Phillips 66

Welcome to the first quarter 2024 Phillips 66 earnings conference call. My name is Lydia and I'll be your operator for today's call. At this time, all participants are in the listen-only mode. Later, we will conduct a question and answer session. Please note that this conference is being recorded. I'll now turn the call over to Jeff Dieter, Vice President, Investor Relations. Jeff, you may begin.

Welcome to Phillips 66 first quarter earnings conference call. Participants on today's call will include Mark Glazier, President and CEO, Kevin Mitchell, CFO, Tim Roberts, Midstream and Chemicals, Rich Harbison, Refining, and Brian Mandel, Marketing and Commercial. Today's presentation materials can be found on the investor relations section of the Phillips 66 website. along with supplemental financial and operating information. Slide two contains our safe harbor statement. We will be making forward-looking statements during today's call. Actual results may differ materially from today's comments. Factors that could cause actual results to differ are included here, as well as in our SEC filings. With that, I'll turn the call over to Mark. Thanks, Jeff.

Welcome, everyone, to our first quarter earnings call. We continued to progress our strategic priorities, and we returned significant cash to our shareholders. While our crude utilization rates were strong during the quarter, our results were affected by maintenance that limited our ability to make higher value products. We were also impacted by the renewable fuels conversion at Rodeo, as well as the effect of rising commodity prices on our inventory hedge positions. Currently, our assets are running near historical highs and we are ready to meet peak summer demand. Before we provide an update on our strategic priorities, we want to recognize our midstream, refining, and chemicals businesses, which have all received honors for their exemplary safety performance in 2023. Our midstream gathering and processing business received the top 2023 GPA safety award in the large operator division. In refining, The Rodeo and Sweeney facilities both received the AFPM Distinguished Safety Award, which is the highest annual safety award in the industry. This was Sweeney Refinery's third straight year to receive the honor. The Ponca City Refinery earned the Elite Platinum Award and the Lake Charles Refinery secured the Elite Gold Award. In chemicals, CP Chem received two AFPM Safety Awards. I'm very proud of our employees and the employees of CP Chem for their commitment to safety. I would like to congratulate them on a job well done. Today, beginning on slide four, we'll highlight the progress we've made on our strategic priorities. Next, we'll discuss our first quarter financial results. Then, we look forward to your questions. We previously announced plans to monetize assets that no longer meet our long-term objectives. and we set a target to generate over $3 billion in proceeds. The expected proceeds will support our strategic priorities, including returns to shareholders. This quarter, we launched a process to divest our retail marketing business in Germany and Austria and communicated the plans to employees. Completion of the dispositions is subject to satisfactory market conditions and customary approvals. We have distributed almost $10 billion through share repurchases and dividends since July of 2022. Over the remaining three quarters of 2024, we expect to achieve our $13 to $15 billion target. Share repurchases will continue to be an important component of our capital allocation. We're committed to return over 50% of our operating cash flows to shareholders. Recently, we announced a 10% increase in our quarterly dividend, contributing to a 16% compound annual growth rate since 2012. The dividend increase reflects the confidence we have in our growing mid-cycle cash flow generation and our disciplined approach to capital allocation, including a secure, competitive, and growing dividend. In refining, we continue to run at crude utilization rates above the industry average for the fifth consecutive quarter. We remain focused on improving performance, increasing market capture, and reducing costs to enhance our earnings per barrel. We have achieved over $560 million or more than 80 cents per barrel in run rate cost reductions from business transformation. We expect to achieve our full $1 per barrel run rate target by the end of the year. In midstream, our NGO wellhead-to-market business is focused on capturing operating and commercial synergies of over $400 million by year-end 2024. Midstream's estimated 2024 mid-cycle adjusted EBITDA is $3.6 billion, providing stable cash generation that covers the company's top capital priorities, funding sustaining capital, and the dividends. During the first quarter, we achieved a major milestone with the startup of our Rodeo Renewable Energy Complex. Slide five summarizes our journey to transform the San Francisco refinery into one of the world's largest renewable fuels facilities. The facility benefits as a superior location to secure renewable feedstocks and market renewable fuels. The project leverages existing assets and is expected to generate strong returns. We began producing renewable diesel from our Unit 250 hydrotreater in April of 2021. We have gained valuable operational experience and market knowledge that positions us for success in our expanding renewable fuels business. Unit 250 continues to exceed expectations and has increased production to approximately 10,000 barrels per day. Our Rodeo Renewable Energy Complex is producing 30,000 barrels per day of renewable fuels. We're on track to increase production capability to full rates of approximately 50,000 barrels per day by the end of the second quarter. Once complete, we'll have the ability to produce renewable jet, a key component of sustainable aviation fuel. We're proud of the team's strong project execution and appreciate their commitment to operating excellence in achieving this significant milestone. The Rodeo Renewable Energy Complex positions Phillips 66 as a world leader in renewable fuels. Slide 6 provides an update on business transformation progress. Our run rate savings were $1.24 billion at the end of the first quarter, comprised of $940 million of cost reductions and $300 million of sustaining capital efficiencies. Through the first quarter, we've achieved $750 million in annualized cost reductions. The majority of these cost reductions relate to refining operating and SG&A expenses, as well as benefits to equity earnings and gross margin. We're on track to realize $1 billion of cost reductions in 2024 to sustain higher cash generation. Before I turn the call over to Kevin to review the financial results, I want to stress that the market fundamentals are good, our assets are running well, and we have a clear path to achieving our strategic priorities and growing cash flows.