Phillips 66 profit jumps 14 pct, shares up

HOUSTON Thu Aug 2, 2012 1:29am IST

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HOUSTON (Reuters) - Phillips 66, (PSX.N) on Wednesday posted a 14 percent jump in second-quarter profit as the largest U.S. independent refiner reported stronger refining margins and chemical sales.

The company, which split off from ConocoPhillips (COP.N) earlier this year, said its refineries and chemical businesses benefited from lower-priced feedstocks in the second quarter. Refining profits surged 53 percent. Its shares rose more than 1 percent after the earnings report.

CEO Greg Garland told analysts the company will keep a Gulf Coast oil refinery once targeted for sale. But he said it may sell others unless it can find ways to move a greater volume of inexpensive crude to them.

"We have a range of assets in terms of returns. Think about assets around the periphery that may be non-core to us," Garland said during the second-quarter earnings conference call.

Net income was $1.18 billion, or $1.86 per share, up from $1.04 billion, or $1.64 per share, a year earlier.

Refining profits rose 53 percent to $1.18 billion.

The earnings boosted company shares, which closed up nearly 2 percent at $38.34.

Chief Financial Officer Greg Maxwell told analysts the company's capital expenditures for 2012 would range between $1 billion and $1.5 billion.

Phillips 66 said it would retain its 247,000 barrel-per-day Alliance plant in Belle Chasse, Louisiana, because it expects increased access to cut-price light sweet crude to run there.

Garland said Phillips 66 "really likes" its Midwest and Gulf Coast refineries, which have easier access to cheaper Canadian and inland U.S. crudes.

But East Coast and West Coast refineries face more challenging cost environments, he said. Both regions receive crude that costs more than largely landlocked inland U.S. crude.

"The East and West Coast refineries are challenged refineries, and we think there are opportunities to improve them," Garland told Reuters in a post-call interview.

The company has one East Coast refinery -- the 238,000 barrels-per-day (bpd) Bayway plant in Linden, New Jersey -- and three West Coast refineries. Phillips 66 sold a Pennsylvania refinery to Delta Air Lines (DAL.N) in June.

Phillips 66 plans to buy 2,000 railcars to move cheap crude from North Dakota's Bakken shale play to the Bayway plant and its 100,000 bpd plant in Ferndale, Washington. Bayway already runs 10,000 to 20,000 bpd of Bakken crude, Garland said.

He said the New Jersey and Washington plants were "absolutely" more likely to stay in the company's portfolio if Phillips 66 can increase the amount of Bakken crude they run, backing out other more expensive crudes.

Bayway, which Garland said was "probably the best refinery on the East Coast," can run up to 100,000 bpd of light crude, while Ferndale can run 50,000, he told Reuters. The company aims to rail Bakken crude to both plants, Garland told Reuters.

That's in addition to Bakken crude already moved by rail and barge to Gulf Coast and Illinois refineries, he said.

Also, the company is working to run more shale crude from the Mississippi Lime play in Oklahoma and Kansas at its 198,400 bpd refinery in Ponca City, Oklahoma. That effort will involve trucking crude from the company's existing gathering systems, Garland said.

Those plans will boost the amount of shale crude already growing in the company's overall crude slate. Garland said Phillips 66 plants ran 120,000 bpd of shale crude in the second quarter, up from 100,000 bpd in the first quarter and 40,000 bpd in 2011.

When analysts asked about potential acquisitions -- refineries or other assets -- Garland dismissed the thought.

"There's nothing really interesting to us at this time," he said.

(Additional reporting by Ernest Scheyder in New York and Anna Driver in Houston; Editing by Gerald E. McCormick and John Wallace)

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