Phillips 66 Profit Tops Estimates on Higher Refining Margins
Phillips 66 posted a fourth-quarter profit beat as U.S. refining margins rebounded from multi-year lows, lifting earnings after a challenging year for refiners.
(Reuters) — Refiner Phillips 66 beat Wall Street estimates for fourth-quarter profit on Feb. 4, as a rebound in U.S. refining margins lifted earnings after a prolonged slump in 2024.
Shares of the company were up 4% at $154.19 in morning trade.
U.S. fuel maker margins have begun to rebound from multi-year lows, a pullback that followed the earlier spike triggered by sanctions on Russia in the wake of its invasion of Ukraine, which had constricted global supply.
U.S. refiners are also expected to benefit from the resumption of Venezuelan oil exports and lower fuel costs. Reuters reported last month that Phillips 66 and Valero each bought a cargo of Venezuelan crude under Washington's agreement with Caracas to allow limited exports.
Quarterly U.S. refinery margins, measured by the 3-2-1 crack spread, were up about 45% on average in the fourth quarter from a year earlier.
Phillips 66's realized margin more than doubled to $12.48 per barrel in the quarter, swinging its refining segment to adjusted earnings of $542 million, compared with a year-ago loss.
The refiner's quarterly crude capacity utilization rose to 99% from 94% a year earlier, while turnaround expenses climbed nearly 10% to $135 million.
It now expects first-quarter utilization in the low 90% range and turnaround costs of $170 million to $190 million.
Piper Sandler analyst Ryan Todd said the company's refining helped offset lower midstream performance in the fourth quarter, but added that lower utilization and higher expenses are expected to weigh on first-quarter estimates.
The refiner said it cut debt by $2 billion during the quarter, ending the year at $19.7 billion, aided by the December sale of a 65% stake in its German and Austrian fuel retail business at a $2.8 billion valuation.
Phillips 66 reported an adjusted profit of $2.47 per share for the three months ending on Dec. 31, compared with analysts' average estimate of $2.16 per share, according to data compiled by LSEG.