Phillips 66 (PSX)·Q2 2025 Earnings Summary

Executive Summary

• Q2 2025 delivered a clean beat: adjusted EPS of $2.38 vs Street $1.71*, on sales of $33.323B vs $32.321B*, driven by 98% refining utilization, 86% clean product yield, and realized refining margins of $11.25/bbl .
• Adjusted EBITDA surged to $2.501B (vs $736M in Q1), with Refining swinging to $392M adjusted pre-tax, Marketing & Specialties rising to $660M, and Midstream steady at $731M .
• Management cut FY 2025 turnaround guidance by $100M to $400–$450M and guided Q3 refining utilization to low–mid 90% with $50–$60M turnaround; corporate costs guided to $350–$370M .
• Strategic catalysts: Coastal Bend (EPIC NGL) integration underpinning ~$1B Midstream adjusted EBITDA in Q2, proactive wind-down of Los Angeles Refinery, and $906M returned to shareholders in Q2; quarterly dividend set at $1.20/share .

What Went Well and What Went Wrong

What Went Well

• “Refining ran at 98% utilization, highest since 2018…lowest adjusted cost per barrel since 2021…market capture 99%” — CEO Mark Lashier, highlighting operational excellence that drove margins and earnings leverage .
• Midstream strength post-EPIC: “Midstream generated adjusted EBITDA of approximately $1 billion…Dos Picos II came online ahead of schedule” — Lashier on stable earnings growth and wellhead-to-market strategy acceleration .
• Marketing & Specialties upside: adjusted pre-tax income reached $660M, aided by stronger margins/volumes and reversal of Q1 timing effects .

What Went Wrong

• Chemicals softness: adjusted pre-tax fell to $20M on lower polyethylene margins and sales prices; Q2 impacted by tariff-related disruptions as Chinese punitive tariffs pushed product back into global markets (management expects gradual firming through 2026–2027) .
• Renewable Fuels losses persisted (-$133M pre-tax), reflecting weak margins and regulatory uncertainty; PSX ran Rodeo at reduced rates and is pushing cost reductions, feedstock optionality, and SAF mix shift .
• Working capital use of $1.1B in Q2 (receivables build from higher refined product sales), moderating near-term free cash flow conversion despite strong operational cash generation excluding working capital ($1.920B) .

Financial Results

Results vs Wall Street Consensus (S&P Global)

Values retrieved from S&P Global.*

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “Phillips 66 delivered strong financial and operating results…Refining ran at the highest utilization since 2018…record year‑to‑date clean product yield…lowest cost per barrel since 2021.” — Mark Lashier, Chairman & CEO .
• “Adjusted earnings were $973 million, or $2.38 per share…operating cash flow excluding working capital was $1.9 billion…we returned $906 million to shareholders.” — Kevin Mitchell, CFO .
• “We had a fantastic quarter at 99% market capture…a steady drumbeat of improvement in the refining system…we saw adjusted controllable costs at $5.46 per barrel in Q2.” — Rich Harbison, EVP Refining .
• “We’re focused on organic Midstream growth…plan to organically grow Midstream EBITDA to $4.5 billion by 2027.” — Mark Lashier .

Q&A Highlights

• Strategy/structure: Management remains open‑minded but prioritizes integrated value; “no sacred cows”; any separation must create long‑term value; near‑term focus is messaging and disclosure over structural moves .
• Debt & cash: Path to ~$17B debt relies on operating cash flow plus disposition proceeds (EUR 1.5B/$1.6B Germany/Austria jet expected in Q4), while maintaining 50%+ cash returns to shareholders .
• Refining drivers: Significant QoQ improvement (~$1.3B) was from higher realized margins, higher volumes post turnarounds, and lower costs; capture 99%, utilization 98% .
• Distillate outlook: Tight inventories and seasonal factors expected to keep margins strong; potential easing with more OPEC/heavy barrels later; gasoline could benefit as yield shifts to distillate .
• Renewables: Running Rodeo at reduced rates amid weak RD margins and policy uncertainty; leaning into SAF, feedstock optionality, and cost reduction; advocacy on PTC/RVO/LCFS .

Estimates Context

• EPS beat: $2.38 vs consensus $1.71*, reflecting strong refining capture, utilization and lower controllable costs .
• Revenue beat: $33.323B vs $32.321B*, aided by higher refined product sales post Q1 turnarounds and market capture .
• Implications: Street likely to raise estimates for Refining and M&S near term; Chemicals may see cautious revisions pending tariff resolution and margin recovery trajectory into 2026–2027 .

Values retrieved from S&P Global.*

Key Takeaways for Investors

• Operational torque is back: With realized margins at $11.25/bbl, 98% utilization and 99% capture, PSX’s refining run‑rate demonstrates high operating leverage to margins; this drove the EPS/Revenue beat and should support near‑term sentiment .
• Stable base grows: Midstream integration (Coastal Bend, Dos Picos II) and organic G&P plans underpin more durable EBITDA, de‑risking the cycle and supporting the deleveraging plan to ~$17B .
• Guidance prudence: Lower FY turnaround guidance ($400–$450M) and Q3 utilization/expense guardrails point to sustained operational discipline into H2 .
• Chemicals a watch item: Tariff headwinds make near‑term prints noisy, but management’s 2026–2027 improvement view plus CPChem mega‑projects suggest medium‑term recovery .
• Renewables optionality matters: Reduced runs and SAF focus reflect a pragmatic stance until PTC/RVO/LCFS clarity; any policy tailwinds could materially narrow losses .
• Capital returns consistent: $906M returned in Q2; $1.20/share dividend declared for Q3 aligns with commitment to >50% operating cash flow returns, subject to macro and working capital swings .
• Trading lens: Near‑term, refining strength and guidance reduction in turnaround spend are supportive; monitor distillate spreads, H2 asset sale proceeds, and Chemicals margins for estimate momentum .