Phillips 66 Quarter Profit Doubles on Refining, Chemicals

Phillips 66, the largest U.S. independent refiner by sales, said first-quarter profit more than doubled as cheap U.S. oil and natural gas widened margins for the company’s refineries and chemicals plants.

Net income rose to $1.41 billion, or $2.23 a share, from $636 million, or $1, a year earlier, the Houston-based company said today in a statement. Excluding tax costs and the sale of a graphite business, per-share profit exceeded the $1.89 average of 16 analysts’ estimates compiled by Bloomberg. Sales fell 9.9 percent to $41.3 billion.

Phillips 66, which has the capacity to refine 2.2 million barrels of oil a day, was spun off from ConocoPhillips last year as that company sought to become a pure exploration and production business. Chairman and Chief Executive Officer Greg Garland has said he’s focused on chemicals, pipelines and natural gas processing to reduce the volatility that comes with refining earnings.

“One advantage Phillips has now compared to other refiners is a sizable chemicals business,” Brian Youngberg, an analyst with Edward Jones in St. Louis who rates the company a hold and doesn’t own shares, said in a phone interview today. “Chemicals and refining continue to lead strong earnings growth for the company.”

Phillips 66 dropped 2.1 percent to $59.67 at the close in New York. The shares, which have 13 buy and eight hold ratings from analysts, have risen 12 percent this year.

WTI Margin

The margin between the cost of West Texas Intermediate oil and the price at which refiners sell fuel rose 20 percent to an average of $32.689 a barrel in the January-to-March period, according to data compiled by Bloomberg.

The company said 68 percent of the crude used in its refineries during the quarter sold at prices cheaper than the global benchmark. Low-cost U.S. natural gas and other feedstocks helped the chemicals unit.

To take advantage of added output, Phillips 66 is developing a gas processing facility in Texas that will handle 100,000 barrels a day and may be operating in the second half of 2015. It also took delivery of 400 rail cars during the first quarter to help bring more low-cost crude to refineries on the East and West Coast.

Joint Ventures

The company is adding to its ability to export refined products, after sending 150,000 barrels a day abroad in the first quarter. Phillips 66 expects to increase its export capacity to 370,000 barrels a day by year end.

Phillips 66 has stakes in 15 operating refineries as well as a chemical joint venture with Chevron Corp. and a pipeline unit with Spectra Energy Corp.

The company, whose third-largest shareholder is Warren Buffett’s Berkshire Hathaway Inc., plans to raise as much as $300 million in an initial public offering in the second half of the year for a minority interest in some of its pipeline and logistics assets.

Independent refiners don’t own exploration or production assets.

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