Phillips 66 announced first quarter earnings of US$987 million, compared with earnings of US$1.1 billion during the fourth quarter of 2014. Adjusted earnings were US$834 million, a decrease of US$79 million from the fourth quarter of 2014.
“Refining market conditions helped us realise the best margins we’ve had over the last two years,” said Greg Garland, Chairman and CEO of Phillips 66. “Refining utilisation rates were impacted by a heavy turnaround schedule, and were further reduced by the extended turnaround at the Alliance Refinery. Our Chemicals business increased capacity utilization and had a solid quarter. The NGL market environment negatively impacted results from our DCP Midstream investment as well as our own NGL midstream business. We continued to aggressively grow Phillips 66 Partners through the drop of our interests in three pipeline systems, and Partners also made good progress on its organic growth and joint venture projects."
"We continue to execute major projects in Midstream and Chemicals, as well as smaller high return projects, on time and on budget. Our capital discipline and strong balance sheet allow us to maintain shareholder distributions, in the form of share repurchases and regular dividends.”
Refining adjusted earnings were US$495 million in the first quarter, compared with US$322 million in the fourth quarter of 2014. The improvement was primarily due to higher realised refining margins, partially offset by lower volumes.
The increase in margins was largely driven by improved secondary product margins as well as higher gasoline market crack spreads. Secondary product margins improved mainly due to lower crude costs. Crack spreads improved mainly as a result of significantly higher gasoline market cracks in the Western/Pacific. First quarter gasoline market cracks for that region were US$20.21/bbl, compared with US$7.46/bbl during the fourth quarter of 2014.Lower volumes were primarily driven by turnaround activity and unplanned downtime in the Gulf Coast at the Alliance Refinery. Phillips 66’s worldwide refining crude utilisation and clean product yield were both 84% in the first quarter of 2015.
The Chemicals segment reflects Phillips 66's equity investment in Chevron Phillips Chemical Company LLC (CPChem). First quarter Chemicals adjusted earnings were US$203 million, compared with adjusted earnings of US$270 million in the fourth quarter of 2014.
During the first quarter, CPChem's Olefins and Polyolefins (O&P) business contributed US$183 million to Phillips 66's Chemicals adjusted earnings. The US$65 million decrease was mainly due to lower O&P cash chain margins, driven by lower polyethylene sales prices, as well as planned turnarounds in the first quarter. Global utilisation for O&P was 87% during the quarter, up from 83% in the fourth quarter, primarily reflecting a full quarter of Port Arthur operations. CPChem's Specialties, Aromatics and Styrenics (SA&S) business contributed US$26 million of adjusted earnings in the first quarter, in line with the prior quarter.
Midstream adjusted earnings were US$67 million in the first quarter, compared with adjusted earnings of US$97 million in the fourth quarter of 2014.
Phillips 66’s Transportation business generated earnings of US$65 million during the first quarter. The US$12 million increase was primarily due to the fourth quarter write off of a deferred tax asset.
During the first quarter, the company’s equity investment in DCP Midstream, LLC (DCP Midstream) had an adjusted loss of US$12 million, comparable to the prior quarter. The loss was due to lower NGL, crude and natural gas prices, partially offset by the absence of hedge losses associated with the steep price declines during the fourth quarter.
Earnings from the NGL business were US$14 million in the first quarter. The US$41 million decrease was largely related to lower trading margins on seasonal propane and butane storage activities, as well as inventory impacts.
Phillips 66 Partners contributed US$19 million to the Midstream segment's first quarter earnings.
Adapted from press release by Rosalie Starling
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