Phillips 66(PSX) - 2025 Q2 - Quarterly Report

Part I – Financial Information This section provides a comprehensive overview of the company's financial performance, position, and cash flows Financial Statements The company's financial statements for Q2 2025 show decreased net income and revenues, increased assets, and reduced operating cash flow Consolidated Income Statement Highlights (Q2 2025 vs Q2 2024) | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Sales and other operating revenues | $33,323 | $38,129 | -12.6 | | Net Income Attributable to Phillips 66 | $877 | $1,015 | -13.6 | | Diluted EPS | $2.15 | $2.38 | -9.7 | Consolidated Balance Sheet Highlights (As of June 30, 2025) | Metric | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Total Current Assets | $21,076 | $17,910 | +17.7 | | Total Assets | $75,942 | $72,582 | +4.6 | | Total Current Liabilities | $19,685 | $15,087 | +30.5 | | Long-term debt | $17,200 | $18,231 | -5.7 | | Total Equity | $28,627 | $28,463 | +0.6 | Consolidated Cash Flow Highlights (Six Months Ended June 30) | Metric | 2025 (Millions) | 2024 (Millions) | Change (%) | | :--- | :--- | :--- | :--- | | Net Cash Provided by Operating Activities | $1,032 | $1,861 | -44.5 | | Net Cash Used in Investing Activities | ($1,143) | ($338) | +238.2 | | Net Cash Used in Financing Activities | ($523) | ($2,389) | -78.1 | Notes to Consolidated Financial Statements Notes detail significant events including refinery idling, major acquisitions and divestitures, and a substantial litigation accrual - The company announced the intention to cease operations at its Los Angeles Refinery in Q4 2025, resulting in accelerated depreciation of $239 million and $485 million for the three and six months ended June 30, 2025, respectively[23] - On April 1, 2025, the company acquired Coastal Bend, a midstream business, for $2.2 billion, net of cash acquired[24] - On January 31, 2025, the company sold its 49% interest in Coop Mineraloel AG, receiving cash proceeds of $1.2 billion and recognizing a before-tax gain of $1 billion[48] - A definitive agreement was signed to divest a 65% equity interest in the Germany and Austria retail marketing business for expected pre-tax cash proceeds of approximately $1.6 billion[140][141] - As a result of a jury verdict in the Propel Fuels litigation, the company recorded an accrual of $604.9 million in Q3 2024[83] Management's Discussion and Analysis of Financial Condition and Results of Operations Q2 2025 earnings decreased due to specific factors, while management focuses on strategic priorities including shareholder returns and business growth Executive Overview and Business Environment Q2 2025 earnings and cash flow reported, with strategic priorities focusing on shareholder returns and business growth amidst mixed market conditions - The company's financial target aims to return greater than 50% of net cash provided by operating activities to shareholders through dividends and share repurchases[151] - Strategic priorities include enhancing Refining segment returns and growing Midstream and Chemicals businesses, with a budgeted 2025 capital expenditure of $2.1 billion (excluding acquisitions)[150][151] - Key market conditions in Q2 2025 included a decrease in the benchmark high-density polyethylene chain margin from 18.3 to 7.4 cents per pound YoY, while the composite 3:2:1 market crack spread increased from $18.96 to $21.65 per barrel YoY[155][156] Results of Operations Q2 2025 consolidated net income decreased due to lower Chemicals earnings and accelerated depreciation, partially offset by stronger Marketing and Refining results Income (Loss) Before Income Taxes by Segment (Q2 2025 vs Q2 2024) | Segment | Q2 2025 (Millions) | Q2 2024 (Millions) | Change (Millions) | | :--- | :--- | :--- | :--- | | Midstream | $731 | $767 | ($36) | | Chemicals | $20 | $222 | ($202) | | Refining | $359 | $302 | $57 | | Marketing and Specialties | $571 | $415 | $156 | | Renewable Fuels | ($133) | ($55) | ($78) | | Corporate and Other | ($428) | ($340) | ($88) | | Total | $1,120 | $1,311 | ($191) | - The Midstream NGL business results increased by $269 million in Q2 2025, primarily due to the absence of a 2024 impairment charge and contributions from newly acquired Coastal Bend operations[181] - The Chemicals segment's income plummeted by $202 million in Q2 2025, driven by lower polyethylene margins due to decreased sales prices and higher feedstock costs[184] - The Refining segment's income increased by $57 million in Q2 2025, driven by improved realized margins and higher volumes, despite accelerated depreciation for the Los Angeles Refinery[191] - The Marketing and Specialties segment's income for the first six months of 2025 increased by $1,072 million, primarily due to a $1 billion pre-tax gain on the sale of the company's investment in Coop[196] Capital Resources and Liquidity As of June 30, 2025, the company maintained strong liquidity, funding acquisitions and shareholder returns with $1.1 billion cash and $3.7 billion credit Key Financial Indicators | Indicator | June 30, 2025 (Millions) | Dec 31, 2024 (Millions) | | :--- | :--- | :--- | | Cash and cash equivalents | $1,052 | $1,738 | | Total debt | $20,935 | $20,062 | | Total equity | $28,627 | $28,463 | | Percent of total debt to capital | 42% | 41% | - In H1 2025, the company funded a $2.2 billion acquisition (Coastal Bend), paid $956 million in dividends, and repurchased $666 million of common stock[205][237][239] - The company amended its Accounts Receivable Securitization Facility, increasing its size from $500 million to $1 billion, which was fully utilized as of June 30, 2025[211][213] Capital Expenditures and Investments (Six Months Ended June 30, 2025) | Segment | Capital Spending (Millions) | | :--- | :--- | | Midstream | $600 | | Refining | $324 | | Marketing and Specialties | $49 | | Renewable Fuels | $18 | | Corporate and Other | $19 | | Total | $1,010 | Quantitative and Qualitative Disclosures About Market Risk The company states that its commodity price risk and interest rate risk at June 30, 2025, have not materially changed from prior disclosures - There were no material changes in commodity price risk or interest rate risk compared to the 2024 Annual Report[280] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - The Chairman and CEO, along with the EVP and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[281] - No changes in internal control over financial reporting occurred during the quarter that have materially affected, or are reasonably likely to materially affect, these controls[282] Part II – Other Information This section provides updates on legal proceedings, risk factors, equity repurchases, and other general corporate information Legal Proceedings The company reported a new environmental enforcement action and material developments in the Propel Fuels litigation, including a significant jury verdict - A new enforcement action was commenced by the New Mexico Environment Department against DCP Operating Company, L.P. alleging violations at multiple gas plants and seeking a civil penalty over $1 million[287] - An update on the Propel Fuels litigation confirms a $604.9 million jury verdict and notes that motions for exemplary (treble) damages and for a new trial are expected to be ruled on in 2025[288] Risk Factors The company reports that there have been no material changes from the risk factors previously disclosed in its 2024 Annual Report on Form 10-K - No material changes to risk factors were reported since the 2024 Annual Report on Form 10-K[291] Issuer Purchases of Equity Securities In Q2 2025, the company repurchased approximately 3.55 million shares for $395 million, with $2.85 billion remaining in the program Share Repurchases (Q2 2025) | Period | Total Shares Purchased | Average Price Paid per Share ($) | Total Cost (Approx. Millions) | | :--- | :--- | :--- | :--- | | April 2025 | 1,422,753 | $102.46 | $145.8 | | May 2025 | 1,136,882 | $114.89 | $130.6 | | June 2025 | 985,777 | $120.51 | $118.8 | | Total | 3,545,412 | $111.46 | $395.2 | - The company's share repurchase program, initiated in 2012, has an aggregate authorization of $25 billion and does not expire; as of June 30, 2025, approximately $2.85 billion remained available[292][294] Other Information No directors or Section 16 officers adopted, modified, or terminated Rule 10b5-1 trading arrangements, and annual advisory votes on executive compensation will continue - No director or Section 16 officer entered into or modified a Rule 10b5-1 trading plan during the quarter ended June 30, 2025[295] - Following the 2025 Annual Meeting, the company will hold advisory votes on named executive compensation annually[296]