Highlights
-
Reported record earnings of $217 million and adjusted EBITDA of $305
million
-
Raised quarterly distribution by 5.3 percent to $0.792 per common unit
-
Increased capacity of Gray Oak Pipeline to 900,000 barrels per day
HOUSTON--(BUSINESS WIRE)--
Phillips 66 Partners LP (NYSE: PSXP) announces third-quarter 2018
earnings of $217 million, or $1.10 per diluted common unit. Cash from
operations was $255 million, and distributable cash flow was $218
million. Adjusted EBITDA was $305 million in the third quarter, compared
with $276 million in the prior quarter.
“This quarter we delivered record earnings from strong operations across
our diversified portfolio,” said Greg Garland, Phillips 66 Partners’
chairman and CEO. “We continued growing our distribution and will
achieve our five-year 30 percent distribution CAGR target next quarter.
Rapid growth in our first five years has significantly increased our
scale. Combined with our demonstrated ability to identify and execute
organic projects, we are well-positioned for further growth.”
On Oct. 17, 2018, the general partner’s board of directors declared a
third-quarter 2018 cash distribution of $0.792 per common unit, a 5.3
percent increase over the previous quarter distribution of $0.752 per
common unit. The Partnership has increased its distribution per common
unit every quarter since its initial public offering in July 2013.
Financial Results
Phillips 66 Partners’ third-quarter earnings were $217 million, compared
with $186 million in the prior quarter. The Partnership reported
adjusted EBITDA of $305 million in the third quarter, compared with $276
million in the second quarter. The improvement reflects higher equity
earnings, primarily from record volumes on the Bakken and Sand Hills
pipelines. In addition, increased earnings from wholly owned pipelines
were driven by improved volumes, reflecting strong run rates at
Mid-Continent refineries operated by Phillips 66.
Liquidity, Capital Expenditures and Investments
As of Sept. 30, 2018, total debt outstanding was $2.9 billion. The
Partnership had $100 million in cash and cash equivalents and $750
million available under its revolving credit facility.
The Partnership’s total capital spending for the quarter was $197
million, including $24 million of maintenance capital. Expansion capital
of $173 million included spend on a new isomerization unit at the
Phillips 66 Lake Charles Refinery and the Clemens Caverns expansion, as
well as investments in the Gray Oak, Bayou Bridge and Sand Hills
pipelines.
Strategic Update
The Partnership is constructing the Gray Oak Pipeline, which will
provide crude oil transportation from the Permian and Eagle Ford to
destinations in Corpus Christi and Freeport, including the Phillips 66
Sweeny Refinery. Supported by customer commitments, capacity of the
pipeline will be 900,000 barrels per day (BPD). Phillips 66 Partners
currently has a 75 percent ownership interest in the pipeline project,
and third parties have options to acquire an interest in the pipeline
that could reduce Phillips 66 Partners ownership to 42.25 percent by
year end. Gray Oak Pipeline is anticipated to be in service by the end
of 2019.
In Corpus Christi, the Gray Oak Pipeline will connect to the new South
Texas Gateway Terminal under development by Buckeye Partners, L.P. The
marine terminal will have an initial storage capacity of 3.4 million
barrels and is expected to begin operations by the end of 2019. Phillips
66 Partners owns a 25 percent interest in the terminal.
In connection with Phillips 66’s project to add natural gas liquids
(NGL) fractionation capacity at the Sweeny Hub, the Partnership is
increasing storage capacity at Clemens Caverns from 9 million barrels to
15 million barrels. The caverns project is expected to be completed in
late 2020.
The Partnership is constructing a 25,000-BPD isomerization unit at the
Phillips 66 Lake Charles Refinery to increase production of
higher-octane gasoline blend components. The $200 million project
includes a long-term agreement with Phillips 66 for processing services
with a minimum volume commitment. Completion is expected in the third
quarter of 2019.
The Partnership expects both the extension of the Bayou Bridge Pipeline
from Lake Charles, Louisiana, to St. James, Louisiana, and the expansion
of the Sand Hills NGL Pipeline to be completed in the fourth quarter of
2018. The Lake Charles products pipeline project is also progressing and
remains on schedule. The Sacagawea raw natural gas pipeline project was
completed and commenced operations in the third quarter of 2018.
Investor Webcast
Members of Phillips 66 Partners executive management will host a webcast
today at 2 p.m. EDT to discuss the Partnership’s third-quarter
performance. To listen to the conference call and view related
presentation materials, go to www.phillips66partners.com/events.
For detailed supplemental information, go to www.phillips66partners.com/reports.
About Phillips 66 Partners
Headquartered in Houston, Phillips 66 Partners is a growth-oriented
master limited partnership formed by Phillips 66 to own, operate,
develop and acquire primarily fee-based crude oil, refined petroleum
products and natural gas liquids pipelines, terminals and other
midstream assets. For more information, visit www.phillips66partners.com.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE “SAFE HARBOR”
PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This news release contains certain forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, which are intended to be covered by the safe harbors created
thereby. Words and phrases such as “is anticipated,” “is estimated,” “is
expected,” “is planned,” “is scheduled,” “is targeted,” “believes,”
“continues,” “intends,” “will,” “would,” “objectives,” “goals,”
“projects,” “efforts,” “strategies” and similar expressions are used to
identify such forward-looking statements. However, the absence of these
words does not mean that a statement is not forward-looking.
Forward-looking statements relating to Phillips 66 Partners’ operations
(including joint venture operations) are based on management’s
expectations, estimates and projections about the company, its interests
and the energy industry in general on the date this news release was
prepared. These statements are not guarantees of future performance and
involve certain risks, uncertainties and assumptions that are difficult
to predict. Therefore, actual outcomes and results may differ materially
from what is expressed or forecast in such forward-looking statements.
Factors that could cause actual results or events to differ materially
from those described in the forward-looking statements include the
continued ability of Phillips 66 to satisfy its obligations under our
commercial and other agreements; the volume of crude oil, refined
petroleum products and NGL we or our joint ventures transport,
fractionate, terminal and store; the tariff rates with respect to
volumes that we transport through our regulated assets, which rates are
subject to review and possible adjustment by federal and state
regulators; fluctuations in the prices for crude oil, refined petroleum
products and NGL; liabilities associated with the risks and operational
hazards inherent in transporting, fractionating, terminaling and storing
crude oil, refined petroleum products and NGL; potential liability from
litigation or for remedial actions, including removal and reclamation
obligations under environmental regulations; the failure to complete
construction of announced and future capital projects in a timely manner
and any cost overruns associated with such projects; and other economic,
business, competitive and/or regulatory factors affecting Phillips 66
Partners’ businesses generally as set forth in our filings with the
Securities and Exchange Commission. Phillips 66 Partners is under no
obligation (and expressly disclaims any such obligation) to update or
alter its forward-looking statements, whether as a result of new
information, future events or otherwise.
Use of Non-GAAP Financial Information—This news release
includes the terms “EBITDA,” “adjusted EBITDA,” “distributable cash
flow,” “run-rate EBITDA,” and “coverage ratio.” These are non-GAAP
financial measures. EBITDA and adjusted EBITDA are included to help
facilitate comparisons of operating performance of the Partnership with
other companies in our industry. EBITDA and distributable cash flow help
facilitate an assessment of our ability to generate sufficient cash flow
to make distributions to our partners. We believe that the presentation
of EBITDA, adjusted EBITDA and distributable cash flow provides useful
information to investors in assessing our financial condition and
results of operations. Our coverage ratio is calculated as distributable
cash flow divided by total cash distributions and is included to help
indicate the Partnership’s ability to pay cash distributions from
current earnings. The GAAP performance measure most directly comparable
to EBITDA and adjusted EBITDA is net income. The GAAP liquidity measure
most comparable to EBITDA and distributable cash flow is net cash
provided by operating activities. The GAAP financial measure most
comparable to our coverage ratio is calculated as net cash provided by
operating activities divided by total cash distributions. These non-GAAP
financial measures should not be considered as alternatives to GAAP net
income or net cash provided by operating activities. They have important
limitations as analytical tools because they exclude some but not all
items that affect net income and net cash provided by operating
activities. They should not be considered in isolation or as substitutes
for analysis of our results as reported under GAAP. Additionally,
because EBITDA, adjusted EBITDA and distributable cash flow may be
defined differently by other companies in our industry, our definition
of EBITDA, adjusted EBITDA and distributable cash flow may not be
comparable to similarly titled measures of other companies, thereby
diminishing their utility.
A reconciliation of current quarter adjusted EBITDA to net
income accompanies this release. The disaggregation of capital spending
between expansion/growth and maintenance is not a distinction recognized
under GAAP. We provide such disaggregation because the Partnership will
generally fund maintenance capital spending with cash from operating
activities and fund expansion/growth capital spending with financing
activities. We believe this is an important distinction in our liquidity
profile.
References in the release to earnings and capital spending refer
to net income and capital spending attributable to the Partnership,
respectively. References to EBITDA refer to earnings before interest,
income taxes, depreciation and amortization.
Results of Operations (Unaudited)
|
Summarized Financial Statement Information
|
|
|
Millions of Dollars
Except as Indicated
|
|
|
Q3 2018
|
|
Q2 2018
|
|
Selected Income Statement Data
|
|
|
|
|
|
|
Total revenues and other income
|
|
$
|
384
|
|
|
|
354
|
|
|
Net income
|
|
217
|
|
|
|
186
|
|
|
Net income attributable to the Partnership
|
|
217
|
|
|
|
186
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
305
|
|
|
|
276
|
|
|
Distributable cash flow
|
|
218
|
|
|
|
204
|
|
|
|
|
|
|
|
|
Net Income Attributable to the Partnership Per Limited Partner
Unit—Diluted (Dollars)
|
|
|
|
|
|
|
Common units
|
|
$
|
1.10
|
|
|
|
0.94
|
|
|
|
|
|
|
|
|
Selected Balance Sheet Data
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
100
|
|
|
|
151
|
|
|
Equity investments
|
|
2,215
|
|
|
|
2,104
|
|
|
Total assets
|
|
5,643
|
|
|
|
5,506
|
|
|
Total debt
|
|
2,922
|
|
|
|
2,946
|
|
|
Equity held by public
|
|
|
|
|
|
|
Preferred units
|
|
746
|
|
|
|
747
|
|
|
Common units
|
|
2,451
|
|
|
|
2,381
|
|
|
Equity held by Phillips 66
|
|
|
|
|
|
|
Common units
|
|
567
|
|
|
|
538
|
|
|
General partner
|
|
(1,320
|
)
|
|
|
(1,332
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Statement of Income
|
|
|
Millions of Dollars
|
|
|
Q3 2018
|
|
Q2 2018
|
|
Revenues and Other Income
|
|
|
|
|
|
|
Operating revenues—related parties
|
|
$
|
256
|
|
|
244
|
|
Operating revenues—third parties
|
|
9
|
|
|
10
|
|
Equity in earnings of affiliates
|
|
118
|
|
|
100
|
|
Other income
|
|
1
|
|
|
—
|
|
Total revenues and other income
|
|
384
|
|
|
354
|
|
|
|
|
|
|
|
Costs and Expenses
|
|
|
|
|
|
|
Operating and maintenance expenses
|
|
84
|
|
|
85
|
|
Depreciation
|
|
30
|
|
|
29
|
|
General and administrative expenses
|
|
16
|
|
|
16
|
|
Taxes other than income taxes
|
|
8
|
|
|
9
|
|
Interest and debt expense
|
|
28
|
|
|
29
|
|
Other expenses
|
|
1
|
|
|
—
|
|
Total costs and expenses
|
|
167
|
|
|
168
|
|
Income before income taxes
|
|
217
|
|
|
186
|
|
Income tax expense
|
|
—
|
|
|
—
|
|
Net income
|
|
217
|
|
|
186
|
|
Less: Net income attributable to Predecessors
|
|
—
|
|
|
—
|
|
Net income attributable to the Partnership
|
|
217
|
|
|
186
|
|
Less: Preferred unitholders’ interest in net income attributable to
the Partnership
|
|
9
|
|
|
10
|
|
Less: General partner’s interest in net income attributable to the
Partnership
|
|
64
|
|
|
55
|
|
Limited partners' interest in net income attributable to the
Partnership
|
|
$
|
144
|
|
|
121
|
|
|
|
|
|
|
|
|
|
|
|
Selected Operating Data
|
|
|
Q3 2018
|
|
Q2 2018
|
|
Wholly Owned Operating Data
|
|
|
|
|
|
|
Pipelines
|
|
|
|
|
|
|
Pipeline revenues (millions of dollars)
|
|
$
|
123
|
|
|
111
|
|
Pipeline volumes(1) (thousands of barrels daily)
|
|
|
|
|
|
|
Crude oil
|
|
1,047
|
|
|
1,020
|
|
Refined products and natural gas liquids
|
|
959
|
|
|
920
|
|
Total
|
|
2,006
|
|
|
1,940
|
|
|
|
|
|
|
|
Average pipeline revenue per barrel (dollars)
|
|
$
|
0.66
|
|
|
0.63
|
|
|
|
|
|
|
|
Terminals
|
|
|
|
|
|
|
Terminal revenues (millions of dollars)
|
|
$
|
37
|
|
|
38
|
|
Terminal throughput (thousands of barrels daily)
|
|
|
|
|
|
|
Crude oil(2) |
|
436
|
|
|
471
|
|
Refined products
|
|
754
|
|
|
806
|
|
Total
|
|
1,190
|
|
|
1,277
|
|
|
|
|
|
|
|
Average terminaling revenue per barrel (dollars)
|
|
$
|
0.33
|
|
|
0.33
|
|
|
|
|
|
|
|
Storage, processing and other revenues (millions of dollars)
|
|
$
|
105
|
|
|
105
|
|
Total operating revenues (millions of dollars)
|
|
$
|
265
|
|
|
254
|
|
|
|
|
|
|
|
Joint Venture Operating Data
(3)
|
|
|
|
|
|
|
Crude oil, refined products and natural gas liquids (thousands of
barrels daily)
|
|
668
|
|
|
638
|
|
(1) Represents the sum of volumes transported through each
separately tariffed pipeline segment.
|
|
(2) Bayway and Ferndale rail rack volumes included in
crude oil terminals.
|
|
(3) Proportional share of total pipeline and terminal
volumes of joint ventures consistent with recognized equity in
earnings of affiliates.
|
|
|
|
|
|
|
|
|
Capital Expenditures and Investments
|
|
|
Millions of Dollars
|
|
|
Q3 2018
|
|
Q2 2018
|
|
Capital Expenditures and Investments
|
|
|
|
|
|
Expansion
|
|
$
|
173
|
|
169
|
|
Maintenance
|
|
24
|
|
10
|
|
Total Partnership
|
|
197
|
|
179
|
|
Predecessors
|
|
—
|
|
—
|
|
Total Consolidated
|
|
$
|
197
|
|
179
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Distributions
|
|
|
|
|
|
|
|
Millions of Dollars
Except as Indicated
|
|
|
Q3 2018
|
|
Q2 2018
|
|
Cash Distributions
†
|
|
|
|
|
|
|
Common units—public
|
|
$
|
44
|
|
|
40
|
|
Common units—Phillips 66
|
|
55
|
|
|
51
|
|
General partner—Phillips 66
|
|
61
|
|
|
57
|
|
Total
|
|
$
|
160
|
|
|
148
|
|
|
|
|
|
|
|
Cash Distribution Per Common Unit (Dollars)
|
|
$
|
0.792
|
|
|
0.752
|
|
|
|
|
|
|
|
Coverage Ratio*
|
|
1.36
|
|
|
1.38
|
|
†Cash distributions declared attributable to the indicated
periods.
|
|
*Calculated as distributable cash flow divided by total
cash distributions. Used to indicate the Partnership’s ability to
pay cash distributions from current earnings. Net cash provided by
operating activities divided by total cash distributions was 1.59x
and 1.53x at Q3 2018 and Q2 2018, respectively.
|
|
|
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA and Distributable Cash Flow to
Net Income
|
|
|
|
|
|
|
|
Millions of Dollars
|
|
|
Q3 2018
|
|
Q2 2018
|
|
|
|
|
|
|
|
Net income attributable to the Partnership
|
|
$
|
217
|
|
|
|
186
|
|
|
Plus:
|
|
|
|
|
|
|
Net income attributable to Predecessors
|
|
—
|
|
|
|
—
|
|
|
Net Income
|
|
217
|
|
|
|
186
|
|
|
Plus:
|
|
|
|
|
|
|
Depreciation
|
|
30
|
|
|
|
29
|
|
|
Net interest expense
|
|
28
|
|
|
|
29
|
|
|
Income tax expense
|
|
—
|
|
|
|
—
|
|
|
EBITDA
|
|
275
|
|
|
|
244
|
|
|
Proportional share of equity affiliates’ net interest, taxes and
depreciation
|
|
30
|
|
|
|
28
|
|
|
Expenses indemnified or prefunded by Phillips 66
|
|
—
|
|
|
|
1
|
|
|
Transaction costs associated with acquisitions
|
|
—
|
|
|
|
3
|
|
|
EBITDA attributable to Predecessors
|
|
—
|
|
|
|
—
|
|
|
Adjusted EBITDA
|
|
305
|
|
|
|
276
|
|
|
Plus:
|
|
|
|
|
|
|
Deferred revenue impacts*† |
|
(5
|
)
|
|
|
(5
|
)
|
|
Less:
|
|
|
|
|
|
|
Equity affiliate distributions less than proportional EBITDA
|
|
22
|
|
|
|
18
|
|
|
Maintenance capital expenditures† |
|
23
|
|
|
|
10
|
|
|
Net interest expense
|
|
28
|
|
|
|
29
|
|
|
Preferred unit distributions
|
|
9
|
|
|
|
10
|
|
|
Distributable cash flow
|
|
$
|
218
|
|
|
|
204
|
|
|
*
Difference between cash receipts and revenue
recognition.
|
|
†Excludes MSLP capital reimbursements and turnaround
impacts.
|
|
|
|
|
|
|
Reconciliation of Adjusted EBITDA and Distributable Cash Flow to
Net Cash Provided by Operating Activities
|
|
|
Millions of Dollars
|
|
|
Q3 2018
|
|
Q2 2018
|
|
|
|
|
|
|
|
Net Cash Provided by Operating Activities
|
|
$
|
255
|
|
|
|
226
|
|
|
Plus:
|
|
|
|
|
|
|
Net interest expense
|
|
28
|
|
|
|
29
|
|
|
Income tax expense
|
|
—
|
|
|
|
—
|
|
|
Changes in working capital
|
|
(7
|
)
|
|
|
(10
|
)
|
|
Undistributed equity earnings
|
|
(2
|
)
|
|
|
(1
|
)
|
|
Deferred revenues and other liabilities
|
|
1
|
|
|
|
5
|
|
|
Other
|
|
—
|
|
|
|
(5
|
)
|
|
EBITDA
|
|
275
|
|
|
|
244
|
|
|
Proportional share of equity affiliates’ net interest, taxes and
depreciation
|
|
30
|
|
|
|
28
|
|
|
Expenses indemnified or prefunded by Phillips 66
|
|
—
|
|
|
|
1
|
|
|
Transaction costs associated with acquisitions
|
|
—
|
|
|
|
3
|
|
|
EBITDA attributable to Predecessors
|
|
—
|
|
|
|
—
|
|
|
Adjusted EBITDA
|
|
305
|
|
|
|
276
|
|
|
Plus:
|
|
|
|
|
|
|
Deferred revenue impacts*† |
|
(5
|
)
|
|
|
(5
|
)
|
|
Less:
|
|
|
|
|
|
|
Equity affiliate distributions less than proportional EBITDA
|
|
22
|
|
|
|
18
|
|
|
Maintenance capital expenditures† |
|
23
|
|
|
|
10
|
|
|
Net interest expense
|
|
28
|
|
|
|
29
|
|
|
Preferred unit distributions
|
|
9
|
|
|
|
10
|
|
|
Distributable cash flow
|
|
$
|
218
|
|
|
|
204
|
|
|
*Difference between cash receipts and revenue recognition.
|
|
†Excludes MSLP capital reimbursements and turnaround
impacts.
|
View source version on businesswire.com:
https://www.businesswire.com/news/home/20181026005076/en/
Phillips 66 Partners LP
Jeff Dietert (investors), 832-765-2297
jeff.dietert@p66.com
or
Rosy
Zuklic (investors), 832-765-2297
rosy.zuklic@p66.com
or
Dennis
Nuss (media), 832-765-1850
dennis.h.nuss@p66.com
Source: Phillips 66 Partners LP