Phillips 66 Profit Rises, $1 Billion Share Buyback Planned

Phillips 66 (PSX), which became the largest U.S. independent refiner after its spinoff from ConocoPhillips earlier this year, said second-quarter profit rose 13 percent on higher fuel margins and announced a plan to buy back shares valued at $1 billion.

Net income rose to $1.18 billion, or $1.86 a share, from $1.04 billion, or $1.64, a year earlier, Houston-based Phillips 66 said in a statement today. Profit excluding the sale of the Trainer refinery, debt retirement, and other one-time costs was $2.23 a share, 55 cents more than the average of 14 analysts’ estimates compiled by Bloomberg.

U.S. refiners have seen profit reach the highest point since 2007 as new crude production in Texas and the Midwest has reduced oil costs. The difference between crude and the price at which refiners can sell fuel averaged $29.05 a barrel in the April-to-June period, the most for a second quarter, according to data compiled by Bloomberg. Phillips 66 plans to keep its Alliance refinery in Belle Chasse, Louisiana in anticipation of less expensive Gulf Coast crude.

“We’re off to a solid start, running well in a positive margin environment,” Greg Garland, chairman and chief executive officer, said in the statement. The board has approved the repurchase of as much as $1 billion of the company’s shares. The company didn’t give a timeframe for the buybacks.

The emerging advantage of U.S. crude supplies will help Phillips 66 return cash to shareholders and may draw new investors to boost the stock price, Paul Cheng, an analyst at Barclays Plc in New York, said in a June 30 note to clients. Billionaire Warren Buffett said on July 13 that Berkshire Hathaway Inc. (BRK/A) had invested in Phillips 66.

Pipeline Growth

The company was still part of ConocoPhillips during the first month of the quarter before its April 30 spinoff. The new company reported earnings in its refining, pipeline and chemicals businesses for the full three months that compare to what it would have earned in the year-ago quarter on the same basis.

Phillips 66 has stakes in 15 operating refineries as well as a chemical joint venture with Chevron Corp. (CVX) and a pipeline unit with Spectra Energy Corp. (SE) Garland has touted future growth from pipelines and chemicals as he seeks to reduce less profitable refining holdings.

ConocoPhillips (COP) last week said its quarterly profit fell 33 percent because of the loss of income from the refining unit.

The earnings were announced before regular trading began on U.S. markets. Phillips 66 rose 1.8 percent to $38.27 at the close in New York. The shares have 11 buy ratings and six holds from analysts.

Independent refiners process crude but don’t explore for or produce oil and natural gas. Phillips 66 is the largest independent U.S. refiner by sales and market value.

To contact the reporter on this story: Bradley Olson in Houston at bradleyolson@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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