Bloomberg News

Phillips 66 Profit Rises Amid Higher Refining Margins

October 31, 2012

Phillips 66 Profit Rises Amid Higher Gulf Coast Refining Margin

A Phillips 66 logo is seen on a gas pump as a car is filled at a gas station in Princeton, Illinois. Photographer: Daniel Acker/Bloomberg

Phillips 66 (PSX:US), which became the largest U.S. independent refiner after its spinoff from ConocoPhillips (COP:US) earlier this year, said third-quarter profit rose 52 percent as the margin between oil costs and fuel prices widened.

Net income rose to $1.6 billion, or $2.51 a share, from $1.05 billion, or $1.65, a year earlier, Houston-based Phillips 66 said today in a statement. Profit excluding asset writedowns, early debt payoffs and other one-time items was $2.97 a share, 61 cents more than the average of 15 analysts’ estimates (PSX:US) compiled by Bloomberg. Adjusted profit in the company’s chemicals business rose 42 percent to $275 million.

Since its May 1 spinoff, Phillips 66 has led U.S. refiners in a rally rooted in surging U.S. crude output, which has depressed prices and allowed the companies to save on every barrel they process. The margin between crude costs and the prices at which refiners sell fuel on the U.S. Gulf Coast averaged $12.71 a barrel in the July-to-September period, the most since 2005 and a 69 percent increase over the same period last year, according to data compiled by Bloomberg.

“Low cost feedstock versus the crudes that are included in industry markers and inventory impacts provided meaningful uplift to refining earnings,” Jeff Dietert, an analyst at Simmons & Co. in Houston, said in a note to clients.

Growth Opportunities

Chief Executive Officer Greg Garland has steered Phillips 66 toward growth opportunities in the company’s chemical and pipeline segments, a plan that has attracted investors, Brian Youngberg, an analyst at Edward Jones in St. Louis, said in an interview before earnings were released. “Longer term, that’s where the upside is.”

Phillips 66 has stakes in 15 operating refineries as well as a chemical joint venture with Chevron Corp. (CVX:US) and a pipeline and natural gas liquids unit with Spectra Energy Corp. (SE:US)

The company lost $77 million in its pipeline and natural gas liquids businesses as prices fell more than 40 percent from the same period in 2011, according to the statement. DCP Midstream, the joint venture with Spectra, produced 398,000 barrels a day in the quarter, a “slight increase” from last year, according to the statement.

Phillips 66 fell 0.7 percent to $47.16 at the close in New York.

To contact the reporter on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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Companies Mentioned

  • PSX
    (Phillips 66)
    • $76.81 USD
    • 4.46
    • 5.81%
  • COP
    (ConocoPhillips)
    • $70.59 USD
    • 1.76
    • 2.49%
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