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Phillips 66 Pops On Earnings Miss

By  +Follow July 31, 2013 1:27PM
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Phillips 66 (PSX) , by market cap the world’s largest oil and gas refiner and marketer, posted second-quarter earnings on Wednesday morning that showed the company’s profits were significantly lower than expected.

Phillips is in the habit of beating earnings forecasts on a regular basis, but for the recently ended period, the company netted $958 million, or $1.53 per share on revenue of $43.95 billion, compared to the prior-year period during which the company made $1.18 billion, or $1.86 per share. Analysts had expected earnings of $1.81 per share on revenue of $42.03 billion.

The recent increase in US oil prices was cited as one of the reasons for the diminished results, but the company’s refining operations were also substantially hampered by a hike in the cost of ethanol credits, otherwise known as Renewable Identification Numbers (RINS).

In 2005, the Environmental Protection Agency implemented the Renewable Fuel standard, imposing a gradual decrease in the burning of fossil fuels by requiring refiners to blend increasing amounts of ethanol into their products, with the goal of adding 36 billion gallons of renewable fuel into the overall supply by 2022. The EPA tracks the compliance of oil and gas refiners through RINS, which operate as credits; in other words, a company can acquire RINS through the purchase and subsequent blending of ethanol into its products or, if it does not comply, can meet its RINS requirements by purchasing them from other companies.

As ethanol minimums have increased, so too has the cost of RINS, and oil companies claim that the higher prices are starting to inflate the cost of doing business. On a conference call discussing the company’s quarterly performance, Phillips 66 said that it will increase exports in the third quarter to offset higher prices.

Still, the rare miss on top and bottom lines was offset by the company’s approval of a $1 billion share buyback program, as well as a debt reduction of $500 million. Shares were down about 3 percent before the commencement of trading, but rebounded nearly 5 percent after the opening bell to $61.36.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.


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Results for PSX
FinSentS SP500
31 Oct 14 16:18:15
$PSX:US Phillips 66 Announces Quarterly Dividend of $0.50 (PSX) #PHILLIPS 66 http://t.co/69yLFSB8Q7 #SP500
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31 Oct 14 10:11:15
RT @HBJEmilyWilk: Ohhh drama. Phillips 66 $PSX fires GC building its huge Houston campus #CRE http://t.co/urBcNWOJLS via @HOUBizJournal @HB…
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31 Oct 14 09:55:57
RT @HBJEmilyWilk: Ohhh drama. Phillips 66 $PSX fires GC building its huge Houston campus #CRE http://t.co/urBcNWOJLS via @HOUBizJournal @HB…
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31 Oct 14 09:44:38
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Morningstar Gives “A” Credit Rating to Phillips 66 $PSX http://t.co/3OJCMLQlz9
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30 Oct 14 13:51:44
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29 Oct 14 21:56:06
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29 Oct 14 11:46:23
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29 Oct 14 09:11:04
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29 Oct 14 09:09:54
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29 Oct 14 07:50:54
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29 Oct 14 07:42:06
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29 Oct 14 07:38:09
$PSX reports EPS of $2.02, smashing estimates and a significant improvement from earnings of $0.85 last year.
				
				
By  +Follow July 31, 2013 1:27PM
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