Phillips 66 Co. reported Wednesday $1.697 billion in income for the second quarter, down $264 million from the prior three-month period amid weakening refining margins.
The Texas state-based company’s earnings for the April-June quarter fell by over half the corresponding figure in the second quarter of 2022, when it collected $3.036 billion in pre-tax profit for its refining segment. But margins have since dropped, after riding on oil and gas prices that skyrocketed amid a trade disruption that followed Russia’s invasion of Ukraine February 2022.
Phillips 66 logged a pre-tax refining income of $1.134 billion for the second quarter of 2023, down $474 million from the year’s opening quarter, according to its results press release.
Realized margins slid to $15.32 a barrel from $20.72 quarter on quarter “primarily due to the decline in market crack spreads and lower feedstock advantage”, Phillips 66 said. Refining margins for the second quarter of 2022 averaged $28.31 per barrel.
Income also softened quarter over quarter amid decreased refining margins for its North American rivals Chevron Corp., ExxonMobil Corp., Imperial Oil Ltd. and Valero Energy Corp. The United Kingdom’s BP PLC and Shell PLC, Italy’s Eni SPA, Norway’s Equinor ASA, India’s Reliance Industries Ltd. and France’s TotalEnergies SE all likewise reported lower profit and lower refining margins for the second quarter.
Brent, an international basis for crude pricing, peaked last year in the month of June, four months into the war in Ukraine, at $122.71 per barrel on a monthly average. But June 2023 was the weakest month for the North Sea-based Brent in the one-year period with an average of $74.84, according to data from the USA Energy Information Administration (EIA). The West Texas Intermediate (WTI), another global benchmark, also peaked in the month of June last year at $114.84 per barrel before plunging to $70.25 June 2023, its lowest in one year, based on the EIA database.
Annual average prices for Brent and the WTI in 2022 were the highest since 2014, according to the EIA.
Phillips 66 said higher volumes and lower operating expenses had partially offset lower refining margins for the second quarter of 2023. Other energy majors also reported higher refining activity for the period, with ExxonMobil saying in its results release July 28 the three months ended June saw its highest second quarter global throughput in the last 15 years.
Phillips 66 generated $1 billion in cash from operations, which also include chemicals production and midstream, for the second quarter, down from $1.2 billion for the first quarter.
Phillips 66 had $3 billion of cash and cash equivalents and a total debt of $19.866 billion with a net debt-to-capital ratio of 35 percent as of the end of the second quarter.
Adjusted for extraordinary or non-recurring items, profit for the second quarter was $1.766 billion.
It said it had since July 2022 returned $5.4 billion to shareholders through dividends and repurchases, including $1.8 billion in the second quarter of 2023. Phillips 66 has set a target of $10-12 billion for shareholder distributions by yearend 2024.
The company, trading on the New York Stock Exchange, closed 2.78 percent lower at $108.99 Wednesday.
Shift to Renewable Fuel
Phillips 66 is converting its San Francisco refinery into a renewable fuels factory with an initial phase capacity of 50,000 barrels per day.
It said May 11, 2022 it has made a final investment decision for the conversion project with an expected cost of $850 million.
“Upon completion of Rodeo Renewed, the converted facility will no longer process crude oil and instead use waste oils, fats, greases and vegetable oils to produce an initial 800 million gallons per year (over 50,000 barrels per day) of renewable transportation fuels, including renewable diesel, renewable gasoline and sustainable aviation fuel”, Phillips 66 said then.
In an update of the project in Wednesday’s earnings announcement, it said Rodeo Renewed is expected to start commercial operation in the first quarter of 2024.
Refining is currently the largest contributor among Phillips 66’s segments.
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