Phillips66's fourth-quarter earnings down on lower refining margins

Phillips 66 reported fourth-quarter 2022 earnings of $1.9 billion, compared with earnings of $5.4 billion in third-quarter 2022. Excluding special items of $15 million, the company had adjusted earnings of $1.9 billion for the fourth quarter, compared with third-quarter 2022 adjusted earnings of $3.1 billion.

Adjusted pre-tax income for refining was $1.6 billion in the fourth quarter, compared with adjusted pre-tax income of $2.9 billion in the third quarter. The decrease was due primarily to lower realized margins. Realized margins declined to $19.73/bbl in the fourth quarter from $26.87/bbl in the third quarter mainly due to lower market crack spreads and clean product differentials. The global market crack spread, excluding RIN costs, decreased to $23.58/bbl in the fourth quarter from $28.18/bbl in the third quarter. Pre-tax turnaround costs for the fourth quarter were $236 million. Crude utilization rate was 91% and clean product yield was 86%.

Midstream fourth-quarter 2022 pre-tax income was $656 million, compared with $3.6 billion in third-quarter 2022. Midstream results in the fourth quarter included restructuring costs of $18 million related to the integration of DCP Midstream, LP and its general partner entities (collectively DCP Midstream), while third-quarter included a net gain of $3 billion related to the consolidation of DCP Midstream, DCP Sand Hills Pipeline LLC, and DCP Southern Hills Pipeline LLC, and the transfer of interest in Gray Oak Pipeline LLC, as a result of the merger of DCP Midstream LLC, and Gray Oak Holdings LLC, effective Aug. 17, 2022.

Transportation fourth-quarter adjusted pre-tax income was $237 million, compared with adjusted pre-tax income of $229 million in the third quarter. NGL and Other adjusted pre-tax income was $448 million in the fourth quarter, compared with adjusted pre-tax income of $412 million in the third quarter. The increase was mainly driven by higher fractionation volumes, as well as a full quarter of consolidated results of DCP Midstream, DCP Sand Hills Pipeline LLC, and DCP Southern Hills Pipeline LLC.

The chemicals segment reflects Phillips 66’s equity investment in Chevron Phillips Chemical Co. (CPChem). Chemicals fourth-quarter 2022 reported and adjusted pre-tax income was $52 million, compared with $135 million in third-quarter 2022. This decrease was mainly due to lower margins and volumes, partially offset by decreased utilities costs and the impact of third-quarter legal accruals. Global olefins and polyolefins utilization was 83% for the quarter.

Transportation fourth-quarter adjusted pre-tax income was $237 million, compared with adjusted pre-tax income of $229 million in the third quarter.

NGL and Other adjusted pre-tax income was $448 million in the fourth quarter, compared with adjusted pre-tax income of $412 million in the third quarter. The increase was mainly driven by higher fractionation volumes, as well as a full quarter of consolidated results of DCP Midstream, DCP Sand Hills Pipeline, LLC, and DCP Southern Hills Pipeline, LLC.

In the fourth quarter, the fair value of the company’s investment in NOVONIX, Ltd., decreased by $11 million compared with a $33 million decrease in the third quarter.