Phillips 66 (PSX)·Q1 2025 Earnings Summary

Executive Summary

• Q1 2025 was materially impacted by one of Phillips 66’s largest-ever spring turnaround programs and accelerated depreciation at the Los Angeles refinery; GAAP EPS was $1.18 and adjusted EPS was -$0.90, with Total Revenues and Other Income of $31.73B . Against S&P Global consensus, adjusted EPS missed (-$0.90 vs -$0.72*) and revenue was below ($31.73B vs $32.05B*) .
• Midstream remained the cornerstone of stability; Sweeny Hub set a fractionation record, and the EPIC NGL acquisition expanded Permian takeaway and fractionation capacity, positioning PSX for fee-based growth and integration benefits .
• Management guided to mid-90% utilization in Chemicals and Refining for Q2 2025, turnaround expense of $65–$75MM, and Corporate & Other costs of $340–$360MM, signaling the bulk of turnaround costs are behind them .
• Strategic catalysts: $2.0B proceeds from asset sales (Coop and GCX), ongoing portfolio optimization (Europe retail), and a recent $0.05 dividend increase reinforcing a secure, competitive, growing dividend policy .

What Went Well and What Went Wrong

• What Went Well

  • “Our assets, not impacted by planned maintenance, ran well,” with turnarounds completed safely, on time, and under budget; Sweeny crude flexibility enhanced by ~40 MBD heavy/light switching, improving long-term margins .
  • Sweeny Hub recorded fractionation volumes of 650 MB/D, and Midstream adjusted EBITDA remained robust; EPIC NGL acquisition is immediately accretive and expands Permian connectivity .
  • Dividend policy reaffirmed; PSX returned $716MM to shareholders (repurchases and dividends) and maintains >50% of operating cash flow returns to shareholders .

• What Went Wrong

  • Refining posted an adjusted pre-tax loss (-$937MM) driven by lower volumes and higher costs from turnarounds, despite higher realized margins; worldwide crude utilization fell to 80% .
  • Renewable Fuels declined on the transition from blenders tax credits to production tax credits, inventory LIFO impacts ($60MM), and timing of U.K. credits ($50MM recognized in Q4 but not Q1), prompting reduced rates at Rodeo in April .
  • Marketing & Specialties GAAP pre-tax income was skewed by a $1,017MM gain on asset disposition (Coop); adjusted pre-tax income was $265MM, with elevated Op/SG&A and FX noise .

Financial Results

Segment adjusted pre-tax income (loss):

KPIs and operating metrics:

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Our results reflect not only a challenging macro environment, but also the impact from one of our largest-ever spring turnaround programs, managed safely, on-time and under budget.”
• “We acquired EPIC NGL… immediately accretive and expands our takeaway capacity from the Permian… enhances our ability to offer producers unmatched flow assurance.”
• “Looking ahead to the second quarter… utilization rates to be in the mid-90s… turnaround expense between $65–$75 million.”
• “We will return over 50% of net operating cash flow to shareholders through share repurchases and a secure, competitive and growing dividend.”

Q&A Highlights

• Activist/Elliott: Board rigorously evaluates strategic alternatives; midstream spin sale would entail large tax leakage (~$10B on a $50B valuation); spin-offs could be tax-free but dissynergies are material given deep integration .
• Balance sheet path: Aim for ~$17B debt; asset sale proceeds and margin recovery to support reduction while maintaining 50%+ OCF returns .
• Renewables detail: Q1 hit from BTC→PTC transition, LIFO inventory (~$60MM), and timing of U.K. RTFC credits; policy clarity on RVO/LCFS needed; Rodeo running reduced rates in April .
• Tariffs/NGL exports: Expect rerouting of global LPG flows; Freeport export term contracts intact; delivered cargo flexibility supports value capture .
• Turnarounds: Q1 carried heavy activity; lingering in Q2 is modest; guidance reflects wind-down .

Estimates Context

Values with asterisks (*) were retrieved from S&P Global.

Where estimates may adjust:

• Lower-than-expected revenue and more negative adjusted EPS driven by heavy turnaround costs and reduced volumes could prompt downward revisions to near-term Refining contributions; management’s mid-90% utilization guidance and lower Q2 turnaround expense support potential recovery in Q2 estimates .
• Renewables uncertainty around PTC/RVO/LCFS likely keeps forecast dispersion elevated until policy clarity; Q1-specific headwinds (LIFO/RTFC timing) are non-recurring .

Key Takeaways for Investors

• The Q1 trough appears operationally driven; with turnarounds largely behind and utilization guided to mid-90%, PSX is set up for sequential improvement in Q2 .
• Midstream’s fee-based growth (EPIC NGL, Iron Mesa, Dos Picos II) and Sweeny Hub scale provide cash-flow stability, supporting debt reduction and shareholder returns irrespective of refining cycles .
• Refining realized margins improved sequentially, but volume/cost drag dominated; enhanced crude flexibility (Sweeny) and ongoing cost/market capture projects should support margin capture into H2 .
• Renewable Fuels remains policy-sensitive; expect volatility until PTC/RVO/LCFS frameworks are finalized; management is optimizing feedstock and product mix including SAF optionality .
• Capital returns remain anchored at 50%+ of OCF; dividend growth policy intact; $2.0B asset sale proceeds and ongoing portfolio optimization bolster balance sheet flexibility .
• Strategic posture is to preserve integration synergies; Board/management emphasize data-driven evaluation of structural alternatives amid activist pressure .