Weaker year-over-year margins and lower utilization rates contributed to the quarterly loss. For the quarter, revenue fell 41% to $16.299 billion.
Third-quarter 2020 segment results are summarized below.
Refining: The segment reported a 3Q adjusted loss of $1.903 billion.
Marketing & Specialties: Adjusted third-quarter profit fell to $415 million from $498 million in 3Q19.
EARNINGS & GROWTH ANALYSIS
Phillips 66 does not provide formal guidance; to reflect current energy market challenges. In addition, in the Refining segment, the company will defer or cancel certain discretionary projects and reduce operating and administrative costs by $500 million this year. It also temporarily suspended share repurchases on March 18.
Phillips holds a majority stake in its MLP, Phillips 66 Partners LP (PSXP), which had its IPO in 2013. PSX also has the opportunity to drop down additional midstream assets into the MLP, which it did on September 22, 2017, when it sold $2.4 billion of assets to PSXP. Management has thus far generated $3.7 billion in cash proceeds from PSXP.
FINANCIAL STRENGTH & DIVIDEND
Over the last year, PSX has reduced its outstanding share count by 3%.
PSX remains focused on balanced capital allocation. It continues to invest for growth, but has also returned substantial capital to shareholders. PSX returned $3.2 billion to shareholders through dividends and stock buybacks in 2019 and $6.1 billion in 2018. It returned $393 million to shareholders in 3Q20.
On May 8, 2019, PSX raised its quarterly dividend by 12.5% to $0.90, or $3.60 annually.
Phillips 66 secured a new $1 billion, 364-day term loan facility in 1Q20, which was fully drawn as of March 31, 2020. On April 6, Phillips 66 increased the size of the facility to $2 billion, with $1 billion remaining undrawn. The company also issued $1 billion of senior unsecured notes on April 9. Phillips 66 Partners has a $750 million revolving credit facility.
MANAGEMENT & RISKS
Greg Garland is PSX’s chairman and CEO.
PSX maintains a 50% interest in the CPChem JV following its separation from ConocoPhillips. Phillips 66 was formed through a spinoff from ConocoPhillips on May 1, 2012.
PSX has incurred and will continue to incur substantial costs to comply with environmental laws and regulations. This could weigh on earnings if the company is unable to offset these costs with higher selling prices.
Phillips 66 is a downstream energy company with assets in four segments: Refining, Marketing, Chemicals, and Midstream. Its refining and marketing operations include 14 refineries.
Phillips 66 shares have traded between $40.04 and $119.82.
On November 6, BUY-rated PSX closed at $46.68, down $1.51.