Phillips 66 Stock Under Pressure As Refining Losses Offset Midstream Gains

Phillips 66 PSX shares are trading lower on Friday after it reported fourth-quarter FY24 results.

Midstream segment adjusted pre-tax income rose to $708 million, vs. $672 million in the third quarter of FY24, led by increased NGL margins and volumes.

The Chemicals segment adjusted pre-tax income stood at $72 million versus $342 million in the prior quarter, owing to a decline in margins along with higher turnaround and maintenance costs.

The Refining segment adjusted pre-tax loss improved to $(759) million from $(67) million in the prior quarter due to lower realized margins on reduction in market crack spreads and higher depreciation related to the planned stoppage of operations at the Los Angeles Refinery.

The company reported refining operations with 94% crude capacity utilization and 88% clean product yield.

The Marketing and Specialties segment adjusted pre-tax income fell significantly to $185 million from $583 million in the prior quarter on seasonally lower margins.

Adjusted EPS of $(0.15) topped the consensus of $(0.23).

Phillips 66 reported operating cash flow, excluding working capital impacts, of $901 million in the quarter.

As of Dec. 31, the company reported cash and cash equivalents of $1.7 billion, along with $4.6 billion in committed credit facility capacity.

The company has returned $5.3 billion to shareholders through dividends and share repurchases in 2024

Phillips 66 achieved $1.5 billion in run-rate business transformation savings and synergy capture of $500 million from successful DCP integration.

Strategic Priorities Update: The company plans to return greater than 50% of operating cash flow to shareholders.

Also, Phillips 66 aims to achieve a 2% higher than the industry-average crude utilization and annual adjusted controllable costs of $5.50 per barrel in refining, excluding adjusted turnaround expenses.

The company targets growing Midstream and Chemicals mid-cycle adjusted EBITDA of $1 billion in total by 2027 and reducing total debt to $17 billion.

Mark Lashier, chairman and CEO said, "In support of our Midstream wellhead-to-market strategy, we recently announced an agreement to acquire EPIC's NGL business, bolstering our Permian and Gulf Coast footprint,"

"Upon closing, these assets will be accretive to earnings and highly integrated with our existing infrastructure, providing additional opportunities to enhance returns and shareholder value," he added.

Investors can gain exposure to the stock via IShares U.S. Oil & Gas Exploration & Production ETF IEO and VanEck Oil Refiners ETF CRAK.

Price Action: PSX shares are down 2% at $118.33 at the last check Friday.

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