Investor Update February 2018
NYSE: PSX www.phillips66.com Lake Charles Refinery Cautionary Statement
This presentation contains certain forward-looking statements. Words and phrases such as “is anticipated,” “is estimated,” “is expected,” “is planned,” “is scheduled,” “is targeted,” “believes,” “intends,” “objectives,” “projects,” “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 the operations of Phillips 66 and Phillips 66 Partners LP (including their respective joint venture operations) are based on management’s expectations, estimates and projections about these entities, their interests and the energy industry in general on the date this presentation 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 can be found in filings that Phillips 66 and Phillips 66 Partners LP make with the Securities and Exchange Commission. Phillips 66 and Phillips 66 Partners LP are under no obligation (and expressly disclaim any such obligation) to update or alter these forward-looking statements, whether as a result of new information, future events or otherwise.
This presentation includes non-GAAP financial measures. You can find the reconciliations to comparable GAAP financial measures at the end of the presentation materials or in the “Investors” section of the websites of Phillips 66 and Phillips 66 Partners LP.
1 Diversified Downstream Company
Marketing & Midstream Chemicals Refining Specialties
Integrated Midstream 50% Interest in CPChem Diversified Refining Portfolio Stable, High-return Network Businesses Location Advantaged Investing in Quick Payout Pursue Organic and M&A Chemicals Portfolio Projects Enhancing U.S. Fuels Opportunities Brands USGC Petchem Project Footprint Offers Opportunities PSXP as a Funding Vehicle Nearing Completion for Midstream Growth
2 Executing Strategy
Leading Operating Excellence Growth CPChem USGC Petrochemicals Project Phillips 66 Partners Bakken Pipeline Beaumont Terminal Sweeny Hub Returns Refinery yield and feedstock flexibility projects U.S. marketing reimaging Distributions 30% dividend CAGR since September 2012 $10.4 B in total share repurchases/exchanges High-Performing Organization Vacuum Tower, Billings Refinery, Billings, MT
See appendix for footnotes. 3 Operating Excellence
Total Recordable Rates Refining Environmental Metrics (Incidents per 200,000 Hours Worked) (No. of events) Industry Average
’13 ’14 ’15 ’16 ’17
317 302 279 264 240
Phillips 66 CPChem DCP Midstream 2013 2014 2015 2016 2017
Operating Costs and SG&A Refining Capacity Utilization ($B) (%) Adjusted Op. Costs and SG&A Turnaround Costs Planned Maintenance & Turnarounds 5% 3% 4% 5% 2%
5.4 5.8 5.5 5.5 5.8 93% 94% 91% 96% 95%
2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
See appendix for footnotes. 4 Environmental, Social, Governance
Extensive ESG engagement Industry Safety Metrics (Incidents per 200,000 Hours Worked) 6 Board engaged in setting company ESG strategy 4
2 Record low reportable environmental events
0 Agricul., Food All Construction Prof. Petroleum Petchem. Phillips 66 Crop Manufact. Manufact. & Bus. Refining Manufact. Investing in forward-looking research and Prod. Services development technology Phillips 66 SOx, NOx, PM Emissions (Thousand tons)
Promoting inclusive and diverse workforce 30
Committed to corporate and local 25 philanthropic programs 20
15 2012 2013 2014 2015 2016 See appendix for footnotes. 5 U.S. Crude Oil and Gas Plant NGL Production
Source: I.H.S., April 2017 6 Midstream Macro Environment
U.S. Crude Oil Export Volume (MMBD) U.S. Clean Product Exports (MMBD)
1.0 2.5
2.0
1.5 0.5 1.0
0.5
0.0 0.0 2012 2013 2014 2015 2016 2017 2012 2013 2014 2015 2016 2017 U.S. LPG Export Volume (MMBD) Phillips 66 Export Capacity (MMBD) 1.2 1.5 Propane Butane
1.0 0.6 1.3
0.5 Thousands
0.0 0.0 2012 2013 2014 2015 2016 2017 Clean Products Crude LPG Total Source: EIA, annual averages data through October 2017, Petroleum Monthly 7 Chemicals Macro Environment
U.S. Ethane Demand Global PE Capacity and Demand (MMBD) (MMTA)
2.5 Exports 150 Capacity Base Ethane Petchem & Price-sensitive Demand 2.0 Flexible Feedstock
100 1.5
1.0 50
0.5
0.0 0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: I.H.S., April 2017 8 Refining Macro Environment
Global Clean Product Demand (MMBD) Global clean product demand 70 Diesel expected to grow Jet Gasoline 60
Global utilization rates expected in 50 low-80s, with U.S. refining in low-90s 40
30 Strong U.S. utilization due to cost and 20 reliability advantages, and growing export demand 10
0 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
Source: I.H.S., April 2017 9 Integrated Midstream Network
10 Midstream
2018E Annual Year-End Run-Rate Adjusted EBITDA Platform for growth ($B)
1.8 – 2.0 Focus on NGL value chain
Expand crude and products 0.6 PSX export capability PSX
PSXP 2018E year-end run-rate PSXPPSXP 1.0 1.1 adjusted EBITDA $1.1 B
Assets Online Growth Market Total
See appendix for footnotes. 11 Phillips 66 Partners
Distribution Growth Funding Midstream growth (cents/unit)
Organic growth opportunities
Sand Hills Pipeline expansions (TX)
Bayou Bridge Pipeline extension (LA)
Lake Charles Isomerization Unit (LA) 67.8 64.6 61.5 55.8 58.6 50.5 53.1 31% distribution CAGR 2013-2017 45.8 48.1 42.8 37.0 40.0 31.7 34.0 27.4 30.2 Top quartile growth post-2018 21.3 22.5
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 201320132014201420142014201520152015201520162016201620162017201720172017
12 DCP Midstream
DJ Basin Well positioned in low-cost supply basins 0.9 Bcf/d processing capacity Strong growth projects around existing footprint
Sand Hills NGL Pipeline expansions to 365 MBD in 1Q 2018, 450 MBD in 2H 2018 Permian Mid-continent DJ Basin gathering and processing infrastructure 1.3 Bcf/d 1.8 Bcf/d processing processing expansions of ~200 MMCFD in 3Q 2018 with capacity capacity another ~200 MMCFD in service mid 2019 Gulf Coast Express Permian 1.9 BCFD natural gas JV pipeline expected in service 4Q 2019
Stable distributions to LP unit holders and South resumed distributions to owners 2.6 Bcf/d processing capacity
13 Feedstock Advantaged Chemicals Portfolio
Worldwide U.S. Gulf Net Ethylene Coast Capacity: 4,810 kMTA
U.S. Net Ethylene Capacity: 3,685 kMTA
Middle East Saudi Net Ethylene Qatar Capacity: Arabia 1,125 kMTA
14 Chemicals Outlook
2018E Average Ethylene Production Cost Curve Middle East ethane and North ($/Ton) America NGLs remain positioned at the low end of the cost curve Asia Coal 1,000
M.E. Naphtha N.A. W. Asia LPG Ethylene demand growth outpacing Europe Naphtha LPG W. Asia Europe N.A. global GDP Naphtha Naphtha 500 LPG M.E. LPG
N.A. Ethane
Expect demand growth to rapidly M.E. Ethane balance new capacity additions 0 0 50 100 150 200 Cumulative Production - Million Metric Tons
Source: I.H.S., December 2017. 15 CPChem
USGC Petrochemicals Project 1,000 kMTA polyethylene at Old Ocean, TX Started operations 3Q 2017 1,500 kMTA ethylene at Cedar Bayou, TX Mechanical completion 4Q 2017 Commissioning 1Q 2018 Long-term mid-cycle EBITDA ~ $1.2-1.4 B
Additional projects in future years
Cash flow improvement expected in 2018 following heavy investment cycle CPChem USGC Ethane Cracker, Cedar Bayou, TX
EBITDA estimate is on a CPChem 100% basis and is based on July 2017 IHS forecast premises. 16 Enhancing Returns in Refining and Marketing
17 Refining
Improving returns PSX Global Clean Product Yield Billings heavy crude project (2Q 2017)
Ponca City yield flexibility (4Q 2017) 85.5% 84.6% 84.1% 84.4% 84.6% Wood River FCC modernization (2Q 2018)
Bayway FCC modernization (2Q 2018) 2013 2014 2015 2016 2017
Lake Charles crude flexibility (2H 2018) U.S. Refining Capacity Utilization ~ 25 other low-cost, high-return projects
Increasing clean product yield 88% 93% 90% 94% 91% 91% 90% 96% 91% 95%
Top tier refinery utilization rates 2013 2014 2015 2016 2017 U.S. Industry Average Phillips 66
See appendix for footnotes. 18 Marketing and Specialties
Stable, high-return businesses
Marketing Enhancing U.S. fuels brands 3% volume uplift at reimaged sites Adding 25-30 European sites per year Expanding brand licensing Providing ratable refinery off-take
Specialties Increasing value through integration, optimization, and product innovation
19 Capital Structure
Equity and Debt Investment-grade credit ratings 27.4
23.9 23.7 PSX – BBB+ / A3 30% 22.4 22.0 27% 27% PSXP – BBB / Baa3 28% 22% 26% 25% 22% 21% 10.1 10.1 Nearly $9 B of total liquidity 8.6 8.9 6.1
~3.5x Debt/EBITDA target at PSXP 2013 2014 2015 2016 2017
PSX Equity $B PSX Debt $B PSX Noncontrolling Interest PSXP Third-party Debt $B Attributable to PSXP $B Consolidated Debt-to-Capital PSX Debt-to-Capital, excluding PSXP 20 Capital Allocation
Maintain financial strength, strong 2015 – 2017 investment-grade credit rating
Fund sustaining capital expenditures
Pay a growing, secure and competitive Distributions dividend Reinvestment
60% reinvestment and 40% shareholder distributions
See appendix for footnotes. 21 Capital Expenditures
Consolidated Capital Expenditures 2018E Consolidated – $2.3 B ($B) 5.8
Phillips 66 2018E – $1.7 B
$0.8 B Growth 3.8 2.8 $0.9 B Sustaining 2.3 1.8 1.8
Phillips 66 Partners 2018E – $0.6 B
2013 2014 2015 2016 2017 2018E
PSX PSXP
2015 consolidated capital expenditures of $5.8 billion include $1.5 billion investment in DCP Midstream. 22 Distributions
Important source of shareholder value Annual Dividend ($/share)
Growing, secure, and competitive dividend 2.45 2.73 1.89 2.18 1.33 30% CAGR with seven increases since May 2012 2013 2014 2015 2016 2017
Cumulative Distributions ($B)
Committed to share repurchases 16.4 13.4 11.1 Repurchased/exchanged 142 MM shares, 8.4 over 20% of shares initially outstanding 3.7
2013 2014 2015 2016 2017
See appendix for footnotes. Share Repurchases and Exchanges Dividends 23 Creating Value
Mid-Cycle Incremental Run-Rate Adjusted EBITDA ~ $1.5 B long-term expected ($B) EBITDA growth from projects coming online 2017-2018 ~ $1.5
Shifted from heavy-investment period to increasing net cash generation
Continued investment in higher- valued businesses generating strong returns Midstream Chemicals Refining M&S Total
See appendix for footnotes. 24 Delivering Shareholder Returns
Total Shareholder Return Integrated portfolio PSX +262% 300% Disciplined capital allocation Peers +178% 260% S&P 100 +123% 220%
Returns focused 180%
140%
Value-added growth 100%
60% Strong balance sheet 20%
-20% Compelling investment May-12 May-13 May-14 May-15 May-16 May-17
See appendix for footnotes. 25 Investor Update February 2018
NYSE: PSXP www.phillips66partners.com Phillips 66 Partners Ownership Structure
(NYSE: PSX)
100% ownership interest
PSXP Public Common Phillips 66 Partners GP LLC 55% limited partner Unitholders (PSXP General Partner) interest General Partner Units IDRs 43% limited partner interest
2% general partner interest
(NYSE: PSXP)
Operating Subsidiaries
Joint Ventures As of December 31, 2017. Public also owns 13.9 million perpetual convertible preferred units. 27 Phillips 66 Partners
Strong alignment with Phillips 66
Highly integrated assets
Stable and predictable cash flows
Strong growth potential
Financial flexibility
Sweeny Fractionator, Sweeny, TX
Pecan Grove Marine Dock 28 Phillips 66 Partners
Pecan Grove Marine Dock 29 Distribution Growth
Distribution / LP Unit (cents)
67.80 61.50 64.60 55.80 58.60 50.50 53.10 45.80 48.10 40.00 42.80 34.00 37.00 27.43 30.17 31.68 21.25 22.48
3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2013 2013 2014 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 2017 2017 2017
Coverage 1.13x 1.10x 1.10x 1.44x 1.32x 1.28x 1.14x 1.17x 1.39x 1.45x 1.14x 1.20x 1.24x 1.48x 1.31x 1.35x 1.12x 1.33x Ratio
3Q 2013 distribution represents the minimum quarterly distribution, actual distribution of 15.48 cents equal to MQD prorated. 30 Financial Growth
Annual performance highlights since 2014 Adjusted EBITDA ($MM) 754 58% growth in Earnings 471 75% growth in Adjusted EBITDA 285 141 65% growth in Distributable Cash Flow 33 2013 2014 2015 2016 2017 Earnings ($MM) Distributable Cash Flow ($MM)
572 461 380 301 194 228 116 128 29 30 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017
Percentages are 2014 – 2017 compounded annual growth rate; 2013 is partial year. Adjusted EBITDA and Distributable Cash Flow shown are attributable to PSXP. 31 Phillips 66 Partners Capital Expenditures
PSXP Capital Expenditures 2018E Capex of $595 MM ($MM)
$510 MM Growth
Bayou Bridge Pipeline
Sand Hills Pipeline 595 Lake Charles Isomerization Unit 461 352
Sacagewea Gas Pipeline 205 4 $85 MM Sustaining 66 2013 2014 2015 2016 2017 2018E
See appendix for footnotes. 32 $510 MM 2018 Organic Growth Plan
Bayou Bridge Pipeline Transports crude from Nederland, TX to Lake Charles, LA, and eventually to St. James, LA Increases crude supply options for Louisiana refineries Nederland to Lake Charles leg began operations in April 2016 Development continues for segment from Lake Charles to St. James, completion in 2H 2018 Sand Hills Pipeline Adding lateral connections and increasing pumping capacity Lake Charles Isomerization Unit Developing new 25 MBD unit to increase premium gasoline production Sacagawea Gas Pipeline Constructing 24-mile raw natural gas pipeline in Bakken in joint venture with Paradigm Energy Partners
33 PSXP Debt Profile
$2.9 B Total Debt as of December 31, 2017 Senior Notes Maturity Profile ($MM) $2.9 B Senior Notes, weighted average cost of 3.97%: 5-Year $300 MM notes, 2.646% coupon 10-Year $500 MM notes, 3.605% coupon 10-Year $500 MM notes, 3.550% coupon 625 10-Year $500 MM notes, 3.750% coupon 500 500 500 450 30-Year $450 MM notes, 4.680% coupon 300 30-Year $625 MM notes, 4.900% coupon $0.1 MSLP Tax-exempt Bonds BBB / Baa3 credit rating 2020 2025 2026 2028 2045 2046
Weighted average cost excludes revolving credit facility. 34 Financial Flexibility
Investment-grade credit rating
Financial targets:
30% distribution CAGR 2013-2018
3.5x debt / EBITDA
1.1x annual coverage ratio
Support Phillips 66 Midstream growth
35 Total Return Since IPO
PSXP +164% 300% Closed $70 MM Closed $1.3 B Alerian MLP Index -15% acquisition acquisition Closed $2.4 B 250% acquisition
Closed $775 MM 200% Closed $700 MM acquisition acquisition 150%
100% Closed $340 MM Closed $1.0 B acquisition acquisition Closed $236 MM IPO acquisition 50%
0%
-50% Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16 Jul-16 Oct-16 Jan-17 Apr-17 Jul-17 Sep-17Dec-17
Chart reflects total unitholder return July 22, 2013 to January 31, 2018. Distributions assumed to be reinvested in units. Source: Bloomberg. See appendix for further footnotes. 36 Appendix
Freeport LPG Export Terminal Corporate Strategy
Operating Committed to safety, reliability and environmental stewardship while Excellence protecting shareholder value
Reshaping our portfolio by capturing growth opportunities in Midstream Growth and Chemicals
Enhancing returns by maximizing earnings from existing assets and Returns investing capital efficiently
Distributions Committed to dividend growth, share repurchases and financial strength
High-Performing Building capability, pursuing excellence and doing the right thing Organization
38 Value Chain
39 Midcontinent Integrated Growth
Midstream Palermo rail terminal/Sacagawea Pipeline (PSXP) Bakken Pipeline (PSXP)
Refining, Marketing & Specialties Ponca City Yield improvement projects Tar Stripper Retirement Gas oil hydrotreater expansion 100% lease crude purchases
Wood River ULSD expansion FCC modernization
Billings Vacuum tower project Marketing & Specialties Grow branded fuels volumes Enhance Phillips 66 brand Marketing JVs and alliances 40 Western Gulf Creating a World-Class Energy Complex
Midstream
Sweeny Fractionator (PSXP) Freeport LPG Export Terminal
Refining, Marketing & Specialties
Sweeny Strategic asset integration FCC optimization
Marketing & Specialties Grow unbranded fuels volumes Focus on high-quality branded assets Increase high-margin exports
41 Eastern Gulf Refining Logistics and Midstream Growth
Midstream Beaumont Terminal expansion Bayou Bridge Pipeline (PSXP) River Parish NGL System (PSXP)
Refining, Marketing & Specialties Lake Charles Increase feedstock advantage New Isomerization unit (PSXP) ULSD project
Alliance ULSD project
Marketing & Specialties Grow unbranded fuels volumes Leverage brand value through licensing Increase high-margin exports Grow performance lubricants and export sales
42 West Coast Enhancing Returns
Refining, Marketing & Specialties San Francisco Yield improvements Reduce Coker Operating Pressure Renewable diesel project Los Angeles Renewable diesel project Marketing & Specialties Grow branded and unbranded fuels volumes Enhance 76 brand Increase high-margin exports Grow export lubricant sales
43 Atlantic Basin Enhancing Returns
Refining, Marketing & Specialties
Bayway FCC modernization Yield improvements
Marketing & Specialties Grow JET and COOP brands in Europe Increase unbranded volumes in the U.K. and U.S. Expand brand licensing in the U.S.
44 Adjusted Free Cash Flow 2012–2017 Average
Midstream ($B) Chemicals ($B)
PSXP Contributions 1.0 (0.3) (0.2) 1.0 1.7 0.8 0.9
Adjusted CFO & PSXP Sustaining Capex Available Cash Flow Adjusted CFO Sustaining Capex Adjusted FCF Contributions Refining ($B) Marketing & Specialties ($B)
(0.8) (0.1) 2.7 0.9 1.8 0.8
Adjusted CFO Sustaining Capex Adjusted FCF Adjusted CFO Sustaining Capex Adjusted FCF
Adjusted CFO excludes working capital. Sustaining capex excludes capital leases. Midstream adjusted CFO excludes PSXP. PSXP contributions are calculated as consideration paid by PSXP to PSX in dropdown transactions plus quarterly cash distributions paid from PSXP to PSX. Midstream sustaining capex excludes PSXP. Phillips 66’s share of DCP Midstream, CPChem and WRB adjusted CFO reflects that portion of those entities’ cash flow over which Phillips 66 has significant influence over reinvestment/distribution decisions. DCP Midstream, CPChem and WRB free cash flow calculated based on Phillips 66’s share of after tax cash flow at the enterprise level. 45 2012–2017 Average Adjusted ROCE
30% M&S
Chemicals 27%
15% 20% Refining PSX Total 12%
13% Midstream
7% Corporate 0% (8%)
-15% 0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30 32
Average Capital Employed ($B)
46 Phillips 66 Debt and Liquidity
Debt Maturity Profile Liquidity ($B) ($B)
5.0
7.9
5.0 4.0
2.9 2.0 0.5 0.3 0.3 2019 2020 2021 2022-30 2031-50 Cash Undrawn Revolving Total Bonds Revolving Credit Facility Term Loans Credit Facility Committed Liquidity
Debt maturity profile and liquidity as of December 31, 2017. Excludes PSXP. Debt maturity profile excludes capital leases. 47 2018 Sensitivities
Sensitivities shown above are independent and are only valid within a limited price range. 48 Phillips 66 Outlook
1Q 2018 Global Olefins & Polyolefins utilization Mid-90% Refining crude utilization Mid-80% Refining turnaround expenses (pre-tax) $230 MM - $260 MM Corporate & other costs (after-tax) $160 MM - $180 MM 2018 Refining turnaround expenses (pre-tax) $520 MM - $570 MM Corporate & Other costs (after-tax) $640 MM - $680 MM Depreciation and amortization $1.4 B Effective income tax rate Low-to-Mid-20%
49 2018 Capital Budget
50 Footnotes
Slide 3 Total share repurchases and exchanges include the PSPI share exchange in 2014. Dividend CAGR calculated from initial dividend of $0.20 per share in 3Q 2012 to last increase of $0.70 per share in 2Q 2017. Slide 4 Industry averages are from: Phillips 66 – American Fuel & Petrochemical Manufacturers (AFPM) refining data, Chevron Phillips Chemical Company LLC (CPChem) – American Chemistry Council (ACC), DCP Midstream, LLC (DCP Midstream) – Gas Processors Association (GPA). Slide 5 Industry safety metrics as of 2016. Source: Bureau of Labor Statistics. Sulfur oxides (SOx), nitrous oxides (NOx) and particulate matter (PM).
51 Footnotes
Slide 11 Run-rate adjusted EBITDA for PSXP assets online represents the estimated run-rate view as of December 31, 2017. Run-rate adjusted EBITDA for PSX assets online represents the sum of (i) forecasted year-end 2018 EBITDA of other Midstream assets currently online and (ii) an estimate of the run-rate EBITDA potential of terminal, storage and other logistics assets currently embedded in the Refining segment if they were transferred to the Midstream segment and market-based fees were charged to Refining for their use. Slide 18 To enhance comparability to current operating assets, clean product yield shown excludes impacts from Whitegate and Melaka prior to their sales. U.S. Industry average from U.S. Energy Information Administration (EIA). Slide 21 Reinvestment excludes Phillips 66’s portion of self-funded capital spending by DCP, CPChem and WRB. Includes $1.5 B equity contribution to DCP in 2015.
52 Footnotes
Slide 23 Annual dividend reflects sum of declared quarterly dividends. 2017 reflects one quarterly dividend of $0.63 and three quarterly dividends of $0.70. Dividend CAGR calculated from initial dividend of $0.20 per share in 3Q 2012 to last increase of $0.70 per share in 2Q 2017. 2014 share repurchases/exchanges include the PSPI share exchange. Slide 24 Chart reflects estimated mid-cycle run-rate adjusted EBITDA contribution of projects coming online in 2017 and 2018. Slide 26 Chart reflects total shareholder return May 1, 2012 to January 31, 2018. Dividends assumed to be reinvested in stock. Source: Bloomberg. Peer average includes Delek US Holdings, Inc., HollyFrontier Corporation, Marathon Petroleum Corporation, PBF Energy Inc., Andeavor (formerly Tesoro Corporation), Valero Energy Corporation, Enterprise Products Partners L.P., ONEOK, Inc., Targa Resources Corp., Celanese Corporation, Eastman Chemical Company, Huntsman Corporation, LyondellBasell Industries, and Westlake Chemical Corporation.
53 Footnotes
Slide 32 Capital expenditures attributable to the Partnership. Excludes predecessor capital spending Slide 36 $2.4 B transaction closed as of October 6, 2017, includes $625 MM non-recourse Bakken JV debt and $100 MM of Merey Sweeny, LP (MSLP) debt.
54 Footnotes
1H 2017 1H 2017 is as of June 30, 2017, or the six-month period ended June 30, 2017, as applicable; except as otherwise noted. 3Q YTD 2017 3Q YTD 2017 is as of September 30, 2017, or the nine-month period ended September 30, 2017, as applicable; except as otherwise noted. Forecasted and Estimated EBITDA We are unable to present reconciliations of various forecasted and estimated EBITDA included in this presentation, because certain elements of net income, including interest, depreciation and income taxes, are not reasonably available. Together, these items generally result in EBITDA being significantly greater than net income.
55 Non-GAAP Reconciliation (slide 4)
Millions of Dollars 2013 2014 2015 2016 2017
Production and operating expenses $ 4,206 $ 4,435 $ 4,294 $ 4,275 $ 4,699 Selling, general and administrative expenses 1,478 1,663 1,670 1,638 1,695 5,684 6,098 5,964 5,913 6,394 Plus: Sentinel operating expenses* 81 90 88 94 - Total expenses 5,765 6,188 6,052 6,006 6,394 Less: Turnaround expenses** 368 424 516 506 598 Adjusted Operating Costs and SG&A $ 5,397 $ 5,764 $ 5,536 $ 5,500 $ 5,796
*Sentinel Transportation, LLC became a wholly-owned subsidiary of Phillips 66 on 12/31/16. Costs for 2013 - 2016 are included for comparison purposes. ** Turnaround expenses are reported under Operating expenses in the Income Statement
56 Non-GAAP Reconciliations (Slide 45)
Millions of Dollars Average 2012 - 2017 Marketing & FCF Reconcilition Midstream Chemicals Refining Specialties Cash From Operations GAAP 886 355 2,604 908 Less: Change in Non-Cash Working Cap. (3) - 119 (52) Cash From Operations (excluding WC) 883 355 2,723 855 Less: P66 Equity affiliate cash from ops 177 355 518 - Add: Equity look through cash from ops 357 998 466 - Less: PSXP's portion of CFO* 182 - - - Adjusted FCF (excl WC) 881 998 2,671 855
Total Capex GAAP 1,693 - 944 198 Less: Growth Capex 1,277 - 229 135 Sustaining Capex 416 - 715 63 Less: P66 Equity affiliate sustaining capex 250 - - - Add: Equity look through sustaining capex 112 207 107 - Less: PSXP's portion of sustaining capex 16 - - - Adjusted Sustaining Capex 262 207 822 63
PSXP Contributions* 1,042 - - -
Adjusted Free Cash Flow 1,661 791 1,849 792
*PSXP formed in 2013, values of 0 included for 2012 57 PSXP Adjusted EBITDA and Distributable Cash Flow Reconciliation to Net Income (Slide 31)
Millions of Dollars 2013 2014 2015 2016 2017 Reconciliation to Net Income Attributable to the Partnership Net income attributable to the Partnership 29 116 194 301 461 Plus: Net income attributable to Predecessors 145 129 112 107 63 Net income 174 245 306 408 524 Plus: Depreciation 43 46 61 96 116 Net interest expense — 5 34 52 99 Income tax expense 2 1 — 2 4 EBITDA 219 297 401 558 743 Proportional share of equity affiliates’ net interest, taxes and depreciation — — 31 45 66 Expenses indemnified or prefunded by Phillips 66 — 2 2 6 8 Transaction costs associated with acquisitions 1 3 2 4 4 EBITDA attributable to Predecessors (187) (161) (151) (142) (67) Adjusted EBITDA 33 141 285 471 754 Plus: Deferred revenue impacts*† — 2 4 11 6 Less: Equity affiliate distributions less than proportional EBITDA — — 19 28 29 Maintenance capital expenditures† 3 12 8 22 50 Net interest expense — 3 34 52 100 Preferred unit distributions — — — — 9 Distributable cash flow 30 128 228 380 572 Adjusted EBITDA for all prior periods has been retrospectively adjusted to present our proportional share of equity affiliates’ EBITDA, rather than cash distributions received. *Difference between cash receipts and revenue recognition. † Excludes MSLP capital reimbursements and turnaround impacts. 58 PSXP Adjusted EBITDA and Distributable Cash Flow Reconciliation to Operating Cash Flow (Slide 31)
Millions of Dollars 2013 2014 2015 2016 2017 Reconciliation to Net Cash Provided by Operating Activities Net cash provided by operating activities 199 296 392 492 724 Plus: Net interest expense — 5 34 52 99 Income tax expense 2 1 — 2 4 Changes in working capital 18 (3) (12) 28 (30) Adjustment to equity earnings for cash distributions received — — — (1) 1 Other — (2) (13) (15) (55) EBITDA 219 297 401 558 743 Proportional share of equity affiliates’ net interest, taxes and depreciation — — 31 45 66 Expenses indemnified or prefunded by Phillips 66 — 2 2 6 8 Transaction costs associated with acquisitions 1 3 2 4 4 EBITDA attributable to Predecessors (187) (161) (151) (142) (67) Adjusted EBITDA 33 141 285 471 754 Plus: Deferred revenue impacts*† — 2 4 11 6 Less: Equity affiliate distributions less than proportional EBITDA — — 19 28 29 Maintenance capital expenditures† 3 12 8 22 50 Net interest expense — 3 34 52 100 Preferred unit distributions — — — — 9 Distributable cash flow 30 128 228 380 572 Adjusted EBITDA for all prior periods has been retrospectively adjusted to present our proportional share of equity affiliates’ EBITDA, rather than cash distributions received. *Difference between cash receipts and revenue recognition. † Excludes MSLP capital reimbursements and turnaround impacts. 59 Non-GAAP Reconciliations (Slide 46)
Millions of Dollars Average 2012-2017 Phillips 66** Midstream Chemicals Refining M&S Corporate Phillips 66 ROCE Numerator Net Income $ 3,974 317 836 1,824 873 (12) After-tax interest expense 203 - - - - 203 GAAP ROCE earnings 4,177 317 836 1,824 873 191 Special Items (463) 91 74 5 (57) (438) Adjusted ROCE earnings $ 3,714 408 910 1,828 815 (247)
Denominator GAAP average capital employed* 30,705 6,055 4,540 13,797 3,073 3,074 Discontinued Operations (77) - - - - - Adjusted average capital employed* $ 30,628 6,055 4,540 13,797 3,073 3,074 *Total equity plus debt.
GAAP ROCE (percent) 14% 5% 18% 13% 28% 6% Adjusted ROCE (percent) 12% 7% 20% 13% 27% -8% ** Phillips 66 consolidated includes discontinued operations.
60