Phillips 66’s debt trend
Phillips 66’s (PSX) total debt-to-capital ratio stood at 30% in the first quarter of 2019, down from 32% in the first quarter of 2018. A company’s debt-to-capital ratio depicts the percentage of debt in its capital structure. Lower debt on a company’s balance sheet implies higher strength and the flexibility to handle harsh business conditions with ease.
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Phillips 66’s net debt-to-EBITDA trend
Phillips 66’s net debt fell 7% over the first quarter of 2018 to $10.0 billion in the first quarter of 2019 due to a decline in its total debt and a rise in its cash and equivalents in the same period. Phillips 66’s total debt fell 3% from the first quarter of 2018 to $11.3 billion in the first quarter of 2019. In the same period, the company’s cash rose 49% YoY to $1.2 billion due to its higher earnings.
Phillips 66’s trailing-12-month EBITDA also rose steeply led by better Refining earnings and steady and growing Midstream earnings.
Thus, given the decline in its net debt and the rise in its EBITDA, Phillips 66’s net debt-to-EBITDA ratio fell from 2.9x in the first quarter of 2018 to 1.7x in the first quarter of 2019.
What does Phillips 66’s debt analysis suggest?
Phillips 66’s total debt-to-capital ratio declined from the first quarter of 2018 to the first quarter of 2019, indicating improvement. In the same period, the company’s net debt-to-EBITDA ratio fell, indicating the company’s strengthening debt position.
Going forward, in the second and third quarters, Phillips 66’s earnings could rise. Usually, these quarters are robust for refiners due to the seasonal nature of the business. PSX’s capex activities will also likely support its growth in the near future. Thus, the company’s debt position could further strengthen in the coming quarters.