HOUSTON--(BUSINESS WIRE)--Phillips 66 (NYSE: PSX), an energy manufacturing and logistics company, announces second-quarter earnings of $496 million, compared with $385 million in the first quarter of 2016. Adjusted earnings were $499 million, an increase of $139 million from the last quarter.
"We operated well during the quarter and delivered industry-leading safety performance," said Greg Garland, chairman and CEO of Phillips 66. "Refining ran at record utilization rates, Chemicals successfully completed major turnarounds, and DCP Midstream had improved results. We experienced increased demand across our businesses."
"During the quarter, we generated $1.8 billion in cash from our operations and a PSXP equity offering. We reinvested $620 million into our businesses and returned $570 million of capital to shareholders through dividends and share repurchases. In addition, during the quarter we raised our quarterly dividend 12.5 percent, our sixth increase since the formation of our company," said Garland.
Midstream's second-quarter earnings were $39 million, compared with $65 million in the first quarter of 2016. The first-quarter Midstream earnings included a net benefit of $25 million from special items, primarily related to proceeds from a favorable legal settlement at DCP Midstream, LLC (DCP Midstream).
Midstream's second-quarter adjusted earnings were $39 million, in line with the first quarter of 2016. The second-quarter results were impacted by planned maintenance, losses from the timing of seasonal propane and butane storage, project expenses related to the Freeport LPG Terminal and lower earnings from the Rockies Express Pipeline joint venture. These items were largely offset by higher fractionation and transportation volumes, as well as improved results from DCP Midstream.
For the second quarter, the company’s equity investment in DCP Midstream had a loss of $9 million, compared with a $21 million adjusted loss in the prior quarter. Results benefited from improved commodity prices, improved asset performance, favorable contract restructuring efforts and cost reduction initiatives.
Financial Position, Liquidity and Return of Capital
During the second quarter, Phillips 66 generated $1.2 billion of cash from operations. Excluding working capital impacts, operating cash flow was $560 million. Working capital changes were primarily driven by increases in commodity prices and the timing of Marketing receipts. Capital expenditures and investments totaled $620 million.
Phillips 66 returned $571 million to shareholders during the quarter, consisting of $329 million in dividends and the repurchase of 3 million shares of common stock for $242 million. Since July 2012, the company has returned $12.3 billion to shareholders in the form of dividends, share repurchases and share exchange. Phillips 66 ended the quarter with 523 million shares outstanding.
As of June 30, 2016, cash and cash equivalents were $2.2 billion and debt was $8.9 billion, including $1.1 billion of debt at Phillips 66 Partners (PSXP). The company's consolidated debt-to-capital ratio and net-debt-to-capital ratio were 27 percent and 22 percent, respectively.
Strategic Update
Phillips 66 continues to evaluate its portfolio of assets and opportunities to ensure investments deliver value.
CPChem's world-scale U.S. Gulf Coast Petrochemicals Project is approximately 80 percent complete, with startup expected in the second half of 2017. This project consists of an ethane cracker and related polyethylene facilities that will increase CPChem's global ethylene and polyethylene capacity by approximately one-third.
In Refining, progress continues on several high-return projects. The Wood River Refinery has debottlenecking and yield improvement projects that are scheduled for completion in the third quarter. The Billings Refinery is increasing its heavy Canadian crude run ability to 100 percent. This project is expected to be complete in the first half of 2017, while the Bayway Refinery is undergoing an FCC modernization to increase gasoline yield, expected in 2018.
In Midstream, the Freeport LPG Export Terminal is nearing completion. The project is on budget with startup expected by year-end.
Phillips 66 continues to invest in its Beaumont Terminal, the largest terminal in the company's portfolio. The terminal has 3.2 million barrels of new storage capacity under construction; 2 million barrels of additional crude storage are expected to be in service by year-end and 1.2 million barrels of additional product storage are expected to be in operation by mid-2017.
In May 2016, Phillips 66 contributed the remaining 75 percent interest in the Sweeny fractionator and associated NGL storage caverns along with the Standish Pipeline to PSXP for total consideration of $775 million. Transaction consideration consisted of the Partnership assuming $675 million of notes payable to Phillips 66 and the company's receipt of $100 million in newly issued PSXP units. PSXP used the net proceeds of $656 million from a public unit offering to repay debt assumed.
Phillips 66 is participating in joint ventures to develop the approximately 470,000 BPD Dakota Access Pipeline (DAPL) and Energy Transfer Crude Oil Pipeline (ETCOP) projects. Phillips 66 has a 25 percent interest in these joint ventures. The pipeline projects remain on schedule and are expected to be ready for service by the end of 2016.
