Phillips 66 at Goldman Sachs Energy, CleanTech & Utilities Conference Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : And Mark, we'll kick off before we get into the macro with an important announcement yesterday on the midstream side with a $2 billion acquisition of EPIC. Do you want to talk to us about why this makes sense and what you want us to know about it as an investment community?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Thanks, Mark. Don, we'd love your perspective on the asset. How should we think about the multiple that was paid for and there was some growth on that asset as well and so I would think that the implied multiple compresses. Talk about the strategic logic of the asset too.

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Kevin and Jeff, do you want to talk about the financials of the transaction in terms of transaction multiples and then also the financing of it? There's been discussion about what the optimal capital structure is and one of the tricky things that we were talking about that last night is as the business increasingly becomes a midstream-oriented business and less of a refining-oriented business, the capacity of the organization to take on a little bit more debt is there. But it's always tough to talk about that evolution with the market. So your perspective on that too.

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Thanks, Kevin. Let's start a little bit on macro and refine, we'll come back to midstream and some of the other segments here in a moment. But Mark, I'm curious on your perspective on the refinance set up as we go into the new year. Where are we relative to your view of mid-cycle cracks? And certainly, the year started off strong a year ago, but it faded pretty hard. So I think a look back on what changed and how does that change the way that you're thinking about the path forward?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : And Mark, what you're painting is a refining softness driven largely by a supply situation. Are you seeing any evidence, and maybe it's a question for Jeff as well, in your system -- in your wholesale system of demand weakness? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 07, 2025 / 3:20PM, PSX.N - Phillips 66 at Goldman Sachs Energy, CleanTech & Utilities Conference

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : And we've seen a tick up in European gas prices which has certainly moved into the distillate crack on the Gulf Coast in particular.

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Yeah. And sticking on refining, let's talk about California. Phillips 66 made a decision to seize operations in Los Angeles.

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : When you think about the outlook for that market, what should we be mindful of and how should we contextualize the West Coast with all this renewable supply coming online?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : And then -- REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 07, 2025 / 3:20PM, PSX.N - Phillips 66 at Goldman Sachs Energy, CleanTech & Utilities Conference

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Mark, when you came in two years ago, you said one of your primary focuses was improving operational reliability --

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : And capture rates at the refining business. Where do you think we are in that journey?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Yeah. Last one on refining, Canada, it's obviously a very dynamic environment. We're dealing with a little bit of tighter diffs post TMX, but there's a lot of uncertainty also around tariffs. As you read the tea leaves of what's happening in Washington, do you think common sense prevails? How do you think about (multiple speakers)

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : We'll see how this evolves. But let's talk on -- let's pivot back to midstream because this is becoming an increasingly important part of the business. And Don, it's great to have you here. What -- talk big picture about how you envision this business looking five years from now.

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : $4 billion is a very meaningful number. It's become a large part of the business. I guess the question we often get is can you get full credit for the value of a midstream business that should deserve a much higher multiple embedded in a diversified company that's often perceived to be a refining company. And so how do you evolve the narrative -- the investor narrative to understand that the business mix is changing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JANUARY 07, 2025 / 3:20PM, PSX.N - Phillips 66 at Goldman Sachs Energy, CleanTech & Utilities Conference

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Kevin or Mark, can you talk about one or two examples of that integration value that would help to bring it to light?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Last one on midstream is, do you view a lot of these transactions, whether it's Pinnacle or EPIC have been more bolt-on in nature? DCP, a little bit, I'll characterize it as mid-scale. Do you see the potential if the currency is there to do, which is probably trickier now in light of what some of these midstream companies have done and the refining macro but over time to be a large-scale midstream consolidator?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Mark, you are a chemicals ninja. You so much about the space and you've taught us a lot about it. Where are we in the cycle and how do we them get back to mid cycle?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : And you've talked about $0.3 a pound being your view of mid-cycle. Has that evolved at all?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Let's finish off on capital allocation. It's been a big part of the strategy to return capital to shareholders in the form of buybacks and dividend growth. How should we think about that in 2025 in light of a softer refining cash flow environment?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : And then mid-cycle number, Kevin, you spent a lot of time talking to the market about it in the $14 billion. How -- in light of the refining environment and the chemicals environment and some of the M&A and divestitures, there's a lot of moving pieces, how would you help -- how should we think about that number?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : The -- Kevin, when you look at the differences and Jeff, this could be a good question for you as well, the difference if it's between Wall Street and that $14 billion, where do you think the biggest deltas still are? Are they -- is it chems, is it --

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Yeah. So I'll finish with you, Mark. You've got -- the business has got an interesting peer set. Of course, they're the large cap refiners, but also, it's looked at in the context of other integrated oils. It's looked at in the context of midstream companies increasingly. Why do you think that the investment community at this conference should be focused on PSX in 2025 relative to those pure play alternatives?

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : All right. Thank you all for being here. It's always a highlight to have Phillips 66 at the conference and you gave us something exciting to talk about this morning.

Question: Neil Mehta - Goldman Sachs Group Inc - Analyst : Thank you.