PHILLIPS-66 Earningcall Transcript Of Q2 of 2024
Mark E. Lashier -- Chairman and Chief Executive Officer Thanks, Jeff. Welcome, everyone, to our second quarter earnings call. First, I'd like to introduce Don Baldridge, our new EVP of midstream and chemicals. He previously served as the interim CEO of DCP and brings a wealth of midstream experience to Phillips 66. I also want to wish Tim Roberts the best in his retirement and thank him for his contributions to Phillips 66, including being instrumental in executing our NGL wellhead-to-market strategy. Let's turn to our second quarter performance. We continue to systematically execute on our strategic priorities, focusing on what we control. The improvements are visible in our results. Since July 2022, we've returned over $11 billion to shareholders through share repurchases and dividends. We expect to achieve our $13 billion to $15 billion target by the end of the year. Share repurchases will continue to be a priority in our capital allocation plan. We are committed to returning over 50% of our operating cash flows to shareholders. In refining, we're enhancing performance and reducing our cost structure. Crude utilization during the quarter was our highest at over -- in over five years at 98% and clean product yield was 86%. In addition, we've lowered our costs by nearly $1 per barrel. In midstream, we continue to benefit from synergy capture as we execute on our NGL wellhead-to-market strategy. Earlier this month, we closed on our acquisition of Pinnacle Midstream. It was a bolt-on to our natural gas gathering and processing business and grows our stable earnings with high-quality, 100% fee-based long-term contracts. The assets are strategically located near our existing Permian footprint in the liquids-rich Midland Basin. In the second quarter, we sold our 25% nonoperated interest in the Rockies Express pipeline for $685 million. We've generated over $1 billion from asset dispositions toward our previously announced target of more than $3 billion. By the end of the second quarter, the Rodeo Renewable energy complex reached full rates with the start-up of the second hydrocracker and both pretreatment units. The complex is processing approximately 50,000 barrels per day of renewable feedstocks. On the next two slides, I'll focus on the improvements we've made to our cost structure. We're approaching our $1.4 billion run rate savings target, and the results are hitting the bottom line. Slide 4 provides cost detail at the total company level compared with the first half of 2022. We've supported growing our business while mitigating inflationary impacts through business transformation. We've realized approximately $400 million in cost reductions, including our share of WRB costs. Additionally, we've been successful in driving efficiencies in our logistics spend that flow through margin, as well as lowering our sustaining capital spend. Slide 5 highlights how our business transformation efforts have translated into a lower refining cost per barrel. Adjusted controllable costs, excluding turnarounds, were $5.93 per barrel. We're closing in on our target to lower cost by $1 per barrel. We continue to increase shareholder value through strong operating performance and disciplined capital allocation as we deliver on our strategic priorities. I want to recognize our employees for their hard work and dedication to driving value creation for shareholders. Kevin, over to you. Kevin J. Mitchell -- Executive Vice President, Chief Financial Officer Thank you, Mark. Slide 6 covers key financial metrics. Adjusted earnings were $984 million or $2.31 per share. We generated operating cash flow of $2.1 billion and returned $1.3 billion to shareholders. I will now move to Slide 7 to cover the segment results. In the second quarter, we made changes to our segment reporting, including a new segment for our renewable fuels business. The new segment includes the Rodeo Renewable energy complex, as well as contributions from the optimization of renewal feedstocks, fuel sales and credits. We also moved our investment in NOVONIX from the midstream segment to Corporate and Other. Our slides and other reporting materials reflect these changes, and prior period results have been recast for comparative purposes. Adjusted earnings increased $162 million compared with the prior quarter. Midstream results were up mainly due to higher volumes, including record NGL pipeline and fractionation volumes. In addition, costs were lower, reflecting DCP synergy capture. In chemicals, results increased from higher margins. Refining was slightly lower than last quarter. Higher volumes and reduced operating costs mostly offset the impact of lower crack spreads driven by weaker distillate prices. Marketing and specialties results were higher, mostly due to seasonally stronger margins and volumes. Slide 8 shows the change in cash flow. We had strong cash flow aided by working capital and proceeds from asset dispositions. Working capital was a benefit of $916 million, mainly reflecting changes in accounts receivables and payables that include the impact of falling commodity prices. We received $685 million in cash proceeds from the sale of our 25% interest in REX pipeline. Looking ahead to the third quarter. In chemicals, we expect the global O&P utilization rate to be in the mid-90s. In Refining, we expect the worldwide crude utilization rate to be in the low 90s and turnaround expense to be between $140 million and $160 million. We anticipate Corporate and Other costs to come in between $330 million and $350 million. For the full year, we expect refining turnaround expense to be between $500 million and $530 million. This is a reduction from previous guidance. And finally, in early August, we will begin publishing a monthly refining market indicator on our investor relations website. Now, we will open the line for questions after which, Mark will wrap up the call. Operator Questions & Answers: |
Phillips-66