Phillips 66 (PSX.N) reported impressive quarterly profits that exceeded expectations, driven by robust refining margins and gains from its midstream unit.
This positive outcome led to a 1.7% increase in its premarket trading shares.
The company’s market capture soared to 107%, a substantial improvement compared to the 66% recorded in the previous quarter.
This achievement is especially notable as Phillips 66 has been facing pressure from activist investor Elliott Investment Management due to rising operating expenses and underperforming refining operations.
Notably, competitors Valero Energy (VLO.N) and Marathon Petroleum (MPC.N) also outperformed Wall Street’s projections with stronger-than-expected margins.
Phillips 66’s midstream unit saw adjusted earnings rise to $754 million, driven by increased natural gas liquids volumes and record exports of liquefied petroleum gas.
However, it’s important to note that some of these gains are attributed to deferred revenue related to throughput and deficiency agreements.
The company’s chemicals segment experienced substantial growth, with earnings more than doubling to $106 million.
Additionally, the fourth quarter saw a crude capacity utilization rate of 92%, indicating efficient operations.
While total processed input decreased slightly to 1.89 million barrels per day compared to the previous year’s 1.90 million bpd, TD Cowen analysts noted that the earnings beat was somewhat expected, with some benefits from the midstream sector potentially not being repeatable.
They also highlighted a modest working capital inflow, resulting in no sequential reduction in net debt.
Despite a drop in realized margins from $19.73 to $14.41 per barrel in the fourth quarter due to declining fuel prices, Phillips 66 managed to mitigate the impact through inventory hedging, higher Gulf Coast clean product realizations, and robust commercial sales.
In conclusion, Phillips 66’s strong quarterly performance, surpassing analyst estimates with adjusted earnings of $3.09 per share, showcases the company’s resilience and adaptability in a challenging market environment.
The increased market capture and growth in its midstream and chemicals segments reflect its commitment to delivering value to shareholders and maintaining a competitive edge in the energy sector.