Phillips 66 Q2 2025 Earnings Call Transcript

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

Question: Manav Gupta - UBS - Analyst : Good morning. I wanted to focus a little bit on the refining results 99% capture, 98% crude utilization. I understand some of those things would be tough to replicate. But even quarter-over-quarter or year-over-year, gives a remarkable achievement. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 4:00PM, PSX.N - Q2 2025 Phillips 66 Earnings Call So can you help us understand what helped you drive close to $1.3 billion in quarter-over-quarter improvement in refining? I know the tracks were higher, but help us walk through some of the stuff which you were able to achieve here. I think you probably were working on it for some time, but it all came together in the second quarter.

Question: Manav Gupta - UBS - Analyst : Thank you guys. I'll be a quick follow up. Very strong results from M&S better than our expectations, even if you deduct the $89 million onetime, Help us understand some of the dynamics there? And now that you have sold these assets, what would be a good run rate of EBITDA normalized for this business?

Question: Manav Gupta - UBS - Analyst : Thank you so much for responses. And it was great to see Mark on CNBC today morning. Thank you.

Question: Neil Mehta - Goldman Sachs - Analyst : Yeah, good morning, good afternoon. I've been spending some time, chatting with Mr. Dietert about global refining balances and there's a healthy debate in the market over the next couple of years about how you guys are thinking about net capacity adds? And then also the swing factor of China, which obviously has excess export capacity that's been pretty disciplined about product quotas. And so I just love your bottoms-up view of how you think about those net adds over the next couple of years?

Question: Neil Mehta - Goldman Sachs - Analyst : Thanks, Brian. Just follow-up on the cash flow. The Doug's question about just debt levels being about 10, 11 points higher than where you want it to be. When you just talk about two dynamics working capital, there was a $1.1 billion outflow, but I would think that swings back in the back half. So if you could just talk about what drove that and how you think that evolves and then the jet sale because between those two nuts, I think you can close a lot of the gap that you need to get to the $17 billion level. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 4:00PM, PSX.N - Q2 2025 Phillips 66 Earnings Call

Question: Neil Mehta - Goldman Sachs - Analyst : Makes sense. Thanks, Kevin.

Question: Jason Gabelman - TD Cowen - Analyst : Yeah. Hey, thanks for taking my question. I wanted to go back to kind of how you're thinking about the business after the activism campaign that you endured and there was a lot of focus on that Midstream part of the business. And I'm wondering if the company is thinking about doing a deep dive on that segment and the structure that makes sense. In any way, that would be different than how you kind of evaluate that business in normal course through the year.

Question: Jason Gabelman - TD Cowen - Analyst : Great, thanks. And my follow-up is just on a couple of weaker segments, chems and renewable fuels. And on chems, I just want to know if your outlook for when we reach mid-cycle in that industry has changed at all and then renewable fuels given margins where they are, do you consider tapering back runs there and just kind of outlook for margins in general would be great. Thanks. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 4:00PM, PSX.N - Q2 2025 Phillips 66 Earnings Call

Question: Jason Gabelman - TD Cowen - Analyst : Great, thanks for the answers.

Question: Jean Ann Salisbury - BofA Global Research - Analyst : Hi, I have a Midstream question. Obviously, the top concern right now across Permian volume, levered Midstream is the falling rig count in the Permian and whether growth could materially slow there next year. Can you talk about PSX's exposure to potentially slowing growth in the Permian? And how you might actually be less exposed than some peers in the medium term given your high share of contracted third-party volumes?

Question: Jean Ann Salisbury - BofA Global Research - Analyst : Great, Don, thanks for that color. And then as a broader follow-up, I think in the most recent PSX deck, there were a lot of examples of the $500 million of operating synergies from integration. Can you just kind of speak high level like directionally, I guess, on what environments caused those operating synergies to be higher, like, for example, is it just when there's refining in chems margins? Do those numbers go up to or perhaps in more volatile environment, the operating synergies go up. But any kind -- or is it just more of a steady state number as you guys look at it?

Question: Jean Ann Salisbury - BofA Global Research - Analyst : Great, thanks, Don, that's all for me.

Question: Ryan Todd - Piper Sandler - Analyst : Good, thanks. Maybe first talk one back on refining. Distillate markets have been very tight with really supportive margins. Can you talk about what you see as the primary drivers in your view? How do you see the outlook over the remainder of the year? And as you think about your operations, is there anything more that you can do to increase distillate yields or are you maxed out given the current crude sight?

Question: Ryan Todd - Piper Sandler - Analyst : Alright, thank you. And then one, I know a big focus here improvement in refining performance has also been an improvement on the commercial side of the business. Can you talk about how you view your progress in that regard? And particularly in a quarter like this one, what benefits you might be seeing in terms of your efforts on the commercial side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 4:00PM, PSX.N - Q2 2025 Phillips 66 Earnings Call

Question: Ryan Todd - Piper Sandler - Analyst : Okay, thank you.

Question: Phillip Jungwirth - BMO Capital Markets - Analyst : Thanks. You guys have been pretty active in managing the Midstream portfolio and are now shifting the focus more to organic growth. But wondering if there's more to do on the divestiture side here where there's crude or refined product pipelines that maybe you don't necessarily operate. Are there arguably still integration synergies? Or is maintaining ownership more about just enhancing the cost structure for refining, diversification or just not the right environment to really realize full value.

Question: Phillip Jungwirth - BMO Capital Markets - Analyst : Okay. Great. And then I don't think we've asked about the new M&S allocation slide that you have in the deck here, just to be more apples-to-apples in terms of comparing refining performance. But it was a nice quarter for refining. I mean, typically, PSX tends to really outperform in the central corridor. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 4:00PM, PSX.N - Q2 2025 Phillips 66 Earnings Call I assume with the M&S allocation, I mean, the outperformance is even greater there. So just in a quarter where WCS didn't really give you much help. What do you guys look at as far as really attributing and driving that relative outperformance? And then in some of the other regions, maybe like the Gulf Coast. I know you mentioned the Sweeny project, but are there other things you can do there, new projects or otherwise to improve relative margin uplift given that you are pretty vertically integrated in the Gulf Coast also?

Question: Phillip Jungwirth - BMO Capital Markets - Analyst : Thanks.

Question: Joe Laetsch - Morgan Stanley - Analyst : Hey team, thanks for taking my questions. So I wanted to start on the full year turnaround expense guidance, which was used by $100 million. Was this due to outperformance or was prior planned maintenance deferred. What I'm getting at and trying to figure out is if the $400 million to $500 million level run rate to use going forward? Thanks.

Question: Joe Laetsch - Morgan Stanley - Analyst : Thanks for that detail and good to see the execution. My second question is on the Midstream side. Now that Coastal Bend has been closed for a couple of months. Can you talk to how the integration is going, synergy capture and any surprises now that you've had at in time with it in the portfolio. Thank you.

Question: Joe Laetsch - Morgan Stanley - Analyst : Great. Thanks for taking my questions.

Question: Paul Cheng - Scotiabank GBM - Analyst : Hey, guys. Good -- I think it's still good morning for you guys. Brian, can I go back to the renewable diesel. You're saying that you are running at reduced rates. Just curious that if the margin is lower, that means that you're going to reduce further from the second quarter level. In other words, that how sensitive you are in your runway versus the market condition. And also that whether you have fully booked the PTC in the second quarter or that there's some incremental benefit that we should assume and expand on that? That's the first question. The second question, I think, is for Mark. Upon the completion of the shutdown of LA, you have no refinery in California, but you have wholesale and marketing and retail marketing operation there. And also that in Europe, given the market condition is never really that great for the oil and gas business. So in those two sets of business, it means that in Europe, your refining and marketing business and in California, your marketing business, in the long haul, how do you see them fit into your portfolio? Are they -- should be part of your portfolio long haul? Thank you.

Question: Matthew Blair - Tudor Pickering Holt & Co Securities LLC - Analyst : Thank you and good morning. I want to check in on the refining guide for Q3. I think it was for utilization in the low to mid-90% range versus the 92% -- or 98% in Q2 and your turnaround expense is flat quarter-over-quarter. The indicator in July, at least should be higher than the Q2 average. So I guess we're a little surprised that utilization might be coming down fairly significantly in Q3. Is there anything to read into that? Or what's going on there?

Question: Matthew Blair - Tudor Pickering Holt & Co Securities LLC - Analyst : Thank you, that's helpful. And then on the renewables business, I'm wondering if it would make sense to seek out a partner here. There's a lot of other examples in the space where your competitors are working with partners to provide help on feedstocks. We saw a deal earlier this week where a partner came in and valued SAF capacity at about $4.50 a gallon, which seems like a pretty attractive number. So is that on the table for PSX bringing in a partner on the renewable diesel side? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JULY 25, 2025 / 4:00PM, PSX.N - Q2 2025 Phillips 66 Earnings Call

Question: Matthew Blair - Tudor Pickering Holt & Co Securities LLC - Analyst : Great. Thank you.