Phillips 66's Contributions to Ponca City

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The Ponca City News reported on October 21, 2012 that Phillips 66 provides financial and in-kind support to community organizations through corporate and employee based programs. "Our philanthropic contributions in Ponca City and the surrounding area are significant. In 2011, direct contributions to non-profit agencies, matching United Way contributions, and contributions based on employee and retiree hours or monetary contributions were in excess of $1.1 million dollars." The Ponca City Refinery earned profits in excess of $500 million in 2011 for Phillips 66 and based on Phillips' third quarter earnings report for 2012 with a realized crack spread of $31.83 for mid-continent refineries and a capacity utilization of 102%, the Marland Refinery in Ponca City will contribute at an annualized rate of over $1 billion ($1.032 B) of net profits in 2012 to Phillips bottom line. Graphic: Hugh Pickens. Note: The area of each bag of money is proportional to the amount of money. Click on the graphic to enlarge.
Phillips 66's Marland Refinery in Ponca City is the most profitable refinery of Phillips 66's fourteen worldwide refineries, contributing a net profit of over $500 million in 2011 to Phillips bottom line. For 2012, profits are on target for the Marland Refinery in Ponca City to contribute of over $600 million of net profit to Phillips bottom line. Based on Phillips' third quarter earnings report for 2012 with a realized crack spread of $31.83 for mid-continent refineries and a capacity utilization of 102%, the Marland Refinery in Ponca City will contribute at an annualized rate of over $1 billion ($1.032 B) of net profits in 2012 to Phillips bottom line. Derivative Photo: Hugh Pickens

by Hugh Pickens November 8, 2012

The purpose of this report is to look at the benefits that the Phillips 66's Marland Refinery in Ponca City provides to the community in wages to local employees, property taxes paid to the community, and direct philanthropic contributions to the community and compare these contributions to the contribution in profits that the Marland Refinery provides to the company. We will evaluate four categories:

  • Wages Paid to Local Employees
  • Property Taxes Paid the Community
  • Direct Philanthropic Contributions to the Community
  • Profits from the Refinery to Phillips 66

Contents

Background

The Phillips 66 Refinery located in Ponca City, Oklahoma, has a published crude oil processing capacity of 187,000 barrels per day[1] making it by far the largest refinery in Oklahoma.[2] The refinery processes a mixture of light, medium and heavy crude oil. Most of the crude oil processed is received by pipeline from the Gulf of Mexico, Oklahoma, Texas and Canada. Additional foreign crude is purchased into the Gulf Coast and delivered by pipeline. The Ponca City Refinery is a high-conversion facility that produces a full range of products, including gasoline, diesel fuel, jet fuel, LPG and anode-grade petroleum coke. Its facilities include fluid catalytic cracking, delayed coking and hydrodesulfurization units. Finished petroleum products are shipped by truck, railcar, and company-owned and common-carrier pipelines to markets throughout the Mid-Continent Region.[3]

The Phillips 66 Refinery in Ponca City contributed a net profit of over $500 million in 2011 to Phillips bottom line, making it the most profitable of Phillips 66's fifteen worldwide refineries.

Based on Phillips' second quarter earnings report for 2012 and the realized crack spread of $26.34 for mid-continent refineries (Borger Refinery, Billings Refinery, Marland Refinery in Ponca City, and Wood River in Ravena, Illinois), profits are on target for the Marland Refinery in Ponca City to contribute of over $600 million of net profits in 2012 to Phillips bottom line.

Based on Phillips' third quarter earnings report for 2012 with a realized crack spread of $31.83 for mid-continent refineries and a capacity utilization of 102%, the Marland Refinery in Ponca City will contribute at an annualized rate of over $1 billion ($1.032 B) of net profits in 2012 to Phillips bottom line.

Wages Paid to Ponca City Residents

The Ponca City News reported on October 14, 2012 that Refinery Manager Pete Stynes spoke to the Ponca City Lions Club on October 10, 2012 about Phillips 66's Refinery in Ponca City and said that 800 employees work at the refinery with the direct employment of 625 Phillips employees.[4]

FuelFix reported on January 12, 2012 that according to the United Steelworkers International representing 30,000 refinery and chemical workers at 168 production, refining, marketing, transportation, pipeline and petrochemical facilities nationwide the average wage of US refinery and chemical workers is $33.85 an hour.[5] We estimate that of the 800 workers at the Marland Refinery, 100 of them are in engineering or managerial positions earning an average yearly salary of $110,000. We estimate that the cost of additional employee benefits including social security payments, unemployment benefits, pension benefits, vacation days, sick days, holidays, and medical benefits adds an additional 60% to direct wages paid. This cost is known as the burden rate.[6]

Marland Refinery in Ponca City Hourly Employees Salaried Employees
Hourly Wage $ 33.85
Yearly Salary $ 70,408.00 $110,000.00
Number of Employees 700 100
Wages $49,285,600.00 $11,000,000.00
Payroll Taxes (10%) $4,928,560.00 $1,100,000.00
Wages and Payroll Taxes $54,214,160.00 $12,100,000.00
Total Wages and Payroll Taxes for Hourly and Salaried Employees $66,314,160.00

Under these assumptions the total wages and payroll taxes paid to the 800 employees at the Marland Refinery in Ponca City including both hourly employees and salaried employees is $66,314,160.00 (54,214,160.00 + 12,100,000.00).

Comparison with Borger Refinery

By way of comparison with the Phillips Refinery in Borger, Texas, the Borger News Herald reported on July 11, 2012 that refinery manager Chris Coon spoke to the Borger Rotary Club on July 10, 2012 about employment and payroll at the Borger Refinery. Coon told members that the Borger refinery has about 920 full time employees including 200 routine contractorswith a pannual payroll of $65 million. Phillips also pays $6 million in payroll taxes and about $12 million in property taxes.[7] The Borger Refinery is comparable in capacity with the Marland Refinery in Ponca City having a throughput capacity of 146,000 barrels per day compared with Marland's throughput capacity of 187,000 bpd.

Borger Refinery All Employees
Hourly Wage $ 34.00
Average Yearly Salary $ 70,652.00
Number of Employees and Routine Subcontractors 920
Wages $65,000,000.00
Payroll Taxes (10%) $6,000,000.00
Wages and Payroll Taxes $71,000,000.00

The figures provided by the refinery manager at Borger are consistent with the calculations made for employees at the Marland Refinery in Ponca City. Using the same average yearly salary of employees at Borger Refinery, the annual wages plus payroll taxes for the Marland Refinery at Ponca City is $61,739,000.00.

Property Tax Paid to the Community

Tax Assessment of the Refinery

The Phillips Refinery is assessed under According to Tax Record 30,446.

Amount
Total Market Value $ 542,889,080
Total Assessed Value (14%) $ 76,004,471
Total Exemption $ 4,255,329
Net Assessed $ 71,749,142
Tax Paid $ 6,771,684

The total annual tax paid by Phillips 66 for the refinery is $ 6,771,684.

Tax Assessment for Real Estate

On May 21, 2012, Conoco transferred real estate in Kay County to Phillips 66 for a value of $69,223,000.00. Real property in the Ponca City School District is taxed at a rate of .00948 for a annual tax of $656,234. Philips 66's real estate in Ponca City includes the following.

Parcel Description Value
75003302602E100700 Refinery - 31.85 Acres (31.85 Acres) 22,323,400.00
75003302602E100200 1000 S. Pine PLANT AREA BLDG 33, 31 Container Bldg, etc. (108.94 Acres) 17,948,028.00
80000302502E200300 3400 N 7th St Defense Plant Central Control Room (287.83 Acres) 6,114,668.00
75003302602E100800 Atrium with Stairwell (2.09 Acres) 2,915,796.00
75003302602E101600 "Research Building" (4.92 Acres) 2,497,566.00
80000302502E200330 GAS TO LIQUIDS PLANT, BLDG ONLY (0.00 Acres) 2,293,541.00
75003302602E000100 1000 S. Pine (0.50 Acres) 1,313,326.00
75003302602E101300 Swimming Pool and Atrium (1.06 Acres) 1,194,994.00
80000402502E100100 Warehouse, TPS Facility (150.78 Acres) 1,189,585.00
75003302602E100300 Tower Complex - Research South (0.83 Acres) 1,155,484.00
75003402602E200100 East Plant Buildings (71.08 Acres) 965,078.00
75003302602E101900 Tower Complex - Research North (0.61 Acres) 920,928.00
75003302602E400100 Tank Farm - 157.92 Acres (157.92 Acres) 527,735.00
75003302602E101000 Cannot Identify Total Living Area 110620 (2.41 Acres) 511,513.00
75003302602E100100 Buildings 21 - 26 (2.61 Acres) 505,235.00
75003202602E300400 1600 S WAVERLY ST (10.00 Acres) 500,235.00
75003302602E101100 0.59 Acres 491,689.00
75003302602E101400 BLDG 1938 0x0 14 (1.56 Acres) 385,110.00
75003302602E100900 0.28 Acres 347,290.00
80000302502E300400 3550 S 7TH ST (10.00 Acres) 311,763.00
75003302602E100600 1.20 Acres 296,528.00
75003402602E300100 1500 S 4TH (45.76 Acres) 264,911.00
80000402502E200100 158.36 Acres 261,746.00
75003302602E300100 148.17 Acres 224,017.00
132000000000000000 UTILSHOP STEEL FR 1985 120x50 AVG (68.89 Acres) 207,050.00
80000302502E400100 147.13 Acres 202,451.00
75003302602E100500 0.04 Acres 191,591.00
75003302602E200100 138.96 Acres 185,011.00
75003302602E101200 0.20 Acres 175,185.00
75003302602E101500 0.48 Acres 174,541.00
80001002502E200200 117 Acres (117.64 Acres) 170,431.00
083000007001000000 0.00 Acres 155,138.00
75003302602E100400 1.47 Acres 137,823.00
75003302602E101700 Library (0.13 Acres) 133,993.00
80000302502E100900 3258 S 14TH (7.34 Acres) 132,700.00
80000302502E100800 3258 S 14TH (7.77 Acres) 122,479.00
80001002502E300100 69.63 Acres 106,186.00
75003502602E300100 37.82 Acres 66,694.00
80000202502E300100 38.18 Acres 64,906.00
085000000000000000 0.00 Acres 64,033.00
80000302502E101800 3277 S 7TH (0.54 Acres) 62,074.00
80000302502E101300 3.58 Acres 60,407.00
009000000000000000 16.80 Acres 54,516.00
815000000000001800 35.39 Acres 53,085.00
75003202602E400210 131.00 Acres 45,682.00
145000026003000000 1404 S 7TH- Sold on 6/22/2012 (0.00 Acres) 43,272.00
020000001000000000 0.00 Acres 42,070.00
19903402602E400100 UTILMSCF UTIL SHED conc. fl 1979 36x28 6 (15.88 Acres) 39,669.00
050500000000000000 0.00 Acres 34,184.00
109000014000000000 0.00 Acres 29,025.00
145000026001000000 1400 S 7TH (0.00 Acres) 27,541.00
80000302502E100400 10.25 Acres 27,265.00
107000003001000000 1000 S 4TH (0.00 Acres) 21,000.00
050000020009000000 1316 S 5TH - Sold on 6/29/2012 (0.00 Acres) 19,927.00
050000019009000000 0.00 Acres 19,908.00
145000025013000100 1321 S 5TH- Sold on 5/7/2012 (0.00 Acres) 17,929.00
815000000000001500 6.54 Acres 16,350.00
19903402602E400200 Site of Standing Bear Museum (46.85 Acres) 16,055.00
095000000019000000 1407 S 5TH (0.00 Acres) 13,348.00
75003402602E200200 1.90 Acres 12,070.00
082000046000000000 1ST & SOUTH AVE (0.00 Acres) 11,178.00
123000013000000000 0.00 Acres 9,909.00
125000000001000000 0.00 Acres 9,450.00
75003202602E400200 1700 S WAVERLY (2.78 Acres) 9,035.00
125500001000000000 0.00 Acres 8,999.00
75003402602E400200 17.43 Acres 8,998.00
145000026009000000 1414 S 7TH (0.00 Acres) 7,088.00
145000026012000000 1418 S 7TH (0.00 Acres) 7,088.00
145000026027000000 1403 S 6TH (0.00 Acres) 5,670.00
073000015000000000 0.00 Acres 5,314.00
145000026005000000 1408 S 7TH (0.00 Acres) 4,916.00
050500002018000000 1513 S 5TH (0.00 Acres) 4,725.00
095000000011000000 513 E ENGLAND (0.00 Acres) 3,780.00
095000000013000000 1425 S 5TH (0.00 Acres) 3,780.00
145000026016000000 1421 S 6TH (0.00 Acres) 3,591.00
132000010006000000 501 STANDING BEAR PA (0.00 Acres) 3,240.00
145000026020000000 1415 S 6TH (0.00 Acres) 3,201.00
050000019003000000 1406 S 5TH (0.00 Acres) 3,150.00
050000019005000000 1412 S 5TH (0.00 Acres) 3,150.00
050000020012000000 1320 S 5TH (0.00 Acres) 3,150.00
095000000003000000 1408 S 6TH (0.00 Acres) 3,150.00
095000000005000000 1410 S 6TH (0.00 Acres) 3,150.00
095000000007000000 1416 S 6TH (0.00 Acres) 3,150.00
095000000015000000 1421-1423 S 5TH (0.00 Acres) 3,150.00
095000000017000000 1415 S 5TH (0.00 Acres) 3,150.00
095000000021000000 1405 S 5TH (0.00 Acres) 3,150.00
095000000023000000 1401 S 5TH (0.00 Acres) 3,150.00
107000001013000000 919 S 4TH (0.00 Acres) 3,150.00
107000001015000000 917 S 4TH (0.00 Acres) 3,150.00
107000001017000000 915 S 4TH (0.00 Acres) 3,150.00
107000002013000000 1023 S 4TH (0.00 Acres) 3,150.00
107000002015000000 1015 S 4TH (0.00 Acres) 3,150.00
107000002017000000 1013 S 4TH (0.00 Acres) 3,150.00
107000002019000000 1009 S 4TH (0.00 Acres) 3,150.00
107000002021000000 1005 S 4TH (0.00 Acres) 3,150.00
107000002023000000 1003 S 4TH (0.00 Acres) 3,150.00
145000021013000000 1223 S 4TH (0.00 Acres) 3,150.00
145000021017000000 1215 S 4TH (0.00 Acres) 3,150.00
145000021019000000 1211 S 4TH (0.00 Acres) 3,150.00
145000021021000000 1207 S 4TH (0.00 Acres) 3,150.00
145000021023000000 1203 S 4TH (0.00 Acres) 3,150.00
145000022013000000 1119 S 4TH (0.00 Acres) 3,150.00
145000022015000000 1117 S 4TH (0.00 Acres) 3,150.00
145000022017000000 1115 S 4TH (0.00 Acres) 3,150.00
145000022019000000 1107 S 4TH (0.00 Acres) 3,150.00
145000022021000000 1105 S 4TH (0.00 Acres) 3,150.00
145000022023000000 1101 S 4TH (0.00 Acres) 3,150.00
145000026023000000 1411 S 6TH (0.00 Acres) 3,150.00
145000026025000000 1407 S 6TH (0.00 Acres) 3,150.00
145000027012000000 1324 S 7TH (0.00 Acres) 3,150.00
050500001004000000 1510 S 7TH (0.00 Acres) 3,087.00
050000019001000000 1402 S 5TH (0.00 Acres) 2,835.00
145000026018000000 1417 S 6TH (0.00 Acres) 2,833.00
095000000000000000 1400 S 6TH (0.00 Acres) 2,520.00
095000000000000100 1329 S 5TH (0.00 Acres) 2,520.00
145000026015000000 1425 S 6TH (0.00 Acres) 2,520.00
132000025001000000 204 WAYNE (0.00 Acres) 2,063.00
095000000009000000 1420 S 6TH (0.00 Acres) 2,048.00
050000019001000100 1404 S 5TH (0.00 Acres) 1,890.00
095000000009000100 1420 1/2 S 6TH (0.00 Acres) 1,103.00
040000025000001000 0.00 Acres 818.00

Phillips 66 Philanthropic Contributions to Ponca City

The Ponca City News reported on October 21, 2012 that Phillips 66 provides financial and in-kind support to community organizations through corporate and employee based programs. "Our philanthropic contributions in Ponca City and the surrounding area are significant. In 2011, direct contributions to non-profit agencies, matching United Way contributions, and contributions based on employee and retiree hours or monetary contributions were in excess of $1.1 million dollars. When employee and retiree contributions are added to the company contributions, the total is over $1.7 million dollars."[8]

Profits Earned by the Marland Refinery

The Ponca City Refinery earned profits in excess of $500 million in 2011 for Phillips 66 and based on Phillips' third quarter earnings report for 2012 with a realized crack spread of $31.83 for mid-continent refineries and a capacity utilization of 102%, the Marland Refinery in Ponca City will contribute at an annualized rate of over $1 billion ($1.032 B) of net profits in 2012 to Phillips bottom line.

On October 31, 2012 Phillips reported their adjusted earnings for refining operations were $1,580 million in their 3rd Quarter Earnings Report for 2012. Phillips also reported the crack spreads for the Mid-Continent, Gulf Coast, Atlantic Basin, and Western Pacific of $31.83, $11.42, $13.02, and $13.30 respectively. The total profit for each refinery is calculated by determining the crack spread times the normalized throughput capacity for each refinery to allocate the total refinery profit to each refinery.

Location Capacity (KBD) [A] Normalized Capacity (KBD) [B] Crack Spread ($) [C] Capacity Utilization (%) [A]*[B]*[C] Per Cent Contribution to Total Refining Profits Extrapolated Yearly Profit
Ponca City, OK 187 187 31.83 102 6,071 16 1,032
Roxana, IL 306 153 31.83 102 4,967 13 844
Billings, MT 118 118 31.83 102 3,831 10 651
Borger, TX 146 73 31.83 102 2,370 6 403
Belle Chasse, LA 247 247 11.42 88 2,482 7 422
Old Ocean, TX 247 247 11.42 88 2,482 7 422
Westlake, LA 239 239 11.42 88 2,402 6 408
Linden, NJ 238 238 13.02 100 3,099 8 527
Whitegate, England 71 71 13.02 100 924 2 157
Humber, Germany 221 221 13.02 100 2,877 8 489
Carson/Wilmington, CA 139 139 13.30 97 1,793 5 305
Rodeo, CA 120 120 13.30 97 1,548 4 263
Melaka, Malaysia 76 76 13.30 97 980 3 167
Ferndale, WA 105 105 13.30 97 1,355 4 230
Total 2,245 28,730 100 6,320

Using this method for 2012, the Marland Refinery in Ponca City will make a contribution to Phillips 66's net profit of over $ 1 billion ($1.032 B), by far the largest of any of Phillips' refineries.

References

About the Author

Hugh Pickens

Hugh Pickens (Po-Hi '67) is a physicist who has explored for oil in the Amazon jungle, crossed the empty quarter of Saudi Arabia, and built satellite control stations for NASA all over the world. Retired in 1999, Pickens and his wife moved back to his hometown of Ponca City, Oklahoma in 2005 where he cultivates his square foot garden, mows nine acres of lawn, and photographs local events at the Poncan Theatre and Ponca Playhouse.

Since 2001 Pickens has edited and published “Peace Corps Online,” serving over one million pageviews monthly. His other writing includes contributing over 1,200 stories to “Slashdot: News for Nerds,” and articles for Wikipedia, “Ponca City, We Love You”, and Peace Corps Worldwide.

Other Articles by Hugh Pickens about Ponca City

Full Disclosure

I am an independent investor who is a stockholder in Phillips 66 and the purpose of this web site is to follow Phillips 66 to document and understand the company's plans and policies particularly with respect to its Refinery and Marketing Business Segment with a special emphasis on evaluating the impact of Phillips 66 business decisions on the Marland Refinery in Ponca City, Oklahoma. I began building my position in PSX when Phillips 66 went public on May 1, 2012 and am long PSX. I will disclose publicly if I close my position on PSX or go short. Unless stated otherwise, there is a citation for every statement in this article. The only exception is the "Conclusions Section" in this report which includes my own judgments and findings. Nothing in this report is to be taken as a recommendation to buy or to sell stock in Phillips 66 (PSX). I am an advocate that that it would be beneficial for both Phillips 66 and the community of Ponca City for Phillips 66 rename its Ponca City refinery the "Marland Refinery in Ponca City" to honor an oil pioneer who together with Frank Phillips brought prosperity and advancement to Northern Oklahoma.

Updates to the Web Site

This web page is frequently updated so check back periodically to see the latest information added to "An Independent Evaluation of Phillips 66, its Business Strategy, and Execution." If you have any information or insights that you would like to see added to this report on Phillips 66 and Ponca City please contact Hugh Pickens by email at hughpickens AT gmail DOT com.

Copyright

The material in this article is licensed under under the Creative Commons under an Attribution-Noncommercial-Share Alike 2.0 Generic license. Except for short, fair use excerpts, the material on this article cannot be used for commercial purposes without permission of Hugh Pickens. Attribution for use of any material from this article must be provided to Hugh Pickens and if used on the web a link must be provided to http://hughpickens.com.

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