Financial Data and Key Metrics Changes - Second quarter reported earnings were $877 million or $2.15 per share, while adjusted earnings were $973 million or $2.38 per share, reflecting a significant recovery from a prior quarter's adjusted loss of $368 million [13][15] - Operating cash flow generated was $845 million, with cash flow excluding working capital at $1.9 billion [14][16] - Net debt to capital ratio stood at 41%, influenced by the acquisition of Coastal Bend assets for $2.2 billion [14] Business Line Data and Key Metrics Changes - Refining assets operated at 98% utilization, the highest since 2018, with clean product yield exceeding 86% [5][7] - Midstream generated adjusted EBITDA of approximately $1 billion, on track to meet the $4.5 billion annual EBITDA target by 2027 [5][10] - Marketing and Specialties reported its strongest quarter since 2022, contributing to a robust capital allocation framework [6][15] Market Data and Key Metrics Changes - Year-to-date market capture improved by 5% compared to the first half of the previous year, reaching 99% in the second quarter [8][15] - The second quarter PSX market indicator was just over $11 per barrel, with an estimated EBITDA increase of approximately $170 million for every dollar per barrel increase [8][15] Company Strategy and Development Direction - The company remains focused on enhancing refining competitiveness, driving organic growth in midstream, reducing debt, and returning over 50% of net operating cash flow to shareholders [11][12] - Strategic investments include the acquisition of Coastal Bend and capacity expansion projects aimed at growing Midstream EBITDA [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capture market opportunities and improve performance despite external challenges [4][22] - The outlook for refining remains positive, with expectations of strong margins driven by tight distillate markets and seasonal demand [90] Other Important Information - The company plans to reduce turnaround expenses by $100 million for the full year, reflecting improved execution and planning [18][110] - New board members have been onboarded to enhance strategic discussions and shareholder value creation [12] Q&A Session Summary Question: Strategy after recent shareholder engagement - Management remains committed to the integrated company strategy, with ongoing evaluations of strategic alternatives to maximize shareholder value [21][24] Question: Debt levels and mid-cycle conditions - Current debt levels are viewed as manageable, with plans to reduce debt through operational cash flow and asset dispositions [31][62] Question: Refining performance drivers - The significant quarter-over-quarter improvement in refining was attributed to higher utilization rates and disciplined operational focus [36][38] Question: Chemicals and renewable fuels outlook - Chemicals faced challenges due to tariffs, but long-term outlook remains positive; renewable fuels are running at reduced rates due to weak margins [70][74] Question: Midstream growth and integration - The company is confident in its midstream growth outlook, supported by contracted third-party volumes and ongoing integration efforts [82][83]

Production Strategy - Phillips 66 is maximizing diesel production to capitalize on strong demand [1] - The company would consider investing in projects that enhance refineries' flexibility to produce more diesel [1]

Financial Performance - The company delivered $392 million in adjusted pre-tax income [2] - Refining utilization rates reached the highest level since 2018 [2] - The company achieved the lowest cost per barrel since 2021 [2] Operational Efficiency - The company maximized market capture [2] - Record yield in clean products was achieved in the first half of the year [2] - The company is putting more crude through refineries and obtaining cleaner, higher-value products [3]

Financial Performance - Q2 2025 - Adjusted earnings reached $973 million, or $2.38 per share[16] - Operating cash flow totaled $845 million[16] - Shareholder distributions amounted to $906 million[17] - Capital expenditures and investments were $587 million[17] - Net debt-to-capital ratio stood at 41%[17] Segment Performance - Q2 2025 - Midstream adjusted EBITDA was $1 billion[11] - Refining adjusted pre-tax income was $392 million[20] - Marketing & Specialties adjusted pre-tax income was $660 million[20] - Renewable Fuels had an adjusted pre-tax loss of $133 million[20] Refining Metrics - Q2 2025 - Refining crude utilization was 98%[43] - Clean product yield was 86%[43] - Market capture was 99%[43] - Refining adjusted controllable costs were $5.46 per barrel[43] Outlook - Q3 2025 - Global Olefins & Polyolefins utilization is projected in the mid-90% range[25] - Refining crude utilization is expected in the low to mid-90% range[25] - Refining turnaround expense is estimated between $50 million and $60 million[25] - Corporate & Other costs are projected between $350 million and $370 million[25]

Core Viewpoint - Phillips 66 reported quarterly earnings of $2.38 per share, exceeding the Zacks Consensus Estimate of $1.66 per share, and showing an earnings surprise of +43.37% compared to the previous year’s earnings of $2.31 per share [1][2] Financial Performance - The company achieved revenues of $33.52 billion for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 9.75%, although this represents a decline from year-ago revenues of $38.91 billion [2] - Over the last four quarters, Phillips 66 has exceeded consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance - Phillips 66 shares have increased approximately 9.1% since the beginning of the year, outperforming the S&P 500's gain of 8.2% [3] Future Outlook - The company's earnings outlook will be crucial for investors, including current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the next quarter is $2.29 on revenues of $30.19 billion, and for the current fiscal year, it is $4.44 on revenues of $122.67 billion [7] Industry Context - The Oil and Gas - Refining and Marketing industry, to which Phillips 66 belongs, is currently ranked in the bottom 26% of over 250 Zacks industries, indicating potential challenges ahead [8]

Financial Performance - Philip 66 earnings reached $238 per share [1] - Revenue totaled $335 billion, exceeding expectations [1] - Realized margin per barrel increased by approximately 124% [2] - Adjusted pre-tax income from refining was $392 million [4] - Midstream adjusted pre-tax earnings amounted to $731 million [6] - Marketing and specialties business delivered $660 million of pre-tax net income [7] Operational Efficiency - Refining achieved its highest utilization rates since 2018 [1][4] - Lowest cost per barrel since 2021 was achieved [1][4] - Record yield in clean products was achieved in the first half of the year [4] Strategic Decisions - The company is winding down its Los Angeles refinery due to challenging inefficiencies and lack of profitability, incurring $239 million of pre-tax accelerated depreciation [1][18][20] - Philip 66 is focused on maximizing shareholder value and believes in its integrated structure [8][10] - Three new board members were added, two nominated by Elliot and one nominated by Philip 66 [10][11]

[Financial Summary](index=1&type=section&id=Financial%20Summary) [Consolidated Income Statement](index=1&type=section&id=Consolidated%20Income%20Statement) Phillips 66 reported Q2 2025 net income of $908 million, down from Q2 2024, due to lower sales and equity earnings Consolidated Income Statement Highlights (Millions of Dollars) | Financial Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | Sales and other operating revenues | 33,323 | 38,129 | 63,753 | 143,153 | | Total Revenues and Other Income | 33,522 | 38,911 | 65,248 | 145,496 | | Income before income taxes | 1,120 | 1,311 | 1,768 | 2,675 | | Net Income | 908 | 1,020 | 1,434 | 2,175 | | Net Income Attributable to Phillips 66 | 877 | 1,015 | 1,364 | 2,117 | Earnings Per Share (Dollars) | EPS Type | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Basic | $2.15 | $2.39 | | Diluted | $2.15 | $2.38 | [Special Items](index=5&type=section&id=Special%20Items) Q2 2025 recorded a net pre-tax special charge of $167 million, mainly from derivatives and legal accruals, contrasting with a YTD gain of $897 million - Total pre-tax special items for Q2 2025 were a charge of **($167) million**, while YTD 2025 special items were a gain of **$897 million**[12](index=12&type=chunk) - The Marketing and Specialties segment recorded a **$928 million** YTD gain from asset dispositions, including the sale of its interest in Coop Mineraloel AG, but also recognized an **$89 million** unrealized loss from foreign currency derivatives in Q2[12](index=12&type=chunk) - The Midstream segment had a **$68 million** gain on an asset disposition in Q1 2025[12](index=12&type=chunk)[13](index=13&type=chunk) [Segment Performance](index=3&type=section&id=Segment%20Performance) [Overall Segment Performance](index=3&type=section&id=Overall%20Segment%20Performance) Midstream and Marketing & Specialties drove Q2 2025 earnings, with Refining recovering significantly and Chemicals declining, leading to $2,501 million in adjusted EBITDA Adjusted Income (Loss) Before Income Taxes by Segment (Millions of Dollars) | Segment | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Midstream | 731 | 683 | 753 | | Chemicals | 20 | 113 | 222 | | Refining | 392 | (937) | 302 | | Marketing and Specialties | 660 | 265 | 415 | | Renewable Fuels | (133) | (185) | (55) | Adjusted EBITDA by Segment (Millions of Dollars) | Segment | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Midstream | 972 | 885 | 971 | | Chemicals | 148 | 244 | 348 | | Refining | 867 | (452) | 531 | | Marketing and Specialties | 718 | 315 | 484 | | Renewable Fuels | (110) | (162) | (43) | [Midstream](index=9&type=section&id=Midstream) Midstream reported Q2 2025 income before taxes of $731 million and adjusted EBITDA of $972 million, driven by NGLs and increased transportation volumes Midstream Financials (Millions of Dollars) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Income before Income Taxes | 731 | 751 | 767 | | Adjusted EBITDA | 972 | 885 | 971 | Midstream Operating Volumes | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Pipelines (MB/D) | 3,093 | 2,893 | 3,059 | | NGL Production (MB/D) | 456 | 437 | 437 | | NGL Fractionated (MB/D) | 883 | 748 | 744 | [Chemicals](index=12&type=section&id=Chemicals) Chemicals saw a significant Q2 2025 earnings drop to $20 million income before taxes, driven by lower margins and decreased Olefins and Polyolefins capacity utilization to 92% Chemicals Financials (Millions of Dollars) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Income before Income Taxes | 20 | 113 | 222 | | Adjusted EBITDA | 148 | 244 | 348 | - Olefins and Polyolefins capacity utilization was **92%** in Q2 2025, down from **98%** in Q2 2024[31](index=31&type=chunk) - The Ethylene to High Density Polyethylene chain cash margin decreased to **7.4 cents/lb** in Q2 2025 from **18.3 cents/lb** in Q2 2024[31](index=31&type=chunk) [Refining](index=14&type=section&id=Refining) Refining achieved a strong Q2 2025 turnaround with $359 million income before taxes, driven by higher worldwide realized margins of $11.25/BBL and 98% crude oil capacity utilization Refining Financials (Millions of Dollars) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Income (Loss) before Income Taxes | 359 | (937) | 302 | | Adjusted EBITDA | 867 | (452) | 531 | Refining Margins and Utilization | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Worldwide Realized Refining Margins ($/BBL) | 11.25 | 6.81 | 10.01 | | Worldwide Crude Oil Capacity Utilization (%) | 98% | 80% | 98% | - Total turnaround expenses dropped to **$53 million** in Q2 2025 from **$270 million** in Q1 2025, contributing to improved profitability[36](index=36&type=chunk) [Marketing and Specialties](index=19&type=section&id=Marketing%20and%20Specialties) Marketing and Specialties reported increased Q2 2025 income before taxes of $571 million, driven by strong realized fuel margins, particularly in the U.S. at $2.83/BBL, and higher sales volumes Marketing and Specialties Financials (Millions of Dollars) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Income (Loss) before Income Taxes | 571 | 1,282 | 415 | | Adjusted EBITDA | 718 | 315 | 484 | Realized Marketing Fuel Margins ($/BBL) | Region | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | U.S. | 2.83 | 1.36 | 1.70 | | International | 7.11 | 4.87 | 5.87 | [Renewable Fuels](index=21&type=section&id=Renewable%20Fuels) Renewable Fuels continued to incur a Q2 2025 pre-tax loss of $133 million, an increased loss year-over-year but an improvement from Q1, with 40 MB/D produced and 71 MB/D sold Renewable Fuels Financials (Millions of Dollars) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Income (Loss) before Income Taxes | (133) | (185) | (55) | | Adjusted EBITDA | (110) | (162) | (43) | Renewable Fuels Operating Statistics (MB/D) | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :--- | :--- | :--- | :--- | | Total Renewable Fuels Produced | 40 | 44 | 31 | | Total Renewable Fuel Sales | 71 | 63 | 45 | [Corporate and Other](index=22&type=section&id=Corporate%20and%20Other) Corporate and Other reported a Q2 2025 pre-tax loss of $428 million, primarily from net interest expense and corporate overhead, with the debt-to-capital ratio increasing to 42% Corporate and Other Loss Detail (Millions of Dollars) | Component | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net interest expense | (230) | (200) | | Corporate overhead and other | (196) | (133) | | **Total Loss before Income Taxes** | **(428)** | **(340)** | Capital Structure | Metric | End of Q2 2025 | End of Q2 2024 | | :--- | :--- | :--- | | Total Debt (Millions) | $20,935 | $19,960 | | Total Equity (Millions) | $28,626 | $30,507 | | Debt-to-Capital Ratio | 42% | 40% | [Cash Flow and Capital Program](index=7&type=section&id=Cash%20Flow%20and%20Capital%20Program) [Cash Flow Information](index=7&type=section&id=Cash%20Flow%20Information) Net cash from operating activities significantly decreased to $1,032 million in H1 2025 due to working capital, while investing activities used $1,143 million, including a $2,220 million acquisition, and financing used $523 million Summary of Cash Flows (YTD, Millions of Dollars) | Cash Flow Activity | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | 1,032 | 4,191 | | Net Cash Used in Investing Activities | (1,143) | (2,463) | | Net Cash Used in Financing Activities | (523) | (3,305) | | **Net Change in Cash** | **(594)** | **(1,585)** | - Investing activities in YTD 2025 included **$1,010 million** in capital expenditures and a significant **$2,220 million** acquisition, offset by **$2,031 million** in proceeds from asset dispositions[18](index=18&type=chunk) - Financing activities in YTD 2025 included **$3,499 million** in debt issuance, **$2,375 million** in debt repayment, **$666 million** in stock repurchases, and **$956 million** in dividend payments[18](index=18&type=chunk) [Capital Program](index=8&type=section&id=Capital%20Program) Consolidated capital expenditures and investments for H1 2025 totaled $1,010 million, with $608 million for growth and $402 million for sustaining capital, primarily allocated to Midstream Consolidated Capital Expenditures by Type (YTD 2025, Millions of Dollars) | Category | Amount | | :--- | :--- | | Growth | $608 | | Sustaining | $402 | | **Total** | **$1,010** | Consolidated Capital Expenditures by Segment (YTD 2025, Millions of Dollars) | Segment | Amount | | :--- | :--- | | Midstream | $600 | | Refining | $324 | | Marketing and Specialties | $49 | | Renewable Fuels | $18 | | Corporate and Other | $19 | | **Total** | **$1,010** | [Non-GAAP Reconciliations](index=24&type=section&id=Non-GAAP%20Reconciliations) [Reconciliation to Adjusted EBITDA](index=24&type=section&id=Reconciliation%20to%20Adjusted%20EBITDA) This section reconciles Q2 2025 GAAP net income of $908 million to Phillips 66 Adjusted EBITDA of $2,501 million through adjustments for taxes, interest, depreciation, and special items Reconciliation of Net Income to Adjusted EBITDA (Q2 2025, Millions of Dollars) | Line Item | Amount | | :--- | :--- | | Net income | 908 | | Plus: Income tax expense | 212 | | Plus: Net interest expense | 230 | | Plus: Depreciation and amortization | 816 | | **Phillips 66 EBITDA** | **2,166** | | Plus: Special Item Adjustments (pre-tax) | 167 | | Plus: Other Adjustments | 168 | | **Phillips 66 Adjusted EBITDA** | **2,501** | [Realized Margin Reconciliations](index=26&type=section&id=Realized%20Margin%20Reconciliations) This section details reconciliations for non-GAAP Realized Refining and Marketing Fuel Margins, bridging GAAP income before taxes to these metrics by adjusting for various operating costs - For the Refining segment, worldwide income before taxes of **$359 million** in Q2 2025 was reconciled to a realized refining margin of **$1,968 million**[56](index=56&type=chunk) - For the Marketing segment, U.S. income before taxes of **$429 million** in Q2 2025 was reconciled to a realized marketing fuel margin of **$523 million**[60](index=60&type=chunk) [Adjusted Effective Tax Rate Reconciliation](index=31&type=section&id=Adjusted%20Effective%20Tax%20Rate%20Reconciliation) This section reconciles the Q2 2025 GAAP effective tax rate of 19.0% to an adjusted effective tax rate of 22.0% by removing special item tax effects, providing insight into recurring operations Effective Tax Rate Reconciliation (Q2 2025) | Metric | Rate | | :--- | :--- | | Effective tax rate (%) | 18.8% | | Adjusted effective tax rate (%) | 22.0% |

Market Overview - The market capitalization of major US stocks shows varied performance, with Oracle at 762.30 billion, Mastercard at 321.36 billion, and Visa at 770.15 billion, reflecting increases of +0.66%, +0.86%, and +0.68% respectively [3] - Exxon Mobil's market cap is 679.53 billion, with a slight decrease of -0.98%, while Johnson & Johnson and Netflix show minor changes of -0.08% and -0.05% respectively [3] - Companies like Wells Fargo and Cisco have market caps of 270.15 billion and 279.59 billion, with respective increases of +0.98% and -0.58% [3] Notable Stock Movements - T-Mobile US Inc experienced a significant increase of +6.20%, reaching a market cap of 272.19 billion [3] - General Electric and Coca-Cola saw market caps of 285.05 billion and 298.76 billion, with increases of +0.37% and +0.91% respectively [3] - Companies like Disney and Goldman Sachs have market caps of 229.06 billion and 221.80 billion, with slight changes of +0.01% and -0.60% [3] Sector Performance - The technology sector shows mixed results, with Intel at 991.05 billion, down -3.28%, while AMD increased by +2.46% to 254.92 billion [5] - The consumer goods sector is represented by companies like Procter & Gamble and Coca-Cola, with market caps of 371.68 billion and 298.76 billion, showing slight increases [3][4] - The energy sector, represented by Exxon Mobil and Chevron, shows varied performance, with Exxon down -0.98% and Chevron up +0.66% [3] Summary of Key Companies - Oracle's market cap stands at 762.30 billion, reflecting a positive trend [3] - Mastercard and Visa show strong performance with market caps of 321.36 billion and 770.15 billion, both increasing [3] - Companies like Pfizer and Comcast have market caps of 1579.81 billion and 1332.00 billion, with Pfizer showing minimal change and Comcast down -3.16% [4][5]

Core Insights - Phillips 66 (PSX) is expected to report quarterly earnings of $1.63 per share, a decline of 29.4% year-over-year, with revenues forecasted at $30.54 billion, down 21.5% from the previous year [1] Earnings Estimates - Over the last 30 days, the consensus EPS estimate has been revised upward by 4.7%, indicating analysts' reassessment of their initial forecasts [2] - Changes in earnings estimates are crucial for predicting investor reactions, as empirical studies show a strong correlation between earnings estimate revisions and short-term stock performance [3] Revenue and Key Metrics - Analysts predict 'Sales and other operating revenues' to be $30.66 billion, reflecting a year-over-year decrease of 19.6% [5] - The estimated 'Equity in earnings of affiliates' is $316.23 million, indicating a decline of 35.1% compared to the prior year [5] - 'Revenues and Other Income - Other income' is projected to reach $41.52 million, down 28.4% from the year-ago quarter [6] - 'Revenues - Total Refining' is expected to be $15.63 billion, showing a significant increase of 69.9% year-over-year [6] Refining Operations - 'Refining operations - Gulf Coast - Crude oil processed' is forecasted at 495.27 thousand barrels per day, down from 507.00 thousand barrels per day in the same quarter last year [7] - 'Refining operations - Atlantic Basin/Europe - Crude oil capacity' is estimated to remain stable at 537.00 thousand barrels per day, unchanged from the previous year [8] - 'Refining operations - Worldwide - Crude oil processed' is expected to be 1,751.92 thousand barrels per day, down from 1,802.00 thousand barrels per day in the same quarter last year [9] - 'Refining operations - Atlantic Basin/Europe - Capacity utilization' is projected at 94.6%, down from 98.0% year-over-year [9] - 'Refining operations - Atlantic Basin/Europe - Crude oil processed' is expected to be 508.20 thousand barrels per day, down from 527.00 thousand barrels per day in the previous year [10] - 'Refining operations - West Coast - Crude oil processed' is forecasted at 228.29 thousand barrels per day, slightly up from 227.00 thousand barrels per day last year [10] - 'Refining operations - West Coast - Capacity' is expected to remain at 244.00 thousand barrels per day, unchanged from the previous year [11] - 'Refining operations - West Coast - Capacity utilization' is projected at 93.6%, slightly up from 93.0% in the same quarter last year [12] Stock Performance - Over the past month, Phillips 66 shares have returned +6.9%, outperforming the Zacks S&P 500 composite's +5.7% change [13]

Financial Performance - Phillips 66 is expected to report fiscal Q2 earnings of $1.75 per share and sales of $32.1 billion, reflecting a 26% decrease in earnings and a 16% drop in sales compared to last year's figures of $2.38 per share and $38.1 billion [2] - In Q1, the company reported net earnings of $487 million, a significant increase from $8 million in Q4, with strong performance in midstream, chemical, and marketing segments offsetting losses in refining [2] - The current market capitalization of Phillips 66 stands at $51 billion, with total revenue over the past twelve months reaching $138 billion, and operating profits of $604 million alongside net income of $1.9 billion [2] Historical Trends - Historical data indicates that Phillips 66 stock has fallen 63% of the time on the day following earnings announcements, with a median decline of 2.5% and maximum one-day negative returns reaching 6% [2] - Over the past five years, there have been 19 earnings data points, with favorable one-day returns observed approximately 37% of the time, which increases to 45% when considering the last three years [4] - The median of the seven positive returns is 1.5%, while the median of the twelve negative returns is -2.5% [4] Correlation Analysis - A strategy to analyze the correlation between immediate and medium-term returns following earnings announcements can help traders adjust their positions accordingly [3][5] - The correlation between 1D post-earnings returns and subsequent 5D returns can be utilized to position trades effectively, especially if the 1D return is positive [5]