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What Led to Phillips 66’s Better-than-Expected 3Q17 Earnings?

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Part 2
What Led to Phillips 66’s Better-than-Expected 3Q17 Earnings? PART 2 OF 5

How Phillips 66’s Segments Performed in 3Q17

Phillips 66’s third quarter segmental review

In 3Q17, Phillips 66’s (PSX) total adjusted net income of $858 million rose 54% YoY. PSX’s refining earnings rose from $134 million in 3Q16 to $548 million in 3Q17, which was due to the rise in the refining margins year-over-year coupled with the rise in utilization rate year-over-year. The greatest contributor to Phillips 66’s overall adjusted net income was the refining segment. The refining earnings contributed 64% to the total adjusted income.

How Phillips 66’s Segments Performed in 3Q17

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However, PSX’s Chemicals segment, which fell by 19% YoY to $153 million in 3Q17, contributed 18% to the company’s total adjusted earnings. PSX’s Midstream segment earnings fell from $75 million in 3Q16 to $67 million in 3Q17 due to lower NGL earnings and a decline in DCP Midstream (DCP) earnings.

Even though PSX’s Marketing and Specialty segment noted a decline in earnings, it made the second-highest contribution of 25% to PSX’s total adjusted earnings. PSX’s Marketing and Specialty earnings fell to $211 million in 3Q17 from $267 million in 3Q16 due to lower marketing margins in the US. Corporate and other expenses dented earnings by $121 million in 3Q17.

Phillips 66’s refining margin in 3Q17

PSX’s worldwide refining margin rose by $3.3 per barrel or 45% YoY to $10.5 per barrel in 3Q17. The highest rise of $5.0 per barrel, or 99%, YoY came from the Atlantic Basin/Europe region. Also, the West Coast registered a $3.9 per barrel, or 43%, YoY increase in refining margins. Plus, the margins in the Central Corridor rose by $2.9 per barrel, or 26%, YoY in 3Q17. Gulf Coast margins rose by $1.8 per barrel or 33% YoY in 3Q17.

PSX’s peers’ refining margins

Phillips 66 (PSX) peer Valero Energy (VLO) noted a rise in its GRM (gross refining margin) by $2.2 per barrel over 3Q16 to $10.9 per barrel in 3Q17. Also, Marathon Petroleum’s (MPC) gross refining and marketing margin rose by $3.5 per barrel over 3Q16 to $14.1 per barrel in 3Q17.

Andeavor’s (ANDV) consolidated refining index value has risen $5.5 per barrel over 3Q16 to $17.7 per barrel in 3Q17, which might result in a higher margin for ANDV in its 3Q17 earnings.

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