Daily Management Review

Phillips 66 Profit Beats Estimates Handsomely Due To Boost In Refining Margins


Phillips 66 Profit Beats Estimates Handsomely Due To Boost In Refining Margins
Profit margins from its refining business jumped by almost five-fold because of resurgent demand for motor fuels since rise in the uptake of Covid-19 vaccines and reducing restrictions, which helped Phillips 66 to announce market estimates beating quarterly profits on Friday.
After more than a year of low demand owing to the pandemic, which also took refining capacity offline, gasoline and distillate consumption in the United States, the world's top fuel user, has returned to five-year averages.
"We're probably more optimistic today that we're moving towards more of a mid-cycle earnings profile in our refining business," Chief Executive Officer Greg Garland said on a call with analysts.
In the third quarter, an adjusted pre-tax profit of $184 million was generated by Phillips 66's refining segment, compared to a loss of $970 million for the same quarter the previous year. On the other hand, the company achieved 381.5 per cent growth in realized refining margins to $8.57 a barrel.
Some refining capacity of the company was thrown offline due to some recent storms which resulted in in tighter supplies.
A $1 billion impairment charge was announced by Phillips 66, owing to Hurricane Ida's impact on its Alliance Refinery in Louisiana, which would be closed for the remainder of the year.
The company said that its refining crude utilization because of that closure will get limited to the low of 80 per cent area in the fourth quarter, compared to 86 per cent in the third quarter.
The company reported a 12.5 per cent year over year rise in its total processed inputs to 168.74 million barrels per day but was lower compared to the 1.3 per cent achieved by the company from the preceding three months.
Phillips 66's stock was down 2.5 per cent at $74.79, as the oil industry as a whole fell.
For the three months ended Sept. 30, the company reported a net income of $402 million, or 91 cents per share, compared to a loss of $799 million, or $1.82 per share, for the same quarter a year earlier.
Phillips 66’s adjusted earnings came in at $1.4 billion, or $3.18 per share, which comfortably beats estimates of $1.95 per share from Refinitiv IBES.