Marketing and Special Products at Phillips 66

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Conoco and Phillips 66 announced on November 18, 2001 that their boards of directors had unanimously approved a definitive agreement for a "merger of equals". The merged company, ConocoPhillips, became the third-largest integrated U.S. energy company based on market capitalization and oil and gas reserves and production. On November 11, 2011 ConocoPhillips announced that Phillips 66 would be the name of a new independent oil and gasoline refining and marketing firm, created as ConocoPhillips split into two companies. ConocoPhillips kept the current name of the company and concentrated on oil exploration and production side while Phillips 66 included refining, marketing, midstream, and chemical portions of the company. Photo: Hugh Pickens all rights reserved.

by Hugh Pickens, Ponca City Oklahoma


The purpose of this report is to provide a comprehensive overview of Phillips 66 that documents and explains the company's business strategy and execution of that strategy.

Major Sections of this report on Phillips 66 include:

Safety, Environment, Legal


Corporate


Strategic and Financial


Business Segments


Stock Market


Reference

Refining Business Segment


Increasing Profitability in Refining Business Segment


Detailed Look at Ponca City Refinery


Other Phillips Refineries


Other Locations


Contents

Master Index of Articles about Phillips 66

The 587 foot tall Mammoet PTC 140 crane, seen here from North First Street, towers over the Refinery Complex in Ponca City. The supercrane was used to move two new 232 ton coker reactor units within the refinery on September 29, 2013. Phillips was willing to invest $70 million in the two new coker reactor units because the Ponca City Refinery is one of the best run, safest, and most profitable of Phillips' fifteen worldwide refineries and Garland wants the refinery in Ponca City to continue to run smoothly and profitably. This photograph of the supercrane in Ponca City was taken from almost two miles away from the crane. Photo: Hugh Pickens All Rights Reserved.
Hugh Pickens, an analyst who closely follows Phillips 66, speaks with Phillips CEO Greg Garland (right) about the disposition of the North Tower, South Tower, and Research West at Phillips' Ponca City Refinery after Garland's speech to the Bartlesville Chamber of Commerce on August 13, 2014.

by Hugh Pickens, Ponca City Oklahoma


The purpose of this report is to provide a comprehensive overview of Phillips 66 that documents and explains the company's business strategy and execution of that strategy.

Major Sections of this report on Phillips 66 include:

Safety, Environment, Legal


Corporate


Strategic and Financial


Business Segments


Stock Market


Reference

Refining Business Segment


Increasing Profitability in Refining Business Segment


Detailed Look at Ponca City Refinery


Other Phillips Refineries


Other Locations


Marketing and Special Products

Phillips 66 treats marketing and special products as part of the R&M Business Segment but a significant portion of the earnings of R&M are not related directly to refining. Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that marketing and special products is a very stable business that brings in $500 million to $700 million of annnual net income. "When we talk about marketing in the US, we do not own any stations. We market through branded wholesale stations in the US. There's about 8,000 branded stations that are marketed under either the Phillips 66, the Conoco, or the 76 brand. About half of our marketing margin is actually moved through unbranded wholesale. In Europe, we do sell direct. We have about 900 stations in Germany and Austria, another 250 stations in Switzerland in a joint venture with Coop. In Germany and Austria, we -- Switzerland and UK we market under the JET brand. Extremely high market efficiency out of these stations. Strong ROCEs in excess of 30%. We like the European retail presence. We look at the European market. It's a lot like North America. It's really a flat to declining market. So we will grow, but we'll grow marginally in the European business. We're also a large top three supplier of lubricants in the US, the other business we like and we'll continue to grow that business."[1]

Latest News and Views on Marketing

July 31, 2015: Phillips Marketing and Special Products Business Segment Posts Earnings of $182 million for Second Quarter

Businesswire reported on July 31, 2015 that Phillips announced second-quarter earnings of $1,012 million, compared with earnings of $987 million in the first quarter of 2015. Adjusted earnings were $1,002 million, an increase of $168 million from the last quarter. “Our Refining, Chemicals, and M&S businesses delivered a strong quarter, providing solid earnings and cash flow,” said Greg Garland, chairman and CEO of Phillips 66. "We operated well, executed major turnaround activity and progressed our capital projects. We also returned more than $600 million to shareholders through dividends and share repurchases."

Marketing and Specialties (M&S) second-quarter adjusted earnings were $182 million, compared with $194 million in the first quarter of 2015. Adjusted earnings for Marketing and Other were $134 million, a decrease of $10 million from the prior quarter. The business realized strong U.S. margins driven by favorable market conditions and higher volumes; however, earnings were slightly lower than last quarter primarily due to foreign currency impacts. Second-quarter refined product exports were 143,000 barrels per day (BPD), up 57,000 BPD primarily due to favorable distillate export economics combined with increased refinery throughput in the Gulf Coast. Phillips 66’s Specialties businesses generated earnings of $48 million during the second quarter, in line with the first quarter.[2]

December 5, 2014: Phillips to Invest $170 Million in 2014 in Marketing and Specialties

Phillips 66 announced on December 5, 2014 that in Marketing and Specialties, the company plans to invest $170 million for growth and sustaining capital. The growth investment reflects Phillips 66’s continued plans to expand and enhance its fuel marketing business.[3]

December 6, 2013: Phillips to Invest $140 Million in 2014 in Marketing and Specialties

Phillips reported on December 6, 2013 that they plan to invest $140 Million in 2014 in Marketing and Specialties growth and sustaining capital. The growth investment reflects Phillips 66’s intent to expand its international fuel marketing business. The company plans to add approximately 200 new retail sites in Europe over the next five years.[4]

September 26, 2013: Former Phillips 66 Marketer Shuns Big Oil for E15

Domestic Fuel reported on September 26, 2013 that Scott Zaremba, a Kansas retailer who sold fuel under the Phillips 66 brand for 28 years, has decided to drop Phillips 66 so he can offer consumers the choice of E15 ethanol. “They changed the rules mid-stream for what they would allow me to do once E15 came out,” said Zaremba. “And so I re-branded my locations to Zarco USA and created a brand of American Fuels.” Zaremba says it was necessary to offer something else, becoming the first retailer in the nation to offer E15 and hopes others will follow his lead and break with Big Oil and choose the cleaner, more economical and stable renewable fuel, ethanol. “We see the great opportunity now of being able to give the consumer a choice, reduce our dependency on foreign oil, and move forward being able to have something for the consumer that will give them higher octane in a cleaner burning product, and give stability to our economy.”[5]

June 10, 2013: Phillips Forces Gas Station Owners to Either Label or Stop Selling Gasoline Blended with 15 percent Ethanol

Cezary Podkul reported on Fox Business on June 10, 2013 that according to new Phillips 66 guidelines any gasoline with more than 10 percent ethanol has to be served from a separate, yellow hose with the aim of distinguishing E15 from other Phillips 66-branded gasolines with 10 percent or less ethanol. On April 1, Zaremba received a notice from Phillips 66, the nation's third-largest refiner, that he could no longer sell the E15 fuel from his regular black fuel hoses, as he had been selling it since last July. "He has other options, but they aren't cheap - or very feasible," writes Podkul. "For example, it would cost $100,000 to $250,000 to install new stand-alone gas pumps for E15, Zaremba said. Or he can always pay a $412,000 fee to Phillips 66 to break his marketing contract - expensive options that have so far kept him in compliance with the Phillips 66 guidelines, the only way he said he could." Phillips 66 Spokesman Dennis Nuss said in a statement that they were simply part of an occasional update to its brand standards meant "to ensure a positive and consistent customer experience at the pump." Oil producers say they are just doing the responsible thing - holding firm to a 10 percent maximum blend of ethanol in gasoline, or E10 - because anything more than that can cause engine damage in many vehicles on the road today.[6]

May 14, 2013: Phillips to Celebrate New Company During Marketing Conference

CSP Daily News reported on May 14, 2013 that Phillips will have booths manned by informed company representatives from the fuels, lubricants and aviation divisions to promote Phillips 66 Lubricants, Phillips 66 Motor Fuels Marketing and Phillips 66 Aviation at the 2013 Marketing Conference & Trade Show from May 21 to May 24 2013 at the Aria Resort in Las Vegas. Phillips chose the theme "New Energy, New Possibilities" to celebrate the establishment and spirit of the new corporation. "The theme expands on our excitement and passion for providing you new opportunities, ideas and ways to help grow your business," the company said. "Expect informative and beneficial breakout sessions, engaging speakers, a comprehensive trade show, exciting entertainment and much more."[7]

January 2, 2013: California Sues Phillips for Environmental Violations at Gas Stations

Bloomberg reported on January 2, 2013 that California Attorney General Kamala Harris and and seven county district attorneys filed a complaint on January 2, 2013 in state court seeking an order to force ConocoPhillips and Phillips 66 to comply with California’s laws for underground gasoline storage tanks as well as unspecified civil penalties for violating the state’s health and safety code. “The state’s hazardous waste laws help protect our residents from contaminated groundwater,” Harris said in a statement. “This lawsuit safeguards public health by ensuring proper maintenance of the tanks that store fuel beneath many California communities.” The People v. Phillips 66, RG13661894, Superior Court of California, Alameda County (Oakland) accuses the two companies of improperly monitoring, inspecting and maintaining underground storage tanks.[8]

Specialty Coke

September 5, 2012: Garland Says Speciality Coke Provides Stable Earnings

Greg Garland told investors and securities analysts at the 2012 Barclays CEO Energy-Power Conference in New York on September 5, 2012 that the specialty coke business provides stable earnings and really slightly stronger earnings in the base refining business. "As we think about specialty coke, really two types, anode coke and the needle coke. Anode coke is critical to the production of aluminum. We think the aluminum market grows about 5% to 7% a year. We have about a 7% market share of global demand in this business. So this business provides stable earnings and really slightly stronger earnings in the base refining business. We also make a needle grade coke at two of our refineries. It's the only type of coke that's used to make graphite anodes in the steel recycling industry. This industry is growing about 2% to 4% a year, very high profit for us. This is based upon proprietary PSX technology. So you'll see us grow this business over time.[9]

Specialty Lubricants

June 23, 2014: Phillips to Acquire Lubricant Manufacturer Spectrum Corp

Olivia Pulsinelli reported in the Houston Business Journal on June 23, 2014 that Phillips is acquiring Memphis-based Spectrum Corp. a specialty lubricants company from Dominus Capital LP as it plans to grow its lubricants business. There are approximately 225 employees working at Spectrum today who will become Phillips 66 employees upon closing of the transaction,” a Phillips 66 spokesman told the Houston Business Journal. “The acquisition of Spectrum complements our strong-performing lubricants business by increasing our access to specialized global lubricants markets and is in line with our strategy to selectively grow our marketing and specialties segment,” Tim Taylor, president of Phillips 66, said in a statement. “It also creates new opportunities to expand our worldwide lubricants customer base.”[10]

References



Master Index of Articles about Phillips 66

The North Tower and the South Tower, part of Phillips 66's Refinery Complex in Ponca City, contain over 250,000 square feet of Class A office space that is essentially unused. Research West contains another 230,000 square feet of unused Class A office space. Photo: Hugh Pickens
Ponca: A Core Asset. Phillips CEO Greg Garland told members of the Bartlesville Chamber of Commerce on August 27, 2013 that the refinery at Ponca is a 'core asset' of Phillips 66. The refinery in Ponca City "is making very good money for us," Garland told his Bartlesville audience. Garland added that he expects gas demands in the U.S. to decline by 20 percent in the next 10 years, but that demand for refined products in South America and Africa will more than offset that decline.

by Hugh Pickens, Ponca City Oklahoma


The purpose of this report is to provide a comprehensive overview of Phillips 66 that documents and explains the company's business strategy and execution of that strategy.

Major Sections of this report on Phillips 66 include:

Safety, Environment, Legal


Corporate


Strategic and Financial


Business Segments


Stock Market


Reference

Refining Business Segment


Increasing Profitability in Refining Business Segment


Detailed Look at Ponca City Refinery


Other Phillips Refineries


Other Locations

Personal tools