Phillips 66’s cash flow

In the first quarter of 2019, Phillips 66 (PSX) had cash from operations of -$478 million due to its seasonal inventory buildup. In the same period, its cash outflows from investing activities rose from $0.4 billion to $1.0 billion.

However, Phillips 66’s cash outflows from financing fell steeply by 89% YoY (year-over-year) to $0.3 billion in the first quarter of 2019.

Did Phillips 66’s Liquidity Position Weaken in Q1?

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Phillips 66’s cash flow shortfall

The company had cash outflows of $1.0 billion in the form of capex and $0.4 billion in the form of dividends in the first quarter, totaling ~$1.4 billion of significant cash outflows. Therefore, Phillips 66 needed a total of $1.9 billion, including negative cash flows from operations, capex, and dividends.

Phillips 66 also spent $0.3 billion on stock repurchases in the first quarter. The company funded the requirement primarily by drawing down its cash reserves, which resulted in a decline in its cash balance. PSX’s cash balance fell from $3.1 billion at the beginning of the first quarter to $1.3 billion at the end of the first quarter.

What does Phillips 66’s cash flow analysis show?

Phillips 66 saw a cash flow shortfall in the first quarter mainly due to the volatile refining environment, which led to an inventory pileup. However, its inventory levels are likely to normalize soon.

Thus, going forward, if its Refining margins expand and its Marketing, Midstream, and Chemical segments’ growth plans materialize as expected, then Phillips 66’s earnings and cash flows are likely to enhance, improving its liquidity position.

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