Phillips 66 (PSX)

Renewable Diesel Margin Outlook
Q: What is the progress and profitability outlook for the Rodeo Renewable diesel project?
A: Management reported that the Rodeo Renewable Energy Complex is processing 50,000 barrels per day of renewable feedstocks, having ramped up ahead of schedule. - They are transitioning to lower carbon intensity feedstocks and will begin producing sustainable aviation fuel in Q3, with up to 20,000 barrels per day offered to the market in Q4. - While biofuels margins were positive but at the lower end in Q2, they expect margins to improve due to factors like increased renewable jet production reducing renewable diesel supply, potential increases in RIN prices, firmer distillate demand, and falling vegetable oil prices. - However, they note that there is still significant regulatory uncertainty for next year. -

Cost Reduction Sustainability
Q: Are the cost reductions in refining structural and sustainable?
A: Management views the cost reductions as primarily structural and sustainable. - They've reduced adjusted controllable costs by $0.83 per barrel in the first half of the year. - Over 1,000 employees have implemented over 1,000 initiatives, resulting in over $600 million of structural costs removed. - Examples include saving $5 million annually by adopting best practices in tank turnarounds and reducing fuel usage by $5.6 million annually through optimization in hydrogen plant operations. - They are committed to a relentless pursuit of cost efficiencies for sustained value creation. -

Midstream Performance and Guidance
Q: How is midstream performing and what is the outlook?
A: The Midstream segment had a great quarter, with strong volumes and improved costs due to synergy capture from the DCP integration. - NGL volume performance was strong, and they are confident in hitting their synergy capture targets. - They are on track to the $3.6 billion EBITDA guidance, expecting to stabilize around $675 million per quarter. - Some Q2 performance was due to onetime items, and they anticipate some volume impact in Q3 due to Hurricane Beryl. -

Asset Sales and Capital Allocation
Q: What is the status of asset sales, particularly the European retail business?
A: Management is in active discussions regarding the sale of their European retail marketing assets, with strong interest from multiple parties. - This sale would be a significant step toward their $3 billion asset disposition target. -

Leverage Targets and Capital Allocation
Q: How will you balance returning capital to shareholders with achieving leverage targets?
A: They will meet their $13 billion to $15 billion cash return target range this year, even though the refining margin environment is weaker. - Next year, they are confident in managing both cash returns to shareholders and improving the balance sheet, aided by EBITDA growth and expected cash from asset dispositions. -

M&A Strategy and Future Plans
Q: What is the M&A strategy following the Pinnacle acquisition?
A: The Pinnacle acquisition enhances their wellhead-to-market Midstream backbone and provides opportunities for organic growth. - They are looking for assets that, when connected to their system, generate more value. - They will continue to seek similar opportunities that are immediately accretive and backed by solid fee-based contracts, particularly in the Permian Basin. -

TMX Pipeline Impact
Q: How is the TMX pipeline affecting Canadian crude availability and West Coast refining?
A: The TMX pipeline is running at 650,000 to 675,000 barrels per day, heading to 700,000 barrels by year-end. - About two-thirds of incremental TMX barrels are going to Asia, which was a surprise, and one-third to the West Coast. - This benefits their Ferndale and especially their L.A. refineries by providing more barrels at advantaged prices. - Increased Canadian production may put more pressure on pipelines in the next 2-3 years, potentially widening heavy crude differentials. -

Refining Utilization and Macro Outlook
Q: What are the refining utilization guidance and macro outlook?
A: They are guiding down utilization in Q3 due to market softening, particularly on the West and East Coasts. - They are taking the opportunity to perform discretionary maintenance to ensure strong operations when market conditions improve. - Overall, they believe medium- and long-term refining fundamentals are positive, with U.S. refiners remaining advantaged globally. -

Mid-Cycle EBITDA Guidance
Q: Are you still confident in achieving mid-cycle EBITDA targets?
A: Management remains confident in achieving $14 billion in EBITDA at mid-cycle conditions by 2025. - While some segments like Midstream and Marketing are at or above mid-cycle, others like Chemicals and Renewable Fuels may not reach mid-cycle by then. - The Refining segment is executing projects and cost reductions to contribute to this target. -

Chemicals Pricing Outlook
Q: What is the outlook for polyethylene pricing and demand?
A: CPChem is operating well and seeing strengthening demand in North America and increased exports. - Margins are gradually improving as the value chain recovers from previous lows. - They expect margins to continue recovering due to stronger global markets and improving inventory positions, particularly domestically. -