Phillips 66 Surpasses Q3 Profit Expectations

Phillips 66, one of the leading players in the refining sector, reported strong adjusted earnings for the third quarter on Tuesday, surpassing analysts' expectations. This increase was primarily driven by solid performance in its chemicals and midstream operations. The company, which operates a vast pipeline network across the United States, witnessed an increase in fuel transportation this year as it gained a larger share of the natural gas liquids market.

In the first nine months of 2024, Phillips 66 transported 2.79 million barrels per day through its pipelines, marking a notable increase from 2.70 million barrels per day in 2023. The adjusted earnings from the chemicals segment tripled to reach $342 million, while general expenses decreased by 4.7%.

Despite these gains, Phillips 66's refining segment experienced a decline in margins due to falling crack spreads, dropping from $19.06 per barrel to $8.31 per barrel for the quarter. This downturn reflects a broader trend in the industry, as U.S. refining margins (represented by the 3-2-1 crack spread) fell to $14.28 in mid-September, reaching the lowest level since early 2021.

The company's shares fell approximately 2.2% in morning trading, occurring in the context of a general decline in global refiners' profitability amid softening consumer and industrial demand, particularly in China. In a related development, BP reported a decline in its third-quarter profits today, attributing it to weakening refining margins and a slowdown in oil demand.

Phillips 66's adjusted earnings for the third quarter came in at $2.04 per share, comfortably exceeding the average estimate of $1.66 compiled by LSEG. The positive results underscore the company's strategic advantage, contrasting with the challenges facing the refining industry, thanks to its diversified operations in the chemicals and midstream segments.