Germany. And our exchange agreement terms also give us a competitive advantage. We had the general falling of spot prices, which helped us. Shortage of Russian distillate in the market as well helped us internationally. And then I would say, conversely, in the U.S., we actually saw margins come off in Q3 from Q2. But overall, we had a very good quarter.” (Phillips 66 Q3 2022 Earnings Call Transcript, 11/1/2022)

Phillips 66 dismissed talk of a windfall profits tax as political rhetoric

Phillips 66 CEO dismissed President Biden’s windfall profits tax: “ You have to remember that there’s an election next week, and I think that there’s going to be a lot of rhetoric right up to that point in time.”“Mark Lashier — President and Chief Executive Officer: Yes. Thanks, Paul. This is Mark. Your first question, we’ve been, along with the rest of our peers in the industry, engaged with the Biden administration around the challenges that they see in the marketplace. And it’s earnings season, a lot of integrated oils are coming out with very, very solid results. And I think that’s the target of the President’s latest comments. Our view is when we get off of the public rhetoric and engage with them to address the issues of inventories and supply and cost and price, it’s been constructive. And they know that they have to proceed with caution because things that they try to do could disrupt the markets even more. And they are listening, and they are taking into account the advice that we’ve been giving them along with our peers. You have to remember that there’s an election next week, and I think that there’s going to be a lot of rhetoric right up to that point in time.” (Phillips 66 Q3 2022 Earnings Call Transcript, 11/1/2022)

Phillips 66 reported massive profits thanks to tight refining capacity, allowing the company to increase its dividends

Phillips 66 told analysts that even as new refinery capacity was increasing, a large portion was still being taking offline, supporting higher margins. “Jeff Dietert — Vice President, Investor Relations: Yeah. Doug, we have between 1.3 million and 1.5 million barrels a day of capacity growth per year in the ’22, ’23, ’24 time frame. Now that will be offset by about half as much capacity that’s announced rationalizations that will be coming out of the market, including our Rodeo Renewed that we’re converting to a renewable diesel facility. So there will be some capacity growth, but the market’s tight, as you know, from the cracks in the marketplace and the inventories today currently.”

Phillips 66 said that supply constraints were “supporting elevated refining margins,” leading to earnings over $3 billion.“Mark Lashier — President and Chief Operating Officer: We’re focused on reliably providing critical energy products, including transportation fuels to meet demand. We’ve maintained strong operations in successfully completing our spring turnaround activities early in the second quarter. Even with global refineries running near max capacities, gasoline and distillate inventories remain low, supporting elevated refining margins. In the second quarter, we had adjusted earnings of $3.3 billion or $6.77 per share.”

A Phillips 66 executive said their refining income was $3.1 billion, “up from $140 million in the first quarter” and “Realized margins increased by 168% to $28.31 per barrel.” “Kevin Mitchell — Executive Vice President and Chief Financial Officer: The $11 million improvement in Other mainly reflects lower employee-related expenses and higher capitalized interest related to growth projects. During the second quarter, we received $216 million in cash distributions from CPChem. Turning to refining on Slide 8. refining’s second quarter adjusted pre-tax income was $3.1 billion, up from $140 million in the first quarter. The improvement was primarily due to higher realized margins across all regions. Realized margins increased by 168% to $28.31 per barrel. Pretax turnaround costs were $223 million, up from $102 million in the prior quarter. Crude utilization was 90% in the second quarter and clean product yield was 83%. (Phillips 66 (PSX) Q2 2022 Earnings Call, 7/29/2022)Phillips 66 increased their dividend by 5%, over 11 times from its inception in 2012.“Mark Lashier — President and Chief Operating Officer: In May, we raised our dividend 5% to $0.97 per share. We’ve increased the dividend 11x since our inception in 2012, resulting in an 18% compound annual growth rate. Our strategy remains consistent, supported by a strong foundation of operating excellence and a high-performing organization. We’re focused on strategic return-enhancing growth investments in midstream, chemicals and emerging energy while selectively investing to increase returns in refining and marketing and specialties.” (Phillips 66 (PSX) Q2 2022 Earnings Call, 7/29/2022)

Phillips 66’s CEO cited their “capital discipline,” saying any cash should go to their shareholders 

Phillips 66’s CEO touted their “commitment to capital discipline… As cash flow improves further, we’ll prioritize shareholder returns and debt repayment.”“Greg Garland — Chairman and Chief Executive Officer: The 2022 capital program of $1.9 billion reflects our commitment to capital discipline. Approximately 45% of our growth capital this year will support lower carbon opportunities, including Rodeo Renewed. As cash flow improves further, we’ll prioritize shareholder returns and debt repayment. In October, we increased the quarterly dividend to $0.92 per share. We remain committed to a secure, competitive, and growing dividend. We’d like to resume share repurchases this year and on our path toward getting back to pre-COVID debt levels over the next couple of years. We’re taking steps to position Phillips 66 for the long-term competitiveness. Across our businesses, we’re assessing opportunities for permanent cost reductions. (Phillips 66 Q4 2021 Earnings Call, 1/28/2022)

Phillips 66’s CEO said the company was planning to “be very constrained on capital” so it could focus on shareholder returns. “Greg Garland — Chairman and Chief Executive Officer: And so I would say that we’re probably on the upside of that. So given 6 to 7 billion of cash flow, our first dollar is always going to go to sustaining capital, that’s $1 billion. Dividend is 1.6 billion, and then that leaves room for us. We can signal that the capital budget is going to be 2 billion or less, so we’re 1.9 billion for this year. That’s a deliberate signaling that for this year or next year, we’re going to be very constrained on capital. That frees us up to pursue some debt repayment and get back to share repurchases while doing a little bit of growth. And so I think we make that all balance as we think about that. (Phillips 66 Q4 2021 Earnings Call, 1/28/2022)

Phillips 66 CEO: “I want to get back to share repurchases. I mean, we’ve been out of share repurchases, and it’s time to step back into those.” “Greg Garland — Chairman and Chief Executive Officer: OK. Paul, I think you’re up to five questions now, but I’ll try my best to start. At least I’ll answer the ones I want to, how about that? So first of all, we — I mean, historically, we’ve used 1.5 billion to 2.5 billion is growth capex. So I think that for many reasons, pandemic, one of them, the need to be structured around debt repayment and get back to share repurchases, we purposely signaled total capex budgets of 2 billion or less for this year and kind of next year. We’ll see what happens going forward. But I do think we want to get the balance sheet back to something over the next two years, approaching pre-COVID, so call it, 12 billion. I want to get back to share repurchases. I mean, we’ve been out of share repurchases, and it’s time to step back into those. And so I think for all the right reasons, we want to keep capital constrained across the portfolio over the next couple of years (Phillips 66 Q4 2021 Earnings Call, 1/28/2022)

Phillips 66 CEO: “the whole idea is to free up more cash for debt repayment and getting back into share repurchases.” “Greg Garland — Chairman and Chief Executive Officer: So there are certainly lots of growth still around the portfolio, allows us to be very structured about how we think about capital allocation. But to your point, the whole idea is to free up more cash for debt repayment and getting back into share repurchases. Kevin, if you want to take DCP, I’ll let you take it.” (Phillips 66 Q4 2021 Earnings Call, 1/28/2022)

A Phillips executive suggested as much as 4.5 million barrels per day of refinery capacity has been cut 

A Phillips 66 executive said “we’ve seen a total of about 4.5 million barrels a day of refining rationalization… When you look at last year, it was the first year in at least 30 years where there was more capacity rationalized out of the global fleet than there was capacity added. And so we are seeing that benefit.” “Jeff Dietert — Vice President, Investor Relations: Yes, Doug, I think we’ve seen a total of about 4.5 million barrels a day of refining rationalization that’s been announced and much of that has already occurred. When you look at last year, it was the first year in at least 30 years where there was more capacity rationalized out of the global fleet than there was capacity added. And so we are seeing that benefit. As we look forward, there’s still pressure with higher natural gas prices in Europe on that — those units’ profitability. So we see that continuing to occur. We’ve also seen COVID delays, challenges getting labor in to execute new capacity additions so they’re getting spread out. We’ve seen a reduction of capital spending and concerns over energy transition. So it’s definitely impacting the supply side of the equation. (Phillips 66 Q4 2021 Earnings Call, 1/28/2022)

Phillips 66 crowed over massive profits and cash funneled to investors in 2022

Phillips 66 President reported nearly $2 billion in earnings in the 4th quarter and funneling $3.3 billion to Wall Street investors for 2022. “Mark Lashier — President and Chief Operating Officer: Thanks, Jeff. Good morning, and thank you for joining us today. In the fourth quarter, we had adjusted earnings of $1.9 billion or $4 per share. We generated $4.8 billion in operating cash flow. For the year, adjusted earnings were $8.9 billion or $18.79 per share. Our diversified, integrated portfolio generated strong earnings and cash flow in 2022, supported by a favorable market environment and solid operations. Our cash flow generation allowed us to strengthen our financial position by repaying debt and resuming our share repurchase program. We returned $3.3 billion to shareholders through share repurchases and dividends.” (Phillips 66 Q4 2022 Earnings, 1/31/2023)

Of the $3.3 billion spent on shareholders in 2022, $1.5 billion was stock buybacks. “Kevin Mitchell — Executive Vice President and Chief Financial Officer: During the year, we paid down $2.4 billion of debt. This includes $430 million of debt paid down by DCP Midstream since we began consolidating, effective August 18. We funded $2.2 billion of capital spending and returned $3.3 billion to shareholders, including $1.5 billion of share repurchases. The other category includes the redemption of DCP Midstream’s Series A preferred units of $500 million.” (Phillips 66 Q4 2022 Earnings, 1/31/2023)

Phillips 66 spent $1.2 billion on dividends and stock buybacks in the 4th quarter of 2022 alone. “Kevin Mitchell — Executive Vice President and Chief Financial Officer: We generated an operating cash flow of $4.8 billion, including a working capital benefit of $2.1 billion and cash distributions from equity affiliates of $261 million. Capital spending for the quarter was $713 million, including $310 million for growth projects. We returned $1.2 billion to shareholders through $456 million of dividends and $753 million of share repurchases. We ended the quarter with 466 million shares outstanding.” (Phillips 66 Q4 2022 Earnings, 1/31/2023)

Phillips 66 predicted continued high profits with billions more planned to spend on dividends and buybacks

A Phillips 66 executive said 2022 was a “record year” and “with increased volatility in the market, that generally drives better business.” “Brian Mandell — Executive Vice President, Marketing and Commercial On the marketing business, I’d say that we will continue to perform well, perhaps not as well as in 2022. That was a record year. But with increased volatility in the market, that generally drives better business. We also had a joint venture retail record year last year, and we continue to grow our retail joint venture in the U.S., and that continues to perform. Also, there are issues in the European market that have helped us. Even things like expanding our credit card business have been helpful in growing our business. So, I think we’ll continue to grow the business. You’ll see the earnings strong, but perhaps not quite as strong as 2022.” (Phillips 66 Q4 2022 Earnings, 1/31/2023)

Phillips 66’s President told analysts their plan was to spend as much as $12 billion on dividends and stock buybacks by mid-2024. “Mark Lashier — President and Chief Operating Officer: Slide 4 summarizes our progress. We are delivering returns to shareholders. Since July 2022, we’ve returned $2.4 billion to shareholders through share repurchases and dividends. We’re on track to meet our target return of $10 billion to $12 billion by year-end 2024. In January, we reached an agreement to acquire all of the publicly held common units of DCP Midstream. We expect the transaction to close in the second quarter of 2023, at which point, we will have an 87% economic interest in DCP Midstream.” (Phillips 66 Q4 2022 Earnings, 1/31/2023)