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Phillips 66 (PSX) Q1 Earnings Beat on Higher Refining Margin

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Phillips 66 PSX reported first-quarter 2021 adjusted loss per share of $1.16, narrower than the Zacks Consensus Estimate of a loss of $1.41. The company reported adjusted earnings of $1.02 per share in the year-ago quarter.

Quarterly revenues totaled $21,927 million, up from the year-ago quarter’s $21,244 million. Moreover, the top line beat the Zacks Consensus Estimate of $16,877 million.

The better-than-expected results were due to lower costs and expenses as well as improved base oil and finished lubricant margins. Higher refining margin from Atlantic Basin/Europe further boosted the results. The positives were partially offset by low demand for refined products caused by the coronavirus pandemic. Moreover, the severe impact of winter storms in Gulf Coast and Central regions affected its operations.

Phillips 66 Price, Consensus and EPS Surprise

Phillips 66 Price, Consensus and EPS Surprise
Phillips 66 Price, Consensus and EPS Surprise

Phillips 66 price-consensus-eps-surprise-chart | Phillips 66 Quote

Segmental Results

Midstream

The segment generated adjusted pre-tax quarterly earnings of $276 million, down from $460 million in the year-ago quarter. Profits from DCP Midstream, NGL and Other significantly decreased for the first quarter. Lower pipeline and terminal volumes affected transportation.

Chemicals

Adjusted pre-tax earnings of $184 million were down from $193 million in the prior-year quarter. CPChem’s O&P business was affected by the winter storm that decreased production and increased utility expenses. Its global O&P utilization rate came in at 79%.

Refining

It reported a huge adjusted pre-tax loss of $1,026 million compared with the year-ago loss of $401 million. This underperformance was caused by challenging market conditions, and turnaround and maintenance activities due to the winter storm. The segment’s realized refining margins on a worldwide basis fell to $4.36 per barrel from the year-ago quarter’s $7.11. Moreover, the same in Central Corridor and West Coast fell to $5.97 and $3.33 per barrel from the year-ago level of $13.50 and $4.80, respectively.

However, Atlantic Basin/Europe witnessed an increase in margins from $2.38 per barrel in the year-ago quarter to $4.86 for the March quarter of 2021.

Marketing and Specialties

Pre-tax earnings decreased to $290 million from $488 million in the year-ago quarter.

While realized marketing fuel margins in the United States decreased to $1.94 per barrel from the year-ago quarter’s $2.08, the same in international markets declined to $4.01 from the year-ago level of $8.53. The negatives were partially offset by improved base oil and finished lubricant margins.

Costs and Expenses

Total costs and expenses for the first quarter decreased to $22,698 million from $23,722 million in the year-ago period. Notably, impairment charges were significantly higher than the year-ago period.

Financial Condition

For the reported quarter, Phillips 66 generated $271 million of cash from operations. Its capital expenditures and investments totaled $331 million. It paid dividends of $394 million in the reported quarter.

As of Mar 31, 2021, cash and cash equivalents were $1.4 billion, down sequentially from $2.5 billion. Total liquidity of the company was $6.7 billion. Consolidated debt decreased to $15.4 billion from $15.9 billion in fourth-quarter 2020. Its debt to capitalization was 43%.

Outlook

The company recently started the San Francisco Refinery in Rodeo, CA, which will likely meet the growing demand for renewable fuels. It intends to resume construction of the fourth fractionator at the Sweeny Hub in the June quarter. Post completion of the same, the Sweeny Hub will have a fractionation capacity of 550,000 bpd. CPChem expects to reach a final investment decision for U.S. Gulf Coast project by 2022.

Zacks Rank & Stocks to Consider

The company currently has a Zacks Rank #4 (Sell). Some better-ranked players in the energy space include CrossAmericaPartners LP CAPL, Frank's International N.V. FI and Holly Energy Partners, L.P. HEP, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

CrossAmerica’s bottom line for first-quarter 2021 is expected to surge 166.7% year over year.

Frank's International’s bottom line for 2021 is expected to rise 46.7% year over year.

Holly Energy’s bottom line for 2021 is expected to jump 27.3% year over year.

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