ROHSTOFF INTERNATIONAL

13:00 | 27.10.2017
Phillips 66 Partners Reports Third-Quarter Earnings

Phillips 66 Partners LP (NYSE: PSXP) announces third-quarter 2017
earnings of $99 million, or $0.51 per common unit. Cash from operations
was $152 million, and distributable cash flow was $136 million. Adjusted
EBITDA was $168 million in the third quarter, compared with $170 million
in the prior quarter.

“We delivered solid financial results this quarter, operating well with
minimal impact on our business from Hurricane Harvey,” said Greg
Garland, Phillips 66 Partners’ chairman and CEO. “In October, we
completed the acquisition of Merey Sweeny and a 25 percent interest in
the Bakken Pipeline. This acquisition from Phillips 66 is our largest to
date and keeps us on track to deliver our 30 percent five-year annual
distribution growth target. We are well positioned to achieve our $1.1
billion run-rate EBITDA goal by the end of 2018.”

On Oct. 18, 2017, the General Partner’s board of directors declared a
third-quarter 2017 cash distribution of $0.646 per common unit, a 5
percent increase over the previous quarter distribution of $0.615 per
common unit. The Partnership has increased its distribution every
quarter since its initial public offering in July 2013.
Financial Results
Phillips 66 Partners’ earnings were $99 million in the third quarter of
2017, compared with earnings of $103 million in the prior quarter. The
decrease reflects hurricane impacts of $5 million on volumes and costs,
as well as increased scheduled maintenance and indemnified expenses.
These items were partially offset by higher crude oil pipeline and
terminal volumes and improved equity earnings from the Bayou Bridge
Pipeline joint venture.
Liquidity, Capital Expenditures and Investments
As of Sept. 30, 2017, total debt outstanding was $2.3 billion. The
Partnership had $2 million in cash and cash equivalents and $663 million
available under its revolving credit facility.

The Partnership’s total capital spending for the quarter was $97
million. Expansion capital spending totaled $87 million, reflecting
investments in the STACK, Sacagawea, Bayou Bridge, and Sand Hills joint
venture projects.
Strategic Update
The Partnership continued to progress its portfolio of organic growth
projects during the quarter.

The Sand Hills Pipeline is increasing capacity from 280,000 barrels per
day (BPD) to 365,000 BPD, with the expansion expected to be complete in
the fourth quarter of 2017. In addition, DCP Midstream, the pipeline
operator, has announced plans to further expand capacity to
approximately 450,000 BPD, with completion expected in the second half
of 2018. Phillips 66 Partners owns a one-third interest in this joint
venture.

The STACK joint venture expansion project to loop the existing pipeline
was completed in October and increased capacity by 150,000 BPD. An
extension further into the STACK play is expected to be completed in the
fourth quarter of 2017. The Partnership owns a 50 percent interest in
the joint venture.

The Bayou Bridge Pipeline, in which the Partnership holds a 40 percent
interest, currently operates from the Phillips 66 Beaumont Terminal to
Lake Charles, Louisiana. The segment from Lake Charles to St. James,
Louisiana, is expected to begin commercial operations in the second half
of 2018.

Phillips 66 Partners continues development of a new 25,000 BPD
isomerization unit at the Phillips 66 Lake Charles Refinery to increase
production of higher octane gasoline blend components. The project will
include a long-term agreement with Phillips 66 for processing services,
including a minimum volume commitment. Final project approval is
expected in the first quarter of 2018.

The Sacagawea Pipeline joint venture is investing in growth projects to
develop additional services in the Bakken region. The venture is
constructing a 24-mile raw natural gas pipeline system linking
production in Mountrail County, N.D. to gathering and processing
capacity in McKenzie County, N.D. Total cost of the pipeline is expected
to be $60 million and the project is anticipated to be completed by the
end of 2018. Phillips 66 Partners owns a 49.5 percent interest in the
joint venture.
Acquisition Details
On Oct. 6, 2017, Phillips 66 Partners acquired from Phillips 66 a 25
percent interest in each of Dakota Access, LLC and Energy Transfer Crude
Oil Company, LLC (collectively, the Bakken Pipeline) and a 100 percent
interest in Merey Sweeny, L.P. (MSLP), the owner of fuel-grade coke
processing units at the Phillips 66 Sweeny Refinery. The total
transaction value of $2.4 billion includes $625 million in non-recourse
Bakken Pipeline debt and $100 million of MSLP debt. Expected adjusted
annual EBITDA from these assets is $270 million.

Consideration for the acquisition was $1.65 billion. The Partnership
funded the acquisition through the issuance of $240 million of common
and general partner units to Phillips 66, a portion of the proceeds from
a $1.05 billion private placement of preferred and common units and a
$650 million public debt issuance.
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
product and natural gas liquids pipelines and terminals and other
transportation and midstream assets. For more information, visit www.phillips66partners.com.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTSThis news release includes forward-looking statements. 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 (including our joint venture
operations) are based on management’s expectations, estimates and
projections about the Partnership, 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, process, 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, processing, 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; 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 “expected annual adjusted EBITDA.” 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. 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. 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.
Run-rate EBITDA is a forecast of future EBITDA, and is based on the
Partnership’s projections of annual EBITDA inclusive of current assets
and future potential acquisitions by the Partnership. Run-rate EBITDA is
included to demonstrate management’s intention of future growth through
acquisitions and organic projects. Expected annual adjusted EBITDA is
based on the Partnership’s projections for the acquired assets. Expected
annual adjusted EBITDA is included to help facilitate transaction value
analysis, as well as help facilitate an assessment of the acquired
assets’ contributions to PSXP’s future EBITDA growth. We are unable to
present a reconciliation of run-rate EBITDA to net income, which is the
nearest GAAP financial measure, because certain elements of net income,
including interest, depreciation and taxes, were not used in the
forecasts and are therefore not available. Together, these items
generally result in projected EBITDA being significantly higher than net
income. 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 refer to net income
attributable to the Partnership. References to EBITDA refer to earnings
before interest, income taxes, depreciation and amortization. References
to CAGR refer to compound annual growth rate.
 
Results of Operations (Unaudited)
 
Summarized Financial Statement Information

 

 

 

 
Millions of DollarsExcept as Indicated

Q3 2017
 

 

 
Q2 2017Selected Income Statement Data

 

 

Total revenues and other income

$

245

234

Net income

99

103

Net income attributable to the Partnership

99

103

 

Adjusted EBITDA

168

170

Distributable cash flow

 

 

 

 

 

136

 

 

 

 

 

140

 

 
Net Income Attributable to the Partnership  Per Limited Partner Unit—Basic and Diluted (Dollars)

Common units

 

 

 

 

 

$

0.51

 

 

 

 

 

0.61

 

 
Selected Balance Sheet Data

Cash and cash equivalents

$

2

1

Equity investments

1,265

1,212

Total assets

4,219

4,168

Total debt

2,290

2,252

Equity held by public

Common units

1,966

1,970

Equity held by Phillips 66

Common units

472

480

General partner

 

 

 

 

 

(662

)

 

 

 

 

(678

)

 

 
Statement of Income

 

 

 

 
Millions of Dollars

Q3 2017
 

 

 
Q2 2017Revenues and Other Income

 

 

Operating revenues—related parties

$

193

186

Operating revenues—third parties

11

11

Equity in earnings of affiliates

 

 

 

 

 

41

 

 

 

 

 

37
Total revenues and other income
 

 

 

 

 
245
 

 

 

 

 
234

 
Costs and Expenses

Operating and maintenance expenses

69

57

Depreciation

30

26

General and administrative expenses

16

16

Taxes other than income taxes

7

7

Interest and debt expense

23

24

Other expenses

 

 

 

 

 

1

 

 

 

 

 


Total costs and expenses
 

 

 

 

 
146
 

 

 

 

 
130
Income before income taxes

99

104

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

1
Net income

99

103
Less: Net income attributable to Predecessors

 

 

 

 

 

 

 

 

 

 


Net income attributable to the Partnership

99

103
Less: General partner’s interest in net income attributable to the
Partnership

 

 

 

 

 

43

 

 

 

 

 

37
Limited partners’ interest in net income attributable to the
Partnership
 

 

 

 

 
$56
 

 

 

 

 
66
 

 
Selected Operating Data

 

 

 

 
Thousands of Barrels Daily

Q3 2017
 

 

 
Q2 2017Pipeline, Terminal and Storage Volumes

 

Pipelines(1)

Pipeline throughput volumes

Wholly Owned Pipelines

Crude oil

1,015

938

Refined products and natural gas liquids

 

 

 

 

 

920

 

 

 

 

 

977
Total
 

 

 

 

 
1,935
 

 

 

 

 
1,915

 
Select Joint Venture Pipelines(2)

Natural gas liquids

 

 

 

 

 

387

 

 

 

 

 

372

 
Terminals

Terminal throughput and storage volumes(3)

Crude oil(4)

586

494

Refined products and natural gas liquids

 

 

 

 

 

828

 

 

 

 

 

840
Total
 

 

 

 

 
1,414
 

 

 

 

 
1,334(1) Represents the sum of volumes transported
through each separately tariffed pipeline segment.
 
(2) Total pipeline system throughput volumes
for the Sand Hills and Southern Hills pipelines (100 percent basis) per day for each period presented.
 
(3) Terminal throughput and storage volumes
include leased capacity converted to a MBD-equivalent based on capacity divided by days in the period.
 
(4) Crude oil terminals include Bayway and
Ferndale rail rack volumes.
 

Dollars per Barrel

Q3 2017

Q2 2017Revenue

Average pipeline revenue*

$

0.63

0.61

Average terminal and storage revenue

 

 

 

 

 

0.41

 

 

 

 

 

0.42
* Excludes equity affiliates.
 

 
Capital Expenditures and Investments

Millions of Dollars

Q3 2017

Q2 2017Capital Expenditures and Investments

Expansion

$

87

65

Maintenance

 

 

 

 

10

 

 

 

 

10
Total Partnership

97

75
Predecessors

 

 

 

 

 

 

 

 


Total Consolidated
 

 

 

 
$97
 

 

 

 
75
 

 
Cash Distributions
 

 

 

 

Millions of Dollars

Q3 2017
 

 

 
Q2 2017Cash Distributions*

 

 

Common units—public

$

34

28

Common units—Phillips 66

44

40

General partner—Phillips 66

 

 

 

 

 

43

 

 

 

 

 

36
Total
 

 

 

 

 
$121
 

 

 

 

 
104

 
Cash Distribution Per Unit (Dollars)
 

 

 

 

 
$0.646
 

 

 

 

 
0.615

 
Coverage Ratio†
 

 

 

 

 
1.12
 

 

 

 

 
1.35* 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.
 

 
Reconciliation of Adjusted EBITDA and Distributable Cash Flow to
Net Income

 

Millions of Dollars

Q3 2017

Q2 2017Reconciliation to Net Income

Net Income

$99

103
Plus:

Depreciation

30

26

Net interest expense

23

24

Provision for income taxes

 

 

 

 

 

 

 

 

 

 

1
EBITDA

152

154
Distributions in excess of equity earnings

10

16

Expenses indemnified by Phillips 66

4

Transaction costs associated with acquisitions

 

 

 

 

 

2

 

 

 

 

 


Adjusted EBITDA

168

170
Plus:

Deferred revenue impacts*

1

4

Less:

Net interest expense

23

24

Maintenance capital expenditures

 

 

 

 

 

10

 

 

 

 

 

10
Distributable cash flow
 

 

 

 

 
$136
 

 

 

 

 
140* Difference between cash receipts and revenue recognition.
 

 
Reconciliation of Distributable Cash Flow to Net Cash Provided by
Operating Activities
 

 

 

 

 

 

 

 

 

 

Millions of Dollars

Q3 2017

Q2 2017Reconciliation to Net Cash Provided by Operating Activities

Net Cash Provided by Operating Activities

$152

131

Plus:

Net interest expense

23

24

Provision for income taxes

1

Changes in working capital

(20

)

6

Adjustment to equity earnings for cash distributions received

(6

)

Other

 

 

 

 

 

(3

)

 

 

 

 

(2

)
EBITDA

152

154

Distributions in excess of equity earnings

10

16

Expenses indemnified by Phillips 66

4

Transaction costs associated with acquisitions

 

 

 

 

 

2

 

 

 

 

 

 
Adjusted EBITDA

168

170

Plus:

Deferred revenue impacts*

1

4

Less:

Net interest expense

23

24

Maintenance capital expenditures

 

 

 

 

 

10

 

 

 

 

 

10

 
Distributable cash flow
 

 

 

 

 
$136
 

 

 

 

 
140
 
* Difference between cash receipts and
revenue recognition.
 

View source version on businesswire.com: http://www.businesswire.com/news/home/20171027005161/en/


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