PHILLIPS 66 BARCLAYS CONFERENCE€¦ · WLK XOM Chem DOW ROCE Midstream Chemicals Refining and M&S...

PHILLIPS 66 BARCLAYS CONFERENCE

Greg Garland, Chairman and CEO

September 12, 2013

2

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, and refining and petrochemical margins;

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 from litigation or for remedial actions, including

removal and reclamation obligations under environmental regulations; 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.

CAUTIONARY STATEMENT

3

Operating excellence

Growth

Returns

Distributions

High-performing organization

STRATEGY

0

50

100

150

200

250

2002 2004 2006 2008 2010 20120

0.5

1

1.5

2

2.5

Total Recordable Rates

OPERATING EXCELLENCE

4

(Incidents per 200,000 Hours Worked)

20

09

20

10

20

11

20

12

20

13

1H

U.S. Refining Emissions (Lb/MBbl)

(SOx, NOx, and Particulate Matter)

Industry Average

Phillips 66 CPChem DCP

See appendix for footnotes.

Midstream: Growth

Build on integrated Transportation system

Utilize Phillips 66 Partners LP as a growth vehicle

Expand DCP

Grow NGL Operations

Chemicals: Growth

Grow CPChem organically

Advance olefins and polyolefins projects

Capitalize on domestic feedstock advantage

Marketing & Specialties: Selective growth

Expand European Retail Marketing

Grow Lubricants

Ensure refinery pull-through

5

Refining: Enhance returns

Process more advantaged crudes

Expand export capability

Increase yields

Decrease costs

Optimize portfolio

SEGMENT STRATEGY

Gulf Coast Fractionator, Mont Belvieu, Texas.

Refining

Marketing

& Specialties

Midstream

Chemicals

Refining

Marketing

& Specialties

Midstream

Chemicals

GROWING HIGHER VALUED BUSINESSES

6

Long-Term Adjusted Earnings 2009 – 2013 1H


2013 1H ROCE shown


11%

8%

7%

6%

PSX

OKE

EPD

KMP

ROCE

HIGH-PERFORMING BUSINESSES

7

25%

24%

20%

18%

10%

PSX

LYB

WLK

XOM Chem

DOW

ROCE

Chemicals Midstream

21%

18%

11%

9%

6%

PSX

MPC

CVX

VLO

TSO

ROCE

Refining and M&S

0

8

16

24

32

2000 2005 2010 2015 2020

U.S. Growth (MMBD)

8

MIDSTREAM

MACRO ENVIRONMENT

Mont Belvieu NGL Price (% WTI)

Natural Gas

Crude Oil

NGL

2 % CAGR

6 % CAGR

6 % CAGR


0.35

0.45

0.55

0.65

0.75

0.85

2000 2005 2010 2015 2020

Consulant Range History

9

2013 Ethylene Production Cost Curve ($/ton)

U.S.

Average

U.S.

Ethane

ME Ethane

NE Asia SE Asia

0

500

1,000

1,500

0 40 80 120 160

Cumulative Ethylene Capacity (MM tons)

0

1,000

2,000

3,000

2012 2017 2022

Supply Range

Ethane Exports

Petchem Demand

U.S. Ethane Supply/Demand Balance (MBD)

CHEMICALS

MACRO ENVIRONMENT


Western

Europe

-25

-20

-15

-10

-5

0

5

1Q09 1Q10 1Q11 1Q12 1Q13

-25

-20

-15

-10

-5

0

5

1Q09 1Q10 1Q11 1Q12 1Q13

10

-25

-20

-15

-10

-5

0

5

1Q09 1Q10 1Q11 1Q12 1Q13

LLS - Brent (Nominal $/bbl)

WTI - LLS (Nominal $/bbl)

2009 – 2013 avg:

$-10.43/bbl

Maya - LLS (Nominal $/bbl)

2009 – 2013 avg:

$-11.26/bbl

REFINING

MACRO ENVIRONMENT

2009 – 2013 avg:

$1.76/bbl

-$10

-$8

-$6

-$4

-$2

$0

$2

$4

0.00.51.01.52.02.53.03.54.04.55.05.56.06.57.07.58.0

20

15

20

20

Light Sour

Heavy

Medium

N.A. sweet crude production

displaces sweet imports

Additional sweet crude

production displaces light sour

imports

Gulf Coast light sweet crude will

price to compete with imports

REFINING

MACRO ENVIRONMENT

Import Volume, MMBD 11


Light Sweet

North America Crude Import Supply Curve (Vs. Dated Brent $/bbl)

12

Build on integrated Transportation system

Utilize Phillips 66 Partners LP as a growth vehicle

Expand DCP

Grow NGL Operations

MIDSTREAM

GROWTH

MLP. Pecan Grove Crude Terminal, Carlyss, LA.

Crude rail cars

Jones Act ships

Unit train crude unloading facility projects

Clean products export facility projects

Terminal butane blending

Re-commission idle pipelines

New refinery storage

TRANSPORTATION

13 Jones Act tanker delivering Eagle Ford crude.

PHILLIPS 66 PARTNERS LP

14

Strategic relationship with PSX

Stable and predictable cash flows

Significant growth potential

Low cost capital source

Financial flexibility

Figures shown are 100% DCP.

15

2015+

DCP MIDSTREAM

Goliad Gas Plant

200 MMCFD

Granite Wash Gathering System

Expansion

140 MMCFD

National Helium Gas Plant

600 MMCFD

Rawhide Gas Plant

75 MMCFD

LaSalle Gas Plant

100 -- 160 MMCFD

Sand Hills

720 miles, 200 -- 350 MBD

Southern Hills

800 miles, 175 MBD

Front Range

435 miles, 150 -- 230 MBD

Texas Express

580 miles, 280 -- 400 MBD

Gathering and Processing NGL Pipelines

G&P Plant

Under construction/development

Expansion/Restart

DCP Legacy

New/Growth

Sand Hills and Southern Hills startup

Butane and butylene storage hub

Sweeny fractionator and pipelines

Freeport export terminal and de-ethanizer

Clemens salt dome storage

16

NGL OPERATIONS

Sand Hills Pipeline. Metering station. Mont Belvieu, Texas.

0.0

0.5

1.0

1.5

2.0

2010 2011 2012 2013E

MIDSTREAM

GROWTH

17

Capital Program ($B)

NGL Operations

DCP Midstream

Transportation


DC

P

NG

L O

ps a

nd

Tra

nsp

ort

ati

on

G&P in Execution

2013 2015 2017+ 2014 2016

Sand Hills and Southern Hills pipelines

Rail Offloading Facilities

Rail Cars

Butane and Butylene

Storage Hub

Sweeny fractionator, storage,

and pipelines

G&P Expansions

Freeport export terminal and de-ethanizer

New pipelines

2012

CHEMICALS

GROWTH

18

Grow CPChem organically

Advance olefins and polyolefins projects

Capitalize on domestic feedstock advantage

CPChem. Mesaieed, Qatar

-

5

10

15

20

25

CPC CPC '17 DOW XOM LYB WLK

Other

M.E. region

N.A. light feedstock

19

Portfolio concentrated in

advantaged feedstock regions

U.S. 100% light feedstock based

Leading Middle East position

First mover on U.S. expansions


Other category is predominantly heavy feedstock capacity.

N.A. light feedstock is predominantly ethane, propane, and butane.

CHEMICALS

FEEDSTOCK ADVANTAGE

Worldwide Ethylene Capacity (Billion Lbs)

Estimated capex and EBITDA figures are 100% CPChem.

Estimated EBITDA based on 2012 IHS industry margins. 20

CHEMICALS

ADVANCING OLEFINS AND POLYOLEFINS PROJECTS

1-Hexene Unit

Sweeny Ethylene Furnace

NAO Expansion

US Gulf Coast

Petrochemicals Project

Capacity increase

30% from 2012 – 2017

Estimated project spending

$6.5 -- 7.0 B

Additional EBITDA

$1.3 -- 1.6 B per year 2017+

CPChem. Mesaieed, Qatar

21

0.0

0.2

0.4

0.6

2010 2011 2012 2013E

CHEMICALS

EXECUTING GROWTH


2013 2015 2017+ 2014 2016

Sweeny Frac

Expansion

22 MBD

1-Hexene Unit

250 kMTA

Sweeny Ethylene

Furnace

90 kMTA

USGC Petrochemicals

1,500 kMTA (ethylene), 1,000 kMTA (polyethylene)

NAO Expansion

~130 kMTA


2012

22

Process more advantaged crudes

Expand export capability

Increase yields

Decrease costs

Optimize portfolio

REFINING

ENHANCE RETURNS

San Francisco Refinery, Rodeo Facility. San Francisco, California.

REFINING

DIVERSIFIED PORTFOLIO

23

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

WR

LC

Refinery system runs ~50% Sweet - 50% Sour crudes; ~65% Light/Medium - 35% Heavy crudes See appendix for footnotes.

REFINING

ADVANTAGED CRUDE

24

U.S. Refining (MBD)

LLS/ANS

Brent

Heavy

Canadian

WTI/WTS


Current 3+ Years

Gasoline Gasoline

Distillate

Distillate

East East East

Gulf Gulf

Gulf West West

West

REFINING

ENHANCE RETURNS

25

Increase product placement optionality

Capture global demand growth

Maintain high utilization rates

2012 2Q13 3+ Years

Actual Actual Capacity Capacity Capacity

Domestic Exports (MBD)

100

285

180

320

500


0%

10%

20%

30%

2010 2011 2012 2013 1H

ROCE (%)

REFINING

ENHANCE RETURNS

26

0.0

1.0

2.0

2010 2011 2012 2013E

Refining WRB


27

Expand European Retail Marketing

Grow Lubricants

Ensure refinery pull-through

MARKETING AND SPECIALTIES

SELECTIVE GROWTH

Berlin, Germany

28

1.7

3.5

6.5

9.1

4.1 2%

7%

14%

22%

17%

2009 2010 2011 2012 2013 1H

Midstream

Chemicals

Marketing & Specialties

Refining

Corporate

ROCE

Adjusted EBITDA and ROCE ($B)

FINANCIAL SUMMARY

Disciplined capital allocation

Enhanced financial flexibility

Growing shareholder distributions

19.0 20.6 20.8 21.4 21.7

8.0 8.0 7.0 7.0 6.5

30% 28%

25% 25% 23%

2Q 2012 3Q 2012 4Q 2012 1Q 2013 2Q 2013

Equity $B Debt $B Debt to Capital

CAPITAL STRUCTURE

29

20% - 30%

2013 TOTAL CAPITAL PROGRAM

30

WRB

DCP

DCP

CPChem

CPChem

PSX

0

1

2

3

4

PSX Maintenance JV Maintenance Growth Total

$B


SHAREHOLDER DISTRIBUTIONS

31

0.0

1.0

2.0

3Q 12 4Q 12 1Q 13 2Q 13 Total

Dividends

Share

Repurchases

Regular dividends

Secure

Growing

Competitive

Share repurchase

Immediate EPS growth

Below intrinsic value

Accretive to ROCE

Distributions ($B)

$2 B capital returned to shareholders

A PROMISING FUTURE

32

Operating excellence

Growth

Returns

Distributions

High-performing organization

INSTITUTIONAL INVESTORS CONTACT Rosy Zuklic

Manager, Investor Relations

[email protected] 832-765-2297

Humber Refinery. North Lincolnshire, United Kingdom.

FOOTNOTES

34

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).

U.S. Refining emissions exclude Trainer. Values are calculated as pounds of SOx, NOx, and particulate matter per thousand barrels of clean product produced. WRB is included at 50%.

Slide 6

Corporate excluded from percentages.

Slide 7

To facilitate peer comparison, PSX’s Refining and Marketing & Specialties segments were combined for the Downstream ROCE calculation

Downstream ROCE for MPC, VLO and TSO are total company.

Downstream ROCE for CVX estimated based on excluding Chemicals.

XOM Chem refers to Exxon Mobil’s Chemicals segment.

Slide 8

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.

Slide 9

US Ethane Supply/Demand Imbalance -- Source for supply/demand: Internal Phillips 66 Analysis. Source for U.S. Expansions: Hodson Report October 2012 and Phillips 66 internal data

2013 Ethylene Production Cost Curve – Source: IHS

FOOTNOTES

35

Slide 11

Source: P66 internal analysis.

Includes total US & EC Canada.

Years refer to approximate year-end volumes displaced (based on Q1 ‘13 Imports, Production expectations and CDU utilization).

Slide 17

DCP Midstream capital program includes equity share of DCP Midstream capital.

2012 NGL Ops includes acquisition costs for one-third interest of Sand Hills and Southern Hills Pipelines totaling approximately $0.5 B. This amount was also included in DCP Midstream's capital spending, primarily in 2012.

Slide 19

Source: ICIS , 10-K filings, and external press releases

Slide 21

Project capacities are gross capacity.

Chemicals capital program denotes equity share of CPChem capital.

Slide 23 Sour is defined as sulfur > 0.54wt% Heavy is defined as API < 24

Slide 24

U.S. advantaged crude percentages are on an equity basis. Light and medium Canadian crude are in the WTI/WTS category.

Slide 26

Capital program denotes equity share of WRB capital as well as non-cash capital leases.

Slide 30

PSX Maintenance includes corporate.

Capital program includes our net share of certain equity affiliate investments Includes non-cash capital leases.

36

FOOTNOTES

2013 SENSITIVITIES

37

Sensitivities shown above are independent and are only valid within a limited price range

*Assumes LLS is less expensive than Brent

Net Income $MM

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

Worldwide Refining (assuming 95% refining utilization)

$1/BBL Increase in Refining Margin 440

$1/BBL Increase in Crude Price Impact on Secondary Products (20)

$1/BBL Widening LLS / Maya Differential (LLS less Maya) 55

$1/BBL Widening WTI / WCS Differential (WTI less WCS) 40

$1/BBL Widening WTI / WTS Differential (WTI less WTS) 20

$1/BBL Widening LLS / Brent Differential (LLS less Brent)* (20)

$0.10/MMBtu Increase in Natural Gas price (10)

Corporate and Other

1% Increase in Interest Rate (3)

Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators:

NON-GAAP RECONCILIATIONS

ADJUSTED EARNINGS SLIDE 6

38

2013 2012 2011 2010 2009

1H Year Year Year Year

Midstream

Earnings (loss) 200$ 53$ 2,149$ 386$ 386$

Adjustments:

Net (gain) loss on asset sales - - (1,618) - (19)

Impairments - 330 4 - 79

Pending claims and settlements - (23) - - -

Gain on share issuance by equity affiliate (27) - - - (88)

Hurricane-related costs - 2 - - -

Adjusted earnings 173$ 362$ 535$ 386$ 358$

Chemicals

Earnings (loss) 463$ 823$ 716$ 486$ 228$

Adjustments:

Impairments - 27 - - -

Premium on early debt retirement - 89 - - -

Repositioning tax impacts - 41 - - -


Millions of Dollars


ADJUSTED EARNINGS SLIDE 6

39

2013 2012 2011 2010 2009


Refining

Earnings (loss) 1,403$ 3,217$ 1,529$ (545)$ (536)$

Adjustments:

Net (gain) loss on asset sales - (104) 96 - -

Impairments - 606 314 1,110 -

Canceled projects - - 28 29 -

Severance accruals - - 15 28 -

Tax law impacts (13) - - - -

Pending claims and settlements - 19 - - 25



Adjusted earnings 1,390$ 3,844$ 1,982$ 622$ (511)$

Marketing & Specialties

Earnings (loss) 520$ 465$ 573$ 567$ 538$

Adjustments:

Net (gain) loss on asset sales (23) (2) (23) (116) (13)

Impairments - - - 8 37

Pending claims and settlements (16) 38 - (35) -

Exit of business line 34 - - - -




Millions of Dollars


ROCE 2013 1H SLIDE 7

40 * Total equity plus total debt

2013 1H Midstream Chemicals Refining and

M&S

Numerator ($MM)

Net Income 205 463 1,923

After-tax interest expense - - -

GAAP ROCE earnings 205 463 1,923

Special Items (27) - (22)

Adjusted ROCE earnings 178 463 1,901

Denominator ($MM)

GAAP average capital employed* 3,135 3,649 17,890

Annualized Adjusted ROCE 11% 25% 21%

Annualized GAAP ROCE 13% 25% 21%


CPCHEM EBITDA SLIDE 20

41

Incremental Project Earnings Projections

EBITDA Reconciliation to Net Income - $MM

Estimated incremental net income (CPChem View) Low High

Estimated incremental net income 1,000$ 1,313$

Estimated depreciation 280 260

Estimated interest - -

Estimated taxes 20 27

Estimated incremental EBITDA 1,300$ 1,600$


REFINING ROCE SLIDE 26

42

2013 2012 2011 2010

1H Year Year Year

Refining - ROCE

Numerator

Net Income 1,403$ 3,217$ 1,529$ (545)$

After-tax interest expense - - - -

GAAP ROCE earnings 1,403 3,217 1,529 (545)

Special Items (13) 627 453 1,167

Adjusted ROCE earnings 1,390$ 3,844$ 1,982$ 622$

Denominator

GAAP average capital employed* 14,312$ 14,331$ 15,160$ 16,829$

Annualized Adjusted ROCE 19% 27% 13% 4%

Annualized GAAP ROCE 20% 22% 10% -3%

Millions of Dollars

Except as Indicated

* Total equity plus total debt


ROCE SLIDE 28

43

2013 2012 2011 2010 2009


Phillips 66 - ROCE

Numerator

Net Income 2,370$ 4,131$ 4,780$ 740$ 479$

After-tax interest expense 90 160 11 1 1

GAAP ROCE earnings 2,460 4,291 4,791 741 480

Special Items (49) 1,263 (1,184) 1,024 21

Adjusted ROCE earnings 2,411$ 5,554$ 3,607$ 1,765$ 501$

Denominator

GAAP average capital employed* 27,970$ 25,732$ 25,064$ 26,906$ 26,417$

Annualized Adjusted ROCE 17% 22% 14% 7% 2%

Annualized GAAP ROCE 18% 17% 19% 3% 2%

Millions of Dollars

Except as Indicated

* Total equity plus total debt

2013 2012 2011 2010 2009


Phillips 66

Net Income 2,370$ 4,131$ 4,780$ 740$ 479$

Income taxes 1,185 2,500 1,844 579 368

Net interest expense 131 231 (16) (41) (46)

Depreciation and amortization 476 913 908 880 879

EBITDA 4,162$ 7,775$ 7,516$ 2,158$ 1,680$

Adjustments (pre-tax):

Net (gain) loss on asset sales (40) (189) (1,636) (234) (37)


Impairments - 1,197 506 1,512 129





Pending claims and settlements (25) 56 - (56) 39


Repositioning costs - 85 - - -


Adjusted EBITDA 4,080$ 9,124$ 6,454$ 3,514$ 1,676$

Millions of Dollars


ADJUSTED EBITDA SLIDE 28

44

2013 2012 2011 2010 2009


Midstream

Net Income 205$ 60$ 2,154$ 391$ 389$

Income taxes 112 29 454 186 205

Net interest expense - - - - -


EBITDA 355$ 172$ 2,690$ 651$ 693$


Net (gain) loss on asset sales - - (1,830) - (15)

Impairments - 523 6 - 70

Pending claims and settlements - (37) - - -



Adjusted EBITDA 312$ 660$ 866$ 651$ 613$

Millions of Dollars



45

2013 2012 2011 2010 2009


Chemicals

Net Income 463$ 823$ 716$ 486$ 228$

Income taxes 172 366 252 194 67

Net interest expense - - - - -

Depreciation and amortization - - - - -

EBITDA 635$ 1,189$ 968$ 680$ 295$




Adjusted EBITDA 635$ 1,376$ 968$ 680$ 295$

Millions of Dollars



46

2013 2012 2011 2010 2009


Refining

Net Income 1,403$ 3,217$ 1,529$ (545)$ (536)$

Income taxes 771 2,067 902 (56) (286)

Net interest expense - - (1) (2) (1)


EBITDA 2,519$ 5,939$ 3,094$ 56$ (182)$


Net (gain) loss on asset sales - (185) 234 - -

Impairments - 606 500 1,500 -




Pending claims and settlements - 31 - - 39


Adjusted EBITDA 2,497$ 6,445$ 3,896$ 1,690$ (143)$

Millions of Dollars



47

2013 2012 2011 2010 2009


Marketing & Specialities

Net Income 520$ 465$ 573$ 567$ 538$

Income taxes 270 277 333 348 457

Net interest expense - - (32) (40) (46)


EBITDA 853$ 895$ 1,033$ 1,022$ 1,087$


Net (gain) loss on asset sales (40) (4) (40) (234) (22)

Impairments - - - 12 59

Pending claims and settlements (25) 62 - (56) -



Adjusted EBITDA 836$ 953$ 993$ 744$ 1,124$

Millions of Dollars



48

2013 2012 2011 2010 2009


Corporate

Net Income (221)$ (434)$ (192)$ (159)$ (140)$

Income taxes (140) (239) (97) (93) (75)

Net interest expense 131 231 17 1 1

Depreciation and amortization 30 22 3 - 1

EBITDA (200)$ (420)$ (269)$ (251)$ (213)$



Repositioning costs - 85 - - -

Adjusted EBITDA (200)$ (310)$ (269)$ (251)$ (213)$

Millions of Dollars



49


SWEENY FRAC AND EXPORT EBITDA (TRANSCRIPT)

50

Millions of Dollars

First Year

Sweeny Fractionator & Export Facility

Estimated net income 190$

Estimated income taxes 118

Estimated net interest expense 5

Estimated depreciation and amortization 118

Estimated EBITDA 430$


CPCHEM EBITDA (TRANSCRIPT)

51 * Primarily related to premium on early debt retirement

Millions of Dollars

2012

Year

CPChem

Net Income 2,403$

Income taxes 67

Net interest expense 9

Depreciation and amortization 356

CPChem EBITDA 2,835$

Adjustments* 252

Adjusted CPChem EBITDA 3,087$

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