Phillips 66 Q3 Profit Falls On Weak Refining Margins

(RTTNews) - Oil refiner Phillips 66 (PSX) on Wednesday reported a 67 percent decline in profit for the third quarter from last year, as weak margins at the company's oil refining segment more than offset higher earnings at its other segments. Earnings per share for the quarter missed analysts' expectations.

Phillips 66 was spun off in 2012 by ConocoPhillips (COP) into a separately traded company in order to unlock shareholder value.

According to the company, weaker refining margins significantly impacted its third-quarter earnings, while the chemicals segment posted strong earnings due to solid utilization rates and good margins.

Phillips 66's refining segment reported a third-quarter loss of $2 million, compared with earnings of $1.55 billion in the prior-year quarter. The decrease primarily reflects lower realized refining margins, driven largely by an approximate 40 percent decline in the average worldwide market crack spread.

Realized margins also decreased due to tightening crude differentials, particularly in the Gulf Coast, Central Corridor and Western/Pacific regions. Phillips 66's worldwide refining utilization for the quarter was 95 percent.

Marketing and Specialties segment earnings for the quarter more than doubled from last year to $240 million, as the segment benefited from higher margins and decreased costs. Margins improved primarily due to higher Renewable Identification Numbers or RINs values associated with renewable fuel blending activities.

Midstream segment earnings for the quarter were $148 million, compared to loss of $72 million in the year-ago period. The improved results reflect higher earnings at the transportation business as the company's equity investment in DCVP Midstream, partly offset by lower earnings from NGL Operations.

Chemicals segment earnings, which reflects Phillips 66's equity investment in Chevron Phillips Chemical Company, surged 71 percent from the year-ago period to $262 million on improved margins.

Phillips 66's net earnings for the third quarter plunged to $535 million or $0.87 per share from $1.60 billion or $2.51 per share in the year-ago period. The prior-year quarter's results include impairments of $187 million, among others.

Excluding these items, adjusted earnings for the latest quarter were $535 million or $0.87 per share, compared to $1.89 billion or $2.97 per share in the same period last year. On average, 16 analysts polled by Thomson Reuters expected the company to report earnings of $0.94 per share for the quarter. Analysts' estimates typically exclude one-time items.

In July, Phillips 66 Partners successfully completed its initial public offering of common units, which trade on the New York Stock Exchange under the ticker symbol "PSXP". Phillips 66 plans to use the master limited partnership as a vehicle to grow its Midstream segment.

Phillips 66 noted that it has the capacity to export nearly 340,000 barrels per day from its domestic refineries. Over the next several years, the company expects to increase its export capability to 500,000 barrels per day.

Further, the company plans to expand its fuel marketing business in Europe, as part of its plan for selective growth in the Marketing and Specialties segment. Over the next five years, the firm expects to build around 200 new retail sites, which will market motor fuels under the JET brand.

In Wednesday's regular session, PSX is trading at $65.51, up $1.37 or 2.14 percent on a volume of 1.55 million shares.