Phillips 66 (PSX)·Q4 2025 Earnings Summary

Phillips 66 Q4 2025 Earnings: Strong Beat on Record Midstream, Refining Execution

February 4, 2026 · by Fintool AI Agent

Phillips 66 delivered a strong Q4 2025, beating adjusted earnings estimates on record Midstream volumes and excellent Refining execution. The integrated downstream energy company reported adjusted EPS of $2.47, approximately 14% above consensus estimates of ~$2.16. GAAP EPS of $7.17 included a $2.0B gain from selling 65% of its Germany and Austria retail marketing business.

PSX stock jumped 3.5% on the earnings release, trading above $153 after closing at $148.09 the prior day. The stock is now up nearly 8% from its pre-earnings level of $142.

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Did Phillips 66 Beat Earnings?

Yes, Phillips 66 beat on both the top and bottom line.

*Consensus estimates from S&P Global

The beat was driven by:

• Record Midstream volumes: NGL transportation and fractionation both exceeded 1 million barrels per day for the first time
• Strong Refining execution: 99% crude utilization, record 88% clean product yield
• WRB consolidation benefit: Full ownership of Wood River and Borger refineries added to Refining results

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What Did Management Say?

CEO Mark Lashier emphasized 2025 as a "pivotal year" and struck a confident tone on the trajectory ahead:

"2025 was a pivotal year for Phillips 66. Over the last 4 years, we've been laser-focused on improving performance and advancing our strategy. We reduced costs, simplified the company, and made tough decisions. We streamlined leadership, reduced headcount, outsourced work, and rationalized our refining footprint. In 2025, we began to see the benefits of the discipline: solid, consistent results, which we're excited to build upon."

On the ownership culture driving performance:

"We build a culture of ownership and accountability. We've challenged every employee to step up and aligned incentives so more of our people think and act like owners."

On the outlook and investor expectations:

"This is a competitive business, and we have to earn investors' trust every day. We have momentum, and we're confident that we can rise to the challenge and deliver for our shareholders. Results matter, and in 2025, you've seen a positive inflection point in our results, and the best is yet to come."

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How Did the Stock React?

PSX stock responded positively to the earnings beat:

The stock is trading near its 52-week high, reflecting investor confidence in the company's operational execution and strategic repositioning.

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Segment Performance: What Changed This Quarter?

Midstream (+$20M QoQ)

Midstream delivered record volumes in both NGL transportation and fractionation, each exceeding 1 MMBD for the first time. The segment benefited from higher volumes partially offset by lower margins.

Refining (+$112M QoQ)

Refining improvement was driven by:

• Consolidation of WRB Refining LP (100% ownership of Wood River and Borger refineries)
• Record clean product yield of 88%
• Strong realized margins despite higher turnaround expense ($135M vs $36M in Q3)

Note: Los Angeles Refinery ceased fuel production in Q4 2025. Pre-tax accelerated depreciation of $239M was treated as a special item.

Marketing & Specialties (-$38M QoQ)

Adjusted earnings decreased due to lower domestic margins and the impact from selling 65% of the Germany and Austria retail business. Higher U.K. margins and lower costs partially offset the decline.

Chemicals (-$157M QoQ)

Chemicals (50% CPChem JV) saw a significant decline driven by lower margins. The ethylene-to-HDPE chain cash margin compressed to 2.6 cents/lb from 7.6 cents/lb in Q3.

Renewable Fuels (+$24M QoQ)

Results improved due to higher realized margins including inventory impacts, partially offset by lower credits.

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Capital Allocation and Balance Sheet

Phillips 66 continued its disciplined capital allocation strategy:

*Calculated from quarterly data

Balance Sheet Improvement:

• Total Debt: $19.7B (down from $21.8B in Q3)
• Debt-to-Capital: 39% (down from 44%)
• Net Debt-to-Capital: 38% (down from 41%)
• Cash & Equivalents: $1.1B
• Credit Facility Availability: $5.7B

The company returned more than 50% of operating cash flow to shareholders in 2025, consistent with its commitment.

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Strategic Developments

Portfolio Transformation (2025 Highlights)

Acquisitions ($3.5B total):

• Acquired remaining 50% of WRB Refining LP → 100% ownership of Wood River and Borger refineries
• Acquired Coastal Bend assets to enhance Midstream position
• Expanded Dos Picos II

Dispositions ($3.5B total):

• Sold 65% interest in Germany and Austria retail marketing business (closed Dec 2025)
• Sold 49% interest in Coop Mineraloel AG (Q1 2025)

2026 Outlook

• Capital Budget: $2.4B ($1.1B sustaining, $1.3B organic growth)
• Lindsey Oil Refinery: Announced agreement to acquire UK refinery and logistics assets
• Western Gateway Pipeline: Commenced open season for remaining capacity, expanded origins/destinations including LA market

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8-Quarter Performance History

Data from 8-K supplemental filings

The company has shown a clear recovery from the challenging Q4 2024 and Q1 2025 periods, with refining margins and utilization rates returning to strong levels.

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Key Risks and Concerns

1. Chemicals margin pressure: CPChem margins compressed significantly; ethylene-to-HDPE spreads at 2.6 cents/lb are below breakeven for many producers

2. LA Refinery wind-down: Accelerated depreciation of $964M in FY2025 related to the closure; ongoing cessation costs expected

3. Renewable Fuels losses: Segment continues to post losses despite improvement; LCFS credit prices remain pressured at ~$53/ton

4. Debt levels: While improved, net debt of ~$18.6B remains elevated; interest expense was $296M in Q4

5. Propel Fuels litigation: Legal accrual of $262M in 2025 related to ongoing litigation

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Q&A Highlights: What Analysts Asked

Venezuelan Crude Opportunity

Analysts pressed on the heavy crude differential tailwind following Venezuelan crude returning to market. CEO Mark Lashier noted:

"We've got the flexibility to process Venezuelan crude. We can process about 250,000 barrels a day. As a percentage of our total crude processing capacity, we're more heavily weighted, more opportunity there than our peers."

The commercial impact is significant: each $1 widening in WCS differential is worth $140M in annual earnings. Since announcing the WRB acquisition, heavy differentials have widened ~$4/barrel.

Refinery Capacity Increases

Rich Harbison announced 35,000 bpd of structural capacity increases across four refineries, a ~2% system-wide increase:

Cost Reduction Path to $5.50/bbl

Management provided granular detail on the path to $5.50/bbl adjusted controllable costs:

• Q4 2025 actual: $5.96/bbl (or ~$5.50-$5.57 excluding LA wind-down costs)
• LA refinery tailwind: ~$0.30/bbl annualized benefit
• Continuous improvement: Additional $0.15/bbl reduction targeted by year-end 2026
• Over 300 initiatives in the pipeline with "very solid track record" of capturing value

"I see this as a very structural change in the business. We've got organizational changes and work processes... dedicated resources that are challenging the status quo of everything we do each and every day."

Capital Allocation: The 8-2-2-2 Framework

CFO Kevin Mitchell outlined the cash flow allocation framework:

At the targeted $17B debt level, Midstream + M&S EBITDA alone would cover debt at ~3x, leaving Refining essentially debt-free. Management expects to reduce debt by ~$1.5B/year for the next two years.

Western Gateway Pipeline Update

Don Baldridge provided color on the second open season:

• First open season: Multiple shipper commitments secured, providing "solid base of volume"
• Second open season: Extends destinations to LA market (heart of California demand) and origins back to Gulf Coast via Explorer Pipeline (PSX owns 22%)
• Market thesis: West Coast will evolve like East Coast—supplied by few refineries, some imports, and a pipeline delivering "competitively priced, attractive, reliable, American-produced fuel"
• Regulatory support: "Unilateral support" from state and federal officials—unusual for a pipeline project

Midstream: Path to $4.5B EBITDA by 2027

Don Baldridge elaborated on the midstream growth trajectory:

• Current run rate: ~$1B/quarter in adjusted EBITDA, expected to hold steady through H1 2026
• Step changes: Organic growth projects (Coastal Bend expansion, Iron Mesa gas plant) driving step-up in late 2026/2027
• Growth cadence: Gas plant every 12-18 months; additional fractionator capacity planned
• Post-2027 pipeline: Corpus Christi frac expansion, Western Gateway provide visibility beyond 2027 target

2026 Refining Macro Outlook

Management struck a bullish tone on 2026 refining fundamentals:

"We are very bullish. If you look toward the start of spring turnarounds, we believe the refining system will have trouble keeping up with demand."

Key factors cited:

1. Demand growth outpacing supply: Global demand growth exceeds net refinery additions
2. New builds weighted to year-end: Likely to slip into 2027
3. Low unplanned outages in 2025: Hard to sustain such low levels
4. Widening heavy differentials: "Very constructive margins for the year"

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Forward Catalysts

• Q1 2026 earnings (~late April 2026): Monitor refining margins, chemicals recovery
• Lindsey Refinery closing: Expected to enhance UK integrated business
• Western Gateway Pipeline: Second open season results; potential final investment decision
• Iron Mesa Gas Plant: Expected online early 2027
• Coastal Bend expansion: 125K bpd incremental capacity in late 2026
• Continued debt paydown: Target ~$1.5B/year reduction toward $17B goal
• Dividend increases: Management committed to returning >50% of OCF to shareholders

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Sources: Phillips 66 Q4 2025 8-K (Eb125jlGzcA), Press Release (zA3jFjT03B8), Q4 2025 Earnings Call Transcript (gze6qfi9K3c), S&P Global estimates