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transcript
Howard Weil 41st Annual Energy Conference
Greg Garland Chief Executive Officer March 18, 2013 New Orleans, LA
Cautionary Statement
This presentation contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. Words and phrases such as “is anticipated,” “is estimated,” “is expected,” “is planned,” “is scheduled,” “is targeted,” “believes,” “intends,” “objectives,” “projects,” “strategies” and similar expressions are used to identify such forward-looking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to Phillips 66’s operations (including joint venture operations) are based on management’s expectations, estimates and projections about the company, its interests and the energy industry in general on the date this presentation was prepared. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecast in such forward-looking statements. Factors that could cause actual results or events to differ materially from those described in the forward-looking statements include fluctuations in crude oil, NGL, and natural gas prices, refining and marketing margins and margins for our chemicals business; unexpected changes in costs for constructing, modifying or operating our facilities; unexpected difficulties in manufacturing, refining or transporting our products; lack of, or disruptions in, adequate and reliable transportation for our crude oil, natural gas, NGL, and refined products; potential liability for remedial actions, including removal and reclamation obligations, under environmental regulations; potential liability resulting from litigation; limited access to capital or significantly higher cost of capital related to illiquidity or uncertainty in the domestic or international financial markets; and other economic, business, competitive and/or regulatory factors affecting Phillips 66’s businesses generally as set forth in our filings with the Securities and Exchange Commission. Phillips 66 is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.
The information contained in this presentation regarding the formation of an MLP does not constitute an offer to sell, or the solicitation of an offer to buy, any securities. This information is being issued pursuant to, and in accordance with, Rule 135 under the Securities Act of 1933.
2
Enhanced operating excellence Achieved solid financial results Captured opportunities Created shareholder value
Delivering on Commitments
3
7 %
14 %
22 %
-1
0
1
2
3
4
5
6
7
2010 2011 2012
Adjusted Earnings and ROCE($B)
Midstream
Chemicals
R&M
Corporate
ROCE
0.4 0.4
1.8
0.3 0.4
1.1
0.3 0.4
1.2
0.2 0.3
0.9
Total Recordable Rates
Phillips 66 CPChem DCP
At Phillips 66 we take the time to work safely, every
job, every day.
Operating Excellence - Safety
Incidents per 200,000 Hours Worked
20
09
20
10
20
11
20
12
Industry Average
4
See appendix for footnotes.
Macro Environment - U.S. Midstream
5
$100-$130 B of infrastructure capital required during this
decade
Products
$10 - 20 B
Crude
$10 – 25 B
Natural Gas and NGL
$80 – 85 B
0
8
16
24
32
2000 2005 2010 2015 2020
Actual
MM
Bb
ls/d
ay
Natural Gas Forecast
2 % CAGR
6 % CAGR
6 % CAGR
Crude Oil
NGL
See appendix for footnotes.
Macro Environment - Chemicals
6
■ Global demand for chemicals growing at 1.0-1.5x GDP
■ Sustained feedstock advantage in Middle East and U.S.
2013 Ethylene Production Cost Curve ($/ton)
U.S. Average
U.S. Ethane
ME Ethane
West Europe
NE Asia SE Asia
0
500
1,000
1,500
0 40 80 120 160
Cumulative Ethylene Capacity (MM tons)
Source: IHS
0
1,000
2,000
3,000
2012 2017 2022
Supply Range
Petchem Demand
Ethane Exports
U.S. Ethane Supply/ Demand Balance (MBD)
See appendix for footnotes.
■ U.S. expected to maintain structural advantage
■ Exports support strong refinery utilization
Macro Environment - Refining
7
U.S. Refined Product Exports (MMBD)
93.0%
82.9%
88.7%
-2.0
-1.0
0.0
1.0
2.0
2000 2005 2010
Utilization
Ne
t Imp
orts
Ne
t Expo
rts
Utilization
N.A. Crude Production (MMBD)
0
5
10
15
2007 2012 2017 2022
Other US ANS GOM
Canadian Shale
See appendix for footnotes.
Operating Excellence
Growth
Returns
Distributions
High-performing organization
Phillips 66 Strategy
8
Providing energy, improving lives
Midstream: Build on existing base
■ Grow Transportation and NGL Operations
■ Pursue organic growth through DCP
■ Leverage MLPs to support and fund growth
Chemicals: Grow capacity and earnings
■ Pursue organic growth through CPChem
■ Execute mega-projects
Marketing & Specialties: Selective growth
■ Grow lubricants and European marketing
■ Ensure refinery pull-through
Refining: Enhance returns
■ Process advantaged crudes
■ Increase export capability
■ Optimize portfolio
Segment Strategy
9 Restricted Confidential – Business Information
0.0
0.5
1.0
1.5
2.0
2010 2011 2012 2013E
Midstream - Large Platform for Growth
10
Capital Program ($B)
NGL Operations
DCP Midstream
Transportation
Capital program includes equity share of DCP Midstream capital. See appendix for additional footnotes.
NGL Operations
Transportation
DCP Midstream
Fractionator
Storage
Gas Plant
Pipeline
DCP Midstream - Growth
11
2013 2014 2015+
Gathering and processing in execution $2 B
Gathering and processing expansions $2 B
Pipelines and logistics $2 B
Executing ~$6 B in growth projects from 2013 – 2015
G&P Plant
New Plant
Expansion/Restart
DCP Legacy
New/Growth
Transportation and NGL Operations - Adding Capacity
12
2000 additional crude rail cars
Jones Act ships
Bakken crude to Bayway via Global Partners
Export facilities
Sand Hills/Southern Hills NGL pipelines
Gulf Coast fractionator
Crude Volume (MBD)
Partner Destination Delivery Method
Bakken 35-40 Enbridge EC, WC, GC Rail
Canadian 30 Targa WC Rail to barge
Mississippi Lime
20 Magellan Ponca Pipeline
Mississippi Lime
40 Ponca Pipeline
Transportation - New Growth
13
Moving more advantaged crude than we consume
14
Chemicals - Focused Portfolio
S-Chem (SCP and JCP)
Saudi Polymers
Q-Chem and Q-Chem II
2.0
3.6
7.7
2004 2008 2012
Other
Benzene
Styrene
Paraxylene
Cyclohexane
Alpha Olefins
Polypropylene
Polyethylene
Propylene
Ethylene
24.5 25.7
31.5
2012 2014 2017
Chemicals - Growth
15
CPChem Equity U.S. Production Capacity (Blb/y)
CPChem Equity M.E. Production Capacity (Blb/y)
Chemicals - Growth
16
0.0
0.2
0.4
0.6
2010 2011 2012 2013E
Capital Program ($B)
2012 2013 2014 2015 2016 2017+
1-Hexene 250 kMTA
USGC Petrochemicals 1,500 kMTA
NAO Expansion ~130 kMTA
SPCo Petrochemicals (35% ownership) 1,200 kMTA
Sweeny Frac Expansion 22 MBD
Capital program denotes equity share of CPChem capital. See appendix for additional footnotes.
Refining - Diversified Portfolio
17
MI
Germany
HU WG
Ireland
United Kingdom
ME
Malaysia
Western / Pacific 440 MBD Central Region 475 MBD Gulf Coast 733 MBD Atlantic Basin / Europe 588 MBD
LA
SF
FD
BI
BG PC
BW
AL SW
United States
WR
LC
Refining - Enhancing Returns
18
■ Extensive U.S. refining portfolio
■ Infrastructure and commercial capabilities
■ Shifting to 100% advantaged crude
Phillips 66 U.S. Advantaged Crude (MBD)
Current 3+ Years
LLS/ANS
Brent
Heavy
Canadian
WTI/WTS
See appendix for footnotes.
■ Peer-leading distillate yield
East
Gulf
West
285
400
Current 3+ Years
Refining - Enhancing Returns
19
Phillips 66 Export Infrastructure (MBD)
■ Capability to export 30% of coastal production
■ Product placement to maximize margins
39.5% 39.9% 40.2%
40.8%
35.8%
37.1% 37.4%
2010 2011 2012 2013E
Distillate Yield (Percentage of processed inputs)
Industry
See appendix for footnotes.
$500
Adv Crude Yields & Exports
Costs 3+ Years
Refining - Enhancing Returns
20
Mid-cycle Refining ROCE of 15+%
Constant Margin Net Income Improvement
($MM)
0.0
1.0
2.0
2010 2011 2012 2013E
Refining Refining Logistics WRB
Capital Program ($B)
Capital program includes equity share of WRB capital. See appendix for additional footnotes.
Marketing & Specialties
21
>20% 10 - 20% 5 – 10%
Branded Market Share
0.1 - 5% 0%
0.0
0.1
0.2
2010 2011 2012 2013E
Capital Program ($B)
Lubricants
CPreme Graphite CSPI – Flow Improvers
Power Generation Refinery Locations
Manufacturing Locations:
See appendix for footnotes.
Disciplined capital allocation
Growing shareholder distributions
Enhanced financial flexibility
Financial Strategy
22
Capital Allocation
23
Sustaining capital
Increasing distributions
Growth capital
Financial flexibility
2013E cash from operations based on First Call consensus 3/5/2013. See appendix for additional footnotes.
5.3
1.0
0.8
0.8
1.0
Cash from Operations
Uses
Share Repurchases
Debt Repayment
Growth Capital
Dividends
Sustaining Capital
2013E Sources and Uses of Cash ($B)
Regular dividends
Secure
Growing
Competitive
Share repurchase
Discretionary
Tax efficient
Shareholder Distributions
24
Phillips 66 Debut
Announced 1st quarterly dividend of $0.20
Announced $1.0 B share repurchase plan
Expanded share repurchase plan by $1 B and announced dividend increase to $1.25/year
Announced quarterly dividend increase of 25%
Jun Jul Aug Sep Oct Nov Dec May
25
Capital Structure
Equity, debt, and debt-to-capital ratio estimates based on First Call consensus as of 3/5/2013. See appendix for additional footnotes.
21
24
2012 2013E
Equity ($B)
7
6
2012 2013E
Debt ($B)
25
20
2012 2013E
Debt-to-Capital Ratio (%)
A Promising Future
26
Operating excellence
Growth
Returns
Distributions
High-performing organization
Appendix
Institutional Investors Contact: Rosy C. Zuklic rosy.zuklic@p66.com Manager, Investor Relations 832-765-2297
Footnotes
All Slides 2012 information is full year unless otherwise noted.
Slide 4
Injury statistics do not include major projects.
Industry Averages are from: Phillips 66 –American Fuels and Petrochemical Manufacturers (AFPM) refining data, CPChem – American Chemistry Council (ACC), DCP – Gas Processors Association (GPA)
Slide 5
Historical data from U.S. Energy Information Administration (EIA) dry gas, crude oil, and natural gas liquids field production.
Forecast from internal Phillips 66 analysis. CAGR based on 2012 to 2020 growth.
Source of infrastructure capital information: Internal Phillips 66 analysis.
Slide 6
Source for supply/demand: Internal P66 Analysis
Source for U.S. Expansions: Hodson Report October 2012 and P66 internal data
Source for ethylene production cost curve: HIS
Slide 7
Source for U.S. Crude production: Phillips 66 internal analysis.
Source for U.S. Refined Products Exports: U.S. Department of Energy
Slide 10
DCP Midstream capital program includes equity share of DCP Midstream capital.
2012 Transportation includes acquisition costs for one-third interest of Sand Hills and Southern Hills Pipelines totaling approx $0.5 B. This amount was also included in DCP Midstream's capital spending, primarily in 2012
28
Footnotes, cont’d
Slide 16
Project capacities are gross capacity.
SPCo Petrochemicals and USGC Petrochemicals projects include ethylene capacity only. Capacity shown does not include derivatives production.
Chemicals capital program denotes equity share of CPChem capital.
Slide 18
U.S. advantaged crude percentages are on an equity basis. Light and medium Canadian crude are in the WTI/WTS category.
Slide 19
Industry yield data from EIA. Distillate yield calculations exclude Trainer and Wilhelmshaven refineries.
Slide 20
Refining capital program includes equity share of WRB capital as well as non-cash capital leases.
Slide 21
Marketing & Specialties capital program excludes $23 MM of capital expenditures related to Downstream Technology and includes non-cash capital leases.
Slide 23
2013E cash from operations based on First Call consensus 3/5/2013.
Dividends based on current dividend of $1.25/share.
Slide 25
Equity, debt, and debt-to-capital ratio estimates based on First Call consensus as of 3/5/2013, $2 B share repurchase program, and a $1.25 per share annual dividend.
29
Phillips 66 Reporting Segments
30
2012
R&M (includes transportation)
Refining
Marketing, Specialties & Other
Chemicals (CPChem)
Midstream
DCP Midstream
Other Midstream
Corporate
Beginning Q1 2013
Refining
Marketing & Specialties
Chemicals (CPChem)
Midstream
DCP Midstream
NGL Operations
Transportation
Corporate
■ Increased disclosure
■ Better alignment with operations
2013 Guidance
2013 $ B
Corporate Segment Net Expense (after-tax) 0.5
Turnaround Costs (pre-tax) 0.4
Depreciation and Amortization Expense (pre-tax) 1.0
Cash Capital Expenditures 1.8
31
2013 Sensitivities
Worldwide R&M (assuming 95% refining utilization rate) Net Income
$MM
$1/BBL Increase in Refining Margin 440
$1/BBL Increase in Crude Price Impact on Secondary Products (20)
Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market
Indicators:
$1/BBL Widening LLS / Maya Differential (LLS less Maya) 50
$1/BBL Widening WTI / WCS Differential (WTI less WCS) 45
$1/BBL Widening LLS / Brent Differential (LLS less Brent)* (25)
$1/BBL Widening LLS / WTI Differential (LLS less WTI) 25
$1/BBL Widening WTI / WTS Differential (WTI less WTS) 20
10¢/MMBtu Increase in Natural Gas price (7)
Midstream
1¢/Gal Increase in NGL price 4
10¢/MMBtu Increase in Natural Gas price 2
$1/BBL Increase in WTI price 2
Chemicals
1¢/Lb Increase in Olefins Chain Margin (Ethylene, Polyethylene, NAO) 35
Corporate and Other
1% Increase in Interest Rate (6)
32 Sensitivities shown above are only valid within a limited price range. *Assumes LLS is less expensive than Brent.
33 References to earnings refer to net income attributable to Phillips 66.
Reconciliation of Earnings to Adjusted Earnings
Millions of Dollars
2012 2011 2010
Consolidated
Earnings (loss) 4,124$ 4,775$ 735$
Adjustments:
Net (gain) loss on asset sales (106) (1,545) (116)
Impairments 979 318 1,118
Pending claims and settlements 34 - (35)
Cancelled projects - 28 29
Severance accruals - 15 28
Premium on early debt retirement 89 - -
Repositioning costs 55 - -
Repositioning tax impacts 177 - -
Hurricane-related costs 35 - -
Adjusted earnings 5,387$ 3,591$ 1,759$
PSX Non GAAP Reconciliations
34 References to earnings refer to net income attributable to Phillips 66.
Reconciliation of Earnings to Adjusted Earnings
Millions of Dollars
2012 2011 2010
R&M
Earnings (loss) 3,729$ 3,848$ 146$
Adjustments:
Net (gain) loss on asset sales (106) (1,545) (116)
Impairments 633 318 1,118
Pending claims and settlements 57 - (35)
Cancelled projects - 28 29
Severance accruals - 15 28
Repositioning tax impacts 136 - -
Hurricane-related costs 35 - -
Adjusted earnings 4,484$ 2,664$ 1,170$
Midstream
Earnings (loss) 6$ 403$ 262$
Adjustments:
Impairments 303 - -
Pending claims and settlements (23) - -
Adjusted earnings 286$ 403$ 262$
Reconciliation of Earnings to Adjusted Earnings
Millions of Dollars
2012 2011 2010
Chemicals
Earnings (loss) 823$ 716$ 486$
Adjustments:
Impairments 27 - -
Premium on early debt retirement 89 - -
Repositioning tax impacts 41 - -
Adjusted earnings 980$ 716$ 486$
Corporate and Other
Earnings (loss) (434)$ (192)$ (159)$
Adjustments:
Impairments 16
Repositioning costs 55 - -
Adjusted earnings (363)$ (192)$ (159)$
PSX Non GAAP Reconciliations
35 * Total equity plus total debt
Phillips 66 - ROCE
2010 2011 2012
Numerator ($MM)
Net income 740 4,780 4,131
After-tax interest expense 1 11 160
GAAP ROCE earnings 741 4,791 4,291
Special Items 1,024 (1,184) 1,263
Adjusted ROCE earnings 1,765 3,607 5,554
Denominator ($MM)
GAAP average capital employed* 26,906 25,064 25,732
Annualized Adjusted ROCE 7% 14% 22%
Annualized GAAP ROCE 3% 19% 17%
PSX Non GAAP Reconciliations