Investor Update September 2016
NYSE: PSX www.phillips66.com
Cautionary Statement This presentation contains forward-looking statements. 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 forwardlooking statements. However, the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements relating to the operations of Phillips 66 and Phillips 66 Partners LP (including joint venture operations) are based on management’s expectations, estimates and projections, their 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 can be found in filings by Phillips 66 and Phillips 66 Partners LP with the Securities and Exchange Commission. Phillips 66 and Phillips 66 Partners LP are under no obligation (and expressly disclaim any such obligation) to update or alter their forward-looking statements, whether as a result of new information, future events or otherwise. This presentation includes non-GAAP financial measures. You can find the reconciliations to comparable GAAP financial measures at the end of the presentation materials or in the “Investors” section of the websites of Phillips 66 and Phillips 66 Partners LP.
2
Diversified Downstream Company
Midstream: Growth
Chemicals: Growth
Refining: Enhance Returns
Marketing & Specialties: Selective Growth
Execute Sweeny Hub
Grow CPChem organically
Optimize crude slate
Grow integrated transportation system
Advance olefins and polyolefins projects
Expand export capability
Expand European retail marketing
Increase yields
Grow lubricants
PSXP as a funding vehicle
Capitalize on domestic feedstock advantage
Maintain cost discipline
Ensure domestic refinery pull-through
Pursue organic and M&A opportunities
Leverage proprietary technology
Enhance portfolio
3
Corporate Strategy Operating Excellence
Committed to safety, reliability and environmental stewardship while protecting shareholder value
Growth
Reshaping our portfolio by capturing growth opportunities in Midstream and Chemicals
Returns
Enhancing returns by maximizing earnings from existing assets and investing capital efficiently
Distributions High-Performing Organization
Committed to dividend growth, share repurchases and financial strength
Building capability, pursuing excellence and doing the right thing 4
Operating Excellence Total Recordable Rates
Refining Environmental Metrics
(Incidents per 200,000 Hours Worked) Industry Average 1H ’12 ’13 ’14 ’15 ‘16
430
317
300
279 122
Phillips 66
CPChem
DCP Midstream
2012
2013
2014
2015
Operating Costs and SG&A
Refining Capacity Utilization
($B)
(%)
1H 2016
Planned Maintenance & Turnarounds
5.7
5.7
6.1
6.0 2.8
2012
2013
2014
2015
1H 2016
3%
3%
4%
5%
1%
93%
93%
94%
91%
97%
2012
2013
2014
2015
1H 2016
See appendix for footnotes.
5
Energy Prices and Margins Global Market Crack ($/bbl)
Brent ($/bbl)
112
2012
109
2013
99
2014
52
40
2015
1H 2016
16.66
14.03
13.42
2012
2013
2014
2012
90
2013
89
2014
2015
12.24 1H 2016
PE Cash Chain Margin (cpp)
NGL Weighted Average (cpg)
82
16.62
45
41
2015
1H 2016
27
2012
36
2013
42
2014
33
2015
27
1H 2016
See appendix for footnotes.
6
Value Chains
7
Midstream Integrated network Transportation DAPL/ETCOP Beaumont Terminal Bayou Bridge Bakken JVs
NGL Sweeny Complex Sand Hills and Southern Hills JV Fractionators
DCP Midstream Gathering and Processing 8
Sweeny Complex Integrated world-scale midstream, refining and chemicals assets Sweeny Fractionator One Running to design
LPG Export Terminal Commissioning and start-up 4Q 2016 Global LPG organization securing sales Narrow international export arb
Platform for long-term earnings growth 9
Midstream Growth EBITDA
Substantial backlog of investments
($B)
Focus on enhancing and extending logistics around our assets
~ 2.3
Fewer near-term, large investment opportunities
PSX
PSXP 2018E run-rate EBITDA of $1.1 B 0.6
PSXP 1.1
2018E EBITDA guidance reduced 10-20% from $2.3 B Current operating assets include logistics assets included in Refining segment. See appendix for additional footnotes.
0.4 Current Operating Assets
Growth
Market
2018E Run-Rate
10
Phillips 66 Partners Distribution / LP Unit
Distribution / LP Unit ($) (cents)
Strong sponsorship Access to capital markets Organic opportunities Recent acquisitions Distribution guidance unchanged
21.3
22.5
3Q 2013
4Q 2013
27.4
1Q 2014
30.2
31.7
34.0
2Q 2014
3Q 2014
4Q 2014
37.0
1Q 2015
40.0
2Q 2015
42.8
3Q 2015
45.8
48.1
50.5
4Q 2015
1Q 2016
2Q 2016
Coverage Ratio 1.13x 1.10x 1.10x 1.44x 1.32x 1.28x 1.14x 1.15x 1.40x 1.44x 1.15x 1.21x See appendix for footnotes.
11
PSXP Value to PSX Cumulative Dropdown Proceeds ($B)
Attractive cost of capital
2.5
Growing distributions 0.5
1.8
0
2013
Funding Midstream growth
2014
2015
1H 2016
Cumulative LP & GP Distributions ($MM) 327 232
PSX multiple uplift
96 20 2013
See appendix for footnotes.
2014 Limited Partner
2015
1H 2016
General Partner 12
DCP Midstream NGL Production (MMBD)
Self-help initiatives to improve cash flow Operating and cost improvements Contract realignment
402
426
454
410
399
2012
2013
2014
2015
1H 2016
Portfolio optimization Capital discipline DCP Midstream Adjusted EBITDA ($MM)
Strengthened balance sheet 495
585
487 108
Expect to be self-funding
170 2012
DCP Midstream adjusted EBITDA represents Phillips 66’s share. See appendix for additional footnotes.
2013
2014
2015
1H 2016 13
Chemicals Middle East and North America NGL continue advantaged feedstock position
2016E Average Ethylene Production Cost Curve ($/ton) 750 Asia Coal W. Europe Naphtha
600
Petrochemical production costs reduced globally
Asia Naphtha
CPChem
450
Asia LPG/Ethane Rest of World N.A. Naphtha M.E. LPG/Naphtha W. Europe LPG
300
N.A. LPG N.A. Ethane
Ethane available to supply new U.S. crackers
150
M.E. Ethane
0 0
15
30
45
60
75
90
105
120
135
150
Cumulative Capacity MM Tons Source: Wood Mackenzie, as of August 2016.
14
CPChem USGC Petrochemicals Project 1,500 kMTA (ethylene) at Cedar Bayou, TX 1,000 kMTA (polyethylene) at Old Ocean, TX Planned startup 2H 2017
Expect increased distributions USGC project completion 2018 capital spend ~ $1 B Incremental EBITDA ~ $1 B CPChem USGC Ethane Cracker, Baytown, TX
Next major project FID post-2018 EBITDA estimate is on a CPChem 100% basis and is based on January 2016 IHS forecast premises.
15
Refining Diversified portfolio Enhancing returns Portfolio management Yield enhancement Feedstock flexibility Growing export capacity
Platform for Midstream growth See appendix for footnotes.
16
Refining Discipline Adjusted EBITDA ($B)
Operating excellence
2009–2015 Average 6.4
3.3 3.7
3.6
3.4
4.8
1.5
Volatile business 0.9
Market cracks
(0.2)
2009
2010
2011
2012
2013
2014
2015
1H 2016
Total Capex ($B)
0.7
0.8
2012
2013 Sustaining
1.0
1.1
2014
2015
Crude differentials Regulatory environment
1.2
2016E
Significant source of cash Run well and optimize business
Return
See appendix for footnotes.
17
Marketing and Specialties Adjusted EBITDA ($B)
Stable, high-return businesses Marketing Enhancing U.S. fuels brands Adding 100+ European sites by 2020
1.1
2012
Growing branded and unbranded gasoline sales
1.4
1.4
1.5 0.7
2013
2014
2015
1H 2016
Adjusted ROCE (%)
Providing ratable refinery off-take
Specialties Growing high-performance lubricants
18 2012
28
32
35
31
2013
2014
2015
1H 2016
See appendix for footnotes.
18
Capital Allocation Phillips 66 Cash Sources and Uses
Maintain financial strength
($B)
7.1
Fund sustaining and growth capital
7.0
6.7 ~6
5.9 4.8 4.3
Growing dividend and ongoing share repurchases
~5
2016C
2017C
4.0
2.3
2012
2015 PSX adjusted capital expenditures excludes investment in DCP Midstream of $1.5 billion. See appendix for additional footnotes.
~5 ~5
2013
2014
2015
PSX Adjusted CFO
Dividends/Share Repurchase
PSXP Contributions
PSX Adjusted Capital Expenditures 19
Capital Structure Equity and Debt
Investment-grade credit ratings PSX – BBB+ / A3 PSXP – BBB / Baa3
24.1
23.9 22.4 20.8
22.0
25%
28%
27%
27%
21%
Over $7 B of available liquidity at PSX
21.6
22.0
20.8 6.9
8.6
23.1
8.9
8.8
6.1 7.8
~3.5x debt/EBITDA target at PSXP 2012
22.9
2013
2014
2015
7.7
1H 2016
PSX Equity $B
PSX Debt $B
PSX Noncontrolling Interest Attributable to PSXP $B
PSXP Third-party Debt $B Consolidated Debt-to-Capital 20
Capital Spending Consolidated
Capital Program
($B)
($B) 7.7 5.8 5.6
1.8
2012
2013
Refining Midstream
2014
4.4
3.9
3.8
1.7
5.3
2015
2016 Budget
M&S Investment in DCP
3.1
3.5
3.5
2016E
2012
2013
PSXP Corporate
Capital program includes Phillips 66’s portion of capital spending by DCP Midstream, CPChem and WRB.
Consolidated
2014
WRB
2015
2016 Budget
DCP
2016E
CPChem
21
Distributions Annual Dividend ($/sh)
Important source of shareholder value
Growing, secure and competitive dividends
0.45
1.33
2H 2012
2013
1.89
2.18
2.45
2014
2015
2016E
Cumulative Distributions ($B) 11.1
Committed to share repurchases
12.3
8.4 3.7 0.6 2H 2012
See appendix for footnotes.
2013
2014
Share Repurchases and Exchanges
2015
1H 2016 Dividends 22
Delivering Shareholder Returns Integrated portfolio
Total Shareholder Return 220%
Disciplined capital allocation
PSX
+169% +73%
180%
S&P 100 +68%
140%
Peers
Returns focused
100%
Value-added growth
60%
Strong balance sheet Compelling investment
20% -20% May-12
Feb-13
Nov-13
Aug-14
May-15
Feb-16
See appendix for footnotes.
23
Institutional Investors Contact Rosy Zuklic General Manager, Investor Relations C.W. Mallon Manager, Investor Relations
[email protected] 832-765-2297
Investor Update September 2016
NYSE: PSXP www.phillips66partners.com
Phillips 66 Partners Ownership Structure
(NYSE: PSX) 100% ownership interest
Phillips 66 Partners GP LLC (PSXP General Partner) General Partner Units IDRs
PSXP Public Unitholders 57% limited partner interest 41% limited partner interest
2% general partner interest
(NYSE: PSXP)
Operating Subsidiaries As of August 31, 2016.
Joint Ventures 26
Phillips 66 Partners Strong alignment with Phillips 66 Highly integrated assets Stable and predictable cash flows Significant growth potential Financial flexibility
Pecan Grove Marine Dock
27
Distribution Growth Distribution / LP Unit (cents)
Coverage Ratio
34.00
37.00
40.00
42.80
45.80
48.10
50.50
27.43
30.17
31.68
4Q 2013
1Q 2014
2Q 2014
3Q 2014
4Q 2014
1Q 2015
2Q 2015
3Q 2015
4Q 2015
1Q 2016
2Q 2016
1.10x
1.10x
1.44x
1.32x
1.28x
1.14x
1.15x
1.40x
1.44x
1.15x
1.21x
21.25
22.48
3Q 2013
1.13x
3Q 2013 distribution represents the minimum quarterly distribution, actual distribution of 15.48 cents equal to MQD prorated.
28
Financial Performance Adjusted EBITDA ($MM) 97.3
87.0 73.8
73.3 56.9
2Q 2015
3Q 2015
4Q 2015
1Q 2016
2Q 2016
Distributable Cash Flow ($MM) 84.4 74.0 64.5
64.1
47.8
2Q 2015
3Q 2015
4Q 2015
1Q 2016
2Q 2016
Adjusted EBITDA and Distributable Cash Flow shown are attributable to PSXP.
29
Recent Acquisitions from Phillips 66 Recently acquired assets from Phillips 66 Sweeny Fractionator – 100 MBD NGL fractionator Clemens NGL Caverns – 7-8 MMBbl NGL storage facility Standish Pipeline – Refined products pipeline
1Q 2016 $236 MM, 25% controlling interest in Sweeny Fractionator & Clemens NGL Caverns funded with: $24 MM take-back equity of PSXP LP and GP units $212 MM sponsor loan payable to PSX
2Q 2016 $775 MM, Standish Pipe & remaining 75% interest in Sweeny Fractionator & Clemens NGL Caverns funded with: $100 MM take-back equity of PSXP LP and GP units $675 MM sponsor loan payable to PSX Sponsor loan paid down to $19 MM with $656 MM net proceeds from public unit offering 30
Recent Third-Party Acquisitions Explorer Pipeline July 2016, Acquisition of an additional 2.5% equity interest Approximately 600 Mbd petroleum products pipeline delivering to more than 70 major cities in 16 states
STACK 50/50 JV with Plains All American Pipeline, L.P. Aug. 2016, Acquisition of 50% interest Pipeline transporting crude oil from STACK play in northwestern Oklahoma to Cushing, Okla.
South Louisiana NGL Logistics Assets Aug. 2016, Announced acquisition of NGL pipeline system and storage caverns in southeastern Louisiana
31
$300 MM 2016 Organic Growth Plan Bayou Bridge Pipeline Transports crude from Nederland, TX to Lake Charles, LA, and eventually to St. James, LA Increases crude supply options for LA refineries Nederland to Lake Charles leg began operations in April 2016 Expected completion of St. James segment in 2H 2017
Sacagawea Pipeline 76-mile Sacagawea Pipeline and central delivery facility for gathering systems Connection into 100 MBD Palermo crude oil rail-loading facility Provides increased logistics options for shippers in the Bakken region Terminal completed in 4Q 2015; pipeline expected start-up in 3Q 2016
Sand Hills Pipeline Adding lateral connections and increasing pumping capacity
32
Highly Integrated and Diversified Asset Portfolio
33
Fee-based, Long-term Contracts Provide Stability Asset
Existing Pipelines
Existing Terminals / Storage
NGL Services
Clifton Ridge to Lake Charles Sweeny to Pasadena Hartford Connector Gold Line Sand Hills Southern Hills Cross Channel Connector Eagle Ford Gathering Explorer Clifton Ridge Terminal Clifton Ridge / Pecan Grove Docks Pasadena Terminal Pasadena and Hartford Truck Racks Gold Line Terminals Medford Spheres Bayway Rail Rack Ferndale Rail Rack Sweeny Fractionator Clemens Caverns
Initial Term (years)
Maximum Term with Options (years)
10 10 23 10 15 15 5 7 Various
20 20 23 15 15 15 Various
Remaining weighted average contract life of ~10 years
5 5 5 5 5 10 10 10
20 20 20 20 15 20 20 20
Remaining weighted average contract life of ~5 years
10 10
-
PSX accounted for 96% of PSXP’s transportation and terminaling revenues in 2015 and 2014. Hartford Connector includes PSX JV Wood River Refinery to Hartford and Hartford to Explorer pipelines. The term of the Hartford Connector throughput and deficiency agreement began in January 2008.
34
PSXP Debt Profile Debt Maturity Profile
$1.3 B Total Debt as of June 30, 2016
($B)
5-Year $300 MM notes, 2.646% coupon 10-Year $500 MM notes, 3.605% coupon 30-Year $300 MM notes, 4.680% coupon
0.2
5-Year $212 MM sponsor loan, 3.0% 0.5
Average cost of 3.47%
0.3
0.3
BBB / Baa3 credit rating 2020
2025 Sponsor Loan
2045 Senior Notes 35
Financial Flexibility Investment-grade credit rating Financial targets: 30% distribution CAGR 2013-2018 3.5x debt / EBITDA 1.1x annual coverage ratio
Support Phillips 66 Midstream growth
36
Total Return Since IPO PSXP Alerian MLP Index
300%
+133% -15%
Closed $340 MM acquisition
Closed $70 MM acquisition
250%
200%
Closed $775 MM acquisition
Closed $700 MM acquisition
150%
100%
Closed $1.1 B acquisition
IPO
Closed $236 MM acquisition
50%
0%
-50% Jul-13
Oct-13
Jan-14
Apr-14
Jul-14
Oct-14
Jan-15
Apr-15
Jul-15
Oct-15
Jan-16
Apr-16
Jul-16
Chart reflects total unitholder return July 22, 2013 to September 6, 2016. Distributions assumed to be reinvested in units. Source: Bloomberg.
37
Institutional Investors Contact Rosy Zuklic – General Manager, Investor Relations
[email protected] | 832-765-2297 C.W. Mallon – Manager, Investor Relations
[email protected] | 832-765-2297
Appendix
Midcontinent Integrated Growth Midstream Palermo rail terminal/Sacagawea pipeline (PSXP) DAPL/ETCOP
Refining, Marketing & Specialties Ponca City Yield improvement projects Tight oil processing flexibility Optimize lease crude purchases Wood River Dilbit capacity increase ULSD expansion FCC modernization Billings Vacuum tower project Marketing & Specialties Grow branded fuels volumes Enhance Phillips 66 brand Marketing JVs and alliances 40
Western Gulf Creating a World-Class Energy Complex Midstream Sweeny Fractionator One (PSXP) Freeport LPG export terminal
Refining, Marketing & Specialties Sweeny Strategic asset integration FCC optimization Marketing & Specialties Grow unbranded fuels volumes Focus on high-quality branded assets Increase high-margin exports
41
Eastern Gulf Refining Logistics and Midstream Growth Midstream Beaumont terminal expansion: +7 MMBbls Bayou Bridge pipeline
Refining, Marketing & Specialties Lake Charles Increase feedstock advantage New Isomerization unit Alliance Increase light crude runs Marketing & Specialties Grow unbranded fuels volumes Leverage brand value through licensing Increase high-margin exports Grow performance lubricants and export sales
42
West Coast Enhancing Returns Midstream Los Angeles waterborne crude tank Santa Maria rail rack
Refining, Marketing & Specialties San Francisco Yield improvements Los Angeles FCC energy reduction Marketing & Specialties Grow branded and unbranded fuels volumes Enhance 76 brand Increase high-margin exports Grow export lubricant sales
43
Atlantic Basin Enhancing Returns Refining, Marketing & Specialties Bayway FCC reactor modernization Yield improvements Whitegate Entered into contract to sell Refinery, transaction closed September 8, 2016 Marketing & Specialties Grow JET and COOP brands in Europe Increase unbranded volumes in the U.K. and U.S. Expand brand licensing in the U.S.
As of September 8, 2016.
44
Adjusted Free Cash Flow 2012–1H 2016 Average
Adjusted CFO excludes working capital. Sustaining capex excludes capital leases. Midstream adjusted CFO excludes PSXP. PSXP contributions are calculated as consideration paid by PSXP to PSX in dropdown transactions plus quarterly cash distributions paid from PSXP to PSX. Midstream sustaining capex excludes PSXP. Phillips 66’s share of DCP Midstream, CPChem and WRB adjusted CFO reflects that portion of those entities’ cash flow over which Phillips 66 has significant influence over reinvestment/distribution decisions. DCP Midstream, CPChem and WRB free cash flow calculated based on Phillips 66’s share of after tax cash flow at the enterprise level.
45
2009–2016E Average Adjusted Annualized ROCE
46
Debt and Liquidity Debt Maturity Profile
Liquidity
($B)
($B)
4.9 7.1 5.0 4.0
2016
2017
2.2
2.0
1.5 2018
Bonds
As of June 30, 2016. Excludes PSXP. Debt maturity profile excludes capital leases.
2019
2020-30
Revolving Credit Facility
2031-50
Cash
Undrawn Revolving Credit Facility
Total Committed Liquidity
47
2016 Sensitivities Annual Net Income $MM Midstream - DCP (net to Phillips 66) 10¢/Gal Increase in NGL price
25
10¢/MMBtu Increase in Natural Gas price
2
$1/BBL Increase in WTI price
1
Chemicals - CPChem (net to Phillips 66) 1¢/Lb Increase in Chain Margin (Ethylene, Polyethylene, NAO)
35
Worldwide Refining $1/BBL Increase in Gasoline Margin
230
$1/BBL Increase in Distillate Margin
200
Impacts due to Actual Crude Feedstock Differing from Feedstock Assumed in Market Indicators: $1/BBL Widening LLS / Maya Differential (LLS less Maya)
45
$1/BBL Widening WTI / WCS Differential (WTI less WCS)
40
$1/BBL Widening WTI / WTS Differential (WTI less WTS)
20
$1/BBL Widening LLS / Medium Sour Differential (LLS less Medium Sour)
15
$1/BBL Widening ANS / WCS Differential (ANS less WCS)
10
10¢/MMBtu Increase in Natural Gas price
(10)
Sensitivities shown above are independent and are only valid within a limited price range.
48
Phillips 66 Approved Capital Program Millions of Dollars 2016 Budget Sustaining Growth Consolidated Capital Expenditures and Investments Midstream(1) Chemicals Refining Marketing and Specialties Corporate(2)
Select Equity Affiliates (3) DCP CPChem WRB
Capital Program(3) Midstream Chemicals Refining Marketing and Specialties Corporate
Total
227 833 57 180 1,297
2,119 384 80 2,583
2,346 1,217 137 180 3,880
98 241 129 467
125 775 55 956
223 1,016 184 1,423
324 241 962 57 180 1,764
2,244 775 439 80 3,539
2,568 1,016 1,401 137 180 5,303
(1) Includes 100% of Phillips 66 Partners (2) Includes non-cash capitalized lease of $3 million in Corporate (3) Includes Phillips 66’s portion of self-funded capital spending by DCP Midstream, CPChem, and WRB.
49
Footnotes Slide 5 Industry Averages are from: Phillips 66 – American Fuel & Petrochemical Manufacturers (AFPM) refining data, Chevron Phillips Chemical Company LLC (CPChem) – American Chemistry Council (ACC), DCP Midstream, LLC (DCP Midstream) – Gas Processors Association (GPA). Slide 6 Global Market Crack refers to worldwide market crack spread based on Phillips 66 global crude capacity. NGL weighted average prices are based on index prices from the Mont Belvieu and Conway market hubs that are weighted by DCP Midstream’s NGL component and location mix. PE cash chain margins are ethylene to high-density polyethylene cash chain margins. Source: IHS Energy. Slide 10 Current PSXP EBITDA represents estimated run-rate as of June 30, 2016. Current PSX EBITDA includes terminaling, storage and other logistics assets currently embedded in the Refining segment and represents an estimate of the EBITDA potential of these assets if they were transferred to Midstream at market-based fees. Growth is 2018 estimated run-rate EBITDA of projects completed 2016 or later. 50
Footnotes Slide 11 3Q 2013 distribution represents the minimum quarterly distribution; actual distribution of 15.48 cents equal to MQD prorated. Slide 12 Cumulative dropdown proceeds represent the cash proceeds paid by Phillips 66 Partners for assets acquired from Phillips 66, including the subsequent repayment of sponsor notes assumed by Phillips 66 Partners in the transaction. Slide 13 DCP Midstream Adjusted EBITDA represents Phillips 66’s proportional share and is net of noncontrolling interests. Slide 16 Entered into contract to sell Refinery, transaction closed September 8, 2016.
51
Footnotes Slide 17 Adjusted EBITDA is adjusted for special items, noncontrolling interest and proportional share of WRB Refining LP’s (WRB) income taxes, net interest and depreciation and amortization. Refining capex excludes capital leases and excludes Phillips 66’s portion of self-funded capital spending by WRB. Slide 18 Adjusted EBITDA is adjusted for special items, income taxes, net interest and depreciation and amortization. 1H 2016 adjusted ROCE is annualized.
52
Footnotes Slide 19 2012–2015 PSXP Contributions represent cash received by Phillips 66 in the form of distributions and dropdown proceeds, including the subsequent repayment of sponsor notes assumed by Phillips 66 Partners. 2012–2015 PSX Adjusted Capital Expenditures includes sustaining and growth capital expenditures for Phillips 66 but excludes capital leases and excludes Phillips 66 Partners capital expenditures. 2016C and 2017C PSX Adjusted CFO is calculated using consensus Net Income adding back depreciation and amortization. As of August 2016. Source: S&P Capital IQ. 2016C and 2017C PSXP Contributions represent estimated cash to be received by Phillips 66 in the form of distributions and dropdown proceeds. 2016C and 2017C Dividends/Share Repurchase represent company estimates. 2016C and 2017C PSX Adjusted Capital Expenditures include estimated sustaining and growth capital expenditures for Phillips 66 and exclude Phillips 66 Partners capital expenditures.
53
Footnotes Slide 22 Annual dividend reflects sum of declared quarterly dividends. There were only two quarterly dividends in 2012 following May 1st spinoff. 2016E reflects one quarterly dividend of $0.56 and three quarterly dividends of $0.63. 2014 share repurchases and exchanges include the PSPI share exchange. Slide 23 Chart reflects total shareholder return May 1, 2012 to September 6, 2016. Dividends assumed to be reinvested in stock. Source: Bloomberg. Peer average includes Delek US Holdings, Inc., HollyFrontier Corporation, Marathon Petroleum Corporation, PBF Energy Inc., Tesoro Corporation, Valero Energy Corporation, Western Refining, Energy Transfer Equity, L.P., Enterprise Products Partners L.P., ONEOK, Inc., Targa Resources Corp., Celanese Corporation, The Dow Chemical Company, Eastman Chemical Company, Huntsman Corporation and Westlake Chemical Corporation.
54
Footnotes Forecasted and Estimated EBITDA We are unable to present reconciliations of various forecasted and estimated EBITDA included in this presentation, because certain elements of net income, including interest, depreciation and income taxes, are not reasonably available. Together, these items generally result in EBITDA being significantly greater than net income. 1H 2016 1H 2016 is as of June 30, 2016, or the six-month period ended June 30, 2016, as applicable; except as otherwise noted.
55
Non-GAAP Reconciliations (Slide 13) Millions of Dollars 2012
2013
2014
2015
1H 2016
Proportional Share of DCP Midstream Proportional Share of DCP Midstream net income (loss) attributable to Phillips 66
$
179
210
135
(324)
(5)
Provision for income taxes
100
122
79
(139)
(2)
Depreciation and amortization
-
-
-
279
332
214
(463)
4
3
(2)
85
110
118
133
Proportional share of selected equity affiliates depreciation and amortization
131
139
150
166
Lower-of-cost-or-market inventory adjustments
-
-
Gain on asset dispositions
-
-
Impairments in equity affiliates
-
-
Plus: Net income attributable to noncontrolling interests
Proportional Share of DCP Midstream EBITDA
-
(7)
Adjustments (pretax): Proportional share of selected equity affiliates income taxes
-
Proportional share of selected equity affiliates net interest
Pending Claims and settlements Proportional Share of DCP Midstream Adjusted EBITDA
$
2
2 65 87
-
-
-
(30)
-
-
366
6
-
-
-
-
(45)
495
585
487
170
108 56
Non-GAAP Reconciliations (Slide 17) Millions of Dollars 2009 Refining Refining net income (loss) attributable to Phillips 66 Plus: Provision for income taxes Net interest expense Depreciation and amortization Refining EBITDA Adjustments (pretax): Proportional share of selected equity affiliates income taxes Proportional share of selected equity affiliates net interest Proportional share of selected equity affiliates depreciation and amortization Asset dispositions Impairments Canceled projects Pending claims and settlements Severence accruals Hurricane-related costs Certain tax impacts Lower-of-cost-or-market inventory adjustments Pension settlement expenses Recognition of deferred logistics commitments Refining Adjusted EBITDA
$
$
2010
2011
2012
2013
2014
2015
1H 2016
Average 2009-2015
(556)
(661)
1,369
3,091
1,747
1,771
2,555
235
1,331
(296) (1) 641 (212)
(121) (2) 659 (125)
808 (1) 664 2,840
1,998 655 5,744
1,035 685 3,467
696 704 3,171
1,104 738 4,397
99 382 716
746 (1) 678 2,755
1 (179) 178 39 (173)
1 (160) 169 1,500 106 28 1,519
4 (140) 184 234 500 44 24 3,690
5 (118) 236 (185) 606 31 54 6,373
(4) (95) 237 (22) 3,583
3 (19) 245 (145) 131 23 40 3,449
(3) 252 (8) 30 53 53 4,774
127 30 873
1 (102) 214 (15) 391 21 18 7 8 (3) 13 8 3,316
57
Non-GAAP Reconciliations (Slide 18) Millions of Dollars 2013 2014 2015
2012 Marketing and Specialties Marketing and Specialties net income attributable to Phillips 66 Plus: Provision for income taxes Net interest expense Depreciation and amortization Marketing and Specialties EBITDA Adjustments (pretax): Asset dispositions Impairments Pending claims and settlements Exit of a business line Tax law impacts Pension settlement expenses Marketing and Specialties Adjusted EBITDA
$
544
894
1,034
1,187
434
319 147 1,010
433 103 1,430
441 95 1,570
465 (2) 97 1,747
226 52 712
(40) (25) 54 (6) 1,413
(125) (44) 1,401
(242) 11 1,516
712
(4)
$
1H 2016
62 1,068
58
Non-GAAP Reconciliations (Slide 18)
2012 M&S ROCE Numerator Net Income After-tax interest expense GAAP ROCE earnings Special Items Adjusted ROCE earnings Denominator GAAP average capital employed* Discontinued Operations Adjusted average capital employed*
544 544 99 643
2013
Millions of Dollars 2014 2015
894 894 (9) 885
1,034 1,034 (152) 882
1,187 1,187 (240) 947
1H 2016*
434 434 434
3,547 3,547
3,160 3,160
2,743 2,743
2,735 2,735
2,771 2,771
18% 15%
28% 28%
32% 38%
35% 43%
31% 31%
*Total equity plus debt.
Adjusted M&S ROCE (percent) GAAP M&S ROCE (percent) * ROCE for half year 2016 annualized.
59
Non-GAAP Reconciliations (Slide 19)
2012 Phillips 66 Adjusted Cash from Operations Reconciliation Cash From Continuing Operations GAAP Less: PSXP's portion of CFO(1)
$
PSX Adjusted CFO
$
(1)
4,259 4,259
Millions of Dollars 2013 2014 5,942 24 5,918
3,527 100 3,427
2015 5,713 176 5,537
PSXP's portion of CFO excludes changes in working capital
2012 Capital Spending PSX Consolidated Capital Expenditures Less: PSXP Capital Expenditures Less: Equity Contribution to DCP Midstream PSX Adjusted Capital Expenditures
$
$
1,701 1,701
Millions of Dollars 2013 2014 1,779 4 1,775
3,773 67 3,706
2015 5,764 205 1,500 4,059
60
PSXP Adjusted EBITDA and Distributable Cash Flow Reconciliation to Operating Cash Flow (Slide 29) Q2 2015* PSXP Reconciliation to Net Cash Provided by Operating Activities Net Cash Provided by Operating Activities Plus: Net interest expense Provision for (benefit from) income taxes Changes in working capital Undistributed equity earnings Accrued environmental costs Other** PSXP EBITDA Distributions in excess of equity earnings Expenses indemnified or prefunded by Phillips 66 Transaction costs associated with acquisitions EBITDA attributable to noncontrolling interests EBITDA attributable to Predecessors PSXP Adjusted EBITDA Plus: Deferred revenue impacts † Less: Net interest Income taxes paid Maintenance capital expenditures PSXP Distributable Cash Flow
Millions of Dollars Q3 2015* Q4 2015* Q1 2016*
Q2 2016
64.6
49.1
97.0
71.4
94.6
9.5 (0.1) (15.0) (2.2) (0.1) 0.1 56.8 0.2 — — — (0.1) 56.9
9.1 0.1 13.8 (0.9) (0.5) (4.5) 66.2 4.6 1.1 0.4 — 1.0 73.3
9.2 0.1 (16.3) (2.6) (0.2) (8.0) 79.2 6.6 0.5 0.4 — 0.3 87.0
9.7 0.2 14.4 (0.6) — (6.6) 88.5 4.1 0.1 1.0 — (19.9) 73.8
10.9 0.4 (1.8) 1.7 0.1 (6.9) 99.0 2.2 3.9 0.7
2.3
2.5
(1.6)
1.4
1.3
9.5 0.4 1.5 47.8
9.1 — 2.2 64.5
9.2 (0.1) 2.3 74.0
9.9 — 1.2 64.1
10.9 0.3 3.0 84.4
(8.5) 97.3
*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control. **Primarily deferred revenue. †Difference between cash receipts and revenue recognition.
61
PSXP Adjusted EBITDA and Distributable Cash Flow Reconciliation to Net Income (Slide 29) Q2 2015* PSXP Reconciliation to Net Income Net Income Plus: Depreciation Net interest expense Provision for (benefit from) income taxes PSXP EBITDA Distributions in excess of equity earnings Expenses indemnified or prefunded by Phillips 66 Transaction costs associated with acquisitions EBITDA attributable to noncontrolling interests EBITDA attributable to Predecessors PSXP Adjusted EBITDA Plus: Deferred revenue impacts** Less: Net interest Income taxes paid Maintenance capital expenditures PSXP Distributable Cash Flow
Millions of Dollars Q3 2015* Q4 2015* Q1 2016*
Q2 2016
42.0
50.9
60.5
64.7
73.2
5.4 9.5 (0.1) 56.8 0.2 — — — (0.1) 56.9
6.1 9.1 0.1 66.2 4.6 1.1 0.4 — 1.0 73.3
9.4 9.2 0.1 79.2 6.6 0.5 0.4 — 0.3 87.0
13.9 9.7 0.2 88.5 4.1 0.1 1.0 — (19.9) 73.8
14.5 10.9 0.4 99.0 2.2 3.9 0.7 — (8.5) 97.3
2.3
2.5
(1.6)
1.4
1.3
9.5 0.4 1.5 47.8
9.1 — 2.2 64.5
9.2 (0.1) 2.3 74.0
9.9 — 1.2 64.1
10.9 0.3 3.0 84.4
*Prior-period financial information has been retrospectively adjusted for acquisitions of businesses under common control. **Difference between cash receipts and revenue recognition.
62
Non-GAAP Reconciliations (Slide 45) Millions of Dollars Average 2012-1H 2016 FCF Reconcilition Numerator Cash From Operations GAAP Less: Change in Non-Cash Working Cap. Cash From Operations (excluding WC) Less: P66 Equity affiliate cash from ops Add: Equity look through cash from ops Less: PSXP's portion of CFO Adjusted FCF (excl WC) Total Capex GAAP Less: Growth Capex Sustaining Capex Less: P66 Equity affiliate sustaining capex Add: Equity look through sustaining capex Less: PSXP's portion of sustaining capex Adjusted Sustaining Capex PSXP Contributions Adjusted Free Cash Flow
Midstream 783 (26) 809 210 375 92 882 1,879 1,388 491 333 133 6 285 619 1,216
Chemicals 369 369 369 1,084 1,084
Refining 2,804 (296) 3,100 669 589 3,020
Marketing & Specialties 1,087 204 883 883
192 192
948 209 739 123 862
196 131 65 65
-
-
-
892
2,158
818
63
Non-GAAP Reconciliations (Slide 46) Millions of Dollars Average 2009- 2016E Midstream Chemicals Refining
Phillips 66 Phillips 66 ROCE Numerator Net Income After-tax interest expense GAAP ROCE earnings Special Items Adjusted ROCE earnings Denominator GAAP average capital employed* Discontinued Operations Adjusted average capital employed*
$
$
$ $
3,097 118 3,215 (20) 3,196
547 547 (143) 403
754 754 27 781
1,223 1,223 255 1,479
M&S
Corporate
802 802 (56) 746
(342) 118 (224) 10 (214)
28,306 (114) 28,193
4,463 4,463
3,545 3,545
14,727 14,727
3,225 3,225
1,868 1,868
11% 11%
9% 12%
22% 21%
10% 8%
23% 25%
-11% -12%
*Total equity plus debt.
Adjusted ROCE (percent) GAAP ROCE (percent) * ROCE for first-half 2016 annualized.
64
