Phillips 66 Posts Wider-Than-Expected Q1 Loss on Lower Refining Volumes

Phillips 66 PSX reported first-quarter 2025 adjusted loss of 90 cents per share, wider than the Zacks Consensus Estimate of a loss of 77 cents. The bottom line declined from the year-ago quarter’s earnings of $1.90.

Total quarterly revenues of $32 billion beat the Zacks Consensus Estimate of $31 billion. However, the top line declined from the year-ago level of $36 billion.

Weak quarterly earnings can be attributed to lower refining volumes and a drop in realized refining margins worldwide. However, higher contribution from the Midstream segment due to increased NGL transportation volumes, partially offset the negatives.

Phillips 66 Price, Consensus and EPS Surprise

Phillips 66 price-consensus-eps-surprise-chart | Phillips 66 Quote

Segmental Results

Midstream:

The segment generated adjusted pre-tax quarterly earnings of $683 million, up from $613 million in the year-ago quarter. The reported figure surpassed our estimate of $439.3 million. The segment was aided by higher margins fueled by gathering and processing results and higher NGL transportation volumes compared to the prior-year quarter’s level.

Chemicals:

The unit recorded adjusted pre-tax earnings of $113 million, down from $205 million in the prior-year quarter. The reported figure also missed our estimate of $168.4 million.

Refining:

The segment reported an adjusted pre-tax loss of $937 million against adjusted pre-tax earnings of $313 million in the year-ago quarter. The reported figure also missed our projection of a loss of $254.3 million. The deterioration was primarily due to a decline in refining volumes. Higher costs associated with planned turnaround activity also affected the segment.

Refining’s realized refining margins worldwide declined to $6.81 per barrel from the year-ago quarter’s $11.01, and the same in the Central Corridor and Atlantic Basin/Europe dropped to $8.29 and $7.08 per barrel, respectively, from the year-ago quarter’s $12.56 and $9.70.

The West Coast’s margins declined to $7.12 per barrel from $10.60 in the year-ago quarter. In the Gulf Coast, the metric declined to $4.43 per barrel from $10.95 a year ago.

Marketing & Specialties:

Adjusted pre-tax earnings declined to $265 million from $307 million in the year-ago quarter. The reported figure beat our projection of $200.4 million.

Realized marketing fuel margins in the United States declined to $1.36 per barrel from the year-ago quarter’s $1.60, and the same in the international markets declined marginally to $4.87 from $4.88 a year ago.

Renewable Fuels:

The segment reported an adjusted pre-tax loss of $185 million compared with a loss of $55 million in the year-ago quarter. Our model projected adjusted pre-tax earnings of $80.3 million.  The segment was affected by a switch from blenders tax credits to production tax credits. Furthermore, weak results from the international markets and inventory impact contributed to the same.  

Costs & Expenses

Total costs and expenses in the first quarter decreased to $31.1 billion from $35.5 billion in the year-ago period. Our projection for the same was pinned at $32.6 billion.

Financial Condition

Phillips 66 generated $187 million of net cash from operations for the reported quarter. This implies an improvement from $236 million of net cash used in operations in the year-ago period. The company’s capital expenditure and investments totaled $423 million. It paid out dividends of $469 million in the first quarter.

As of March 31, 2025, cash and cash equivalents were $1.5 billion. Total debt was $18.8 billion, reflecting a debt-to-capitalization of 40%.

PSX’s Zacks Rank and Key Picks

PSX currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the energy sector are Archrock Inc. AROC, Nine Energy Service NINE and Kinder Morgan, Inc. KMI. While Archrock currently sports a Zacks Rank #1 (Strong Buy), Nine Energy Service and Kinder Morgan carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

Archrock is an energy infrastructure company based in the United States with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues. With natural gas playing an increasingly important role in the energy transition journey, AROC is expected to witness sustained demand for its services.

Nine Energy Service provides onshore completion and production services for unconventional oil and gas resource development. It operates across key prolific basins in the United States, including the Permian, Eagle Ford, MidCon, Barnett, Bakken, Rockies, Marcellus and Utica, as well as throughout Canada. With a sustained demand for oil and gas in the future, the need for NINE’s services is anticipated to increase, which should position the company for growth in the long run.

Kinder Morgan is a leading North American midstream player with a stable and resilient business model, largely driven by take-or-pay contracts. KMI’s stable business model shields it from commodity price volatility, resulting in predictable earnings and facilitating reliable capital returns to its shareholders. In the first quarter of 2025, Kinder Morgan increased its quarterly cash dividend to 29.25 cents, reflecting an approximately 2% increase from the prior-year level.

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