Phillips 66 Reports Fourth-Quarter Earnings of $708 Million or $1.11 Per Share

  Phillips 66 Reports Fourth-Quarter Earnings of $708 Million or $1.11 Per
  Share

             Adjusted earnings of $1.3 billion or $2.06 per share

                          Fourth-Quarter Highlights

  *Achieved 91 percent refining utilization
  *Processed a 67 percent advantaged crude slate in the U.S.
  *Generated operating cash flow of $1.3 billion; $1.7 billion excluding
    working capital
  *Recorded a $564 million impairment charge related to Melaka Refinery
    investment
  *Strengthened balance sheet with $1.0 billion debt reduction
  *Returned more than $400 million of capital to shareholders through
    dividends and share repurchases
  *Received board approval for a 25 percent increase in the annual dividend
    rate and a $1.0 billion expansion of the share repurchase program
  *Announced intent to form a master limited partnership

Business Wire

HOUSTON -- January 30, 2013

Phillips 66 (NYSE: PSX) announces fourth-quarter earnings of $708 million and
adjusted earnings of $1.3 billion. This compares with earnings of $2.0 billion
and adjusted earnings of $379 million during the fourth quarter of 2011.

“Strong realized refining and chemicals margins improved our earnings during
the quarter,” said Greg Garland, Phillips 66 chairman and chief executive
officer. “Our $1 billion debt reduction strengthens our financial flexibility
and resulted in a 25 percent debt-to-capital ratio at the end of the year. We
were pleased to return more than $400 million in capital to shareholders in
the quarter while also funding new investments including the Sand Hills and
Southern Hills pipeline projects. We also announced our intent to contribute a
portion of our transportation assets to form a master limited partnership,
which we expect will highlight the value of our logistics and infrastructure
assets, and serve as an efficient vehicle for funding growth investments.”

“The company’s solid financial performance in 2012 was underpinned by safe,
reliable and efficient operations. Our differentiated portfolio allowed us to
capture a number of market opportunities across the value chain resulting in
significant cash generation and shareholder value creation,” Garland added.

Refining and Marketing (R&M)

R&M fourth-quarter earnings were $497 million, which included a $564 million
impairment of the company’s equity investment in the Melaka Refinery. Within
R&M, Refining recorded earnings of $319 million, and Marketing, Specialties
and Other generated $178 million. R&M adjusted earnings were $1,096 million,
an increase of $927 million from the same period last year.

Refining’s adjusted earnings were $916 million, significantly higher than a
year ago, largely as a result of improved refining margins. The company
benefitted from improved feedstock advantage with stronger Gulf Coast and
Canadian crude differentials, as well as higher gasoline and distillate market
spreads.

During the quarter, 67 percent of the company’s U.S. crude slate was
considered advantaged, up from 57 percent in the fourth quarter of 2011.
Phillips 66 processed 135,000 barrels per day of shale crude in the fourth
quarter, representing a 97 percent increase over the same period last year.
Clean product yield for the fourth quarter was 83 percent, with a distillate
yield of 40 percent. Compared with the fourth quarter of 2011, export volumes
increased by 5 percent to approximately 140,000 barrels per day as a result of
stronger international markets.

Phillips 66’s worldwide refining utilization was 91 percent for the fourth
quarter, down from 94 percent a year ago. This decrease reflects significant
turnaround activity in the Central Corridor and Western/Pacific regions, as
well as adverse impacts from Hurricane Sandy, primarily at the Bayway
Refinery. Pre-tax turnaround expenses were $84 million, excluding the
company’s share of WRB Refining’s turnaround expense totaling $73 million. In
addition, fourth-quarter expenses related to Hurricane Sandy were $56 million
before-tax.

Compared with the third quarter of 2012, worldwide market crack spreads
decreased 33 percent. The impact of this decrease on Refining’s earnings was
mitigated by increased market capture in the fourth quarter due to the
company’s refinery configuration and improved clean product differentials.
Refining’s market capture increased to 95 percent from 79 percent in the third
quarter of 2012.

Marketing, Specialties and Other contributed adjusted earnings of $180 million
during the fourth quarter, an increase of $38 million from the prior year.
Compared to the same period last year, the company benefitted from improved
margins, partially offset by lower volumes and higher environmental and legal
costs.

While international power production and U.S. marketing volumes were down in
the fourth quarter, the company’s lubricants and specialty products businesses
grew volumes by 16 percent and 14 percent, respectively.

Midstream

The Midstream segment recorded earnings of $85 million for the fourth quarter
of 2012. Midstream adjusted earnings were $62 million, compared with $113
million in the prior year. Fourth-quarter earnings related to the company’s
equity investment in DCP Midstream (DCP) were $38 million, $21 million lower
than a year ago. The decrease was due to lower natural gas liquids (NGL)
prices. This decline was partially offset by lower depreciation expense and
improved production mix as DCP increased its NGL production in liquids-rich
basins. Overall, NGL volumes remained flat.

Adjusted earnings from Phillips 66’s other midstream operations were $24
million for the fourth quarter, compared with $54 million during the same
period last year. The decrease was a result of higher taxes and less favorable
inventory impacts.

Chemicals

Fourth-quarter Chemicals earnings were $246 million, an increase of $98
million from the same period last year, primarily attributable to improved
margins. Externally marketed sales volumes increased to a total of 5.6 billion
pounds in the fourth quarter. The majority of this improvement was in Olefins
and Polyolefins (O&P), in which volumes were up 8 percent from the fourth
quarter last year.

Global utilization for O&P was 90 percent during the quarter. Utilization
rates were negatively impacted by downtime at Saudi Polymers Company.
Excluding this impact, worldwide O&P utilization was near capacity during the
quarter, enabling capture of strong olefins chain margins.

Specialties, Aromatics and Styrenics benefitted from improved benzene margins
driven by higher sales prices, partially offset by rising feedstock costs.

Corporate and Other

Corporate and Other costs were $120 million after-tax for the fourth quarter,
including $47 million of net interest expense. Adjusted for special items,
Corporate and Other costs were $92 million after-tax for the quarter.

Financial Position, Liquidity and Return of Capital

During the quarter, Phillips 66 generated $1.3 billion in cash from
operations. Excluding working capital, operating cash flow was $1.7 billion.
The company also funded $894 million in capital expenditures and investments,
including $513 million for its investments in the Sand Hills and Southern
Hills pipeline projects.

In December, the company prepaid $1.0 billion of its amortizing three-year
term loan and ended the year with $7.0 billion of debt and $3.5 billion of
cash and cash equivalents. The company’s debt-to-capital ratio was 25 percent,
improved from 28 percent at the end of the third quarter. The
net-debt-to-capital ratio was 14 percent at the end of the year.

In the fourth quarter, Phillips 66 returned more than $400 million of capital
to shareholders through $157 million in dividend payments and $245 million of
share repurchases. In December, Phillips 66’s board of directors approved a 25
percent increase in the company’s annual dividend rate, raising it to $1.25
per share for 2013. The board of directors also approved an additional $1.0
billion of share repurchases, increasing the total repurchase program to $2.0
billion.

Full-year Financial Results

Phillips 66’s full-year 2012 earnings were $4.1 billion or $6.48 per share.
This compares with $4.8 billion or $7.52 per share for 2011. Full-year
adjusted earnings were $5.4 billion or $8.46 per share in 2012, compared with
$3.6 billion or $5.66 per share in 2011. The company generated strong returns
with a reported return on capital employed (ROCE) of 17 percent and an
adjusted ROCE of 22 percent.

During 2012, the company generated $4.3 billion in cash from operations.
Excluding working capital, operating cash flow was $5.5 billion. Phillips 66
funded $1.7 billion in capital expenditures and investments. In addition, the
company paid $282 million in dividends, and repurchased 7.6 million shares of
common stock totaling $356 million.

Strategic Initiatives

Phillips 66 remains focused on value creation and growth in its Midstream and
Chemicals segments. As announced in December, the company intends to form a
master limited partnership. A registration statement is expected to be filed
with the Securities and Exchange Commission in the second quarter of 2013 and,
subject to final approval by Phillips 66’s board of directors, an initial
public offering is anticipated during the second half of 2013.

DCP continues to execute its long-term growth plan. In December, the first
phase of the Sand Hills pipeline, which extends from Eagle Ford to Mont
Belvieu, was placed in service. The second phase of the project, with
deliveries from the Permian Basin, is expected to be complete in the second
quarter of 2013. Southern Hills is also on schedule with service from the
midcontinent to Mont Belvieu anticipated by mid-2013. DCP expects to increase
the initial projected capacity of Southern Hills from 150,000 barrels per day
to 175,000 barrels per day.

Chevron Phillips Chemical Company (CPChem) continues to advance several
significant growth projects on the U.S. Gulf Coast, a region with access to
advantaged petrochemicals feedstocks, low energy costs and established
marketing networks to service customers worldwide. CPChem’s Sweeny
fractionation expansion is scheduled to be complete in 2013, and its 1-hexene
project is expected to start up during the first half of 2014. Additionally,
CPChem is evaluating an expansion of its normal alpha olefins capacity at the
Cedar Bayou complex in Baytown, Texas, and expects to make a final investment
decision in the third quarter of this year. Construction of the expansion
would be targeted to commence in the first quarter of 2014, and the project
would be completed in the fourth quarter of 2015. The final investment
decision for CPChem’s world-scale ethane cracker and related polyethylene
units is expected later this year, with projected startup in 2017.

Phillips 66 is enhancing Refining returns by increasing access to advantaged
feedstocks, as well as increasing export capabilities at its coastal
refineries. The company continues to increase the supply of advantaged crudes
to its refineries, supported by investments in logistics infrastructure and
third-party commitments. Phillips 66 expects to process more than 200,000
barrels per day of domestic shale crude in 2013, an increase from the 2012
average of 112,000 barrels per day. In January, Phillips 66 entered into a
five-year transportation and logistics contract with Global Partners to move
approximately 90 million barrels of Bakken crude to the Bayway Refinery. The
agreement provides a reliable, long-term alternative to more expensive
Brent-priced crudes. In addition, the first of two chartered Jones Act vessels
was delivered in January, with the second expected to be delivered during the
second quarter of 2013. Both vessels will transport Eagle Ford crude to the
company’s Gulf and East Coast refineries. The initial delivery of Phillips
66’s 2,000 railcars is expected to occur in early February. The railcars will
be used to transport advantaged crude to the company’s refineries on the East
and West Coasts.

Currently, Phillips 66 has the capability to export up to 285,000 barrels per
day of refined products from its domestic refineries. In the first quarter of
2013, the company expects to complete a project at the Ferndale Refinery to
increase export capacity by approximately 20,000 barrels per day. Through
further investment at its facilities on the Gulf and West Coasts, Phillips 66
expects to increase U.S. export capability to 370,000 barrels per day by the
end of 2013.

Phillips 66 has a history of operating excellence, which includes personal and
process safety, environmental performance, reliability and cost management,
and the company is committed to continuously improving in these areas. In
addition to extensive safety and environmental programs, the company has
implemented an initiative called Optimize 66 to capture $200 million in
before-tax savings, as well as additional value from operational process
improvements and efficiencies, by the end of 2013.

Later today, Phillips 66 Chairman and Chief Executive Officer Greg Garland,
Executive Vice President and Chief Financial Officer Greg Maxwell and
Executive Vice President, Commercial, Marketing, Transportation and Business
Development, Tim Taylor will host a webcast at 11 a.m. EST to discuss the
company’s fourth-quarter performance and provide an update on strategic
initiatives. To listen to the conference call and view related presentation
materials, go to www.phillips66.com/investors and click on “Presentations and
Conference Calls.” For detailed supplemental information, go to
http://www.phillips66.com/EN/investor/financial_reports/earnings_reports/Pages/index.aspx.

                                                         
Earnings
                    Millions of Dollars
                    Fourth Quarter                      Twelve Months
                    2012          2011              2012          2011
Refining
and
Marketing
(R&M)
Refining            $ 319             $ 64              $ 3,158           $ 1,533
Marketing,
Specialties      178         1,737           571         2,315 
and Other
Total R&M             497               1,801             3,729             3,848
Midstream             85                113               6                 403
Chemicals             246               148               823               716
Corporate        (120  )      (51   )          (434  )      (192  )
and Other
Phillips 66     $ 708        $ 2,011          $ 4,124      $ 4,775 
                                                                          
Adjusted
Earnings
                    Millions of Dollars
                    Fourth Quarter                      Twelve Months
                    2012          2011              2012          2011
Refining
and
Marketing
(R&M)
Refining            $ 916             $ 27              $ 3,785           $ 1,975
Marketing,
Specialties      180         142             699         689   
and Other
Total R&M             1,096             169               4,484             2,664
Midstream             62                113               286               403
Chemicals             246               148               980               716
Corporate        (92   )      (51   )          (363  )      (192  )
and Other
Phillips 66     $ 1,312      $ 379            $ 5,387      $ 3,591 
                                                                                  

About Phillips 66

Headquartered in Houston, Phillips 66 is an advantaged downstream energy
company with segment-leading Refining and Marketing (R&M), Midstream and
Chemicals businesses. The company has 13,500 employees worldwide. Phillips
66’s R&M operations include 15 refineries with a net crude oil capacity of 2.2
million barrels per day, 10,000 owned or supplied branded marketing outlets,
and 15,000 miles of pipeline systems. The Midstream segment includes Phillips
66’s 50 percent interest in DCP Midstream, LLC, one of the largest natural gas
gatherers and processors in the United States, with 7.2 billion cubic feet per
day of gross natural gas processing capacity. Phillips 66’s Chemicals business
is conducted through its 50 percent interest in Chevron Phillips Chemical
Company LLC, one of the world’s top producers of olefins and polyolefins with
more than 30 billion pounds of net annual chemicals processing capacity across
its product lines. For more information, visit www.phillips66.com  or follow
us on Twitter @Phillips66Co.

 CAUTIONARY STATEMENT FOR THE PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
               PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

This news release contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are intended to
be covered by the safe harbors created thereby. Words and phrases such as “is
anticipated,” “is estimated,” “is expected,” “is planned,” “is scheduled,” “is
targeted,” “believes,” “intends,” “objectives,” “projects,” “strategies” and
similar expressions are used to identify such forward-looking statements.
However, the absence of these words does not mean that a statement is not
forward-looking. Forward-looking statements relating to Phillips 66’s
operations (including joint venture operations) are based on management’s
expectations, estimates and projections about the company, its interests and
the energy industry in general on the date this news release was prepared.
These statements are not guarantees of future performance and involve certain
risks, uncertainties and assumptions that are difficult to predict. Therefore,
actual outcomes and results may differ materially from what is expressed or
forecast in such forward-looking statements. Factors that could cause actual
results or events to differ materially from those described in the
forward-looking statements include fluctuations in crude oil, NGL, and natural
gas prices, refining and marketing margins and margins for our chemicals
business; unexpected changes in costs for constructing, modifying or operating
our facilities; unexpected difficulties in manufacturing, refining or
transporting our products; lack of, or disruptions in, adequate and reliable
transportation for our crude oil, natural gas, NGL, and refined products;
potential liability for remedial actions, including removal and reclamation
obligations, under environmental regulations; potential liability resulting
from litigation; limited access to capital or significantly higher cost of
capital related to illiquidity or uncertainty in the domestic or international
financial markets; and other economic, business, competitive and/or regulatory
factors affecting Phillips 66’s businesses generally as set forth in our
filings with the Securities and Exchange Commission, including our Form 10
Registration Statement. Phillips 66 is under no obligation (and expressly
disclaims any such obligation) to update or alter its forward-looking
statements, whether as a result of new information, future events or
otherwise.

                          DISCLOSURES UNDER RULE 135

A registration statement relating to the common units of the MLP that would be
sold in the offering referred to above is expected to be filed with the
Securities and Exchange Commission, but has not been filed or become
effective. This news release does not constitute an offer to sell, or the
solicitation of an offer to buy, any securities. This news release is being
issued pursuant to, and in accordance with, Rule 135 under the Securities Act
of 1933.

Use of Non-GAAP Financial Information -- This press release includes the terms
adjusted earnings, adjusted earnings per share, operating cash flow excluding
working capital, and net-debt-to-capital ratio. These are non-GAAP financial
measures. Adjusted earnings, adjusted earnings per share, and operating cash
flow excluding working capital are included to help facilitate comparisons of
company operating performance across periods. The net-debt-to-capital ratio
reduces debt and capital by the amount of cash and cash equivalents shown on
the balance sheet for the reflected period, and is presented to reflect the
net results if the company elected to utilize its cash balances to reduce debt
in the future.

References in the release to earnings refer to net income attributable to
Phillips 66.

                                                                
Reconciliation of
Earnings to
Adjusted Earnings
                                                                                 
                          Millions of Dollars
                          Except as Indicated
                          2012                                2011
                          4Q            Year              4Q             Year
Consolidated
Earnings (loss)           $ 708             $ 4,124           $ 2,011            $ 4,775
Adjustments:
Net (gain) loss             -                 (106  )           (1,660 )           (1,545 )
on asset sales
Impairments                 580               979               -                  318
Canceled projects           -                 -                 28                 28
Severance                   -                 -                 -                  15
accruals
Pending claims              (23   )           34                -                  -
and settlements
Premium on early            -                 89                -                  -
debt retirement
Repositioning               12                55                -                  -
costs
Repositioning tax           -                 177               -                  -
impacts
Hurricane-related      35          35              -            -      
costs
Adjusted earnings     $ 1,312      $ 5,387          $ 379         $ 3,591  
                                                                                 
Earnings per
share of common           $ 1.11            $ 6.48            $ 3.17             $ 7.52
stock (dollars)*
                                                                                 
Adjusted earnings
per share of          $ 2.06       $ 8.46           $ 0.60        $ 5.66   
common stock
(dollars)*
* Assumes the dilutive securities outstanding at April, 30 2012 were also outstanding for
each of periods prior to the separation.
                                                                                 
R&M
Earnings (loss)           $ 497             $ 3,729           $ 1,801            $ 3,848
Adjustments:
Net (gain) loss             -                 (106  )           (1,660 )           (1,545 )
on asset sales
Impairments                 564               633               -                  318
Canceled projects           -                 -                 28                 28
Severance                   -                 -                 -                  15
accruals
Pending claims              -                 57                -                  -
and settlements
Repositioning tax           -                 136               -                  -
impacts
Hurricane-related      35          35              -            -      
costs
Adjusted earnings     $ 1,096      $ 4,484          $ 169         $ 2,664  
                                                                                 
Refining
Earnings (loss)           $ 319             $ 3,158           $ 64               $ 1,533
Adjustments:
Net (gain) loss             -                 (104  )           (65    )           81
on asset sales
Impairments                 564               606               -                  318
Canceled projects           -                 -                 28                 28
Severance                   -                 -                 -                  15
accruals
Pending claims              -                 19                -                  -
and settlements
Repositioning tax           -                 73                -                  -
impacts
Hurricane-related      33          33              -            -      
costs
Adjusted earnings     $ 916        $ 3,785          $ 27          $ 1,975  
                                                                                 
Marketing,
Specialties and
Other
Earnings (loss)           $ 178             $ 571             $ 1,737            $ 2,315
Adjustments:
Net (gain) loss             -                 (2    )           (1,595 )           (1,626 )
on asset sales
Impairments                 -                 27                -                  -
Pending claims              -                 38                -                  -
and settlements
Repositioning tax           -                 63                -                  -
impacts
Hurricane-related      2           2               -            -      
costs
Adjusted earnings     $ 180        $ 699            $ 142         $ 689    
                                                                                 
Midstream
Earnings (loss)           $ 85              $ 6               $ 113              $ 403
Adjustments:
Impairments                 -                 303               -                  -
Pending claims         (23   )      (23   )          -            -      
and settlements
Adjusted earnings     $ 62         $ 286            $ 113         $ 403    
                                                                                 
Chemicals
Earnings (loss)           $ 246             $ 823             $ 148              $ 716
Adjustments:
Impairments                 -                 27              $ -                $ -
Premium on early            -                 89                -                  -
debt retirement
Repositioning tax      -           41              -            -      
impacts
Adjusted earnings     $ 246        $ 980            $ 148         $ 716    
                                                                                 
Corporate and
Other
Earnings (loss)           $ (120  )         $ (434  )         $ (51    )         $ (192   )
Adjustments:
Impairments                 16                16                -                  -
Repositioning          12          55              -            -      
costs
Adjusted earnings     $ (92   )     $ (363  )         $ (51    )     $ (192   )
                                                                                 

                                             
                                                  Millions of Dollars
                                                  2012
                                                  4Q             Year
Cash Flows from Operating Activities                            
                                                                     
Net Cash Provided by Operating                    $ 1,703            $ 5,452
Activities, excluding working capital
Working capital adjustments
Decrease (increase) in accounts and notes           534                (143  )
receivable
Decrease (increase) in inventories                  2,308              55
Decrease (increase) in prepaid expenses             218                (48   )
and other current assets
Increase (decrease) in accounts payable             (2,897 )           (985  )
Increase (decrease) in taxes and other             (561   )      (35   )
accruals
Net Cash Provided by Operating Activities         $ 1,305       $ 4,296 
                                                                             

Contact:

Phillips 66
Alissa Hicks (media), 832-765-1014
alissa.k.hicks@p66.com
or
Rosy Zuklic (investors), 832-765-2297
rosy.zuklic@p66.com
 
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