What Caused Phillips 66’s Refining Margin to Plunge in 2Q16?



Phillips 66’s segments

In 2Q16, Phillips 66’s (PSX) total adjusted net income of $499 million fell by 50% YoY (year-over-year) but rose by 39% quarter-over-quarter. In 2Q16, PSX’s Refining segment contributed $152 million, or 30%, to its adjusted net income.

The highest contributor to its total adjusted net income was the Marketing and Specialty segment, which contributed $229 million, or 46%. The company’s Chemicals segment contributed $190 million, and its midstream segment contributed $39 million to its adjusted net income in 2Q16.

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Phillips 66’s refining margin in 2Q16

PSX’s worldwide refining margin fell by $4.6 per barrel over 2Q15 to $7.1 per barrel in 2Q16. In 2Q16, the highest decline of $8.9 per barrel, or 45%, over 2Q15 came from the West Coast region. The Atlantic Basin and Europe registered a 41% YoY decline in refining margins. Plus, margins in the Gulf Coast and the Central Corridor fell by 30% YoY and 36% YoY, respectively. Also, in 2Q16, gasoline as well as distillate cracks have fallen across its operating zones compared to 2Q15.

PSX’s peers’ refining margins

Phillips 66’s (PSX) peer Marathon Petroleum (MPC) noted a fall in the gross refining and marketing margin by $2 per barrel over 2Q15 to $12.8 per barrel in 2Q16. In 2Q16, Valero Energy (VLO) noted a fall in its gross refining margin to $8.9 per barrel compared to $13.7 per barrel in 2Q15. Also, HollyFrontier’s (HFC) refining margin is expected to fall in 2Q16 compared to 2Q15.

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